Chicago has announced plans to privatize its second-largest commercial airport, Midway Airport, through a lease being offered to private investors under a public-private partnership.
In a move seen as advancing yet further the agenda of turning over pieces of the U.S. public infrastructure to private profiteers, Mayor Richard Daley said plans are being made to turn Midway into the nation’s first privately run airport under a PPP.
Chicago’s decision to be the first city in the United States to privatize a public airport follows the city’s decision in 2004 to be the first to privatize a major highway.
According to the Federal Motor Carrier Safety Administration, Chicago signed a lease on October 28, 2004, of $1.83 billon to place the Chicago Skyway under a nine-year lease awarded to Cintra Concesiones de Infrastructuras de Tranporte, S.A., a Spanish infrastructure company that is a subsidiary of Grupo Ferrovial and the Macquarie Infrastructure Group, an Australian company that portrays itself as “one of the largest private developers of toll roads in the world.”
The FMCSA, on the agency’s website, currently reports 23 U.S. states and one territory have enacted laws enabling the use of various PPP approaches for the development of transportation infrastructure.
Chicago is operating under a 1997 Federal Aviation Administration Airport Privatization Pilot Program that provided only one large hub airport can be included in a pilot program allowing for privatizing up to five “public use” airports in the United States.
“The long-term concession and lease of Midway would be a landmark transaction as the first privatization of a major airport in the United States,” according to the Request for Proposal, or RFP, issued by the city on Feb. 13.
In October 2006, the FAA accepted Chicago’s preliminary application to grab Midway as the sole large commercial hub airport that can be leased under the privatization pilot program
“A long-term lease of Midway Airport will bring a world-class operator capable of providing a high level of airport service that will benefit the traveling public and the airlines serving Midway,” Paul Volpe, the chief financial officer in Daley’s office said in a press release on Tuesday.
Wendy Adams, spokeswoman for Volpe’s office, in a telephone conversation with WND yesterday said the mayor’s office expects the bidding process to be completed somewhere between one year and 18 months from now, resulting in a substantial one-time up-front payment for the airport lease.
Adams refused to say just how large the up-front payment might be, though the Chicago Sun-Times speculated the privatization of Midway may bring the city as much as $3 billion at the launch of a 50-plus-year agreement.
The Sun-Times said Chicago would use the $3 billion “to shore up city pensions and rebuild Chicago’s aging infrastructure.”
Volpe announced Tuesday six international teams have submitted qualification statements in response to the Midway Airport privatization RFP:
- Abertis Infraestructuras SA (Bardcelona, Spain), Babcock & Brown Group (Sydney, Australia), and GE Commercial Aviation Services (Stamford, Conn.);
- AirportsAmerica Group, consisting of Carlyle Infrastructure Partners LP (an investment fund managed by the Carlyle Group, headquartered in Washington, D.C.);
- Chicago Crossroads Consortium, consisting of Macquarie Capital Group Limited (Sydney, Australia), Macquarie Airports (Sydney, Australia), and Macquarie Infrastructure Partners (New York, USA), Macquarie Infrastructure Partners II (New York);
- Chicago First Corporation, consisting of HOCHTIEF AirPort GmbH (Essen, Germany), HOCHTIEF AirPort Capital GmbH & Co. (Essen, Germany), and GS Global Infrastructure Partners I, LP (New York);
- Midway Investment and Development Corporation, consisting of YVR Airport Services Ltd. (Vancouver, Canada), Citi Infrastructure Investors (New York), and John Hancock Life Insurance Company (Boston);
- Morgan Stanley Infrastructure Partners (New York), Aeroports de Paris Management (Paris, France), and HMSHost Corporation (Bethesda, MD).
WND has reported a plan offered earlier this year by New Jersey Democrat governor Jon Corzine to lease the Garden State Parkway and sections of the New Jersey Turnpike under a PPP deal has met stiff community resistance from taxpayers who reject privatization of public infrastructure as a solution to state budget deficits or a means to fund continuing state obligations, including the funding of state employee pension programs.
WND also has reported on the public outcry over national security concerns when Dubai Ports World proposed in 2006 to acquire the London-based Peninsular & Oriental Steam Navigation Co., including P&O operations at 22 U.S. ports.
According to a Chicago press release, Midway International Airport is located approximately 10 miles southwest of Chicago’s downtown and occupies nearly one square mile of land. Seven airlines provide nearly 300 daily flights to approximately 55 destinations.
In 2007, Midway’s five runways handled nearly 304,000 flights and more than 19 million passengers.
The airport generates 90,000 jobs for the region and contributes an estimated $7 billion a year in economic activity.
O’Hare, Chicago’s largest airport, handles an estimated 76 million passengers in 2007.
Under the plan to privatize Midway, O’Hare will still remain a public airport under city management.
The FAA guidelines under the privatization pilot program require that at least 65 percent of the airlines operating at Midway approve the transaction, as well as airlines with at lest 65 percent of the Midway traffic.
Southwest Airlines, Delta, AirTrans, ATA and Frontier have joined in a preliminary understanding with Chicago to approve the privatization deal, with these airlines representing more than 70 percent of the Midway airlines, accounting for approximately 95 percent of Midway traffic.
Under the privatization agreement, the Transportation Security Administration, or TSA, will continue responsibility for passenger and baggage screening at the airport, supervision and oversight of the airport’s security program, and ensuring airline compliance with all federal regulations.
The Chicago Police Department will continue to maintain law enforcement activities and the Chicago Fire Department will continue responsibility for fire, medical and other airport emergencies.
According to Daley’s office, if a Chicago employee wishes to terminate city employment and remain working at the airport, the new airport operator will be required to offer them a new, comparable job at Midway, under the new management.
Daley’s office plans to accept the highest bid from the six groups qualified this week under the RFP, reserving the right to reject all bids, if no bid meets the city’s expectations.