DALLAS -- Denver officials and the Texas firm that installed the flawed automated baggage system for Denver International Airport said yesterday they agreed on a Sept. 30 deadline to strike a deal to modify the system and a process to resolve damage claims.

Hammered out during 16 hours of bargaining, the interim agreement gives Dallas-based BAE Automated Systems about a three-week window to complete negotiations with both the city and United Airlines for construction of a modified baggage handling system at the $3.7 billion airport.

"We have a few weeks of tough negotiating ahead of us," said Ted Minick, counsel to BAE and a member of the negotiating team. "But we're hopeful these negotiations will be successfully concluded."

Under the tentative agreement, the company must come to terms with both United Airlines, the dominant hub carrier in Denver, on a contract for revisions to Concourse B, and the city of Denver for alterations on Concourse A.

BAE president Gene Di Fonso said that if the negotiations are successful and no problems emerge, his company will complete by Feb. 28 the alternative baggage system for Concourse B, where United is located.

City officials also said they were optimistic that an agreement could be reached to modify the baggage system and open the Denver airport by Feb. 28 at the latest.

The baggage system, which loses and chews up luggage, has been primarily blamed for the airport's four opening delays of the past year and the project's mounting costs. "We set up a process," said Briggs Gamblin, spokesman for Denver Mayor Wellington Webb. But, "this is not a settlement of all potential claims," Gamblin said.

Under the agreement, BAE and the city will immediately attempt to resolve all outstanding claims. If unsuccessful, the company and Denver would file any unresolved claims with the district court for the city and county of Denver.

Lee Marable, an attorney for Denver, said the city would make every effort to mediate the disputes, but "some of the issues could end up in a judicial forum."

Some terms already have been determined in the interim agreement. For example, Denver will pay $5 million of about $7 million in invoices that BAE claims are unpaid when a final settlement agreement on a modified baggage system is completed. In addition, Denver will pay most of the $15 million it has retained from payment on the baggage system after successful completion.

"I believe today's announcement combined with last week's accord with United Airlines places us on a sure path toward opening our new airport in a manner that will meet the needs of the traveling public," Webb said.

"Further negotiations will need to be finalized within the next several weeks to assure installation of a successful modified automated baggage system at Denver International Airport," Webb said.

United spokesman Joe Hopkins said that the sooner an agreement could be reached the better. United had wanted to modify the flawed automated baggage system and not turn to a more conventional, manual system because the airline maintains it needs faster service for customers.

Last week, the city and United reached an agreement to modify the system at the airport. Under the terms, both the city and United would put up $11 million each toward revising the $193 million baggage handling system. If the costs exceed $22 million, the Chicagobased airline would pay the remainder and will be reimbursed by the city. The total cost limit would be $30 million.

The pact followed a bond sale earlier in the week when the city issued an additional $257 million of debt to cover airport costs during the delays and the $50 million cost of an alternative system.

Two baggage handling systems are being worked on concurrently in an attempt to open Denver International by the end of February: the revised BAE system and a conventional system that is being designed and installed by a Michigan company.

The many delays and the mounting costs have prompted concerns at rating agencies. Fitch Investors Service lowered its rating on the airport's revenue bonds to BBB-minus, its lowest investment grade, from BBB last month. Moody's Investors Service and Standard & Poor's Corp. lowered the airport's bond ratings in May and retained them last month. Moody's rates the bonds conditional Baa, its lowest investment grade, and Standard & Poor's rates the bonds BB, or junk grade.

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