CHICAGO, Jan 27 (Reuters Legal) - Chicago has put a nearly $1 billion bond sale for its O'Hare International Airport on hold indefinitely due to a lawsuit filed by the airport's two major carriers, a city spokesman said on Thursday.

"We just don't know when we could bring it to market," said Pete Scales, the spokesman.

The city, which had scheduled pricing for the bonds for February 1 and 2 through Citigroup, plans to file a motion on Thursday to dismiss the lawsuit.

United Airlines and American Airlines sued the city in Cook County Circuit Court on Jan. 18 seeking to block further financing of a program to expand O'Hare.

The airlines asked the court to declare that the city is obligated to obtain airline approval for the $3.36 billion completion phase of the O'Hare Modernization Program. The carriers also want the court to block the city from constructing all or any part of the completion phase.

In a statement on Wednesday, Chicago said it believes that its airport use agreement and terminal facilities lease with the airlines give the city the right to issue the bonds, which are backed by passenger facility charges and federal aviation grant funds.

The airlines argue that the second of the two proposed bond issuances would be backed by levies on their revenue, a condition which requires their approval before the bonds can be issued. They also claim that the proposed project is unnecessary because operation levels at O'Hare have declined in recent years.

Meanwhile, the O'Hare program received a boost on Wednesday from the Illinois Supreme Court, which declined to hear an appeal from a cemetery Chicago is trying to acquire for an airport runway. The city's aviation department said the court's decision allows it to move forward in working with families to relocate graves.

The case is United Airlines et al v. The City of Chicago, Circuit Court of Cook County, Chancery Division, No. 11C02081.

For the airlines: The complaint lists Samuel Isaccson, Raj Shah and Joseph Roselius of DLA Piper.

For Chicago: Not immediately available.

(Reporting by Karen Pierog of Reuters; Additional reporting by Jeff Roberts of Reuters Legal)