CHICAGO – The Federal Aviation Administration on Friday cleared the path for Chicago to consider privatizing Midway International Airport, allowing the city to release a request for qualifications from potential bidders.
The FAA on Friday said it had reviewed and accepted Chicago’s revised preliminary application to privatize the airport under the Privatization Pilot Program that allows for up to 10 airports to be privatized, allowing the city to “take the next steps to select a private airport operator.”
Chicago Mayor Rahm Emanuel’s administration submitted the application in late December ahead of an end-of-year deadline for the city to preserve its slot in the FAA program. The city has stressed that it is still in the exploration stage and will use the responses to the RFQ to decide whether a deal makes economic sense.
“Our responsibility is to the taxpayers of Chicago and the first step is to gain a complete understanding of the revenue and market opportunities available to us,” Chicago’s chief financial officer Lois Scott said in a statement.
Midway’s carriers, led by Southwest Airlines, support the RFQ process, city officials said. The airlines stand to benefit under a lease by locking in more favorable operational fees over an extended period.
The city outlines in the RFQ terms of a potential deal that include limiting the lease to no more than 40 years and requiring a revenue sharing provision. The city would retain ownership and enter into a management and land lease with ongoing benefits for the city that would fund infrastructure. An upfront payment would go to retire Midway’s $1.4 billion to $1.5 billion of debt.
The city last month said any eventual deal would differ significantly from former Mayor Richard Daley’s proposed $2.5 billion, 99-year Midway concession that fell apart in 2009 due to the international credit crunch, and from Daley’s unpopular 2009 $1.15 billion parking meter lease.
Market participants have anticipated for some time that the city would revisit the lease given its infrastructure needs, fiscal crunch, growing international investor interest in such deals, and the strong interest in Puerto Rico’s proposal to lease San Juan’s Luis Munoz Marin International Airport in a $2.6 billion deal.
Credit Suisse Group is advising the city. Emanuel last week named a special advisory panel charged with protecting the public’s interest in a potential lease. The advisory panel’s members include a mix of aldermen and representatives of the civic, labor, and business interests and they are charging with submitting a report for public and City Council review as to the impact of any proposed lease. An outside independent financial advisory firm is expected to assist the panel in its deliberations.
