Chicago Midway moves towards privatisation

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Kevin Rozario

8-Apr-2008

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Six groups under review in first lease of a big US airport

The six groups that have submitted responses to a request for qualifications (RFQ) to operate a 50-year lease at Chicago Midway International airport—effectively a privatisation—have been announced by the city of Chicago mayor’s office.

The respondents are:

* Abertis Infraestructuras (Spain), Babcock & Brown Group (Australia) and GE Commercial Aviation Services (US);

* AirportsAmerica Group consisting of Carlyle Infrastructure Partners (US);

* Chicago Crossroads Consortium (Macquarie Capital Group (Australia), Macquarie Airports (Australia), Macquarie Infrastructure Partners (US) and Macquarie Infrastructure Partners II (US));

* Chicago First Consortium (Hochtief AirPort and Hochtief AirPort Capital (Germany) and GS Global Infrastructure Partners I (US));

* Midway Investment and Development Corp (YVR Airport Services (Canada), Citi Infrastructure Investors (US) and John Hancock Life Insurance Co (US);

* Aéroports de Paris Management (France), Morgan Stanley Infrastructure Partners (US) and HMSHost Corp (US).

The city has welcomed the strong response to the RFQ. CFO Paul Volpe said: “We are very pleased with the strong interest we have received from teams wishing to operate Midway in what would be the first lease of a big US airport.” A long-term lease will enable the airport to improve passenger services and travel-retail in order to increase non-aeronautical revenues. It will also shift considerable risk from airlines to the new operator.

The Midway privatisation is one of five to be implemented under a Federal Aviation Administration (FAA) pilot leasing programme, but the only one involving a large hub. Wendy Abrams from the CFO’s office told DFNI: “Under the FAA pilot, only one large commercial hub airport can be leased, and the city secured Midway as that airport when its preliminary application was accepted by the FAA in October 2006.”

No timetable has been set for the submission of bids, but the city of Chicago, along with the six airlines at Midway plus the FAA and Transportation Security Administration are now reviewing the six responses in order to draw up a qualified shortlist. “Once teams are qualified, they conduct due diligence on the asset, and the city will draft operating standards and a lease agreement on which all the qualified bidders will submit a proposal that consists only of the amount in dollars they will pay. At the end, the highest bid is the only determinant in who will win the right to operate Midway,” said Abrams.

The city of Chicago expects to use the substantial transaction proceeds to make infrastructure investments in the city’s neighbourhoods. The city’s leasing of a publicly-owned toll road and a major parking system yielded $2.4bn.

Midway, which benefits from five runways, is situated 10 miles south of Chicago and handles 19m passengers a year.

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