More bad news for Chicago: Financing O'Hare Airport expansion is sketchy

Proposed rebuild of Terminal 2 at O'Hare Airport

Proposed rebuild of Terminal 2 at O'Hare Airport

Crain's Chicago Business reports:

A ratings agency is warning about the financial risks that await O’Hare International Airport if it moves further ahead with a roughly $8.5 billion rebuild and expansion of terminals while the airline industry is reeling from a global pandemic.

Moody’s Investors Service yesterday gave a negative outlook on O’Hare debt, warning “the additional expected debt for the airport's planned capital expansion (will bring) its leverage and costs per enplanement well above its peers."

Enplanement costs could soar to as much as $40 per passenger by 2029 because of the expansion, according to Moody's. That would be about double what United and American airlines--the duopoly that runs O'Hare--pay at their alternate hubs of Denver and Dallas Fort Worth airports respectively.

In other words, if O'Hare gets too costly, United and American could cut service at their O'Hare hub and transfer the business to other cities, Not many people understand that airports, just like other businesses, compete each other.

For almost 20 years, the now long-gone opponents of O'Hare's original expansion warned that higher landing fees could prompt United and American to could go elsewhere. The opponents were ridiculed and crushed by the Chicago political machine, corporate biggies, labor unions and other special interests that would profit from the expansion. Even if the expansion proved--as it has--to be a boondoggle.

City officials and expansion backers, salivating over more billions to be spent on further O'Hare construction brush aside concerns, as if the airlines and not the passengers or taxpayers would have to pay more. Of course, that's bunk, especially if Chicago starts losing O'Hare business and jobs to Denver, Texas or other more efficiently run airports. They would join the costly Chicago and Illinois exodus that's costing the city and state dearly in lost revenues and jobs.

With airline traffic dramatically down, Chicago can't afford to start issuing bonds for further airport expansion. The answer, aviation experts said decades ago, is still true: Build a South Suburban Airport, instead of trying to expand the airspace- and land-constrained O'Hare. If the aviation business is to recover, there's still time to follow that good advice.

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