American Airlines is buying two Spirit Airlines gates at Chicago O’Hare for $30 million, in the first sale transaction to another airline of Spirit’s second bankruptcy.
- Spirit currently operates out of four preferential use gates at O’Hare: G8, G10, G12, and G14.
- They are selling G8 and G10 to American.
- One of American’s 3 Chicago O’Hare Admirals Clubs is at G8.
Spirit has cut its 32 peak daily departures at O’Hare in half. So they don’t need all four gates, and this raises cash. However they do not intend for the deal to improve their liquidity. Instead, they’re prepaying debtor-in-possession loans.
Reuters had reported on Sunday that American filed a notice of appearance in Spirit’s Chapter 11 bankruptcy case and “requested to receive all notices including operating reports, plans of reorganization and liquidation statements.” An American spokesperson said that their interest “is tied to an airport-specific agreement.”
American Airlines Concourse, Chicago O’Hare
So I went looking for the agreement. American Airlines is now a contract counterparty in the Spirit bankruptcy (making them a “party in interest” to be on the service list).
Spirit has told the market that “the value maximizing outcome [of its bankruptcy] may be a merger or sale of the company” and that it is engaged with “a number of interested counterparties.”
Chicago O’Hare
American lost four gates at Chicago O’Hare, and United gained five, as part of a re-allocation process based on flight volumes at the airport. American Airlines sued to stop the re-allocation, and has a strong argument that it was done two years earlier than permitted under the airport’s use and lease agreement based on construction timing.
However, a court refused to grant an injunction (suggesting – as I wrote I expected – money damages to be calculable and sufficient if the airline prevails). The gate reallocation went ahead October 1, appearing to permanently disadvantage American’s growth at the airport.
American Airlines, Chicago O’Hare
The carrier simply failed to restore its capacity at Chicago O’Hare coming out of the pandemic, focusing on other airports. And it’s no clear that they would have had the aircraft to do so, in any case, having retired too many (Boeing 757s, 767s, Airbus A330s and Embraer E190s) during Covid and having grounded regional jets in part due to a pilot shortage. United built back its schedule and gained an even greater durable advantage.
American Airlines Vice Chair Steve Johnson acknowledged in the spring that American will “probably always be second place in Chicago.”
American Airlines Boeing 787-8, Chicago O’Hare
This move, though, helps to mitigate the airline’s losses there. And though United Airlines CEO (and former American Airlines President) Scott Kirby has publicly predicted American’s de-hubbing at the airport, this move underscores a continued commitment.
Smart move, although of course in the lawsuit for monetary damages, AA just provided contemporary evidence of what the fair market value of a gate is at O’Hare.