New O'Hare Runway Opens, First in $8B Expansion Plan

CHICAGO - Chicago's $8 billion O'Hare International Airport runway reconfiguration and expansion program marked a major milestone yesterday with the official opening of the first new runway amid questions over airlines' financial support for the future phases of the massive construction project.

Chicago Mayor Richard Daley, other civic officials and airline representatives celebrated the opening of the $450 million runway by flying in the first plane to land on the new strip. It is expected to provide some flight-delay relief, although more significant relief is not expected until an additional runway opens in 2011.

The Chicago event yesterday coincided with the opening of new runways at Dulles International Airport and Seattle-Tacoma International - all of which come amid reports of an expected drop of at least 10% in domestic flights.

"This is absolutely critical, absolutely necessary, absolutely money well-spent," Rosemarie Andolino, executive director of the O'Hare Modernization Program, said. City officials cite long-term data that projects air travel will grow to more than a nationwide annual one billion passengers over the next decade from 700 million last year.

The airport's major airlines - including United Airlines and American Airlines, which operate hubs at O'Hare - signed off on the $2.9 billion first phase of the OMP in 2003. It has since grown to $3.3 billion.

The runway plan is designed to expand the airport's capacity to a yearly 1.2 million flights from the roughly one million it can now handle and relieve delays that occur in poor weather conditions when runways are closed down.

The runways are being shifted to a parallel design from their current intersecting configuration that results in closures during poor weather. Once completed, the airport will have eight runways, compared to seven now. The plan also calls for a western access to the airport and a new terminal.

While the OMP is slated to be completed in 2014, the city has not yet secured airline approval for the second phase of the program, and airline support was questioned in a front-page report in the Chicago Tribune yesterday. It cited documents from airlines calling city efforts to advance the program as being "premature and inappropriate" because of the industry's fiscal struggles.

Published reports quoted United chief executive officer Glenn Tilton at the ceremony contradicting the report, saying the program has the airline's full support.

Chicago officials are pressing to keep the program on track, arguing that the expansion is needed over the long-term to maintain O'Hare's status as the second busiest airport in the country and to relieve delays that impact the national air traffic grid. Officials are also considering a public-private partnership to build a proposed new $800 million terminal.

The runway expansion is part of a larger planned $15 billion expansion and improvement program that also includes new terminals and general capital improvement projects. Various issues - such as delays in acquiring land due to ongoing litigation - have put a strain on the city's timetable.

The first phase relies on $1.6 billion of general airport revenue bonds, $659 million of bonds backed by passenger facility charges and general airport revenue bonds, the use of PFCs on a pay-as-you-go basis, and $330 million in federal grants.

Overall, the total runway plan loosely relies on $4.43 billion of GARB borrowing, $1.6 billion of PFC-backed debt, $752 million of third-party financing, and $677 million of federal aid and other pay-as-you-go funds.

Chicago earlier this year sold nearly $800 million of O'Hare-related new-money and refunding debt that provided some financing for the ongoing runway projects.

O'Hare has about $4 billion of general airport revenue bonds outstanding in three liens that are rated from the mid- to high-single A range on the third lien to the high double-A category on the first senior lien.

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