CHICAGO – Chicago's O'Hare International Airport will get new gates and ultimately could see an aging terminal demolished and rebuilt to serve as a central hub under initiatives formally unveiled by Mayor Rahm Emanuel Friday.
The airlines have signed off on the gates but the terminal project is further off with airlines only agreeing to negotiations.
"In order to grow, innovate and continue to provide excellent service in a dynamic global aviation system, O'Hare needs to significantly expand and modernize," Chicago Department of Aviation Commissioner Ginger Evans said at the event. "Working with our airline partners we are developing the best path forward to address the needs of the future and ensure Chicago remains a global leader."
The announcement was attended by Illinois' U.S. senators, Republican Mark Kirk and Democrat Dick Durbin, and the heads of United Airlines and American Airlines.
The two carriers maintain hubs at the airport and account for about 80% of flights.
The expansion of one of the airport's terminals to accommodate up to nine new gates carries a $300 million price tag that is expected to be covered by passenger facility charges and other airport revenues in hand.
In a far more expensive undertaking, the city and airlines will work together to "design and develop" a multi-billion dollar capital investment program that calls for the redevelopment of the existing terminal 2 to provide more gates and serve as the airport's central terminal, a statement said. The planning process is expected to be completed next year.
Recently announced projects include the development of two new hotels and upgrades to the existing O'Hare Hilton, which combined would double room capacity at the airport.
"We support the city's effort to expand Terminal 5 and will continue working with our partners to develop the long term vision for O'Hare," said United's chief executive officer, Oscar Munoz.
The city and airlines are currently in lease negotiations ahead of an expiration date in 18 months. The $10-$12 billion O'Hare Modernization Program launched more than a decade ago had called for a new terminal, but on the western edge of the airport. That was put on hold without airline support.
The primary purpose of the modernization program is to redesign and expand the airport's runways shifting to a parallel design from an intersecting one that forces the closure of runways during poor weather. The airlines recently signed off on the final runway under the plan. It carries a $1.3 billion price tag.
Chicago's chief financial officer, Carole Brown, said earlier in the week that while the city would continue weighing new money debt for O'Hare's needs there are no imminent borrowing plans. A large refunding is in the works and will be submitted to the City Council for approval this summer. Sources said the finance team was recently named and the deal could top $1 billion.
Fitch Ratings in May upgraded O'Hare's $6.4 billion of senior lien general airport revenue bonds rating to A from A-minus. About $600 million of passenger facility charge revenue bonds were affirmed at A. The rating on both is stable.
In recent years, traffic growth has exceeded Fitch's base case assumptions while budgets associated with the remaining capital programs have remained intact. The airport benefits from the strong local market and its strategic location as a hub for United Airlines and American.
More than 38 million passengers use the airport annually.
"Traffic performance has trended positive for several consecutive years anchored by increasing domestic and international services," Fitch said.
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 airport also has a $1.7 billion five-year capital improvement program.
"Future requirements are still significant and rely heavily on future debt borrowings for funding," Fitch said. "Latest financial plans to support the remaining elements of the capital program show overall debt levels rising to over $9 billion in total over the next five years."
O'Hare's senior-lien bonds are rated A2 by Moody's, A by S&P Global Services and A-plus by the Kroll Bond Rating Agency.