American Grounds Its Renovation of LAX Terminal : Airport: Carrier calls off a $77-million improvement plan. The action comes in protest of the Riordan Administration’s request to renegotiate the project.

An ongoing feud between the major air carriers and the city of Los Angeles escalated Thursday when American Airlines announced that it is calling off a planned $77-million renovation of its terminal at Los Angeles International Airport.

The decision adds to mounting tensions between the city and the airlines, who were once partners but are now at each other’s throats as the result of Mayor Richard Riordan’s determination to wring more money from the airport to pay for police. The dispute also marks the first major clash between some of the city’s largest businesses and a new mayor who campaigned on a pro-business platform.

Riordan’s Administration contends that it wants to reverse what it views as former Mayor Tom Bradley’s policy of giving the airlines too much influence over the way the airport is run, including overly favorable contracts and landing fees.

Work on the American terminal renovation was scheduled to begin Sept. 9. City airport officials, after long negotiations during former Mayor Tom Bradley’s Administration, had agreed to grant American $40 million in rent credits in exchange for the renovation work it planned on the public areas of Terminal 4 at the airport.

It has been common practice for the city to grant rent credits to the airlines in exchange for renovation work since the late 1970s, when major airport upgrades were begun in preparation for the 1984 Olympics.

The agreement with American won preliminary approval from the Board of Airport Commissioners last fall and again this spring, and the city attorney’s office drew up a contract. Formal approval by the airport commissioners and the City Council was still needed.

When Riordan came to office July 1, he said he wanted to reopen negotiations and called on American to justify the cost of the project and the size of the city rent credit.

Upset by the idea of renegotiating a project so close to its start date, American pulled out.

“We are bewildered by the city’s action,” said Jaynne Allison, American’s vice president for corporate real estate. The city will lose 400 construction jobs and more than $17 million in contracts to local minority-owned businesses, she said.

Ted Stein, president of the Los Angeles Airport Commission, said the airlines will have to grow used to a new, less cozy relationship with the Riordan Administration. Conflict is inevitable during the transition, Stein said.

“Mayor Riordan’s Administration is going to change the airport-airline relationship,” said Stein, the mayor’s special adviser for airport issues. “The airlines have to get used to that. It will not be business as usual.”

Delta Airlines has completed an elaborate, $135-million renovation of its terminal, for which it received rent credits. Stein said the city did not adequately question the cost of those renovations, including the use of expensive marble in some areas. United Airlines, meanwhile, has renovation plans in the works and Stein has told the company that any proposal for city subsidies of the project will be scrutinized.

James E. Landry, president of the Air Transport Assn., the trade group for the major airlines, accused Los Angeles city officials of “playing politics with LAX.”

“The city’s apparent decision to sever the working relationship the airline industry has historically had with the city has resulted in 400 construction jobs being lost,” Landry said. “Over the long term, I hope this does not threaten other airport projects.”

Architect Donald Christian said his firm, Rivers & Christian, has worked on the American Airlines project for the last two years.

“It’s so frustrating,” he said. “I voted for Mayor Riordan. He was pro-business. He’s supposed to bring business to the city and now this.”

Meanwhile, officials throughout the airline industry are watching City Hall with unease, waiting for all the ramifications of Riordan’s new approach.

“Most other cities are falling all over themselves to win new airline service,” said Chris Chiames, the Air Transport Assn. spokesman. “Most cities recognize the economic growth associated with airlines. That is certainly not the case in Los Angeles. We’re the bad guys in L.A.”

The Airport Commission tripled the landing fees charged to airlines just before Riordan took office--a move that could help the mayor’s plan to fatten the airport’s treasury and use the extra money to pay for more police. The fees were raised from 51 cents to $1.56 per 1,000 pounds of weight, bringing them closer to those levied at other major domestic airports.

Furious about the increase, 40 airlines filed suit in federal court last month, seeking to block the new rates. The suit charges that the steep increase violates federal laws and international aviation agreements by charging fees beyond those needed to operate the airport.

Saying that he will not be bullied by the airlines, Riordan maintains that his policies will be in the best interests of the city.

“I am certain that if we allowed the American project to proceed under the old sweetheart policies, the airport’s treasury would be unfairly raided and every other airline--subjected to new, more stringent policies--would cry foul,” Riordan said. “I believe all airlines should be treated alike.”