Hangar space not really free

Despite Hickenlooper’s claim, Republic is paying rent on hangar space in Milwaukee

Peter Marcus, DDN Staff Writer

Thursday, November 12, 2009

Despite remarks by Mayor John Hickenlooper that the city was unable to reach a deal with Republic Airways Holdings, Inc., because the city couldn’t offer “free hangar space,” the airline and airport officials in Milwaukee say rent is being paid.

An announcement was made Tuesday that the Indianapolis-based airline — owner of Denver-based Frontier Airlines and Milwaukee-based Midwest Airlines — is expanding maintenance operations in Milwaukee. With the expansion, Republic is bringing with it around 200 Denver-based Frontier Airlines maintenance jobs. The heavy-maintenance facility will serve Frontier, Midwest and Republic planes, adding about 800 jobs in Wisconsin while preserving another 700.

Hickenlooper said that despite the city’s best efforts, they couldn’t put together an incentive package attractive enough to keep the maintenance facility in Denver because Mitchell International Airport in Milwaukee was offering “free hangar space.”

“We offered every incentive conceivable to Republic Airways, but we can’t pay their rent for them,” said the mayor.

But Republic officials say they are absolutely paying rent in Milwaukee, and an airport spokeswoman confirmed their claims when asked by the Denver Daily News.

“We’re not getting free rent at the hangar, to make a long story short,” said Carlo Bertolini, spokesman for Republic Airways.

In fact, Republic makes payments to the City of Milwaukee for the hangar space. Midwest — which is now owned by Republic — makes payments to the city because Milwaukee used variable-interest bonds to finance construction of a new hangar for the airline. The payments include interest rates over the 32-year lease term, according to airline officials.

The specific dollar amount on rent was not immediately available yesterday. But airport spokeswoman Pat Rowe said Midwest last year also spent $73,000 for a ground lease, plus utilities at Mitchell International Airport.

“They’re paying this money for lease of land at the airport and they’re paying back the City of Milwaukee their … bond money that was put up so that Midwest could construct its hangar,” said Rowe.

The mayor’s office yesterday defended Hickenlooper’s comments on Tuesday, arguing that because Republic now owns some hangar space in Milwaukee through its July purchase of Midwest, the city never had a chance. “In Denver they’d be paying about $2.5 million a year to lease hangar space from Continental (Airlines),” said Hickenlooper’s spokesman Eric Brown. “This put Denver at a disadvantage from the beginning.”

Bertolini, however, says the motivation for Republic to expand in Milwaukee was simply because the city offered better incentives. He said it had little to do with the cost of hangar space.

Republic has been offered up to $27 million in tax credits for job-training expenses, capital expenditure and employee wages. Bertolini said Denver simply didn’t offer an attractive enough package.

“It was prohibitively expensive on the maintenance operation because of the tax issues that made it unfortunately disadvantageous to perform those functions there,” said Bertolini. “In this economic environment there are difficult decisions, and you want to make sure you’re positioned to be as competitive as possible, especially in our industry.”

Hickenlooper’s office said Republic’s move is not reason to reconsider Denver International Airport’s taxing structure.

“We joined the state in offering every incentive and cost saving conceivable to Republic,” said Brown. “In the end, Milwaukee offered a package that apparently made better business sense to Republic.”

Meanwhile, the union representing the soon-to-be displaced maintenance workers say city and state officials didn’t go far enough. Matthew Fazakas, president of Teamsters Local 961, is encouraging officials to reconsider its taxing policies at the airport. “It’s an embarrassment to the City of Denver and the State of Colorado that they would allow a home-grown business like this to move their jobs out of state,” he said.

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