The consortium set to privatize Chicago Midway airport failed to meet its financing deadline on 6 April, stalling plans to modernize the facility.
Chicago approved a two-week extension on 6 April to negotiate a possible six-month extension for Midway Investment and Development Company to secure financing.
The consortium of John Hancock Life Insurance Co., Citi Infrastructure and Vancouver Airport Services had proposed a $2.52 billion-lease and redevelopment deal for the 43-gate airport under a 99-year lease.
"As everyone knows, we've seen unprecedented developments in the national and world economy-specifically in the financial sector-since last September when Midway bids were submitted. And the global economic recession is obviously having a substantial impact on the availability of financing-this has created serious challenges for many businesses and financial institutions," a spokeswoman for airport operator the City of Chicago says.
Chicago is entitled to $126 million from the development company, and has the option to re-bid privatization if the transaction does not close.
Failed financing is not the only challenge the city has faced in its attempts to privatize the airport, an effort that has been in the works for years.
The city filed a preliminary application with the FAA in September 2006 for Midway to be considered for lease under a pilot programme only to have the plan's chief architect, city CFO Dana Levenson, resign around March 2007.
However, the city moved forward with the effort and in November 2007 when Southwest Airlines became the first carrier to endorse the plan.
Federal guidelines require the approval from at least 65% of the airlines serving the airport to privatize and AirTran Airways, Delta Air Lines and Northwest Airlines have since formally committed to support the transaction, the city says.
With Southwest, these carriers represent 80% of the airlines and more than 95% of the traffic at Midway.
If the deal goes through, Midway will become the second airport to be privatized in the United States.
Previously Stewart International airport was the first privately-run airport in the country.
UK firm National Express Group inked a 99-year, $35 million-lease effective April 2000 for Stewart, about 60m (97km) north of New York City.
The transaction occurred under the FAA's pilot programme, which allowed for the sale of five airports.
But the privatization of the Newburgh, New York-based airport did not last. The Port Authority of New York and New Jersey assumed ownership of Stewart in November 2007, paying National Express $78.5 million for the remainder of the lease.