By Steve Rhodes
United Airlines announced on Saturday that it would move its corporate headquarters from suburban Elk Grove Village to downtown Chicago.
The Chicago press hailed the move and practically slapped Gov. Rod Blagojevich and Mayor Richard M. Daley on their backs for once again proving our fair city superior to putative competitors Denver and San Francisco.
Reports out of those cities, however, make it clear that they were never really in the running. And that United Airlines took Chicago – and its media – for a ($7 million) ride.
It’s not as if the local press is totally oblivious; just weirdly unwilling to confront the story head-on.
For example, the Tribune reported this on Friday in a story approving of United’s “classic leverage play” – and buried it at the end:
“At the invitation of officials in California, Jake Brace, United’s chief financial officer, visited San Francisco.
“‘It was a quick in and out,’ said Dennis Conaghan, executive director of the San Francisco Center for Economic Development. ‘We thought it was a window-shopping type of trip.’
“The carrier never made any on-site visits to properties in the Denver area, said Tom Clark, executive vice president of the Metro Denver Economic Development Corp.
“United’s pursuit of a new headquarters location has been ‘absolutely the most manipulative deal I’ve ever seen’ in terms of media coverage, Clark said.
“His ire was directed at the media, not the airline, for making United’s departure from Illinois seem more likely than it ever was.He said United never led Denver to think it was a more serious candidate than it was.”
The paper didn’t take its own report to heart, though. In its Sunday account, “United Lands In Chicago,” the Tribune notes that United officials said Denver and San Francisco “also were attractive sites,” and then quickly dispatches with any skepticism.
“Real estate and finance experts have expressed doubts that United, ‘Chicago’s hometown airline,’ seriously considered a move west.
“[United CEO Glenn] Tilton on Saturday said Ajay Singh, United’s vice president of coporate real estate, spent ‘a little bit of time in San Francisco and Denver.'”
Now consider this Denver Post report: “Denver was supposedly in the running for the new headquarters but never had a real shot at landing the carrier, according to state and local economic development officials.
“‘The fact that we had never spoken with anyone representing United was a very clear indicator that they weren’t serious (about moving to Denver),’ said Jeff Holwell, division director of business development for the Colorado Office of Economic Development and International Trade.
“United was ‘deep in negotiations with the city of Chicago’ before Denver was added to the mix, said Tom Clark, executive vice president of the Metro Denver Economic Development Corp.
“‘I am convinced that they just wanted to move within the city from the beginning,’ Clark said.
. . .
“United never asked for an incentives proposal from Denver and declined the city’s offer to submit one, Clark said.”
Given those circumstances, you’d think Daley (and Blagojevich) would be aggressively questioned about this deal (each also being highly motivated to score a public relations win by “landing” a company that is already here.)
And yet, the Tribune left it at this:
“Daley said he didn’t know if United would have left Illinois but he said the stakes were too high to take a chance. ‘If we lost it there would be headlines, ‘Chicago loses another Fortune 500,’ Daley said.”
The Sun-Times‘s report (not online) on Sunday, “United Joins Flight From Suburbs To City,” was even more cheerful.
“United said in May it might move out of state – to Denver or San Francisco,” the paper said. “Saturday’s announcement culminated weeks of intense negotiations to put together an incentive package to keep the company that advertises itself as Chicago’s ‘hometown’ airline here at home.”
The paper quickly dispatched any notion that United had played the city for fools.
“Many industry observers speculated that United’s announcement that it may skip town was a ploy to win government perks. But [United CEO Glenn] Tilton insisted that the airline seriously considered a move to other hubs in San Francisco or Denver, where the company has strategic assets and a large employee base.”
Now consider this Rocky Mountain News report: “The development comes as no surprise to local officials, who have expressed skepticism about whether United was seriously considering Denver. Published reports in May indicated the company was exploring a move to Denver. But the news caught local officials by surprise, which is rare because companies typically first talk with key leaders when they’re seriously considering such a move.”
And as far as San Francisco goes, I have found no reporting by either the Chronicle or the Examiner there about the possibility of United moving in. When the announcement was made over the weekend, those papers carried a brief Associated Press story.
And yet, in an editorial Sunday (second item) titled “Fly To The Friendly Skyline,” the Sun-Times called the move “another feather in Chicago’s cap” and says the deal “keeps United from moving to San Francisco or Denver or elsewhere.”
Only in passing does the editorial board propose that “this deal should be examined to make sure that the taxpayers aren’t being asked to give up too much,” though it doesn’t say who should do the examining. A newspaper, perhaps?
You might think the local business press would be a little more savvy, but you’d think wrong. Crain’s on Sunday offered up “United A Big Win For Chicago,” and it too swats away the notion that United made its decision before seeking (taxpayer) subsidies like a mosquito-like nuisance.
“The relatively quick resolution of the matter raised the nagging question of whether a subsidy was necessary at all. Little evidence surfaced that the airline was seriously considering alternative sites,” the paper says.
“Denver economic development officials, for example, were prepared to make UAL a rich offer, says Tom Clark, executive vice-president for the Metro Denver Economic Development Corp. But the request never came.
“Still, if UAL was bluffing, it was a bluff too risky for Chicago officials to call.”
Really? Why? If UAL was bluffing – and hadn’t even considered proposals from other cities – then where was the risk?
The Tribune, in fact, reported just 10 days ago that “United Airlines has not asked Denver and San Francisco for a list of incentives the cities might offer to entice the carrier to move its world headquarters there,” though it didn’t make much of it.
In May, the estimable David Greising returned for a day to his old columning role – removed from after a series of wholly faulty Tribune market research exercises – for a piece titled “United’s Talk Of Moving Away Leaves A Bad Odor In The Air.”
“Take a deep breath, Chicago, and relax,” Greising wrote.
“Or better yet, sniff. Because if you nose around hard enough, it soon becomes obvious that United Airlines’ threat to move its headquarters to Denver or some other city does not pass the smell test.
“It smells, in fact, like a transparent effort by United, which recently exited bankruptcy, to get taxpayers to help fund a move downtown.”
Unfortunately, Griesing also wrote that “Chicagoans are street-smart enough to sniff out bluster and baloney a mile away” – unfortunate because it turned out not to be true.
***
Several accounts of United’s move downtown approvingly recall the city’s wooing of Boeing headquarters from Seattle a few years ago, glossing over the fact that, upon reflection, Illinois’s incentive package of $63 million didn’t look so hot compared to Denver’s $18 million package and Dallas’s $14 million package. So we overpaid by about $45 million.
***
Also missing from the coverage: What about the impact on Elk Grove Village?
The Beachwood Tip Line: Classically leveraged.
Posted on July 17, 2006