Save Money in this Sunday's paper

comments

US Airways lease hinges on Charlotte Douglas airport director

By Ely Portillo and Steve Harrison
elyportillo@charlotteobserver.com sharrison@charlotteobserver.com

US Airways wants a major role in selecting the next airport director at Charlotte Douglas International – an official who will then negotiate a new master lease with the airline worth potentially hundreds of millions of dollars.

The airline’s current 30-year master lease expires in 2016.

Chief executive Doug Parker has said that US Airways, as the biggest tenant at Charlotte Douglas, should have a seat on the selection committee or be able to name candidates for consideration to succeed longtime airport director Jerry Orr.

The airline’s role in that selection has emerged in recent weeks amid a controversial push in the state legislature to take control of the airport from the city and transfer it to a new, independent authority.

Whether Charlotte Douglas is controlled by the city or an independent authority, US Airways’ preponderance at the airport virtually guarantees it some influence.

But that stance raises questions for some.

“There is such a thing as too much influence,” said UNC Charlotte business ethics professor Denis Arnold. He said US Airways should have some kind of role in determining qualifications for candidates to replace Orr, but said it was “certainly unreasonable” for the airline to expect to choose someone with whom it will negotiate a major deal.

Master leases at airports cover everything from expansion projects to landing fee rates. All of those will be up for negotiation.

In the case of Charlotte Douglas, the lease also includes a lucrative agreement for sharing concessions revenue, which paid US Airways $10.4 million last year. That largely offset the $17.6 million worth of landing fees the airline paid.

At 72, Orr has hinted he might retire in the coming year. The issue of his replacement has been one of the driving factors behind a push to transfer control and ownership of the airport.

Former city manager Curt Walton last year told the airline it wouldn’t have a large role in picking Orr’s successor, according to authority supporters.

An airline representative met privately with supporters of an authority last year and forwarded draft legislation to a businessman involved with the push. The airline has since said it eventually declined to join the effort.

Charlotte Mayor Anthony Foxx has said he supports giving US Airways a role in the selection.

Behind-scenes lobbying

Susan Warner Dooley is a consultant and former airport executive who has worked at Miami’s airport and the Port Authority of New York and New Jersey. She said when hub airports dominated by one carrier need a new director, the largest airline typically lobbies business leaders and elected officials.

“Frequently it’s behind the scenes,” she said. “But I don’t think they are on the selection committee.”

For example, American Airlines isn’t on the selection committee for a new airport director at Dallas/Fort Worth International Airport, another major hub.

Warner Dooley said US Airways has been a major fan of Orr’s low-cost approach to running Charlotte Douglas.

“US Airways is in love with Jerry,” she said. “They will often say they have to lobby him to build things, because Jerry doesn’t like to spend money.”

She said that the concession revenue-sharing arrangement at Charlotte Douglas isn’t unique, and estimated that about 75 percent of major airports have similar arrangements. However, the terms can vary widely. For example, if an airline actually builds a terminal, as with Delta Air Lines at Cincinnati’s airport, it typically keeps all concession revenue from that terminal.

Orr said Monday that the airport has already had informal talks with tenants about a new master lease. He was not available to talk Tuesday, Orr’s office said. A US Airways executive said the company hasn’t started formal negotiations yet.

Authority or city?

A bill to transfer control of Charlotte Douglas to a 13-member regional authority is awaiting final approval in the N.C. House.

US Airways operates about 90 percent of daily flights at Charlotte Douglas, its busiest hub. US Airways will operate even more of the daily flights, close to 94 percent, once the company completes its pending merger with American Airlines. Charlotte will be the combined airline’s second-busiest hub, behind only Dallas/Fort Worth.

A city-funded consultant said last week that the authority bill should be changed to include more local representation on the proposed Charlotte Airport Authority board. Bob Hazel wrote that local business organizations could be given the right to appoint board members.

Hazel said that US Airways shouldn’t have a direct appointment to the board, as this would be a clear conflict of interest.

But he said local business groups such as the Charlotte Chamber could appoint some members. US Airways is a member of the chamber.

All of the airlines that use Charlotte Douglas will negotiate a new lease together as part of a committee, chaired by US Airways.

Mike Minerva, US Airways’ vice president of legal and government affairs, said negotiations over the new lease could take months or longer. He said the biggest factor in dragging out such negotiations is typically when one of the parties wants to make major changes to the lease.

“Usually the big factors that can make these negotiations take a long time are whether there are significant changes to the business terms of the lease,” Minerva said. “Then you’re tearing it apart, putting it back together.”

Catherine Anderson, a business ethics professor at Queens University, said it’s not a bad idea to give US Airways a voice in choosing the next aviation director.

Its input should be balanced by other people involved in the selection process, she said.

There is some benefit to having the airline lobby openly for a role in the selection, rather than doing things in secret, Anderson said.

“That the airline has asked openly for a voice in the selection is probably better than a closed-door deal outside the public’s sight,” she said.

CITY WEIGHS LEGAL ACTION

The Charlotte City Council and Mayor Anthony Foxx met in closed session Tuesday to discuss possible legal action the city could take if the General Assembly transfers control of the airport to an authority without taking into consideration the changes recommended by a consultant, according to an official familiar with the discussion.

Last week, a consultant hired by the city, Bob Hazel, said Charlotte Douglas International Airport should be run by an authority instead of the city. But he also criticized the current legislation pending in Raleigh, and said the city of Charlotte should have more members on the proposed authority board.

The city has declined to say what legal action it might take. One possibility is appealing to the Federal Aviation Administration, which must sign off on all airport transfers of ownership. Other cities that have lost control of their airports, such as Asheville, have appealed to the FAA to stop transfers.

A new wrinkle in the city’s fight to keep its airport is that Foxx could soon be U.S. Transportation Secretary, who oversees the FAA. President Obama nominated Foxx for the job Monday. The mayor must be confirmed by the Senate. Steve Harrison

Portillo: 704-358-5041; Twitter @ESPortillo
Hide Comments

This affects comments on all stories.

Cancel OK

The Charlotte Observer welcomes your comments on news of the day. The more voices engaged in conversation, the better for us all, but do keep it civil. Please refrain from profanity, obscenity, spam, name-calling or attacking others for their views.

Have a news tip? You can send it to a local news editor; email local@charlotteobserver.com to send us your tip - or - consider joining the Public Insight Network and become a source for The Charlotte Observer.

  Read more



Hide Comments

This affects comments on all stories.

Cancel OK

The Charlotte Observer welcomes your comments on news of the day. The more voices engaged in conversation, the better for us all, but do keep it civil. Please refrain from profanity, obscenity, spam, name-calling or attacking others for their views.

Have a news tip? You can send it to a local news editor; email local@charlotteobserver.com to send us your tip - or - consider joining the Public Insight Network and become a source for The Charlotte Observer.

  Read more


Quick Job Search
Salary Databases