"United, Denver airport reach deal on failed baggage system"

Sunday, December 4, 2005

United, DIA make agreement on passengers, baggage system
The Denver (CO) Business Journal


United Airlines has agreed to increase its number of passengers connecting
through Denver International Airport and also to reduce its debt related to
the automated baggage system (ABS) equipment that made headlines when the
airport opened -- but never worked properly. 
 
United stopped using the ABS earlier this year in favor of moving bags with
a conventional tug-and-cart system. 

The airline remains responsible for the remaining debt on the ABS, $317
million, and pays DIA about $60 million in annual rent for the ABS space and
equipment. 

DIA will use its excess cash flow generated by non-airline revenues,
passenger facility charges (PFCs), and interest savings on previous and
future debt refinancing to retire or service $184 million -- more than half
of the ABS debt. 

The new agreement will reduce United's rates and charges at DIA, but won't
increase costs for the airport's other carriers. 

United's annual rates and charges are as follows: 2006, $4.9 million; 2007,
$8.5 million; 2008 through 2025 (the end of United's lease), $11 million per
year. 

If United doesn't meet a specified level of connecting passengers in any
calendar year, its rates and charges at the airport will be increased by $6
for each passenger below the commitment level. The increased level of
connecting passengers -- 7.5 million in 2006, 7.6 million in 2007 and 7.7
million in 2008 and thereafter -- will financially benefit all carriers, as
well as the airport, DIA said. 

United also canceled the construction of its proposed regional jet facility
scheduled to be built on the east end of Concourse B. This will save DIA $2
million per year through 2025. If United decides to resurrect the project,
its rates and charges benefit will be decreased by $2 million per year. 

Also according to the agreement, United will increase its 2006 gate-usage
obligation on its six Concourse A gates by one flight per day per gate, for
a total of four flights per day per gate, starting Jan. 1.


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