The Denver City Council recently voted down a contract to expand Key Lime Air’s operations at Denver International Airport, citing disagreement with the company’s suspected operation of federal deportation flights on behalf of U.S. Immigration and Customs Enforcement.

But in doing so, could the city be rolling the dice with federal grant money the airport needs for runway repairs and other federal assets?

It’s not likely, a source in the aviation industry with knowledge of federal grant assurances told The Denver Gazette on Wednesday.

The contract rejected by the council was for a 1,200-square-foot expansion of the company’s current ground lease so that personnel could store equipment in their own space rather than in a common storage area shared by other operators on the ramp.

“It wouldn’t necessarily impede their ability to do business and to operate on the airport,” the source said of the rejected contract.

And that’s the key.

Key Lime Air first started operations out of DIA as a cargo carrier in 2006, eventually launching passenger service in 2015.

However, because Key Lime has an existing contract with DIA and is already doing business at the airport, claiming the lack of an individual equipment storage area as prohibitive to the company’s business would be a stretch, the source explained.

“Our grant agreements with the federal government are that we have to provide equal access,” District 2 Councilmember Kevin Flynn said on Monday. “We can’t kick Key Lime Air out of the airport, but we can make them pay to use the piece of concrete that they want to use.”

In general, public-use airports and the entities that own and operate them are prohibited from denying potential tenants or operators the opportunity to do business based on a variety of factors, including regulatory obligations, discriminatory practices, and preferential treatment that confers a competitive advantage, among others.

“This decision does not affect our normal passenger and flight operations at Denver International Airport,” Key Lime President and CEO Cliff Honeycutt told The Denver Gazette in an email. “All flights will continue as scheduled.”

Under the Federal Aviation Administration’s grant programs, such as the Airport Improvement Program, the agency provides millions in grants to public-use airports and some private airports for large projects to improve safety, capacity, and operations. 

Projects like construction or upgrades, runways, taxiways, lighting and certain types of airfield equipment would be eligible.

Airports that take federal funding from the FAA are not allowed to discriminate against an operator because of political viewpoints, essentially because such matters have little to do with safe airport operations. 

Even if there are ramifications from the council’s decision, some council members suggested the risk is worth it.

“I think there are a lot of ways that the airport will try to say that we can’t do this,” District 11 Councilmember Stacie Gillmore said. “Well, I think we need to test those waters, and this might impede some FAA grant dollars that Denver International Airport might get.”

According to public records, DIA has received substantial grant funding from the FAA over the years, with major awards including $60 million in 2022, $22 million in 2023, and $26.6 million in 2024.

Federal grant performance periods can span multiple years.

When asked, a spokesperson for DIA told The Denver Gazette the airport had no comment on the matter.

The Denver City Attorney’s Office also declined to comment.