Flights of Fancy

Denver pays a consultant big money to get overseas flights for DIA--and goes nowhere.

The attorney's spending habits quickly caught the eye of Madsen, who inherited oversight duties for the SH&E contract when she hired on with the city in September 1989. After Goldman billed the city more than $12,000 for the month of November 1989 alone, Madsen fired off an internal memo in which she described the city's handling of the law firm's invoice as "the EPITAMY of no control." Madsen followed that broadside with a January 1990 memo in which she described a "terse conversation" with SH&E executive Richard Murphy over her belief that "miscommunication was rampant between Denver, SH&E and [its] subcontractors." Madsen closed with a reference to an ongoing dispute over whether a trip Goldman had taken to Tokyo was really on behalf of Denver. Concluded the aviation official, "THERE WILL BE NO S&L BAILOUT ON MY WATCH."

By April 1990, however, Goldman and SH&E had run up so many charges that another Madsen memo noted that the contract had gone over budget and that the city had run out of money with which to pay the bills. Madsen recommended that Goldman begin routing his bills through a separate contract with the city attorney's office. Today Madsen says she doesn't remember much about that series of memos. Goldman did a good job for Denver, she adds: "He went to Japan once and Germany twice. Big deal." Madsen also says she has no complaints about SH&E's overall dealings with the city.

Doughty, an unabashed promoter of the notion that American cities could lure international flights through marketing and lobbying efforts, remained a firm believer in SH&E. In an April 26, 1990, memo to then-public works manager William R. Roberts, the aviation director explained why he wanted to again extend the firm's consulting contract. "Hundreds of millions of dollars" were at stake, Doughty wrote, and "Denver is in a strategic position to receive new service through the strength of Stapleton's current operation as well as the new airport's capacity down the road."

Accordingly, the visionaries at SH&E continued to think big throughout 1990, courting British Airways and spending $3,700 to prepare a "briefing report" proposing a competing Denver-London service by Virgin Atlantic Airways. The firm drafted a letter raising the specter of flights to far-off Singapore. And it researched the prospects of a route that would have been a true crown jewel for Denver: direct luxury service from Colorado to Zurich via Swissair. The effort proved to be a Swiss miss.

It's obvious that much of the promotional work Denver paid for in the late 1980s was based on wishful thinking, acknowledges Madsen. "I'm not defending it; it was unrealistic," she says. But Madsen adds that those great expectations came at a time when Denver still had two hub carriers and when airlines as a rule were more willing to take chances on international routes. "You still found carriers putting in flights they knew wouldn't even break even for a number of years," she says. "How quickly we forget the atmosphere, what was going on in the company mindset."

Both the city and SH&E received a rude awakening in 1991, when a rise in jet fuel prices linked to the Gulf War sent the airline industry into a tailspin. Expenditures on the SH&E contract plummeted from $145,000 in 1990 to just $25,000 in 1991, and dropped even further in the two following years as the industry slump continued. For a time, about all the consultants did for the city was compile statistics for a quarterly report officials had asked them to prepare so the airport could tell which airlines were flying where and when from Denver. Goldman's firm stopped doing work for the city, and Doughty departed for Pennsylvania. SH&E, however, stuck around--and was rewarded when officials began gearing up for the opening of DIA. Eager to attract new service, especially in light of Continental's pullout, officials asked SH&E to go after not just international flights but domestic carriers that could help break United's stranglehold on the market.

So far, though, SH&E success stories are as hard to pin down on the domestic front as they are on the overseas scene. For instance, the firm prepared a $13,000 report for Southwest Airlines as part of the city's ongoing attempts to convince the budget carrier to fly into DIA. Southwest didn't bite, citing the airport's high costs. The city also paid SH&E to prepare a brochure selling MarkAir on Denver. The financially troubled airline began service to Stapleton, a decision that had more to do with a seven-figure subsidy it hoped to extract from the city than anything else. But MarkAir crashed and burned last year, sticking DIA with millions in unpaid landing fees and other bills. By contrast, two budget carriers that didn't receive pitches from SH&E have successfully initiated Denver service: Vanguard, with seven daily departures, and the hometown Frontier, now the city's leading discount carrier.

Koller points to Air Canada, which began service between Denver and three Canadian cities last October, as an example where an SH&E route analysis helped sway a carrier toward DIA. Koller says Air Canada used SH&E's three route analyses for Vancouver, Calgary and Toronto to "confirm data" the airline had gathered itself. "I wouldn't say they looked at that in a vacuum, but it is an additional piece of information they can use," she says.

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