DALLAS - After months of squabbling and threats of lawsuits, Denver, BAE Automated Systems, and United Airlines have reached agreements that could help solve baggage problems for a Feb. 28 opening of Denver International Airport and dismiss millions of dollars in claims.

In agreements made late last week, Texas-based BAE would be paid $35 million to make modifications to the faulty automated baggage system in United's Concourse B at the new $3.9 billion airport.

United would shell out $17.5 million to BAE on the airport's opening day, if that occurs by Feb. 28, and would pay the other half when the modifications are substantially complete. The city would then reimburse Chicago-based United, which is Denver's dominant hub carrier that controls about 60% of the market.

In addition, the city and BAE would drop almost all claims against each other over the faulty baggage system and resulting delays in opening the Denver International Airport.

BAE had made a claim of $40 million for contract changes, outstanding invoices, and other problems stemming from the installation of the prototype baggage system, which in tests has lost luggage. Meantime, the city had said it could file an up to $90 million counterclaim to compensate for funds it needed to correct the troubled baggage system, construct a backup system, and pay for other damages.

Although city officials declined to release details of the agreements, they said the pacts represented major steps toward opening the airport in a few months and improving the relationship between the city and BAE.

Accusations had been hurled back and forth when the city blamed BAE for at least two of the four opening delays and rising costs at Denver International Airport during the past year.

The agreements have "gone a long way to repairing the damage," said Briggs Gamblin, spokesman for Denver Mayor Wellington Webb. "It was a conciliatory and positive ending."

Gamblin said the agreements are expected to be approved by the Denver city council within the next week following the delivery of the contract between United and BAE to city offices on late Friday afternoon.

Gamblin said the city aviation and public works staff are reviewing the contract this week, and he is optimistic that it will be approved, barring any problems that the engineering staff might find.

BAE company officials also said they would not comment on the specifics until the pact was finalized.

Highlights of the agreement include:

* The city will not charge BAE for the $35 million cost to modify the automated baggage system and for constructing a $51 million backup baggage system if BAE meets its deadlines. Denver is constructing a conventional baggage system using a Michigan company to insure a Feb. 28 airport opening.

* BAE will pay the city $5 million damages for being late, although it would drop its $40 million claim.

* The city will pay $6.5 million in outstanding invoices, but drop its plans to file an up to $90 million counterclaim.

* The city will pay 75% of money owed under the original contract on opening day and the remaining 25% later.

Over all, the city has paid about $173 million of the total $193 million cost for the automated baggage handling system, which would transport thousands of bags daily along 22 miles of tracks throughout the airport.

With the additional changes on the automated system and the backup baggage system, the total cost for transporting bags through Denver International Airport will be $279 million.

Initially, the airport is expected to open with an automated system in the United concourse, with a more conventional tug-and-cart system to back it up. Other carriers would use a more conventional system after the opening.

If the modified automated system does work by Feb. 28 when the airport is scheduled to open, the city retains rights to assert a claim against BAE for the cost of the conventional tug-and-cart system.

The problems with the baggage system have been blamed for some of the delays that have prevented the airport from opening during the past year. The delays have contributed to mounting costs and concerns among rating agencies.

Fitch Investors Service lowered its ratings 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 bond BB, or junk grade.

Subscribe Now

Access to authoritative analysis and perspective and our data-driven report series.

14-Day Free Trial

No credit card required. Complete access to articles, breaking news and industry data.