Item 9a Supp1
Item Number: _______9a_Supp_1___ Date of Meeting: __October 6, 2009___ Aviation Division 2010 Preliminary Budget Operating Budget Capital Budget Business Plan Forecast Commission Budget Workshop October 6, 2009 1 Financial Goals Airline side of business: Manage growth in passenger airline cost per enplanement (CPE): Drive future CPE below November 2005 forecast through 2012 (basis of airline agreement - SLOA) Maintain rates & charges debt service coverage at 1.0x Non-airline side of business: Grow Net Operating Income (NOI) Mitigate declines associated with reduced passenger levels Provide cash flow to meet/exceed debt service coverage of 1.25x Generate excess cash flow to facilitate airline cost offsets Division: Maintain unrestricted cash and investments equal to at least 10 months of O&M costs 2 Enplanement Forecast 17,000 5 Year Recovery Year Assumption 16,500 2009 -4.5% 2010 0.0% 16,000 2011 1.0% 2012 2.5% 15,500 2013 2.7% 15,000 2014 2.7% 14,500 2007 2008 2009 2010 2011 2012 2013 2014 Not typical recovery; no sharp rebound Travel demand may pick up in late 2010 as economy improves, but capacity cuts and/or increased fares may dampen demand Growth rate in out years reflects FAA long-term forecast (2.7%) Continuing to review and refine forecast 3 Operating Budget Overview 2010 Enplaned Passengers flat (0% change) Revenues: Non-airline revenues down 8.3% Airline revenues up 4.5% due to increased capital costs Expenses: Aviation Division achieved targeted 5% reduction with two exceptions Aviation O&M decreasing by $3.2M, or 2.4% (including exceptions) NOI down $629K, or -0.4% CPE: $12.70, less than $12.88 projected last year for 2010 4 Budget Target $000s 2009 Budget 132,665 Transfer Airport Jobs (176) Transfer Commute Trip Reduction (97) Exclude Environmental Reserves (1,187) Aviation Baseline Budget 131,204 Targeted 5% reduction 6,560 2010 Division Budget Target 124,644 5 Budget Target & Cost Drivers 2010 Budget Target 124,644 2009 Approved Budget 132,665 Exclude Envrionmental Reserve (1,187) Transfers to Corporate (273) Budget Cuts and Savings (7,485) One-time Items in 2009 Budget (4,137) Costs Absorbed: Salary, wages and benefits 2,344 Facility maintenance 920 Total 3,264 New initiatives 1,798 Total budget before exceptions 124,644 Proposed Budget Target Exceptions: Costs offset by new revenues (in 2010) 1,795 Proposed 2010 Baseline Budget 126,439 6 Budget Cuts & Savings Cuts and Savings: $000s FTEs Operations 2,038 (30.4) Business Development 105 (1.0) Utilities 802 Airport Director's Office 270 (2.0) Fire Department 240 (2.0) Facilties & Infrastructure 274 (2.0) Maintenance 2,092 (27.0) Security 1,158 (23.0) Other 506 (3.0) Total Cuts and Savings 7,485 (90.4) Reduced 90.4 FTEs Renewable energy purchase eliminated 7 Facility Maintenance Costs Facility Maintenance Costs $ Elevator & escalator maintenance 750 Replace broken CTE furniture 70 Runway maintenance 100 920 Elevator and escalator breakdowns have been a major customer service problem in 2009. 2009 budget is $140,000. Expect to spend about $1 million. Newer runways require more rubber removal 8 New Initiatives Description $ Real Estate development support 250 Part 150 Noise Study (non-grant funded) 200 Add Sr. Business Dev. Analyst (1.0 FTE) 78 ATR Support - consortium 70 Enplaned passenger survey 100 Contingency for emergency response: Snow and flood 500 Increase division contingency 600 1,798 9 Proposed Target Exceptions $ Budget Exclusion: Environmental Reserve 2009 Budget 1,187 2010 Budget Increase 1,784 2010 Total 2,971 Costs Offset by New Revenues (in 2009) Part 150 Study (grant funded portion) 800 South Access Study (City of SeaTac) 450 Lounge on South Satellite 545 1,795 Capital projects driving asbestos costs include: CUSE expansion ($500K) Escalator renewal and replacement ($500K) Elevator modernization ($383) Delta Sky Club ($700K) PC Air ($310K) 10 Expense Summary by Department 2008 2009 2010 '10-'09 Change Figures in $ 000 Actual Budget Budget Change % Airport Operations 34,917 32,179 31,031 (1,149) -3.6% Business Dev & Mgmt 3,951 4,590 3,696 (894) -19.5% SeaTac Utilities - Total 12,884 13,952 13,147 (805) -5.8% Aviation Maintenance 48,923 46,508 45,458 (1,050) -2.3% Fire Department 14,962 10,654 11,359 705 6.6% Airport Security 7,511 6,868 6,075 (793) -11.5% AV Environmental 3,207 3,909 3,883 (26) -0.7% Aviation Director's Office 3,194 3,147 1,394 (1,753) -55.7% AV Facilities & Infrastructure 1,843 1,936 1,685 (251) -13.0% AV Planning 1,744 1,718 1,720 2 0.1% Other (Excl AV PMG) 6,159 6,017 6,992 975 16.2% Baseline O&M 139,295 131,478 126,439 (5,039) -3.8% Environmental Reserve 2,542 1,187 2,971 1,784 150.3% Total Aviation 141,837 132,665 129,409 (3,255) -2.5% 11 FTEs FTEs % 2009 Budget 833.1 Approved in 2009 2.0 Transfer out 2009 (1.0) Eliminated in 2009 (14.0) Adjusted 2009 820.1 FTEs reduced: 2010 Budget Operations 30.4 Eliminated (76.2) Security 23.0 Baggage Manager 1.0 Maintenance 27.0 Sr Business Analyst 1.0 Other 10.0 0.5 Emergency Mgmt Intern 0.5 Net changes (73.7) Total Eliminated 90.4 Proposed 2010 Budget 746.4 -10.4% 12 Aeronautical Key Indicators 2008 2009 2010 10-09 Bud Var Actual Budget Budget Var $ Var % Enplaned Passengers 16,085 15,800 15,361 (439) -2.8% Aeronautical Cost KPIs Capital Costs / Enpl 5.07 5.09 6.04 0.95 18.8% Operating Costs / Enpl 8.15 8.10 8.27 0.18 2.2% Offsets (1.30) (1.24) (1.47) (0.23) 18.8% Other Aero Revenues 0.79 0.90 0.98 0.08 8.4% Non-passenger Airline Costs (0.81) (0.94) (1.11) (0.18) 18.7% Passenger Airline CPE 11.89 11.90 12.70 0.80 6.7% Capital costs are driving CPE increase 13 Non-Airline Business 2008 2009 2009 2010 10-09 Bud Change Figures in $000s Actual Budget Forecast Budget Var $ Var % Revenues: Public Parking 59,111 57,377 51,963 51,812 (5,565) -9.7% Rental Cars 35,592 35,867 33,850 31,424 (4,444) -12.4% Concessions 33,181 32,821 29,998 29,953 (2,869) -8.7% Other 22,644 22,324 21,300 22,818 494 2.2% Total Revenue 150,528 148,389 137,111 136,006 (12,383) -8.3% Operating Expense 61,279 60,329 57,284 56,659 (3,670) -6.1% Share of terminal O&M 16,396 18,105 17,183 17,253 (851) -4.7% Less utility internal billing (13,515) (16,848) (16,848) (13,654) 3,193 -19.0% Net Operating & Maint 64,160 61,586 57,620 60,258 (1,328) -2.2% Non-Aero Net Operating Income 86,367 86,803 79,491 75,748 (11,055) -12.7% Gross Profit Margin 57.4% 58.5% 58.0% 55.7% (0.03) -4.8% 2010 revenue budget is only 0.8% below 2009 forecast Pricing changes will mitigate drop in parking revenues Adjusted MAGs for rental car companies effective 11/1/09 New Lounge revenues included in Other 2010 O&M costs include CDD tenant work on Rental Car Facility and new lounge costs 14 Non-Airline Key Indicators 2008 2009 2009 2010 10-09 Bud Change Actual Budget Forecast Budget Var $ Var % Revenues / Enplanement Parking 3.67 3.63 3.38 3.37 (0.26) -7.1% Rental Car 2.21 2.27 2.20 2.05 (0.22) -9.9% Concessions 2.06 2.08 1.95 1.95 (0.13) -6.1% Other 1.41 1.41 1.39 1.49 0.07 5.1% Total Revenue 9.36 9.39 8.93 8.85 (0.54) -5.7% Primary Concessions Sales / Enpl 10.29 10.19 9.62 9.78 (0.41) -4.0% Parking, rental car and concessions impacted by economic conditions Modest improvement in Concessions Sales per Enplanement from 2009 forecast 15 Division Summary 2008 2009 2009 2010 '10-'09 Bud Change Figures in $000s Actual Budget Forecast Budget $ % Revenues Total Airline Revenues 204,361 202,913 195,499 212,042 9,128 4.5% Total Non-Airline Revenues 150,528 148,389 137,111 136,006 (12,383) -8.3% Fuel Hydrant 3,440 8,704 8,704 8,353 (351) -4.0% Total Revenues 358,329 360,006 341,314 356,401 (3,605) -1.0% Airport Expenses 140,157 131,478 125,004 