Chicago, carriers reach nearly $1.2B O'Hare deal

AP News
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Posted: Mar 14, 2011 6:48 PM
Chicago, carriers reach nearly $1.2B O'Hare deal

The city of Chicago and two major airlines announced a nearly $1.2 billion deal Monday to go ahead with parts of a long-planned expansion for O'Hare International Airport, one of the world's busiest air traffic hubs.

That means construction of a new runway can begin, even though questions remain about the timing and pace of future expansion. It also allows Mayor Richard Daley to leave office this spring after 22 years with renewed momentum on one of his biggest priorities.

"This is a wonderful day for Chicago, the Chicago region and the country," said Daley, who had scrambled to ensure a signature project didn't grind to a halt. "The agreement ensures that the completion phase continues to move forward without increase to any local tax."

City officials have argued that finishing a second phase of the estimated $15 billion expansion will help reduce delays in Chicago and throughout the U.S. air transport system. The airlines, however, had balked at footing most of the bill for more upgrades and had sued the city to try to stop the expansion.

Both sides were at an impasse as recently as last month, when Daley and airline executives went to Washington to meet with Transportation Secretary Ray LaHood. LaHood, a former Illinois congressman, eventually offered an extra $155 million, in addition to earlier funding, to close the deal.

American and United agreed to back about $300 million in bonds with airline revenues. The city will also use about $365 million in passenger fees.

"We decided on the runway that we felt was most important," LaHood said Monday at O'Hare.

The deal, though, delays decisions about a new western terminal and other elements of the project opposed by American and United airlines. The carriers will drop their lawsuit against the city, and all agreed to continue talking in two years about other improvements, including a costly new terminal.

"We'll get together in 2013 and discuss the next phase in good faith," United Airlines President and CEO Jeff Smisek said. "We've always believed that expansion should be demand-driven."

Joseph Schwieterman, a transportation expert at DePaul University, called LaHood's guarantee "the icebreaker" for airline executives.

"They see they're in the middle of something bigger than normal O'Hare politics," he said. "The highest officials in Washington have latched onto this and won't let go."

The upcoming departure of Daley, who did not run for another term, brought added pressure, Schwieterman said.

"It could be one of his great, signature projects," he said. "That weighed heavily on the political community coming to support him."

The first phase of the project had culminated with the completion of a new runway and a control tower in 2008. A plane carrying Daley and other VIPs was the first to officially touch down on the concrete as part of runway-opening ceremonies.

But some observers were skeptical about the rest of the planned expansion.

"They're not likely to finish the rest of the project," attorney Joseph Karaganis, who represented the owner of a cemetery near O'Hare, said on Monday. Chicago acquired the property to relocate the graves and make way for the runway that will now be built. Scores of homes in Bensenville, which skirts O'Hare to the southeast, were also bulldozed as part of the airport expansion.

"As I see the agreement, they've abandoned the terminals and they're building one of the additional runways," Karaganis said. "Given the lack of need for these additional terminals, none of the outside destruction needed to take place."

Aaron Gellman, a professor and former director of Northwestern University's Transportation Center, said the delays would drive up costs and make it more difficult to complete.

"I don't really see that the net effect of this is very helpful to the project and to the city," Gellman said.

But he called on Mayor-elect Rahm Emanuel, who issued a statement supporting the deal, to keep pushing for expansion.

"O'Hare was building for the future in a way that very few airports in the United States were doing," he said. "The new mayor should be just as proud as the old mayor."