CHICAGO — Chicago's Midway International Airport is in line for $250 million in upgrades under a plan announced Thursday by Mayor Rahm Emanuel, who made clear he's not looking to resurrect airport lease efforts.
The plan calls for an expansion of concessions, the terminal parking garage and security checkpoints and was put together with input from airlines and travelers.
"Midway is more than an airport. It is an important economic engine for the City of Chicago so with this modernization we are making an essential investment in the future of Midway but also the future of Chicago," said Emanuel.
The city will launch a request for proposal for a single-entity concessions operator in September to manage the concession projects. Security checkpoint areas will be expanded to address the bottleneck that frequently occurs while the terminal parking garage expansion will add four levels and 1,400 premium parking spaces.
In addition to creating about 1,700 jobs in the city's estimation, the changes should increase non-airline related airport revenue a goal that was included in the city's most recent airport lease and use agreement with airlines.
"Our proposal will make Midway Airport more efficient and more customer friendly for years to come," said new city Aviation Commissioner Ginger Evans.
The proposed work comes more than a decade after the airport underwent a nearly $1 billion makeover that included a new terminal and two years after Emanuel cancelled a proposed lease of the airport.
Emanuel had resurrected lease efforts first undertaken by his predecessor, Richard Daley, in hopes of raising funds for infrastructure.
Daley's 2009 $2.5 billion deal fell apart when the winning bidder couldn't raise the financing in the aftermath of the 2008 global financial crisis. With improved markets generating interest, Emanuel launched a new round of bidding with revised terms but ended up canceling the effort in 2013 with only one bid in hand.
While the city is staring at a more than $400 million deficit in its next budget and is in need of between $300 million and $550 million more for increasing public safety pension contributions, Emanuel said he is not thinking of trying the airport lease again.
Emanuel said the upgrades show "we are taking Midway's future into our own hands this modernization says that Midway will continue to operate the way it has been operating."
A detailed financing plan for the upgrades was not released.
Ahead of a bond sale last year, city officials said the focus at the airport is now on cyclical maintenance of existing infrastructure, with remaining capital projects, like parking and concession improvements being revenue generating.
The airport's $275 million capital program through 2020 relies on an additional $81 million in borrowing. The airport has a total of $1.5 billion of outstanding first and second lien bonds backed by Midway revenues.
Ahead of the sale, the rating agencies affirmed Midway's ratings.
Fitch and Standard & Poor's rate the airport's second lien bonds A-minus with a stable outlook. The first lien bonds are rated A by both. Moody's Investors Service rates the first and second lien bonds A2 and A3, respectively, both with a stable outlook.
Southwest is the largest carrier at the airport representing both a credit strength and a weakness. The airport serves as Southwest's largest hub airport, a strength, but it opens the airport to concentration risks as it serves 90% of Midway travelers.
"The rating reflects Midway International Airport's resilient and growing traffic base within the strong Chicago air service area. While significant carrier concentration exists, it is partially mitigated by Southwest Airlines' long-term commitment to serving the airport," Fitch wrote.
Among the airport's risk factors, Standard & Poor's noted that Midway's swaps on its floating rate debt continue to "expose the airport to potential liquidity events" should the agency lower the second lien below the BBB-plus level.
