Citi get Chicago airport after missing out on Penn Pike

Citi Infrastructure Investors (Citi) who were 41% of the partnership with Abertis that didn't get the Pennsylvania Turnpike have just got Midway Airport, the #2 airport in Chicago under a 99 year concession with the City of Chicago for $2.52 billion. Concessions on airports in the US are even rarer than on tollroads. This is the first major US airport - one with mostly scheduled commercial service - to be privatized.

Citi have a majority share in the deal which is between the City and a project specific venture Midway Investment and Development Corporation (MIDCo) comprising Citi, John Hancock insurance and Vancouver Airport Services (YVRAS - YVR being the airport call sign).

YVRAS is the operating partner. It operates a bunch of airports, 18, Vancouver Airport itself and the rest mostly elsewhere in Canada and in the Caribbean but also in Chile and Cyprus. YVRAS is 50% Citi and 50% the Vancouver Airport Authority, a local Vancouver not-for-profit which has a 25 year lease and concession on Vancouver airport.

Mayor Richard M Daley in a statement said:

"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.

"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.

"For the airlines, the lease will mean lower and more predictable airport rates and charges which will improve their financial situation.

"And for the taxpayers of Chicago this transaction will provide more than $1 billion in net proceeds ($1.5b is used to pay down city debt on Midway) that can be used during this difficult economy to make the infrastructure investments needed to move Chicago forward, as well as protect for Chicago taxpayers. During this very tough economy, this is very good news for our city."

The lease requires MIDCo to adopt a 25-year use agreement with the airlines in which airline rates and charges are capped at the outset at a level below total 2008 charges and then remain frozen at that level for 6 years. After 2013 the total fees can be raised by no more than "core CPI" (CPI excluding food and energy costs) for the remainder of the 25-year term. The airlines generally retain their existing gate rights at the airport. Rates can be raised to reflect capital improvements only with the approval of the airlines, unless the improvements are government-mandated.

Midway International Airport is 16km (10 miles) southwest of Chicago's Loop. Six airlines provide nearly 300 daily flights to about 55 destinations. Midway has five runways which handle 830 flights/day and about 19m passengers/yr making it about the 30th busiest airport in the US.

Uncontroversial

Privatization of Midway Airport has been under way since 2005. Like the privatization of the Skyway it has been quite uncontroversial.

Chicago seems to lack the rightwing redneck element that sees lease concessions as the dishonorable disposal of public crown jewels and has been such a fuss in Texas, Indiana and other places.

Highway needed near Midway

A long discussed road improvement project for Chicago is an extension of the Skyway west to Midway Airport then north generally along/under Cicero Avenue (IL50) to join I-94 at the present I-90/94 split in Irving Park northwest of the Loop.

The area has plentiful right of way in the form of underutilized and abandoned railroad lines.

This Midway L route would:

- improve access to the Midway Airport and surrounding activities

- serve the heavy trucking needs of the Cicero Av corridor

- relieve congestion on the expressways and interchanges near the Loop by providing a bypass

- relieve pressures on the Tristate Tollway (I-294)

The project is a possible concession development.

TOLLROADSnews 2008-10-04