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So That's What Happened! United and American Playing Hardball with O'Hare Expansion

We followed the saga of Virgin America's failed attempt to get gate access at Chicago's O'Hare Airport because it was interesting to see the negotiations and political maneuvering it takes to enter a new market. In the end, the retro-styled airline was unable to reach a deal with United and American, who currently control most of the gates, so they gave up and launched service to Boston instead. Now a few details are emerging as to what might have happened, lifting the veil on a complex and sharp-elbowed process and making us wonder why anybody would want to enter the airline industry these days.

A recent story from Chicago Business points out that the O'Hare hopes to build additional runways and possibly a new terminal as well, but it needs the financial assistance from United and American to do so. The airlines, for their part, are willing to lay down some money for the runways, but in exchange, they hope to extend their master use agreements, which state who gets what gates, and how much they have to pay for them. In other words, they desperately want to hang on to their gates and shut out upstarts like Virgin America, who could wreak havoc with their snazzy planes and competitive pricing, and they're willing to use the airport expansion as a bargaining chip.

Consumer advocates and the City of Chicago would both like to see more shared-use gates at the airport, but that doesn't seem likely in the foreseeable future. The gates are just too darn valuable to give up, even during periods of sluggish demand for air travel. The parties are now in negotiations to get work started on the runways - which are sorely needed at this delay-prone airport - and hope to have a deal soon.

The bottom line? Stay tuned for more drama, and expect a few delays until the new runways are completed.

[Photo: Chicago Clout]

Related Stories:
· UAL, American Offer to Fund O'Hare Runway Work, But At a Price [Chicago Business]
· Virgin America Coverage [Jaunted]