The Gary/Chicago International Airport Authority has approved development and management agreements for the Gary/Chicago International Airport which will be developed as a public-private partnership (PPP; P3), setting the amount to be invested at $100 million over a 40-year period, according to a statement.
Airport manager AvPorts and its parent company, Aviation Facilities Company (AFCO), are leading the group responsible for managing and developing the airport located in Gary, a city in the US Midwest state of Indiana.
According to the terms of the development agreement, the private sector partner – which along with AvPorts and AFCO includes New York financial services firm Guggenheim Partners – will have to invest $25 million in the first three years. An investment of $300,000 in workforce development is also required within that timeframe, according to the statement released by the airport authority on Monday.
Performance incentives for revenue growth and profit sharing with the airport and the city of Gary are provided in the management agreement.
The airport authority will retain public control of the asset.
“The decision to move forward with the Public Private Partnership shows great insight and forward thinking on the part of the airport board,” Gary Mayor Karen Freeman-Wilson said.
“I have always maintained that the completion of the runway expansion without a viable plan for moving forward would be an exercise in futility,” she added, referring to a $166 million runway currently under construction.
Located just 30 minutes from Chicago in neighbouring Illinois, Gary/Chicago airport bills itself as the ‘third’ Chicago-area airfield behind O’Hare International Airport and Midway International Airport.
In August 2013, it lost its lone commercial carrier Allegiant Airlines, but the airport does not necessarily seek to compete with O’Hare and Midway for commercial flights, the airport authority’s spokesperson, James Ward, told Infrastructure Investor.
“Gary/Chicago International Airport may become more of a general aviation hub, serving freight, cargo and private airlines,” he said.
Gary/Chicago is only the second airport privatisation in the US. The first was Luis Munoz Marin International Airport (LMM) in Puerto Rico, a US territory. In February 2013, the Federal Aviation Administration (FAA) approved leasing the air field to infrastructure fund manager Highstar Capital and Grupo Aeroportuario del Sureste (ASUR) for $2.5 billion and a 40-year term.