BY THE SEAT OF THEIR PANTS

A DESPERATE CITY WOOS A DESPERATE AIRLINE.

City of Denver airport officials are continuing to woo financially troubled MarkAir--this time with a deal that could give the Anchorage-based airline up to seven months of free rent for agreeing to put a new reservations center at Stapleton International Airport.

Despite MarkAir's precarious fiscal history, city officials and the Greater Denver Chamber of Commerce are also continuing to push for a separate $30 million "incentive package" to lure the airline's corporate headquarters to Denver. Under that deal, the city would partially guarantee loans from private lenders with fuel-tax money. Those talks have been on hold as the city attempts to sort out the baggage system at Denver International Airport, but Chamber vice president Tom Clark says MarkAir has submitted a financing proposal that he expects the city to respond to shortly.

MarkAir emerged from Chapter 11 bankruptcy just five months ago and is saddled with debts of approximately $130 million, including $10 million in de- linquent loans from the state of Alaska. The airline also owes $1.1 million in back property taxes and interest penalties to the city of Anchorage, which was among its many creditors in the bankruptcy proceedings, says Anchorage municipal treasurer Ellen Braden. MarkAir is now making payments on that debt under the reorganization plan, Braden says. However, the airline missed a $30,000 payment that was due August 15 for its 1994 taxes, says Braden. A separate $185,000 payment was due today, she says. "We are monitoring it closely and will consider any action if the payment isn't made," she adds.

Meanwhile, the airline is funding an aggressive ad campaign touting itself in Denver.

The airline's controversial owner and chairman, self-made entrepreneur Neil Bergt, has fought a long battle with the Federal Deposit Insurance Corporation over $6.2 million in unpaid bank loans dating from the mid-1980s. The government won a court judgment against Bergt in 1992, and in the summer of 1993, four U.S. marshals were sent to the businessman's opulent homes in Alaska and California to seize personal property including a Cartier watch, sterling-silver flatware and expensive artwork. According to FDIC spokeswoman Cherron McIntosh, the government and Bergt have not yet reached a settlement in the case.

However, if a hurriedly negotiated lease for a MarkAir reservations center at Stapleton is any indication, Mayor Wellington Webb's administration remains gung-ho about landing Bergt's airline, which once helped make ends meet by flying supplies to the Nicaraguan Contras.

The city's new deal with MarkAir would allow the airline to lease 10,175 square feet at Stapleton for just $4 per square foot--and then roll those payments into future rent payments should it decide to keep the center at Stapleton once DIA opens. That would effectively give the airline seven months of free rent, confirms Errol Stevens, who heads the mayor's Stapleton 2000 redevelopment agency. The phone center would be located in the city's empty New Airport Office, built by former mayor Federico Pena for the professionals planning DIA.

"It's very important to the citizens of this community that we attract any viable airline business to this community," says Stevens. The going rate for other airline tenants at Stapleton is $30 per square foot, says Stevens, and private office space near the airport now goes for around $10 per square foot. But the city agreed to give MarkAir an "inducement," because the airline theoretically could have located its phone bank somewhere else.

The deal was pushed through quick-ly, says Stevens, to accommodate MarkAir's desire to move in this week. "City government, when it knows how to do its business, can proceed in a timely businesslike fashion and get business taken care of," Stevens adds. "That's what we did here."

The city had issued a permit for workers to begin wiring the phones even before Stevens presented the deal to the Denver City Council's airport committee on Monday, August 22. The administration negotiated a one-month lease itself, Stevens says, and plans to seek council approval for a second, six-month lease. Under city charter, the council must approve city leases of more than thirty days.

Stevens claims that MarkAir's costs will actually approach the area average of $10 per square foot because the company has agreed to pay for employee parking and janitorial expenses. The city has agreed to cover the airline's electric, gas, water and sewer bills. MarkAir, which as part of its reorganization is making weekly payments to chip away at a $408,000 debt to an Alaska long-distance phone carrier, has also agreed to be responsible for its own phone bill.

According to bankruptcy records, MarkAir lost $5.8 million in the first two months of 1994. The closely held airline now claims to be profitable, but won't release figures.

The Chamber's Tom Clark says he, city councilwoman Mary DeGroot and former DIA finance director Gennifer Sussman, now a private consultant to the city, got a look at MarkAir's books during a whirlwind fact-finding trip to Anchorage last June. The three say they can't discuss the airline's finances. But Clark says that based on a six-and-a-half-hour study session--the trio flew in on a Thursday afternoon and came home Friday night--he is confident the airline will "get current" on its debts by year's end.

However, according to John Delano, deputy director of the Alaska Industrial Development and Export Authority, MarkAir remains ninety days delinquent on $10.3 million in loans from the state of Alaska. He says the airline is also now ninety days delinquent on a separate deal under which the AIDEA agreed to help MarkAir by buying three of its hangars for $8.6 million and leasing them back for an annual fee.

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