United Airlines Lands Downtown
July 14, 2006
BY MARY WISNIEWSKI, DAVID ROEDER AND MARK KONKOL Staff Reporters
United Airlines, which said in May that it might leave the state, will announce this morning that it has found a new corporate headquarters at 77 W. Wacker in downtown Chicago, sources said.
The announcement is the culmination of weeks of intense, closed-door negotiations between United and government officials, who have offered incentives to keep the country's second-largest airline in the Chicago area. The agreed-upon perks are expected to include relief from the jet fuel tax and other incentives.
United, city and state officials had no comment on the deal Friday.
In May, the company which has billed itself as Chicago's "hometown airline" said it was considering a move out of its headquarters in Elk Grove Village -- to Denver, San Francisco or downtown Chicago. Some industry observers saw United's announcement it was looking elsewhere as a ploy to win government incentives to keep the airline in the Chicago area.
The airline's new home at 77 W. Wacker is one of the city's most prestigious corporate addresses. The 50-story building opened in 1992 and is the former home of R.R. Donnelley & Sons Co.
The airline is expected to get about 150,000 square feet for some 350 headquarters workers. United has said it will retain its building in Elk Grove Township near O'Hare Airport and will move other employees into it once the headquarters staff vacates.
Chicago-based Prime Group Realty Trust owns the controlling interest in 77 W. Wacker and has reported up to one-third of its 945,000 square feet is available. Terms of the lease weren't known, and Prime Group executives did not return calls Friday.
The 77 W. Wacker building is within a downtown tax subsidy district that would generate help for United. Known as a tax-increment financing district, or TIF, it provides money for corporate subsidies or public works from growth in property tax revenues.
Some sources have said United could get about $5 million from the TIF.
It was not clear Friday how fuel tax relief could be structured to benefit United, and whether it would include both city and state taxes.
Last year, the city's nickel-a-gallon tax generated $58.5 million, with United paying $14.7 million. United's state jet fuel tax liability was $18.3 million in 2004.
Having a big corporate headquarters is good for civic prestige and can be used as leverage to draw other companies. Top corporate jobs are also thought to benefit tax revenues and support other businesses near the headquarters.
Several corporate headquarters have left Chicago in recent years, including Bank One, Morton International and BP Amoco. Boeing Co. got $51 million in 2001 when it agreed to move its headquarters to Chicago from Seattle.
Tom Clark, executive vice president of the Metro Denver Economic Development Corp., said he had felt all along it was going to be Chicago. "From the professional standpoint, it's probably the right decision for United to make," said Clark. "Their costs would be low, and they wouldn't have to disrupt operations."
The airline, which came out of three years in bankruptcy in February, needs less room for corporate offices. The airline announced in June it needed to cut at least 1,000 salaried and management jobs by the end of the year.
Joseph Schwieterman, an airline industry expert and professor at DePaul University, said the current headquarters was designed for the era of large hierarchical bureaucracies. "United now needs more of a teamwork approach."
Besides, with all the layoffs and labor disputes, "there are a lot of bad memories in the old building," Schwieterman said.
Representatives of the pilots and flight attendants' unions, who were often at odds with United management during the bankruptcy, responded positively to the idea of a move downtown, even if meant millions of dollars in moving costs.
