"Chicago plans privatisation of airport"

Monday, May 22, 2006

Chicago plans privatisation of airport
By Doug Cameron in Chicago
United Kingdom - The Financial Times


Chicago is poised to appoint a financial adviser for the planned privatisation 
of Midway airport, the latest in a series of assets the city is leasing to 
balance its budget.
 
The city last year raised $1.82bn (€1.4bn, £960m) from the 99-year lease of 
the Skyway toll road linking Chicago with Indiana, and last week outlined plans 
to lease the largest underground car park in the US to the private sector in 
what would be the country’s first privatisation of a public parking system.

The Skyway deal paved the way for similar projects in other states, and the 
Midway deal will be closely watched by municipal authorities seeking to plug 
budget gaps. 

The Midway airport lease is expected to attract interest from global 
infrastructure groups such as the pairing of Spain’s Cintra and Australia’s 
Macquarie Infrastructure Group, which bid successfully for the Skyway deal and 
a second toll road in neighbouring Indiana.

Dana Levenson, the city of Chicago’s chief financial officer, said the Skyway 
deal sparked interest in what other assets could be monetised. “Our first 
thought was: ‘What else in the portfolio might serve the same purpose?’ 
There were quite a few,” he said.

The city narrowed the list down to Midway, its second airport after O’Hare 
International, three garbage recycling centres and the 9,176-space parking 
garages under two city- centre parks. Chicago has hired William Blair & Co, the 
investment bank, to run the auction for the car-park lease – which could run 
between 56 and 99 years – and hopes to have bids in by September.

Mr Levenson said the Midway project was more complex, “but we expect to name 
a financial adviser relatively soon”. The city will have to resolve issues 
such as whether federal grants used to upgrade the airport will have to be 
repaid, as well as assuage any political concerns about potential foreign 
control of key infrastructure assets, a sensitive subject in the wake of the 
Dubai Ports World controversy.

Midway handled almost 18m passengers last year and is now one of the largest 
bases for Southwest Airlines, the country’s largest low-fare carrier. 

The privatisation would be by far the largest for a US airport, which are 
almost exclusively owned by cities or other local authorities, though many 
services have been contracted out to the private sector. Midway is twice the 
size of Indianapolis airport, which is managed by UK-based BAA. National 
Express, another UK transportation group, runs the small Stewart airport north 
of New York City under a 99-year lease.

The stable cash flows from airport operators are attracting growing investor 
interest, with Aéroports de Paris slated for an initial public offering later 
this year, and facilities in Mexico also due to be partially floated.

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