Southwest agrees to Midway's privatization
Chicago's plans to lease Midway International Airport to a private operator advanced following a preliminary agreement with the airport's largest tenant, Southwest Airlines Co.
The accord would cap Southwest's fee for operating at the airport for six years, the city said in a statement this week. Fees would increase after that based on inflation.
Dallas-based Southwest, the largest U.S. low-fare carrier, would also have the power to enforce the terms of an operating agreement if a private operator failed to meet its obligations.
"This is a meaningful first step toward what we believe to be a historic opportunity for the city and the airlines operating at Midway Airport," Paul A. Volpe, the city's chief financial officer, said in the statement.
If a final agreement is reached, it may lead to the largest privatization of an airport in U.S. history. Federal Aviation Administration rules require that airlines handling 65 percent of the gross tonnage of planes landing at an airport approve a privatization. Southwest accounts for about 70 percent at Midway, Volpe said Friday.
FAA rules also require Chicago to seek approval from four of the six other airlines flying out of Midway, Volpe said. They are AirTran Holdings Inc., ATA Airlines Inc., Continental Airlines Inc., Delta Air Lines Inc. and Northwest Airlines Corp.
Southwest Vice President of Properties Bob Montgomery said in the statement the airline hopes the agreement leads to a beneficial lease arrangement and the city gives "the project the due diligence that it deserves."
Airlines will pay about $56 million in landing fees and rent to operate at Midway in 2007, Montgomery said in an interview. Southwest pays as much as $42 million, or 70 percent to 75 percent of the fees the city charges the airlines.
The Southwest deal will provide the basis for arrangements with the other airlines, Volpe said. He declined to comment on how much he thinks the city can receive for its planned 99-year lease of Midway.
Volpe expects an agreement with a private operator to be reached nine to 12 months after negotiations with the airlines conclude.
Chicago filed a preliminary application with the FAA to lease the airport in 2006. A final agreement with a private operator will require approval from the FAA and the Chicago City Council, according to the statement.
Almost 14.7 million travelers have used Midway this year through September, according to information on the airport's Web site. At the same time, Chicago's O'Hare International Airport had almost 58 million travelers.