KC offers deal to try to keep American Airlines base, jobs
By RANDOLPH HEASTER
The Kansas City Star
Kansas City has offered up to $200 million in revenue bonds and a partially rent-free lease to help American Airlines modernize its overhaul base and save 2,000 area jobs.
Under an aggressive incentive deal unveiled Thursday afternoon, the city offered to provide $4.5 million annually to help pay off the bonds. It also offered to help make those bonds more marketable to investors by using an existing bond extension and retirement account.
The city also offered a rent-free lease on the city-owned facility for the first five years.
In a letter delivered to David Campbell, American''s vice president of the Kansas City base, Mayor Kay Barnes said the city is offering the financial aid package in an attempt to become long-term partners with the struggling airline.
The proposal was made two days after American said it was reviewing its operations for possible downsizings and consolidations, fueling a high-stakes bidding war among several cities hoping to retain facilities and employees. The airline said it was examining its maintenance operations in Kansas City; Tulsa, Okla.; and Fort Worth, Texas; and hub operations in St. Louis, Chicago and Dallas-Fort Worth.
Given that Tulsa is home to American''s biggest maintenance facility and that Fort Worth is American''s corporate headquarters, the Kansas City facility is widely considered the most likely target if American decides to close a maintenance operation. The Kansas City base employs about 2,000 of roughly 2,300 American employees in the area.
American currently pays the city $1 million annually to occupy the maintenance center at Kansas City International Airport. The lease expires at year''s end.
If American agrees to a new long-term lease, Barnes said the city would issue $100 million in voter-approved, airport revenue bonds to upgrade and modernize the 1.8 million-square-foot facility.
In addition, American would not be required to make lease payments on the base for the first five years. Lease payments would begin in the sixth year, with American covering the total value of the lease through payments until the lease''s expiration.
Among other incentives, Kansas City would:
• Provide $4.5 million annually to cover a portion of the debt service on the bonds once payments begin.
• Provide credit enhancement for the bonds through its Bond Extension and Retirement Account, which gives the city the option to pay off the bonds in case of default.
• Make an additional $100 million in airport revenue bonds available to fund the construction of a new, state-of-the-art engine shop at the base.
The engine shop would accommodate American''s Boeing 737 fleet, which is regarded as one of the airline''s principal domestic aircraft for the future. American executives discussed creating a new engine shop in Kansas City following the company''s acquisition of bankrupt Trans World Airlines in 2001.
In her letter, Barnes also hinted that state and federal assistance may be forthcoming.
We are currently in active discussions with (Missouri) Gov. (Bob) Holden regarding the appropriate role the state of Missouri can and will play in securing your future in Kansas City, the mayor wrote. We are also in contact with our congressional delegation regarding this matter. We look forward to sharing additional details with you soon.
In a briefing at City Hall Thursday, Barnes said Kansas City has plenty to offer American, including a productive work force at the overhaul base. She said the weakness, however, is the condition of the aging facility.
I am confident that we are pursuing this in an appropriate way, Barnes said.
American said it is studying Kansas City''s proposals along with ones submitted by other cities around the country.
We appreciate the efforts of Mayor Barnes and the city, and we are evaluating how this proposal could fit into our plans to return American to financial stability, said airline spokesman Todd Burke.
Earlier this week, American Chief Executive Gerard Arpey said decisions on American''s flight operations and facilities would be made soon. However, talks with various cities are continuing.
There is no firm deadline for making a decision, said Carlo Bertolini, also an American spokesman.
Financial turmoil has engulfed the airline industry since shortly after the merger of American and TWA in 2001, just months before the Sept. 11 terrorist attacks.
American this week furloughed more than 3,100 flight attendants, including 1,778 who once worked for TWA, as part of its ongoing efforts to shed costs and survive financially. The company narrowly averted bankruptcy this spring, when it won $1.8 billion annually in labor concessions. The worker cutbacks were part of a plan to reduce annual costs by $4 billion.
Although American has stated that no final decisions have been made, its public hand-wringing has sparked a bidding war of sorts among city and state leaders around the country hoping to save jobs in a sour economy.
Kansas City and Tulsa leaders traveled to American''s corporate headquarters last week and held separate meetings on their maintenance bases. American also met with Missouri officials Monday to discuss the operations in Kansas City and St. Louis.
In Tulsa, where American employs more than 8,300 people, community leaders have proposed a sales tax that would give American Airlines $22.3 million to make improvements to that city''s maintenance facility. The city also is looking at providing $8 million in utility cost breaks for the airline, according to recent reports in the Tulsa World.
Kansas City''s incentive package potentially dwarfs the one made by Tulsa, depending on final terms of the bond issues and lease agreement. But Tulsa''s maintenance facility generally is regarded to be in better condition. The base is 3.8 million square feet and is believed to be the biggest in the world.
In Fort Worth, city leaders have told the Fort Worth Star-Telegram they plan to meet with airline officials later this month to discuss potential incentives to retain the locally based company''s operations in the city.
American has more than 28,000 employees in the Dallas-Fort Worth area, including a maintenance facility at Alliance Airport that employees about 2,300 people.
As in Kansas City, American leases the city-owned maintenance facility in Fort Worth, which has allowed the airline to avoid tens of millions of dollars in property taxes. The facility also benefits from a 15-year, 100 percent property tax abatement on personal property such as machinery, parts and inventory. That abatement, which is scheduled to expire in 2005, has saved American nearly $5 million.
According to Wednesday''s USA Today, Fort Worth Mayor Mike Moncrief said he met with Arpey and was told not to worry about the Alliance Airport base.
Such reports have heightened concern about the future of the Kansas City base, particularly since American has only operated it since acquiring TWA in April 2001.
To contact Randolph Heaster, call (816) 234-4746 or send e-mail to [email protected].
