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Posted Apr 30, 2020, 9:27 PM
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Join Date: May 2006
Location: Chicago, IL
Posts: 5,612
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City officials say O’Hare’s massive $8.5 billion expansion project is moving ahead. But bleak outlook for air travel could force it to scale back.
Chicago’s aviation department insists the coronavirus pandemic won’t curtail its $8.5 billion expansion plan for O’Hare International Airport, but the unprecedented decline in airline revenues may mean the city will have no choice but to reconsider the scope and timing of the project, according to analysts.
“If the airlines can’t afford this and don’t need terminals as large as they were, the city has a fiduciary duty to the airlines and to the community not to spend money they don’t have," said Henry Harteveldt, travel industry analyst and president of the Atmosphere Research Group.
With flights canceled, jets grounded and passenger traffic plummeting because of the coronavirus, the airlines — which are being counted on to help pay for the expansion — are facing their most severe economic crisis since the Sept. 11, 2001 terrorist attacks.
Travel restrictions and concerns about the virus have brought flying to a near-halt, resulting in billions in losses for airlines. The Transportation Security Administration screened 119,629 people Wednesday, down nearly 95% from the same day last year.
American Airlines reported a $2.2 billion net loss in the first quarter of this year and United Airlines reported a $1.7 billion net loss Thursday for the first quarter. In addition to slashing flights, airlines have been scrambling to cut costs, including capital expenditures and retiring aircraft early.
“Anything that doesn’t have to be done, any type of facility things that don’t have to be done have all been taken out of the capital plan for the next two years,” American chief financial officer Derek Kerr said during a call with investors Thursday.
Other airports have already said they were considering postponing multi-billion dollar expansion plans because of the pandemic, including DFW Airport in Texas and San Diego’s international airport.
The planned O’Hare expansion, the biggest and most expensive in the airport’s 75-year history, is supposed to be finished by the end of 2028. The plans include the addition of a new Global Terminal and three new concourses, and is mostly funded by passenger fees, landing fees and other income.
“O’Hare 21 is a long-term project to meet the airport’s long-term needs, as well as to address needed investments in the future economic growth of the City,” said Chicago Department of Aviation spokesman Matthew McGrath, in an emailed statement. “The Terminal Area Plan, the centerpiece of the capital program, is still in the planning and design phase and is continuing.”
But Harteveldt said if Chicago thinks it can forge ahead with the expansion without taking into account the new fiscal reality for airlines, it’s “living in an alternate universe.”
“Never before has our airline, or our industry, faced such a significant challenge,” American Airlines Chairman and CEO Doug Parker said in a statement Thursday.
“We are continuing to work closely with our partners at the City of Chicago on all airport matters, including long-term modernization,” spokeswoman Gianna Urgo said in a statement.
United issued a statement Thursday saying it is continuing to work “extremely closely” with the city on short- and long-term planning for O’Hare.
“For now we are jointly focused on maintaining cost efficient operations at the airport during the COVID-19 crisis," the statement said. "We appreciate the City’s partnership and look forward to continuing our joint long term planning work in the near future.”
But one sign the O’Hare expansion is facing stiff headwinds occurred at Studio Gang, the Chicago architectural firm leading the team that city officials, under former Mayor Rahm Emanuel, picked last year to design the expansion.
According to a source with knowledge of the situation, Studio Gang in March laid off five employees — four architects and one support staff member — who were scheduled to work on the expansion.
The firm “internally announced a hold on the O’Hare project,” the source, who asked to remain anonymous, wrote in an email to the Tribune. “This hold came from stakeholders on the airport project.”
A spokeswoman for Studio Gang, Elizabeth Krasner, declined to respond to that version of events and said Studio Gang continues to work on the O’Hare expansion.
Studio Gang is headed by namesake Jeanne Gang, designer of the curvy Aqua hotel and residential tower and the under-construction Vista Tower, a hotel and condominium high-rise that will be Chicago’s third-tallest building when it opens later this year.
In addition to Studio Gang, the Studio ORD team consists of Chicago architects Solomon Cordwell Buenz; Dallas-based Corgan aviation architects; Milhouse Engineering & Construction of Chicago and STLarchitects of Chicago.
The expansion will consist of a new global terminal and satellite concourses. The satellite concourses are being designed under the supervision of Studio Gang by Chicago architects Skidmore, Owings & Merrill.
The airport already has started on a $1.2 billion expansion of Terminal 5, which by 2021 will have 10 new gates and 75% more space for passenger amenities. Airport officials say this expansion is needed before the larger project can begin. The city also is working on the Runway 9R extension, and finishing a new 11,245-foot east-west runway.
Harteveldt said the economic crisis facing the airline industry does not mean a new terminal at O’Hare won’t be needed, but the timeline is going to be have to be explored, and possibly subdivided into new phases.
Even if the project moves ahead at its current scale, the city should consider pausing to see whether plans need to be adjusted in response to changes in the way we travel, said Seth Kaplan, editor of Airline Weekly, which covers the aviation industry.
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