American Airlines and United Airlines want Chicago O’Hare’s expansion that they signed off on in 2018 slowed down – or stopped – as the project runs $1.5 billion over budget. Somehow the carriers are surprised that a massive public infrastructure project, in Chicago no less, is spending far more than originally projected?
And in fact it’s only just the ‘next phase’ where a 24% projected cost overrun totals $1.5 billion more than expected. That’s before construction on the new terminal even starts! The project’s total cost has grown from $8.7 billion to a projected $12.1 billion. So the terminal’s overrun is only one piece of an overall $3.4 billion price increase.
New Terminal Rendering, Credit: City of Chicago
New Terminal Interior Rendering, Credit: City of Chicago
The new project replaces terminal 2, which many Chicago travelers are familiar with because it’s currently where passengers are funneled via airport train to pick up rideshares. The new terminal would handle both domestic and international flights.
It’s unclear whether Chicago’s Mayor will insist that airlines honor the contract or sign off on negotiations for modifying it. American’s performance in Chicago is weaker than United’s, so United could gain territory by playing chicken with American and supporting higher costs. (Historically higher costs in Miami have helped protect American from low cost carrier competition, although that’s been less true in recent years.)
Former Chicago Mayor and current Ambassador to Japan Rahm Emanuel is publicly chastising the two airlines, saying ‘a deal’s a deal’ but they signed off on the deal at a specific price point that’s already out of control, and likely to escalate further. That’s what you get of course with public infrastructure, not least of which in a city like Chicago, so they’re naive to expect costs to line up with original projections.
Current United Airlines Terminal, Chicago O’Hare
Current American Airlines Terminal, Chicago O’Hare
Emanuel suggests that the airlines already got what they wanted – runway work – so the city should get what it wants. And that this is important to remain a competitive hub. It’s a strange take to suggest that runways are less important for maintaining a premier airport.
The point of an airport is to get somewhere quickly, at reasonable cost, not beautiful spaces and high end retail. Aesthetics aren’t worth zero but billions in cost overruns hurt Chicago’s position competing for traffic. It makes some flights unprofitable at the margin and makes other connecting hubs more desirable for airlines to use.
If anything, the one thing that makes Chicago competitive for consumers choosing to travel through there over other hubs is Tortas Frontera, the only really great food option in a U.S. airport.
Senator Dick Durbin (D-IL) is fuming though of course his interest is both O’Hare airport and roasting the airlines who loudly oppose his effort to cap credit card interchange. United CEO has been especially vocal and derisive towards the legislation. Durbin is seeking federal investigation of frequent flyer program devaluations as retribution as well.
This project was designed to accommodate growth & ensure that O’Hare remains competitive as a world-class airport, undoubtedly providing financial gains to UA & AA as a result. United & American must work in good faith w/ the City to continue w/ TAP as intended.
— Senator Dick Durbin (@SenatorDurbin) December 1, 2023
Meanwhile do we really believe United is going to pay for the new terminal at Dulles? Scott Kirby clearly thinks the concourse they operate from which was supposed to be temporary when it was built 40 years ago is good enough.
And American won’t even do a full investment at its DFW airport home. The new terminal there is only being partially built, with no check-in or security, and the C terminal is getting a refresh even though the head of the airport said it is silly to do that on the 50 year old building. The DFW CEO had argued for building a new terminal and using that capacity to tear down and rebuild C, using that as the effective airport expansion.