News and Views - News Features

For Immediate Release
May 6, 2004

The following article appeared in the Indianapolis Star. The story is the work of the Indianapolis Star and is offered for the information of our site visitors, without any SH&E endorsement of the publication or its views.

Study: Lease United base in pieces

BY CHRIS O'MALLEY
6 May 2004
The Indianapolis News/Indianapolis Star

United Airlines' former Indianapolis maintenance base is likely too big to land a single tenant, so parts of the huge facility might be vacant "for periods of time," a consultant to the Indianapolis Airport Authority has concluded.

The consulting firm suggests subdividing the 1.7 million-square-foot complex and seeking multiple tenants.

Findings by Simat, Helliesen & Eichner Inc. were shared Tuesday during a conference call that airport Director Patrick F. Dooley conducted with investors who helped fund the base's construction in 1995 at Indianapolis International Airport.

"From our analysis of the (Indianapolis maintenance center), SH&E has concluded that the facility is likely to be too large for any single tenant. Therefore . . . our strategy is to subdivide the IMC into smaller components and look for multiple tenants," said Simat, Helliesen & Eichner in a statement to airport bondholders obtained by The Indianapolis Star.

"We believe that this is the most effective way to market the IMC. While it may mean that portions of the facility remain vacant for periods of time, we believe that ultimately this will result in the highest overall revenue stream."

Simat, Helliesen & Eichner, with offices in New York, Boston, Washington and London, is an aviation consultant with expertise in revenue management, fleet planning and privatization.

The inability to find a sole tenant for the maintenance facility would dampen the potential of putting thousands of former United mechanics back to work quickly. An unknown number of former United mechanics already have left the city or switched occupations.

The head of an upstart aircraft maintenance firm that wants the entire base said he sees problems with multiple tenants.

"They would have to spend a lot of money to subdivide,'' said Alex Perez of Aviation Line Preservation, a grassroots group of several former United workers who are struggling to raise capital and customers.

John Krawczyk, a former United inspector and engineer who resigned this week as Aviation Line Preservation's director of operations, said multiple tenants would provide good diversity.

"But the physical construction of the building is going to provide some pretty big headaches,'' said Krawczyk, citing a centralized heating and cooling system, a common chemical spill collection area that raises liability issues and inventory and security issues.

At its zenith, the 12-hangar facility employed more than 3,000 United workers and contractors. United closed the base last May, after filing for Chapter 11 bankruptcy protection.

Dooley, a former manager at Simon Property Group, told bondholders the airport authority is talking with five potential tenants but would not reveal them. "In some cases, the authority and the tenant have exchanged financial plans concerning rents, concessions, investments, etc.,'' Dooley said.

People familiar with the recruitment effort last week confirmed to The Star that one of the potential tenants is AAR Corp., a Wood Dale, Ill.-based aircraft repair and parts company.

One of AAR's directors is James E. Goodwin, former chief executive of United Airlines. Word that Goodwin again might have a hand in the Indianapolis base immediately stirred up vitriol in mechanic chat rooms, where he is blamed for United's demise and the closing of the Indianapolis base.

But the search for tenants appears to be widening, according to the document provided to bondholders.

"We have contacted interested parties in the U.S. However, we are also looking globally, particularly in Europe," said a Simat, Helliesen & Eichner representative. "While there has been interest expressed in the IMC, as of this date SH&E has not received any firm proposals for the project."

Neither AAR nor city or airport officials will comment. Dooley refused to answer questions from bondholders, complained an investment banker who listened to the call Tuesday. Instead, bondholders were told to submit questions to the airport's legal counsel, Indianapolis law firm Ice Miller. "It was a negative call. They basically said they were not close to signing an agreement," said the bondholder, who asked not to be identified.

The base is proving costly to the airport -- which used to collect $697,000 in annual rent from United -- and to the bondholders who have lost interest payments.

The airport authority budgeted $5.7 million for 2004 base operating expenses, ranging from audits to utility bills to upkeep of computers and hydraulic systems.

Contact:

Polly Shannon
ICF International
1.703.934.3144