Chicago and the major airlines at O’Hare International Airport have reached agreement on final new runway plan.

CHICAGO – Chicago and the major airlines that operate at O'Hare International Airport have agreed to a $1.3 billion plan that paves the way for a new runway to complete the long-planned parallel reconfiguration of the airport's runways.

Mayor Rahm Emanuel formally announced the agreement at O'Hare Sunday with representatives of United Airlines and American Airlines – both of which operate hubs at O'Hare – and Illinois' U.S. Senators, Dick Durbin and Mark Kirk.

"This project will further modernize O'Hare's airfield and significantly increase safety and efficiency; and give air traffic the most flexibility for routing aircraft," said Chicago Department of Aviation Commissioner Ginger Evans.

The $649 million, 11,245-foot-long runway will be the second largest runway at O'Hare once completed in 2020 and will mark the completion of a six parallel runway system. The plan calls for other improvements carrying a price tag of $619 million including a centralized de-icing facility and a new cross-field taxiway system. Other projects will lay the groundwork for other terminal improvements and an increase in the number of gates. No new gates are part of the agreement.

Funding for the runway relies on $345 million in federal funds, the use of $200 million in passenger facility charges, and $103 million from the airlines. Some general airport revenue bonding is expected although the city did not immediately provide a figure.

Former Mayor Richard Daley announced the $8 billion O'Hare Modernization Program to reconfigure and expand the airport's runways in 2001. The goal was to accommodate future travel growth and to ease burdensome bad weather delays that impact the national grid due to the airport's intersecting runway configuration that forces the shut-down of runways.

Progress has come in fits and starts as airlines have sought to slow some projects, and even with more new runways in service flight delays are still a major problem.

"This new runway is one of the final steps in realizing a fully modernized and efficient O'Hare Airport," said FAA Administrator Michael Huerta. "It is an investment in enhanced safety, both in the air and on the ground, and in a better travel experience for passengers in Chicago and across the nation."

The Emanuel administration also announced negotiations have begun for an airport use and lease agreement with airlines that "contemplates new air service" and is expected to be finalized in 2018.

O'Hare has completed the first $3.2 billion phase of the modernization plan and the city is nearing completion on another $1.17 billion that represents the first part of phase two, which was approved in a 2011 pact between the city, airlines, and federal authorities.

The new agreement marks the next step. A proposed terminal expansion and other projects that make up the $8 billion price tag are still on hold. Analysts have been watching to see how the city tackles remaining projects due to the need for airline approval and the outcome of the new lease negotiations.

Chicago saw strong demand on its $2 billion sale last October of GARBs in a deal that benefitted from the airport's growth in passengers, ratings improvements, and conservative debt portfolio. The airport's finances are well-segregated from the troubles of the city government, which helped stave off the yield penalties seen by the city's general credit.

Ahead of the October sale, Fitch Ratings affirmed the GARB rating of A-minus but revised the outlook to positive from stable. Standard & Poor's upgraded its rating one notch to A and assigned a stable outlook. Kroll Bond Rating Agency assigned a first time rating of A-plus with a stable outlook.

Moody's Investors Service was not asked to rate the deal. It rates $6.5 billion of outstanding GARBs and $663 million of stand-alone passenger facility bonds A2.

After years of flat growth, the airport recorded a 5% increase in passenger levels in 2014 and through last August numbers were up by 9.3%. The airport recorded 882,000 flights in 2014 and 70 million passengers. O'Hare recorded 875,136 flights last year, coming in second to Atlanta's Hartsfield-Jackson International Airport.

Fitch in October attributed its new positive outlook to the "continued favorable progression of the airport capital programs with overall costs continuing to remain in line within existing budgets while airport traffic is trending in a positive direction."

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