"O'Hare Expansion Benefits Out Of Line, Says Aviation Analyst"

Wednesday, May 19, 2004

O'Hare Expansion Benefits Out Of Line, Says Aviation Analyst
By JEFF BORGARDT
The Prospect Heights (IL) Journal


A new study has called into question the economic benefits of the
multi-billion dollar O'Hare Airport expansion project.

An analysis by Washington D.C.-based aviation consultant Jon Ash
contends that O'Hare expansion's economic benefits of 195,000 new jobs
and $18 billion in spending have been overstated. Ash discussed his
report at the City Club of Chicago May 17. The report focuses on the
dire fiscal strains of major airline carriers.

United and American Airlines lease about 80% of O'Hare's available
gates. However, United is in bankruptcy and American is also facing
financial problems.

Ash argues that these carriers are therefore unable to underwrite the
$14.8 billion expansion.

Such a major investment would lead to rising airfares, a move the
carriers are loathe to take due to increased competition from low cost
airlines at Midway Airport on the southwest side of Chicago.

Proponents of expansion, on the other hand, point to recent growth in
the number of passenger fliers and the likely inability of Midway to
handle more flights in the future.

Ash also points to what economists call "elasticity of demand." In other
words, customers can substitute or exchange auto, bus or train travel
for jet air travel. Thus, air carriers must attempt to keep costs down.
A large facilities upgrade at O'Hare runs counter to keeping costs down
for the airliners, claim expansion opponents.

According to the new study, if the O'Hare Modernization project, OMP,
were implemented today. it would drive the 2012 per passenger cost at
O'Hare to more than $26 from the current rate of $9.

It also would increase the carriers' airport cost-to-revenue ratio from
5.4% to more than 13%, a level normally considered unacceptable in the
airline business.

Elk Grove Village Mayor Craig Johnson has been the most vocal opponent
of O'Hare expansion.

"How much more evidence does Chicago need to finally acknowledge that
the O'Hare expansion plan fails on just about every count? A truly
regional approach will demonstrate the solution to aviation capacity
growth in the Chicago area is a south suburban airport and
modernization-including western access," said Johnson. "But not
expansion of O'Hare."

In February, the City of Chicago revised cost estimates for the airport
upgrade plan to $14.8 billion.


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