Emanuel Halts Plans to Lease Chicago’s Midway Airport
Citing a lack of competition that wouldn’t benefit taxpayers and travelers, Chicago Mayor Rahm Emanuel halted plans to lease Midway International Airport after one of the remaining two bidding groups backed out.
A team consisting of Ferrovial SA (FER) and Macquarie Group Ltd. (MQG) was the only one remaining after a consortium of Industry Funds Management of Australia and Manchester Airports Group Plc withdrew, according to Sarah Hamilton, a spokeswoman for the mayor. The bidders couldn’t make an offer that would sufficiently protect taxpayers’ interests, she said.
Emanuel, a 53-year-old Democrat, announced in December his plans to explore such a transaction, reviving an idea that died in 2009. His decision to halt the lease talks comes after the city picked two finalists. The contract for the second-biggest Chicago airport could be valued at $2 billion, two people familiar with the auction told Bloomberg News in July.
The lease, which initially drew six bids including from London’s Gatwick airport owner Global Infrastructure Partners, was part of a wider U.S. Federal Aviation Administration pilot program to privatize airports and spur infrastructure investment. Southwest Airlines Co. (LUV), the biggest low-fare carrier, dominates the volume of flights at Midway.
Spain’s Ferrovial, the largest stakeholder in Europe’s busiest airport, London Heathrow, had teamed with Macquarie’s infrastructure arm in a group called Great Lakes Airport Alliance. Ferrovial operates the Chicago Skyway, a toll road on the south side of the third-most-populous U.S. city about six miles (9.7 kilometers) from Midway.
Emanuel’s exploration of such a deal contrasted with his criticism of a 75-year lease of the city’s parking-meter system pushed by his predecessor, Richard M. Daley. The former mayor struck a deal with an investor group led by Morgan Stanley (MS) in 2008 in which the city received a $1.15 billion lump sum, which he used to help balance budgets.
The parking deal drew scrutiny because Chicago gave up billions of dollars in revenue when it leased its 36,000 parking meters. Windy City drivers were projected to pay the private group at least $11.6 billion to park at city meters over the 75 years, 10 times what Daley received.
Emanuel had said the city would receive a percentage fee from the Midway lease deal as well as an annual cash stream. The proceeds would have been used to pay down the debt from the rebuilding of the airport and to invest in mass transit, Hamilton said.
“The mayor said he would not use any of the money for city operating expenses,” she said.
Chicago’s credit rating was dropped three levels in July by Moody’s Investors Service to A3 from Aa3 because of a $36 billion retirement-fund deficit and “unrelenting public safety demands” on the budget.
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