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INSIDE THE BELTWAY

THE BAE BAGGAGE SYSTEM COST HALF A BILLION DOLLARS AND DELAYED DIA'S OPENING FOR MORE THAN A YEAR. AND IT STILL ISN'T WORKING.BAG IT WILL THE CITY HAVE TO PACK IN DIA'S AUTOMATED BAGGAGE SYSTEM?

When BAE was awarded the original baggage contract in May 1992, the Texas firm promised Denver a technological sensation that would serve all three concourses with the most advanced baggage system in the world. Since BAE already had an international reputation as a designer of such systems, few scoffed when it proposed building an automated system at DIA that would make the system used at Stapleton look like the horse and buggy. Behind the scenes, however, electrical contractors and others privy to the technical details immediately questioned whether the system could work, especially given Denver's insistence that the job be completed in a scant nineteen months.

What followed, of course, was a series of hugely expensive delays in opening DIA as the baggage system failed repeated tests. Eventually, the city decided to put in a back-up system, using the old-fashioned tugs and carts--an "alternate" system that now serves every airline at the airport.

Today there is only one place the BAE system is in use at DIA: United's crowded Concourse B. Last fall the city handed management of the baggage system there to United, which agreed to pay BAE $35 million to "upgrade" the failed system. As part of that project, BAE tore up the machinery it had installed in Concourse C, leaving its tracks in place only on the A and B concourses.

In public statements, BAE now insists everything is going well in Concourse B. Executives at the firm declined to comment for this story, saying the company is in the midst of complex negotiations with the city and with United. But over the past few months, BAE has issued a flurry of press releases touting the system's reliability. "Automated baggage system passes major test with flying colors," the firm proclaimed last February.

Since then, BAE has missed its July deadline on Concourse B. And the baggage system doesn't even work properly in moving luggage from the terminal to the concourse--the only leg of the system that works at all. The system is supposed to scan computer bar codes on each bag and automatically route the luggage to the appropriate gate. But a spokesman for United says some manual sorting is still required after passengers drop off their bags in the terminal, exactly the point where BAE's high technology was supposed to take charge. "Some of the automated scanning is working and some isn't," says Tony Molinaro of United.

Molinaro adds that only about 80 percent of the gates on Concourse B are served by the automated system. "It works for certain types of aircraft, depending on where they are and which gates," he says. Luggage bound for planes at the outer gates on United's busy concourse must still travel by tug and cart. "At this point, it's partly automated and partly manual," concedes Molinaro. "We'd like to get a fully automated system."

The automated system is also being used to move bags between planes. But all luggage coming into Denver on United still moves via the back-up system to the main terminal, a difference the airline's passengers don't seem to notice. "From the customer point of view, it's working well and things are fixed," Molinaro notes dryly.

It's hard to believe United can be pleased after pouring millions into an automated system that only works in one direction. The airline runs up to 280 flights per day through Concourse B--its second-largest hub after Chicago's O'Hare--and pays nearly $200 million per year to use 44 gates at DIA. Still, the airline doesn't seem in any great hurry to have BAE complete the Concourse B system.

The contract United signed with BAE last fall allowed the carrier to withhold a final payment of $17.5 million until United certifies that the system is complete. The airline hasn't set any new deadlines for BAE. But it claims not to have lost confidence in the baggage-handling company. "As long as we see progress, no deadline is hard and fast," says Molinaro.

DIA's other airlines have watched BAE's performance on Concourse B and made one thing clear about the high-tech baggage system: They want nothing to do with it.

American Airlines runs 21 flights a day out of Concourse C. Before DIA opened, American feared the automated baggage system would give United a huge advantage over its smaller competitors. Now it's content with its dependable tugs and carts.

"Maybe the baggage system is not as ideal as we first thought it might be," says Tim Smith, a spokesman for American. "We've worked with BAE at numerous locations, but this one may not do what was originally envisioned. It's a tried-and-true method we're using now. We've had to adapt it, but we're making it work."

Smith says American wants to stay on Concourse C, despite Denver's efforts to attract carriers to the almost-empty Concourse A. "We don't think it makes economic sense to move," he says. "Concourse A has a semblance of an automated system and the costs are higher. We're staying at Concourse C for the foreseeable future."

The handful of major airlines using Concourse A--Continental, Frontier and America West (Mexicana and Martinair Holland also offer sporadic service)--say they don't want to use the system even if it can be made to work. The leases for Concourse A carriers specify that rents will rise November 15 to pay for the useless machinery in the concourse tunnels. When that happens, operating costs for Concourse A airlines will soar to a rate 30 percent higher than those of competitors on Concourse C--a potentially crippling blow for carriers already burdened by the high cost of doing business at DIA.

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