DENVER -- United Airlines paid the city of Denver $26.4 million Tuesday toward the cost of delaying Denver International Airport's opening, and raised the possibility of opening the facility with only a partially operating baggage system.
As part of an agreement reached between the city and United, the dominant hub airline in Denver that accounts for more than half the traffic through the city, United agreed that Denver could open the airport with an automated baggage system operating on only two of the facility's three concourses.
The airport's construction is completed, but under the city's agreement with its airlines the airport cannot legally open without a fully operating automated bag system. The airport that has cost more than $4 billion has been delayed three times by a state-of-the-art, $193 million bag system that doesn't work.
The new agreement with United allows the city more "flexibility" in opening the facility, Denver's public works director, Mike Musgrave, told city council members at an airport committee meeting yesterday.
Denver is considering opening Denver International with the automated system operating on A and B concourses and running a traditional mg and cart system through the utility tunnel for Concourse C, which houses the airlines with smaller operations in Denver.
For the record, city officials did not say they would implement the plan, but only that they now could if need be.
"United Airlines has agreed that, at [the date of occupancy] an integrated baggage system for concourses A and B is an acceptable modification so long as no other concourse systems are integrated thereafter into the concourse A and B system without their written consent and provided that the contractual rights of all other airlines operating from concourses A and C are not infringed by any such modification," said a letter to the council from Musgrave and revenue manager Patricia Schwartzberg.
In other words, United is agreeing that the airport can be let out of its commitment to open a fully automated airport, as long as airlines on the third concourse, C, agree to it. And the city cannot compromise the systems on A and B, which house Continental Airlines and United, respectively, by trying to operate the automated system on Concourse C at a later date.
The scenario has been complicated by Continental's pullout from its Denver hub, thus decreasing traffic and therefore airport revenues. Continental is contractually obligated to pay for 20 gates and 6 million enplaned passengers a year for five years. But on Monday, company spokesman David Messing said the airline needs only 10 gates and is trying to sublease the other 10.
Aviation director Jim DeLong said Continental is negotiating with America West, Frontier, and Mark Air to sublease gates. DeLong said Continental will only be allowed to sublease the gates on Concourse A if it does not affect Concourse C leasings.
As part of its new agreement with Denver, United will pay its share of the delay up-front and be reimbursed later through the use of credits against airport leases when the airport opens. The airline has said in the past it would be making this "loan" in order to alleviate financial pressure on the struggling project.
Schwartzberg stressed that the agreement does not include any interest costs. The last agreement with United stipulated the city paying United, through lease give-backs, 8.5% interest on United's contribution.
The root of the problem that the airlines and the city are grappling with, the failed baggage system, continues to antagonize city officials. Tests last week went so poorly that the bag system consultant from Germany, Logplan, did not have enough information from the tests to analyze where the problems are. The system experienced basic mechanical and electrical problems.
"It's a period of continued discovery because some of the minor glitches are affecting our ability to get volume and duration of these diagnostic tests," said project engineer Norm Wittaveen.
Public works manager Musgrave said the city is disappointed with the recent effort by the system's builder, BAE Automated Systems Inc. of Dallas. BAE has not added more staff and committed enough hours to the baggage system, Musgrave said.
"We have a number of issues coming up, mechanical and electrical, that shouldn't be happening," Musgrave said.
The construction cost of the airport is $2.924 billion. By Aug. 15, delays will have added approximately $90 million in costs, at the rate of $16.4 million per month.
