A closer look at the O’Hare Modernisation Programme with Carole Brown
Right in the middle of the United States of America, Chicago occupies a special place in the global aviation network. Now that the Midway Modernisation Programme is almost complete, the city turns its attention to O’Hare International Airport – a rare dual hub airport. GAD365 catches up with the City of Chicago’s Chief Financial Officer Carole Brown to find out more about the programme and the partnerships that stands behind it.
Last year when we were negotiating a new use and lease agreement, we looked at it as an opportunity to reimagine the terminal space and the passenger experience at O’Hare International Airport. As you know, over the past decade, we have been doing the runway reconfigurations at the airport. And by reconfiguring the runway, we got a series of parallel runways. We built them, and we will continue to build them as part of our OMP – O’Hare Modernisation Programme – to end up with a runway configuration that dramatically improves the capacity of O’Hare, but also opens up for terminal expansion. OMP is really about the runway and aeronautical redevelopment.
Once we completed that, we were at the end of our 35-year use and lease agreement. Renegotiating that agreement gave the airport the opportunity to add gates so that we could provide preferential gates to carriers other than American Airlines and United Airlines while also expanding the gate capacity for American and United, which they both wanted. We took this as an opportunity to ask ‘What should O’Hare look like for the 21st century and beyond?’. That’s what this new programme symbolises.
Yes, it’s all about the passenger experience. It’s all about the terminal redevelopment. If you’ve ever flown into O’Hare, you know that if you are flying internationally, you’ll land at our customs facility at terminal 5. But terminal 5 is a considerable distance away from terminal 1 and 3, United Airlines and American Airlines, respectively. What that resulted in is that as domestic traffic was growing along with the US’ domestic airport, the international traffic lag grew. Our two biggest carriers, American and United, had a hard time connecting international traffic from O’Hare because of the distance to the domestic terminals. So generally, if they were doing international connections, they’d just do it at another one of their hub airports because at O’Hare, terminal 5 connections to terminal 1 or 3 for domestic flights is just more time than if they did it through Dallas or Denver.
So the new O’Hare will have a global international terminal and smack down in the middle of the airport near where terminal 2 is. You’ll have seamless international connections to our two biggest carriers in terminal 1 and 3. It’ll be the first global terminal of its kind, but we will make 5 an international and domestic terminal. By doing that, we are going to improve the passenger experience as well as operations for our two largest carriers. We expect that that will allow us to grow international traffic from O’Hare while also adding about 25% more concession space. We think our state-of-the-art baggage handling facilities will add a lot to passenger experience but we are also laying the groundwork for future expansions so that we can easily add new satellite concourses all the way to the Western edge of the O’Hare field. And we’re still open to the potential of having a Western access terminal in future plans for O’Hare. It’s really exciting.
Yes, and we did it in partnership. As you know, airport developments need to be done in partnership with the airlines. With United, American, and our other airline partners at the table, we knew that the development is something that the airlines fully support, and that’s important as we launch the next phase of O’Hare.
As you know, the city owns O’Hare and Midway, and we have a great Department of Aviation that manages the two airports. We started negotiations approximately two years before the use and lease agreement expired. I think that period of negotiations and the willingness to take our time to listen to their issues and to try and craft an agreement that allows for growth for our two largest carriers was important. We are one of the few airports in the world that operates as a dual hub. So it is challenging to negotiate when you have two carriers that have almost equal participation at the airport.
We also wanted to offer and allow growth for our other carriers, like Delta, who have increased operations at both Midwest and O’Hare. We wanted to make sure that we created a situation where we could support all other carriers and their alliance partners while creating an opportunity for gate expansion for the other carriers. To do that, we had to start negotiations early and stay at the table even when things got a little heated.
What made it easier though is that we all had the same goal, and that is a modernised O’Hare with a better passenger experience so that we can remain competitive going forward.
The airlines industry is very competitive. Given the importance of O’Hare in the world-wide aviation system, the greatest challenge was trying to adjust the interests of all of our carriers while taking into account the real competitive nature of the airline industry and doing what’s best for the city and O’Hare.
I think the airlines prefer to maintain control and it’s in the city’s interest to have a certain level of control over its airport. That’s a natural tension. But again, because we all have the goal of wanting to see a much-needed terminal improvement at the airport, that made it easier.
I think the Chicago market is very low-key, but we have three major carriers that operate out of here. O’Hare has American and United; in Midway, we have this amazing partnership with Southwest Airlines.
Southwest has been an incredible partner. They have worked with the city to invest a great deal into the development of terminal space. We’ve done the airside improvements, so we are done with major capital projects at Midway. We’re doing a new parking facility right now; we’ve improved the concession area; we’ve done some terminal improvements; we’ve just redone our concessions agreement, so we’re adding new concessions to the new space.
We don’t have a cannibalisation of demands of the two airports. They serve slightly different markets. Southwest has a little bit over 80% of the gates at Midway, so there’s a really complimentary air service in the two airports. We’re just really lucky.
For us, we are smack down in the middle of the country. We have the competitive advantage of being able to connect. We fly everywhere in the world from O’Hare and Midway, so I think that airlines understand and appreciate it as part of their business plan. That has helped as we talked about a vision for investment into O’Hare, and that is the competitive importance of O’Hare to the global aviation system, which I think makes it easier for the city to negotiate investment into the airports with our carriers.
We’re really lucky, but our challenge is to make sure that we continue to invest in this really important asset for the city.
I think investors in general like US infrastructure projects. They know the importance of transportation infrastructure, so we found that there is a lot of demand for O’Hare bonds and infrastructure. As we communicated the importance of O’Hare in the overall system, investors understood why it is a good bet to invest in O’Hare because they see what we are doing to ensure the long-term viability of the airport.
"We’re so internally focused here, so I am looking forward to hearing about what else is going on in other airports across the country. My good friend Mike Minerva, American Airlines, will be on the panel with me where we will be talking about the use and lease agreement at O’Hare. I’m looking forward to hearing from the airlines because they give us a great amount of insight on where they’re growing and what they’re looking for, and that really informs how we plan for development projects in the future. I also want to see how people are dealing with this really exciting and competitive time for airports."
Carole Brown Chief Financial Officer City of Chicago
13-14 May 2019 | Chicago IL
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