AN EMBARRASSMENT OF GLITCHES
Denver has become the Sally Field of cities. They like us, they really like us, we exclaim whenever the country shows the slightest inclination to forgive us our trespasses.
It was just four months ago that Denver International Airport was scheduled to open--for the fourth time. Instead, Mayor Wellington Webb announced that not only was he postponing the airport's opening, but he wouldn't even announce the next target date until he knew for a fact that the baggage system was up and running, the better to spare Denver more "embarrassment."
Since then, of course, the city has suffered through one national ignominy after another --jokes on Letterman, even David Brinkley making cracks at the expense of our cracking pavement!--while the airport has not come one nanosecond closer to opening.
So for a few hours last Tuesday, Denver's hopes were flying high. The next issue of airport bonds, designated to atone for a multitude of sins including construction of a new "back-up" baggage system, went so well that the city went past the projected $225 million and sold an extra $30 million. But then, the city's script for the sale was a remarkable piece of work, one worthy of an Oscar--if not a federal investigation.
Behind the scenes, the gaffes and glitches were coming faster than those suitcases tumbling off their carts during tests of the $193 million BAE system--back when it was being tested, and back when it was still run by BAE.
On Thursday the city triumphantly announced it had finally reached an agreement with United Airlines, one that would get BAE's automated baggage system--or some variation thereof--working so that DIA could open by February 28. But the agreement contained plenty of fine print, including this provision: It's entirely contingent on the city's coming to terms with BAE.
Unfortunately, just the day before, officials from BAE's parent company, tired of being ignored by the city, had skedaddled back to London after confessing that they had "lost hope" of reaching any agreement with Denver officials.
On Friday Webb started mending fences, extending a "personal invitation" to Laurie Cant, BAE's head of manufacturing, to come back to Denver for extended chats. "We have just completed marathon negotiation sessions with United Airlines and need a couple of days off," Webb explained.
Cant and company will return, of course. The city owes BAE money on the initial deal, and no matter how much the United agreement allows the airline to tinker with the automated system, BAE still owns the software.
That's not the only threat hanging in the air. The ink wasn't even dry on the Denver/ United deal when the airlines assigned to Concourse C--which apparently will have to rely on pack mules to move baggage--complained to Webb that they, too, wanted the automated system they'd been promised, the system "perceived to be the most efficient in providing the customer service that is required to compete from a cost and revenue standpoint." The "Concourse C Carriers," as they call themselves, "feel strongly that the city or airport should not negotiate away our ability to be competitive at DIA and should give the Concourse C Carriers consideration and options for utilization of the automated system before signing away the rights to this system to United. Please give our request serious and expedited consideration as the decision will have a profound impact on our decisions to operate at DIA."
DIA needs the Concourse C Carriers. United's agreement to help pay for the delay of DIA's opening--or, more accurately, loan Denver money in exchange for rebates on future fees--is dependent on the other airlines paying their share. If they don't, United gets its money back. And DIA needs those Concourse C Carriers not just to help pay for the delay, but also to cover costs when the airport actually does open...particularly after Continental's announced cutback to 23 daily flights out of Denver.
But Continental wasn't done doling out the bad news, either. In a letter delivered to the city last week, it, too, complained that it needed an "automated integrated baggage-handling system" if it was to operate at DIA. And the airline also took issue with the way its contractual obligations had been depicted in the city's preliminary statement, dated August 18, that had been used to help sell the bonds. Continental, which is signed up for twenty gates on Concourse A, claims it can cut that commitment back to four gates at any time by paying a penalty of $5 million. According to the city, that option exists only after Continental has used all of its gates--and paid hundreds of millions of dollars--for at least five years.
The city's bond statement is considerably more vague on other details: For example, after outlining the automated baggage system as described in the BAE contract, the statement notes that "the City and United are currently engaged in discussions which may result in agreement on modifications to the Automated Baggage System." The statement then proceeds to describe the "back-up" baggage system that Webb announced early last month, again cautioning that "the City and United are currently engaged in discussions which may result in agreement on modifications to the Back-up Baggage System."
As a result of all the action last week, the city has already had to make a few changes in its script.
This week investors will receive an "official" version of the preliminary bond statement, one that includes descriptions of the United deal, the Concourse C complaints, the Continental letter, the Denver District Attorney's investigation into allegations of wrongdoing and the federal grand jury's investigation into concrete contracts. And the city will have to come clean about something else: Its previous bond sales are now the subject of an investigation by the Securities and Exchange Commission--an investigation that the city attorney blames on all the media attention, on the "national preoccupation with DIA."
The SEC notified the city attorney's office last Monday that it would be investigating the adequacy of the city's "disclosure of information" regarding the airport. But the city didn't bother to disclose that information to Tuesday's bond-buyers.
No wonder they liked us.
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