UPDATE 1-Chicago pursues Midway Airport lease deal

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CHICAGO, Feb 13 (Reuters) - Chicago said on Wednesday it will pursue a long-term lease deal for Midway Airport after five of the seven airlines at the airport reached a preliminary agreement on potential lease terms.

The city said it issued a request for qualifications for companies to run Midway under what would be the first commercial hub airport leased to a private operator.

The potential deal followed the Federal Aviation Administration's acceptance in 2006 of Chicago's application for the only hub airport slot under a pilot program allowing five U.S. airports to be leased to private operators.

Under that pilot program, airlines that account for at least 65 percent of the airport's traffic must approve the transaction.

Chicago said it has reached initial agreements with Southwest Airlines (LUV.N), Delta Airlines(DAL.N), AirTran Airways (AAI.N), ATA Airlines and Frontier Airlines FRNT.O, which account for about 95 percent of Midway's air traffic.

"We have been working closely with the airlines to craft an innovative structure that would provide benefit to the airlines, the airport users, and the city of Chicago, and we are pleased to have their preliminary support for this transaction going forward," said Paul Volpe, the city's chief financial officer, in a statement.

Chicago said it would conduct a competitive bidding process for a lease of 50 years or more among companies determined to be qualified to operate the airport. Requests for qualifications responses are due by March 31.

A lease deal would be subject to approval by the FAA, Transportation Security Administration and Chicago City Council.

Chicago has already netted more than $2 billion in upfront payments from leasing its Chicago Skyway toll bridge and parking garages. The city is also pursuing leases of garbage recycling facilities and metered parking. (Reporting by Karen Pierog; Editing by Leslie Adler)