CHICAGO — Chicago has requested a federal extension until the end of the year to decide whether to attempt to privatize Midway Airport, a move that preserves the city’s ability to resurrect a lease deal that could generate several billion dollars in up-front cash.

“The FAA is currently reviewing the request and will make a determination,” a statement from the Federal Aviation Administration read.

Submitted late last week, the request to reserve the hub slot under a federal pilot program that allows for the privatization of five airports comes as the city  plans a new-money and refunding sale of around $1 billion of Midway airport bonds.

Public finance sources said JPMorgan would run the books on the sale and Bank of America Merrill Lynch and Cabrera Capital Markets would be co-senior managers.

Alderman Edward Burke, chairman of the City Council’s Finance Committee, said he expected three bond issues to be submitted as soon as the next council meeting on April 18. The city’s Finance Department did not have a comment.

The council recently approved more than $3 billion worth of general obligation, water revenue, and O’Hare International Airport borrowing.

Chicago struck a $2.5 billion deal to lease Midway Airport to a private investment group in 2008, but it fell apart in 2009 when the consortium couldn’t raise financing due to the international credit crunch. With strong interest in a proposed privatization of Luis Mñoz Marin International Airport in Puerto Rico, market participants believe the city could pull off a new lease deal.

Former Mayor Richard Daley won extensions to keep Midway’s slot, and Mayor Rahm Emanuel has done the same since taking office in May. The latest deadline came Saturday and it was expected from the language in the previous extension application that the city was going to decide whether to proceed with a lease or relinquish the spot.

The city shifted gears and in a letter late last week to the FAA, Chicago’s chief financial officer, Lois Scott, said the city would submit a decision on its intent by the end of the year, “at which time, if the city moves forward, the city will have released a request for qualifications relating to the airport’s participation in the pilot program.”

“If the updated information is not submitted by the city to the FAA … the city acknowledges that the FAA will consider the city’s application to be officially withdrawn,” Scott wrote.

The city acknowledges in the letter that it may ultimately have to compete for the hub spot if other airports apply.

Emanuel has been cautious on the subject of a Midway lease, pledging any asset deal and the use of proceeds would face strict scrutiny and restrictions. That’s because of the public and political backlash after the $1.15 billion 2009 parking meter lease. The private operators initially struggled to manage the system, rates skyrocketed and Daley exhausted most of the proceeds to balance the last few budgets.

The city had banked on the Midway deal to help shore up its pension funding and to fund infrastructure. Those restrictions on the use of proceeds were imposed in Illinois state legislation paving the way for the lease, and both issues are challenges Emanuel aims to tackle.

Chicago has $15 billion of unfunded pension liabilities. It will pay $476 million towards its four pension funds this year and faces a $550 million increase in 2015 under an Illinois mandate.

Emanuel last week outlined $7 billion in infrastructure improvements planned over the next few years by the city and its sister agencies, and is seeking help from private investors to complete them.

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