Aug 27, 2002
From the Denver Post:

City supports United but prepares for the worst
Webb makes plans he hopes not to use
By Aldo Svaldi

Denver officials are talking to the major airlines to devise a backup plan should United Airlines fail. As much as you cheer for United, you have to play the what-if game, Denver Mayor Wellington Webb said on Monday.

Denver Aviation Director Bruce Baumgartner and economic development chief Ron Bernstein were in Houston on Monday meeting with executives of Continental Airlines, whose chief executive has expressed an interest in expanding at Denver International Airport.

And Webb met with Frontier airlines CEO Jeff Potter last week.

City officials also plan to talk to Delta, Northwest and American airlines, Webb said, even as it continues to support United''s effort to emerge from bankruptcy.

Every day that goes by makes those contingency plans moot, said United spokesman Chris Brathwaite. Because we are taking significant steps forward in our reorganization.

United has made significant progress in bankruptcy court over the past several weeks, striking agreements with four of its six unions to help reduce expenses.

Still, the war in Iraq and the outbreak of severe acute respiratory syndrome, or SARS, have cut air travel and hurt an already struggling industry.

Philip Baggaley, an airline bond analyst with Standard & Poor''s, said recently that United could default on its bankruptcy loans by the end of May, if not sooner.

City officials would not provide specifics on whether other carriers had committed to DIA should United falter.

It was a matter of the city wanting to learn more about our plans and how we might fill in if there were opportunities created by United failing, said Elise Eberwein, spokeswoman with Frontier.

Frontier would like to get more gate space on Concourse A to accomodate additional flights, but it can''t because United holds those gates, she said.

For now, Denver finds itself in a difficult position, wanting to support an airline that accounts for nearly two-thirds of the traffic at DIA but not wanting to be exposed should its dominant carrier fail.

We want United to make it, Webb emphasized.

Denver and United continue to talk, but Webb added that he hasn''t found the same rapport with new CEO Glenn Tilton that he had with past United chief executives.

United officials, however, characterize the situation differently.

We are in constant communication with the city updating them on our progress, Brathwaite said. We have a very good relationship with the mayor.

The mayor says his effort is necessary no matter what happens. Should United survive, chances are it will emerge a much smaller airline flying to fewer cities.

United has even broached the possibility of eliminating certain hubs, including Denver. Under that scenario, as with a liquidation, Denver would need to find airlines willing to serve the routes United drops.

Airline analyst Michael Boyd said success in that effort would depend on the airlines'' need for DIA, not on Denver''s efforts to attract them.

There are airlines that already have plans, Boyd said. It is a thinly veiled secret that Continental has a great interest.

Boyd said he could envision a scenario where Continental moves flights out of its Cleveland hub and Delta transfers flights now heading through Salt Lake City.

Denver has a better chance of getting a replacement for United than Chicago, Boyd said.

But even if replacements step in, DIA will still see only a fraction of the 400 flights United provided, he said.

The mayor said his goal is to find a carrier or carriers willing to make Denver a hub. Denver would have some say in that process through its control of gates that United would return in a liquidation.

What I wouldn''t want to have happen is to have some airlines come in and cherry pick, Webb said.

Few airlines have the financial strength to add capacity in this market, Boyd said, but some might take advantage of the vacuum in Denver.

Denver, facing its own financial bind, has had to ratchet down its costs at DIA. The city can''t offer airlines much in economic incentives or tax breaks. One break under discussion is the elimination of a tax on aircraft equipment that generates $5 million a year in taxes.

But the city is loath to give up revenues without some kind of guarantee - in the case of United, a commitment to keeping flights in Denver.

We need to get something back, Webb said.

Other United officials were not available for comment. Continental declined to comment.

Although he once worried about a world with United, Webb said he is now convinced others will step up.

We believe the geographic location of Denver makes it a prime location for another airline, Webb said.
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Would we be in violation of Federal restrictions on the code-share agreement with United if U and UAL were to share DIA and co-hub there? U would be able to start relatively small and UAL would be able to protect its territory and receive feed revenue. This would keep Frontier from grabbing gates for LCC use and would also keep OALs at bay.

Frontier seems to be the Southwest in Denver. I book many many flights to florida, nevada, and other destinations. Would love to put people on UA and hence US but Frontier has rates much much lower-ow and rt-to any destination I try to book on UA. Seems their fare structure is liken to WN. ow fares are about 1/2 of UA ow fares. Good luck to all
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Cosmo said:

The article above mentions AA, CO, DL, F9, NW and UA as carriers that the Denver mayor is (or soon will be) talking to. Why not US? Somebody in CCY should be pro-active and give the mayor a call!

DCAflyer responds:

Cosmo, I agree. Of those mentioned, however, AA will in all likelihood be in C-11 in a couple of months. DIA is too close to DL''s hub at SLC, so I don''t think they''d be interested in such a massive commitment at DIA. CO has shown some interest in resuming a Denver hub. But you are correct, Dave should be on the horn right now with the folks in Colorado. I think our best best is to work an arrangement with UAL, however, to comingle in that facility and set up a crew base. U and UAL can work out a deal as to who flies where from DIA and which flights to codeshare.
The article above mentions AA, CO, DL, F9, NW and UA as carriers that the Denver mayor is (or soon will be) talking to. Why not US? Somebody in CCY should be pro-active and give the mayor a call!