Chicago’s Midway Airport will become the nation’s first private-run major commercial airport in a billion dollar deal, the City announced on Tuesday
In a winning bid of $2.52 billion by Midway Investment and Development Company LLC is slated for a 99 year lease of Midway Airport. The deal, however, has to be approved by the Federal Aviation Administration and the Chicago City Council, which is set to vote on October 8.
Midway Investment and Development Company includes American companies John Hancock Life Insurance Company and Citi Infrastructure Investors, and the Canadian based YVR Airport Services Ltd.
The sale of Midway Airport marks the first privatization of a major airport in U.S. history and if approved, will become the first airport in an experimental program adopted in 1996 that aims to explore privatization as a means to generate capital for improvements. A total of five airports are permitted by Congress to enter the program.
If approved, Midway Investment and Development Company LLC will take over the Southwest section of the airport which was revived after the collapse of Midway Airlines.
"As the first privatization of a major American airport, this transaction will provide unprecedented benefits for the traveling public, the airlines and the taxpayers of Chicago," said Chicago Mayor Richard Daley. “For the traveling public, the lease will mean the benefits of a world-class airport operator whose airports have been acclaimed for the range and quality of their amenities and service.”
According to Daley, the sale to MIDCo will also provide the airlines with a lower, more predictable airport rate.
Around $1.3 billion of the proceeds will be used to pay off Midway Airport’s debt. Under state law, 90 percent of the remaining $1 billion is required to be used for city infrastructure projects and the city’s under-funded employee pension funds. The use of the remaining $100 million is left to the mayor’s decision.
"With this agreement in place, the question next becomes how we will use the discretionary portion that is available to us once Midway debt has been paid,” said Daley.
It is still too early to decide what projects the fund will support but the potential is substantial, said Daley.
“This transaction will allow us to make much-needed capital investments while other cities and states have suspended infrastructure improvements," said Chicago’s CFO Paul Volpe. "This is a unique opportunity for Chicago."
“We believe together, in this partnership, we can build on the success and reputation of the airport," said MIDCo in a statement.