Out of Control Policy Blog

Chicago Stops Midway Privatization Deal, Time for FAA to Give Other Large Airports a Chance

Chicago Mayor Rahm Emanuel’s abrupt cancellation of his planned 40-year lease of Midway Airport to a private consortium has led some to question the future of U.S. airport privatization. On the contrary, if the Federal Aviation Administration acts responsibly, the Midway debacle could open the airport privatization door to other hard-pressed cities.

When Congress created the Airport Privatization Pilot Program, it decreed that only one of the five “slots” in the program could be used to lease a “large hub” airport (the 29 largest, based on annual passenger counts). For more than five years, Chicago sat on that slot, preventing any of the other 27 large non-Chicago hubs from even considering privatization. In the FAA reauthorization bill enacted last year, Congress increased the number of slots to 10—but retained the “only one large hub” restriction. The law does not spell out how long an applicant may occupy a slot without using it.

Chicago first tried to lease Midway under former Mayor Richard Daley in 2008. But after it selected the winning bidder in 2009, that bidder was caught out by the credit markets collapse and was unable to finance its $2.5 billion bid. When Rahm Emanuel ran for mayor after Daley retired, he campaigned against asset privatizations. But last year, faced with mounting budget problems, he decided to revive the Midway-lease idea. Chicago had held onto its slot thanks to FAA granting its repeated requests for extensions. But when FAA granted the most recent one, it warned that it would be the last.

There are good reasons for FAA to stick to its guns. First, five years ought to be enough time for one applicant to hog the only slot available to any of America’s 29 largest airports. Second, while Chicago could claim mitigating circumstances in the collapse of its first attempt, terminating the second attempt was the city’s own decision.

Third, and most important, in creating the Pilot Program (and expanding it last year), Congress intended to give the cities and counties that own airports the opportunity to try out a phenomenon that has led to many of the world’s largest airports to be sold or leased to a growing investor-owned airport industry. Among these airports are Auckland, Buenos Aires, Copenhagen, Frankfurt, London’s Gatwick and Heathrow, Melbourne, Rome, Sydney, and Vienna (large hubs, all).

Many city and county governments face massive shortfalls in their pension systems, as well as under-funded infrastructure. Of the 27 governments that own large hubs other than Chicago, it’s quite possible that one or more would seriously consider a long-term lease of its airport for several billion dollars—if a slot in the Pilot Program were available. They should have this option, as Congress intended. Chicago had its chance—and blew it. FAA must open the door to the other 27.

Robert Poole is Searle Freedom Trust Transportation Fellow and Director of Transportation Policy


« Study: Public Pensions Nationwide Underfunded… | Main | Benefits of Denver Plastic Bag… »




Out of Control Policy Archives