Denver Worries About UA

Tax request highlights concern about dominant carrier

By: Jerry Chandler

The City of Denver’s bid to make United Airlines immediately pay $7.4 million in 2002 property taxes has gotten the attention of area travel agents, already worried about the bankruptcy of the region’s primary carrier.

“When you read stuff like that, it reinforces the fact this is serious,” said David Rojahn, president of DTR Travel in Englewood, Colo.

“The city is asking that they be on top of the list,” said Paul Shamon, vice president of communications and marketing for Denver-based Navigant International. “Otherwise, they feel it could take up to six years to get paid.”

The property taxes are backed by liens on airline property, such as planes. But the banks that loaned the carrier $1.5 billion to operate during bankruptcy rank higher than the city on the company’s list of secured creditors, so the bank claims would be repaid first.

The city wants the federal bankruptcy court in Chicago to put it at the front of the collection queue, a move that comes against a backdrop of increasing angst in the lee of the Rockies. “I think there’s a real concern now about Chapter 7,” Rojahn said. The carrier already has filed for protection from its creditors while it reorganizes; Chapter 7 filing, however, usually results in liquidation of the company.

Rojahn said Rocky Mountain clients are beginning to book away from United. “The farther out [their trip] is, the better chance they’ll book away. The closer in, it’s not so much a concern,” he said.

"People booking for the summer and fall have this little voice in the back of their minds that says, ‘Ya’ know, this is an important trip for us. All things being equal, I’d prefer to fly another airline.’ ”

Problem is, United and United Express control almost 64 percent of the market at Denver International Airport. Frontier is a distant second at DEN, with some 12.5 percent of the airport’s 1,400 daily flights.

“To be honest, there are not a lot of other choices out of Denver,” Shamon said.

Despite United’s profound economic problems, a spokesman, Chris Brathwaite, said the airline already has reduced flight frequencies so most of the changes have been made. He said the carrier will not necessarily cut service in Denver. Shamon, however, says he is sure there will be some reductions: “They’re going to cut routes that are not profitable.”

What will be Denver’s response if United does liquidate? “It would not be a killer blow,” said Chuck Cannon, an airport spokesman.

DEN already is conducting a “stress analysis” to determine the effects of a UA shutdown. Early feedback indicates that “we could survive,” said Cannon, “although it wouldn’t be pleasant for some while until someone stepped in. Eventually, another carrier would come in and create a major hub here.” Who might that be? “We’ve talked to some airlines,” said the airport spokesman. “That’s about all I can tell you.”

In the 1990s Continental operated a major hub at Denver’s old Stapleton International Airport. Then it downsized its Rocky Mountain operations dramatically but, should UA fold, Continental could step in.

Delta already has a nearby hub at Salt Lake City. American has three mid-continent hubs: Chicago, Dallas/Fort Worth, and St. Louis. Northeast is set in Minneapolis/St. Paul. America West’s nearby Las Vegas and Phoenix operations are too close to DEN.

Southwest? Probably not. Costly landing fees at the airport have been an issue with some carriers, and Denver is one of the few cities that the low-fare carrier has ever abandoned.

However, don’t look for the City of Denver to precipitate a showdown with United over property taxes. The carrier is a major employer in the area. “The city has to be careful here,” said Mike Boyd, an airline consultant and president of the Colorado-based Boyd Group. “The city can’t beat up United. It needs United.”