The city of Chicago has accepted a $2.5 billion bid from Midway Investment and Development Company, LLC for a 99-year lease on Midway International Airport.

Partners in the winning consortium include New York's Citi Infrastructure Investors, Vancouver-based YVR Airport Services Ltd. and Boston-based John Hancock Life Insurance Co.

The privatization is part of an FAA pilot that allows five airports in the U.S. to be leased to private operators, with one slot reserved for a large hub airport. The city originally announced plans to take the large-hub airport slot for Midway back in September 2006, with plans to complete the privatization by the end of 2007.

Under lease terms with the city, MIDCo will pay $2.5 billion up front in rent to the city at the transaction's closing, giving it the right to operate the airport subject to all of the terms of the lease. It includes operating standards covering airport operations, such as safety and security, runway maintenance and upkeep of the terminal.

MIDCo will take over the city's new 25-year use agreement with the airlines. As part of the agreement, airline rates and charges are capped at a level below total 2008 charges and will remain frozen at that level for six years.

FAA needs to give its final approval for the deal, while the Transportation Security Administration will have to approve a revised Airport Security Plan for Midway before the deal is completed. The city will continue to provide police and fire services at Midway.

Photo: Chicago Aviation Department