American Airlines should give a little on new Charlotte lease deal

In a poker game, part of the thrill lies in guessing just how strong your opponent’s hand is before you put your cash on the line.

No such thrills exist for city of Charlotte officials negotiating American Airlines’ new lease at Charlotte Douglas International Airport. All players in this particular game know full well who holds the high cards.

That would be American, which operates more than 90 percent of daily flights at the airport and has been cited by the Charlotte Chamber as a prime factor behind the generation of 27,000-plus local jobs and $2.1 billion in annual wages and benefits since 2009.

That’s leverage. In spades.

The only real question facing city officials is this: How can they cut a respectable deal while negotiating from an unenviable position of weakness?

A similar dynamic played out between the city and the Carolina Panthers several years ago. The NFL team sought city and state money to pull off $250 million in stadium improvements, and was willing to exchange that for a 15-year commitment to stay in Charlotte.

City officials were so eager to please that they sought the General Assembly’s approval for a 30-year food and beverage tax hike that would not only pay for immediate renovations at Bank of America Stadium, but possibly build a new stadium in a decade or so.

State lawmakers said no, so the team settled in 2013 for a scaled-down package of $87.5 million. The city settled for a six-year “tether” tying the franchise to Charlotte.

No one ever seriously thought the city would let its prized NFL franchise slip away. The Panthers are worth $1.56 billion, according to Forbes magazine, but with other cities salivating for pro football, Charlotte had little room to play hardball.

The city’s in the same weak position with American, whose bustling hub rival cities would love to steal. But American, like the Panthers, can afford to take less than its raw leveraging power might ideally command.

The airline has already had a great year in North Carolina. Not only did it turn back efforts to end a state tax break on jet fuel, American saved itself millions annually by killing the underlying tax itself.

City officials should remind the airline of that. They should also note that Charlotte remains one of the cheapest places for American to operate. And, perhaps most critically, that the carrier seeks to shrink its 30-year lease to a five- or 10-year agreement.

In exchange for asking the city to give up that kind of long-term stability, American should sweeten its offer in other places. Perhaps a reconfiguring of the revenue-sharing arrangement, which currently sends 40 percent of profits from concessions and parking sales to American and other airlines? Maybe supporting a few more gates for low-cost air carriers?

American is very good for Charlotte’s economy. But Charlotte is also very good for American’s bottom line. The airline, like the Panthers, is in position to demand a lot.

But if it wants to be a good corporate citizen, it ought to follow the Panthers’ example and settle for something less than what it might optimally want – especially if it isn’t willing to sign a long-term deal.

This story was originally published January 3, 2016 at 11:00 AM with the headline "American Airlines should give a little on new Charlotte lease deal."