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« Should Law Schools Require Legal History? | Main | Should Law Schools Require Legal History? »

Hell Of a Way to Run an Airport

Apparently, government isn't any better at running an airport than it is at running a railroad. Commercial or passenger. If you remember, Conrail was formed as a government-run railroad after it kept so many failing lines on life-support that the whole northeast corridor part of the industry collapsed.

It seems that the Denver City Council decided to just skip the whole "regulating-into-bankruptcy" phase of the process, and go straight to owning and running Denver International Airport itself. Now, while it's considering relaxing purchasing and hiring rules, there's only a hint of a whisper of a suggestion that they might think about beginning to study actually creating a private airport authority. Don't hold your breath.

The most offensive aspect of the city's management is probably its minority set-asides for airport concessions. Which is why Wilma Webb, wife of former mayor Wellington Webb, who clearly needs the help, has an interest in a shop there.

The most damaging aspect though, is probably its continued favoritism to United Airlines. If there were a way of assessing it, United could count the city's goodwill on its balance sheet. And hometown airline Frontier would have to write it up as a liability.

The latest example comes in the form of a deal to let United transfer $184 million in debt to DIA in return for - well, it's hard to say what, exactly. Here's what the Rocky lists as the benefits to DIA:

• Connections: The carrier commits to increasing the level of passengers connecting through DIA to 7.5 million in 2006, 7.6 million in 2007 and 7.7 million in 2008 through 2025. That would lead to an estimated $9 million in additional annual concession and passenger fee revenues for DIA.

• Concourse A: United will fly a minimum of four flights a day through 2025 from each of its six gates in Concourse A, which the carrier uses for its Ted service. United said it currently is exceeding that threshold.

• Concourse B: The airline will shelve plans for a new regional jet facility on Concourse B, saving DIA $2 million annually in construction and other costs.

So United is promising more connecting flights to DIA, with a whopping 2.7% in the first 2 years, and no growth promised thereafter. It's also promising to meet a minimum it says it's already meeting. The only potentially attractive feature here is that the airline is letting the airport off the hook for a regional jet facility, for United, that the airport had agreed to pay for. Yes, those sharp businessmen over at City Hall had agreed to pay for more gates for an airline that was already in bankruptcy.

The cancellation has got to come as a disappointment to Phelps Program Management, but as a relief to just about everyone else. Phelps had the thankless job of rescuing the baggage system from ignominy, and may have reduced costs, but otherwise, the system still isn't working properly. The company's web page for the project shows baggage ramps and carts, but no baggage, so at least they can't be accused of false advertising.

Contrast this with the way DIA is planning to expand for Frontier:

One possible solution: revive Frontier's planned expansion of Concourse A. The carrier delayed the project - initially estimated at nearly $80 million - last year because of industry turmoil and the uncertain future of its bankrupt rival United. In that scenario, Frontier and other carriers would repay DIA for the expansion through rent and other fees.

Frontier's not in dire straits, but they're being artificially constrained from expanding, and it may very well keep them from making their most efficient use of their new debt issue. More ironically, the regional jet facility was supposed to be part of a plan to free up a few gates here, a few gates there, for Frontier, but apparently, that's fallen through now, as well.

I know this is just howling into the wind, but guys, how about a private airport authority, and a gate auction.

Just a thought.

UPDATE: It occurs to me that the one weak point in the Southwest conference call to announce their new Denver service was the CEO's confidence that something could be worked out regarding expansion plans. They must be just thrilled with this announcement.

An announcement that United considers so critical to their plans, that creates such important future obligations on their part, that they didn't even issue a press release on it.

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