Airlines vs. Airports: United and American Balk at O'Hare Modernization

(MoneyWatch)  Chicago O'Hare is one of those airports that people generally dread connecting through, especially during the winter. O'Hare's legendary delays caused Chicago Mayor Richard Daley to outline a plan that would fix the problem for years to come. Now, the program is running into trouble as American (AMR) and United (UAL), O'Hares two largest tenants, are fighting against it. There are merits to both sides, but I agree with the airlines that this isn't necessary right now.

Think back to the early 2000s when O'Hare was an airport in gridlock. Flights were consistently delayed and people actively avoided the airport when possible. The City of Chicago came up with a plan. The airport's runways at the time looked like they had just been dropped on the land wherever they fit. There were seven runways, and all of them but one intersected with at least one other. This meant that they could never all be used at the same time, and that made for a lot of useless pavement.

Realigning the runways
The new plan would add only one new runway, but would also realign the existing ones to give the airport six parallel runways and two diagonals that would run parallel to one other. With six parallel runways, the airport would be able to handle many more flights, solving the gridlock problem. The plan also included a new western terminal with separate access to accommodate future growth. After years of wrangling, the project moved ahead.

A large portion of the work is done. The main benefit of the first phase was to add one of the new parallel runways in the plan at the northern edge of the airport. Another parallel runway to the south is under construction as well. But now the city and the airlines have started to fight over future plans.

The city argues that the modernization is needed to handle long term growth at the airport. The new runway configuration should serve the airport well for years and years. The airlines, however, don't want to spend the money.

Balking at new bonds
While it's the city that's raising funds for this, the airlines ultimately will have to either pay the bill via higher landing fees -- which they may or may not pass on to travelers. If they can't add them to ticket prices, then some flights will become unprofitable and will be cut. The airlines want to prevent that from happening.

So the city has now arrived at a point where it needs to issue about $1 billion in bonds to fund the next part of the project. The airlines say they need to give their permission to issue those bonds and they're refusing to do so. The city said it didn't need permission from the airlines, and it's now in court.

The two sides haven't been talking much, but now U.S. Secretary of Transportation Ray LaHood has stepped in to mediate and the lawsuit is on hold as they try to work things out.

The western terminal has already been pushed out, as it should be. There is no shortage of gate space at O'Hare, despite what you may hear. In fact, the city appears to have finally come to an agreement to acquire Delta's old gates, which it no longer uses since the merger with Northwest. That will mean five new gates will be available for airlines and there is the potential to reconfigure the terminal to add more.

Runway standoff
But the dispute centers around that runway configuration. O'Hare argues that this will be necessary some day and costs will only rise the longer they wait. The airlines say that there's no reason to dive in to this until there's actually proof that there's a need. It's an issue of short term versus long term thinking, and in this case, short term makes more sense.

Keeping costs low is crucial, and there is no guarantee that the new pavement will be needed. But is it likely to be needed eventually? Yes, probably. But it could be 30 years away and that means 30 years of paying for something that's not needed. This is something that can be done in the future when the actual need is there. Will it cost more in the future? Sure, but just building because it's cheaper now is not a good reason to do it.

In the end, my assumption is there will be a positive resolution that sees this go forward one way or another. It might require some bargaining with American and United to keep costs down, but it should get done in the end. It's just a matter of how far in the future that will be.

Related:

• Who Will Fill Delta's Space at Chicago/O'Hare?
• FAA Lifts Chicago/O'Hare's Flight Caps This Fall
• Virgin America CEO: Why Traditional Carriers Can't Innovate

Photo via Flickr user -Tripp-/CC 2.0