The dispute is over a formula that United uses to determine how much it owes the city in "passenger facility charges." Airlines collect the $3 PFCs when customers buy tickets, then pass the fees on to the city to help pay off the debt on the $4.2 billion airport.
In 1990, Congress passed the Aviation Safety and Capacity Expansion Act, which allowed cities nationwide to charge passenger fees to help fund airport expansions. The Denver Municipal Airport System began requiring air carriers to collect the charges in July 1992. The Federal Aviation Administration allows airlines to keep eight cents from every $3 charge.
But an audit of United's 1995, 1996 and 1997 PFC reports found that the airline was also pocketing the eight-cent handling fee on refunded tickets--something it isn't supposed to do--and shortchanging the city in the process, according to city auditor Don Mares. Add to the withheld charges more than $164,000 in interest, and the city is awaiting payoff on its biggest-ever airport-related audit.
When the city tried to collect in January, however, United refused, arguing that an FAA statute "clearly permits a carrier to retain its reasonable expenses incurred in handling a PFC, even if the PFC is ultimately refunded," since the transaction involves just as much work.
But Marcus Richardson, the city's audit supervisor for DIA, says United charges passengers who don't have fully refundable tickets $50 to $75 if they postpone or cancel a flight. "I think that $75 might cover the cost they're talking about," he says.
United further responded to the city's payment request by saying that other airlines also keep a portion of the charge after tickets are refunded. But that's not true, according to Mares. "In the past, we've done audits of other airlines," he says, including Frontier, America West and TWA. "And they have been paying what they owe. So United is sticking out like a sore thumb."
A sore thumb that accounts for 70 percent of the flights in and out of DIA, where it operates a hub. "Because United has the bulk of air traffic, it's a concern," Richardson says. "Based on our history of audits, this is unusual in terms of the amount of money. I think it breaks a record."
Host International Inc., which operated food and retail stores at Stapleton Airport, had to pay $300,000 after a 1993 audit found that the company owed the city for back rent and interest between 1990 and 1992. Unlike United, Host didn't dispute the findings.
After United refused to pay up, the matter was handed over to the FAA, which recently determined that the city is right. DIA aviation manager Bruce Baumgartner reminded United of that in a letter dated March 25.
United Airlines spokeswoman Kristina Price confirms that airline officials received the letter and are "studying it right now." She would not comment on whether United intends to pay or how the airline could appeal the audit.
Local aviation consultant Mike Boyd says United is already charged steep fees to help pay off the construction bonds on DIA, which opened late and at a high cost. He says the airport is partially to blame for dramatic fare increases over the last two years.
A recent American Express survey found that United's one-way fares from Denver to Dallas increased by 248 percent between December 1997 and December 1998. Fares on five other routes from Denver also soared in the last year, landing United's Denver flights on the survey's top-ten list of highest percentage increases out of the 215 routes that American Express studied.
But Boyd also says $629,000 is pocket change for United. "They pay more than that for napkins each month."
The money may also be pocket change for the city, which plans to spend $21 million to relocate the current toll booths so people who are just picking up or dropping off passengers won't have to wait in line to exit the airport. Denver will also spend $1.2 million to put tented roofs on the new toll plazas to match the airport's roof, which was designed to resemble snow-capped Colorado peaks.
Nevertheless, Mares called United's bill a significant chunk of money that would help the airport complete its projects. "We don't know it's a sure thing that we'll collect the money," he says. "Not getting this money does impact a certain bottom line.
