Transcript wagner.nyu.edu

US AIRPORT PRIVATIZATION:
CHICAGO MIDWAY AIRPORT
AND BEYOND
David Narefsky and John Schmidt
Mayer Brown, LLP
March 25, 2008
NYU Wagner Rudin Center for
Transportation Policy & Management
MIDWAY AIRPORT:
TRANSACTION IN CONTEXT
COMPLETED TRANSACTIONS:
• Chicago Skyway – 2005
• Indiana Toll Road – 2006
• Chicago Underground Garages—2006
______________________________________________________
TRANSACTIONS IN PROCESS:
• Chicago Street Parking;
• Pennsylvania Turnpike;
• Congestion Relief Toll Lanes;
• Mass Transit, Ports, Lotteries;
________________________________________________________
• BUT MIDWAY IS ONLY U.S. AIRPORT
TRANSACTION
MIDWAY AIRPORT:
TRANSACTION IN CONTEXT
• Midway would be first major U.S. passenger
airport to be privatized
• Private operation, management and
ownership is common in Canada, Europe,
Asia and Australia
• Over 50 airports privatized since 1987 –
more than 10% of global market
Airport Privatization – Global Overview
•PRIVATIZATION OF UK AIRPORTS
•BAA--Privatized via IPO
 Ownership of Heathrow, Gatwick and Edinburgh
 Acquisition by BAA of Budapest Airport -- and recent
sale to Hochtief
• Recent acquisition of BAA by Ferrovial
•London City Airport
• Credit Suisse/GE Capital/AIG consortium recently
purchase for over 700 million pounds; prior acquisition
for approx. 25 million pounds
Airport Privatization – Global Overview
Macquarie Airports:
 Sydney
 Rome
 Copenhagen
 Brussels
Aeroport de Paris:
 CDG and Orly
Airport
 Recent public
offering of shares
Hochtief:
 Dusseldorf
 Hamburg
 Athens
 Budapest
Other Privatized Airports:
 Vancouver (Vancouver
Airport Authority)
 Frankfort (Fraport)
 Amsterdam (Schipol)
 Mexico – IPO for dozen
regional airports
U.S. Airports – Limited Privatization to Date
JFK
 Terminal 4/International Terminal—design/build/operate
 Consortium = Schiphol USA, LCOR, Lehman Brothers
Indianapolis
 Long-term contract for privatized operations through BAA
 Contract to be terminated
Boston Logan and Pittsburgh
 Privatized concessions through BAA
Orlando -- Sanford
 Operated by TBI
Federal Authorization: FAA Pilot Privatization Program
Enacted in 1997;
Authorizes privatization of up to five airports
 Only One Slot for “large hub” airport (1% of passenger
boardings) – Midway reserved this slot in 2006;
 If five airports are privatized, one must be general aviation
airport;
Stewart Airport (Newburgh, NY)
Only airport successfully privatized under Pilot
Program;
99 year lease to National Express Group
Lease recently acquired by Port Authority;
FAA Pilot Privatization Program—Key Provisions
• Exemption from prohibition on use of proceeds for nonairport purposes – allows proceeds to be “taken off airport”
• Requires approval by 65% of eligible carriers -- by number of
airlines and by landed weight
• Exemption from obligation to repay federal grants
• Authorizes private operator to use net revenues for non-airport
purposes
• Specific requirements for increases in airlines rates and charges.
• Permits private operator to receive and use PFCs and federal grants
on essentially same terms as government owner
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MIDWAY AIRPORT--OVERVIEW
• Premier point-to-point airport—leisure and
business travel to over 55 destinations;
• 19.1 million passengers and 304,000 operations in
2007;
• New airport terminal opened in 2004--43 gates,
concessions triangle, expanded parking and
improved roadways;
• FIS Facility for international flights;
• Located 10 miles southwest of downtown Chicago
• Access via 30 minute, rapid transit rail service;
MIDWAY AIRPORT– INVESTMENT HIGHLIGHTS
• First mover advantage to new asset class
• 100% lease on a very long-term concession
• #1 airport for low-cost carriers
• New approach to rates and charges
• Untapped commercial upside
• State-of-the-art-facility
• Modest capital expenditure plans
• International route potential
• Access to passenger facility charges for Midway
CITY OBJECTIVES FOR MIDWAY
TRANSACTION
• Protect the Public Interest
Maintain highest levels of public and passenger
safety and security
Protect the public interest within the context of
seeking value for the City and the airlines
Detailed operating standards and continued City
oversight
New framework of rates and charges
CITY OBJECTIVES FOR MIDWAY
TRANSACTION
• Maximize sale proceeds
Ability to use funds for infrastructure and
pensions
Ensure that future airport development is
safe, functional, efficient
CITY OBJECTIVES FOR MIDWAY
TRANSACTION
• Fair and Transparent Process
Protect the reasonable interests of current
and future airline users
Ensure fair and equitable treatment of
existing Airport employees
Ensure a smooth transition from public to
private management in a timely manner
STATE LEGISLATION—KEY PROVISIONS
• CITY STATUS OF HOME RULE UNIT;
• EXEMPTION FROM PROPERTY TAXATION;
• USE OF PROCEEDS – AT LEAST 90% FOR:
 “INFRASTRUCTURE WITHIN THE CITY”;
 FUNDING PUBLIC PENSIONS ;
• “BEST PRACTICES” LABOR PROTECTIONS
• COMPLIANCE WITH MBE/WBE REQUIREMENTS;
• NO EXPANSION OF FOOTPRINT OF MIDWAY
AIRPORT;
“BEST PRACTICES” IN LABOR PROTECTION
190 City Employees at Midway = 165 Union + 25 Non-Union
Job Security Protections
* City will offer employment under substantially similar terms and
conditions in another Department or location
* Lessee must also offer employment under substantially similar terms
Project Labor Agreements for public works projects funded by proceeds
* Applies to construction projects valued at $500,000 or more
Wage and benefits protections for employees of Private Operator
* Employees performing work formerly performed by City employees in
bargaining units will receive the economic equivalent of the wage and
benefits that would otherwise be received by the City employees
Protections for union organizing efforts
* Lessee will be required to negotiate a labor neutrality and card check
procedure agreement
.
NEXT STEPS IN MIDWAY PROCESS
• RFQ Responses and Qualify Bidders
• Amended Use Agreement with Airlines and
Lease Agreement with Private Operator
• Receipt of bids in 3Q of 2008
• Review and Approval by City Council and
FAA/TSA -- Public Notice and Comment
• Foreign Investment—CFIUS Considerations
• Closing in 4Q of 2008
Contact Information
David Narefsky
(312) 701-7303
[email protected]
John Schmidt
(312) 701-8597
[email protected]