By RANDOLPH HEASTER
The Kansas City Star
Kansas City has offered up to $200 million in revenue bonds and a partially rent-free lease to help American Airlines modernize its overhaul base and save 2,000 area jobs.
Under an aggressive incentive deal unveiled Thursday afternoon, the city offered to provide $4.5 million annually to help pay off the bonds. It also offered to help make those bonds more marketable to investors by using an existing bond extension and retirement account.
The city also offered a rent-free lease on the city-owned facility for the first five years.
In a letter delivered to David Campbell, American''s vice president of the Kansas City base, Mayor Kay Barnes said the city is offering the financial aid package in an attempt to become long-term partners with the struggling airline.
The proposal was made two days after American said it was reviewing its operations for possible downsizings and consolidations, fueling a high-stakes bidding war among several cities hoping to retain facilities and employees. The airline said it was examining its maintenance operations in Kansas City; Tulsa, Okla.; and Fort Worth, Texas; and hub operations in St. Louis, Chicago and Dallas-Fort Worth.
Given that Tulsa is home to American''s biggest maintenance facility and that Fort Worth is American''s corporate headquarters, the Kansas City facility is widely considered the most likely target if American decides to close a maintenance operation. The Kansas City base employs about 2,000 of roughly 2,300 American employees in the area.
American currently pays the city $1 million annually to occupy the maintenance center at Kansas City International Airport. The lease expires at year''s end.
If American agrees to a new long-term lease, Barnes said the city would issue $100 million in voter-approved, airport revenue bonds to upgrade and modernize the 1.8 million-square-foot facility.
In addition, American would not be required to make lease payments on the base for the first five years. Lease payments would begin in the sixth year, with American covering the total value of the lease through payments until the lease''s expiration.
Among other incentives, Kansas City would:
• Provide $4.5 million annually to cover a portion of the debt service on the bonds once payments begin.
• Provide credit enhancement for the bonds through its Bond Extension and Retirement Account, which gives the city the option to pay off the bonds in case of default.
• Make an additional $100 million in airport revenue bonds available to fund the construction of a new, state-of-the-art engine shop at the base.
The engine shop would accommodate American''s Boeing 737 fleet, which is regarded as one of the airline''s principal domestic aircraft for the future. American executives discussed creating a new engine shop in Kansas City following the company''s acquisition of bankrupt Trans World Airlines in 2001.
In her letter, Barnes also hinted that state and federal assistance may be forthcoming.
We are currently in active discussions with (Missouri) Gov. (Bob) Holden regarding the appropriate role the state of Missouri can and will play in securing your future in Kansas City, the mayor wrote. We are also in contact with our congressional delegation regarding this matter. We look forward to sharing additional details with you soon.
In a briefing at City Hall Thursday, Barnes said Kansas City has plenty to offer American, including a productive work force at the overhaul base. She said the weakness, however, is the condition of the aging facility.
I am confident that we are pursuing this in an appropriate way, Barnes said.
American said it is studying Kansas City''s proposals along with ones submitted by other cities around the country.
We appreciate the efforts of Mayor Barnes and the city, and we are evaluating how this proposal could fit into our plans to return American to financial stability, said airline spokesman Todd Burke.
Earlier this week, American Chief Executive Gerard Arpey said decisions on American''s flight operations and facilities would be made soon. However, talks with various cities are continuing.
There is no firm deadline for making a decision, said Carlo Bertolini, also an American spokesman.
Financial turmoil has engulfed the airline industry since shortly after the merger of American and TWA in 2001, just months before the Sept. 11 terrorist attacks.
American this week furloughed more than 3,100 flight attendants, including 1,778 who once worked for TWA, as part of its ongoing efforts to shed costs and survive financially. The company narrowly averted bankruptcy this spring, when it won $1.8 billion annually in labor concessions. The worker cutbacks were part of a plan to reduce annual costs by $4 billion.
Although American has stated that no final decisions have been made, its public hand-wringing has sparked a bidding war of sorts among city and state leaders around the country hoping to save jobs in a sour economy.
Kansas City and Tulsa leaders traveled to American''s corporate headquarters last week and held separate meetings on their maintenance bases. American also met with Missouri officials Monday to discuss the operations in Kansas City and St. Louis.
In Tulsa, where American employs more than 8,300 people, community leaders have proposed a sales tax that would give American Airlines $22.3 million to make improvements to that city''s maintenance facility. The city also is looking at providing $8 million in utility cost breaks for the airline, according to recent reports in the Tulsa World.
Kansas City''s incentive package potentially dwarfs the one made by Tulsa, depending on final terms of the bond issues and lease agreement. But Tulsa''s maintenance facility generally is regarded to be in better condition. The base is 3.8 million square feet and is believed to be the biggest in the world.
In Fort Worth, city leaders have told the Fort Worth Star-Telegram they plan to meet with airline officials later this month to discuss potential incentives to retain the locally based company''s operations in the city.
American has more than 28,000 employees in the Dallas-Fort Worth area, including a maintenance facility at Alliance Airport that employees about 2,300 people.
As in Kansas City, American leases the city-owned maintenance facility in Fort Worth, which has allowed the airline to avoid tens of millions of dollars in property taxes. The facility also benefits from a 15-year, 100 percent property tax abatement on personal property such as machinery, parts and inventory. That abatement, which is scheduled to expire in 2005, has saved American nearly $5 million.
According to Wednesday''s USA Today, Fort Worth Mayor Mike Moncrief said he met with Arpey and was told not to worry about the Alliance Airport base.
Such reports have heightened concern about the future of the Kansas City base, particularly since American has only operated it since acquiring TWA in April 2001.
To contact Randolph Heaster, call (816) 234-4746 or send e-mail to [email protected].