126,439 (5,039) -3.8% Corporate Expenses 52,484 56,856 52,525 57,135 279 0.5% Baseline O&M 192,641 188,334 177,529 183,574 (4,760) -2.5% Environmental Reserve 2,542 1,187 792 2,971 1,784 150.3% Total Aviation 195,183 189,521 178,321 186,545 (2,976) -1.6% Net Operating Income 163,146 170,485 162,993 169,856 (629) -0.4% Key Measures Passenger Airline CPE 11.87 11.90 11.78 12.70 0.80 6.7% Non-Aeronautical NOI ($000s) 86,367 86,803 79,491 72,791 (14,012) -16.1% Debt Service Coverage 1.40 1.44 1.38 1.36 (0.09) -5.9% Traffic Change vs 09 Fcst Enplanements 16,085 15,800 15,361 15,361 - 0.0% Landed Weight 21,516 21,281 20,231 19,950 (281) -1.4% Expense reductions largely offset revenue drop vs. 2009 budget to maintain NOI. 16 Budget Summary vs. Financial Goals Aeronautical: manage growth of CPE: 2005 forecast of 2010 CPE: $14.87 2008 forecast of 2010 CPE: $12.88 2010 budget for CPE: $12.70 CPE reduction measures incorporated into budget: FIS offset to $7.0 million (target $6.00 per passenger) Use of 90% of PFCs to offset revenue bond debt service Non-aeronautical: Can't offset revenue declines with cost reductions. Budget is conservative Continuing efforts to identify ways to enhance revenues 17 Capital Budget Overview Focus: Renewal and replacement Customer needs Opportunistically promote common use Capacity enhancement projects deferred Most elements of Comprehensive Development Plan have been deferred Proposing to delay reconstruction of Runway 16C for five years Initiate design in 2010 18 Capital Budget 2005 - 2014 $450 Allowance/CDP $400 Rental Car Facility Other CIPs $350 $300 $250 $200 $150 $100 $50 $0 2005 Act 2006 Act 2007 Act 2008 Act 2009 Fcst 2010 Fcst 2011 Fcst 2012 Fcst 2013 Fcst 2014 Fcst 19 Projects Moving to BP Prospective (Status 2) Figures in $000s 2010 2011 - 14 $000's Aeronautical New GSE Electrical Charging Station 1,510 12,900 14,410 SSAT Delta Sky Club Expansion 300 3,700 4,000 C1/C60 BHS Connections 100 6,900 7,000 Total 1,910 23,500 25,410 Aeronautical Renewal & Replacement RW 16C/34C Design (Construction in 2016) 500 500 1,000 Elevator/Escalator Moderization Program 688 19,046 19,734 Roof Replacement Program Phase 1 85 2,085 2,170 Paint Striper Equipment 380 - 380 Claim Device 14 Replacement - 4,000 4,000 Total 1,653 25,631 27,284 Non-Aero New 28th Ave Property Acquisition 2,100 300 2,400 ESP Web Portal 300 - 300 Total 2,400 300 2,700 Non-Aero Renewal & Replacement Elevator Modernization Program - 3,000 3,000 Parking Retrofit 300 7,300 7,600 Parking Garage Lighting Retrofit 100 1,400 1,500 Total 400 11,700 12,100 Total New Projects 6,363 61,131 67,494 CIP By Major Project figures in $000's 2010 2011 2012 2013 2014 Total Description Rental Car Facility 157,918 89,387 16,250 - - 263,555 Renew/Replace 42 Escalators 9,000 15,000 15,000 15,353 - 54,353 Third Runway 5,549 12,909 3,824 - - 22,282 Aircraft RON Parking USPS Site 5,100 1,000 37,800 - - 43,900 Highline School Insulation 521 21,400 - 15,700 - 37,621 Central Plant Pre-Conditioned Air 10,500 10,000 11,269 - - 31,769 North Expressway Relocation 13,000 4,000 - - - 17,000 Airfield Pavement Replacement 600 6,000 6,000 6,000 6,000 24,600 Elevator/Escalator Moderization 688 9,469 4,485 5,092 - 19,734 CDP Future Projects - 1,000 7,682 1,200 7,500 17,382 Allowance CIPs 13,061 30,019 54,499 67,107 76,000 240,686 Other (136 projects) 120,846 106,726 64,131 25,423 12,996 330,122 Total 336,783 306,910 220,940 135,875 102,496 1,103,004 21 Risks & Opportunities Risks: Economic conditions remain uncertain Airlines may adjust schedules further Opportunities: Improving economy could increase enplanements and non-airline revenues 22 Business Plan Forecast $in 000s 2009 Bud 2010 2011 2012 2013 2014 Airline Revenue $201,864 $211,031 $219,426 $235,257 $255,538 $264,131 Non-Airline Revenue 148,289 136,006 138,618 144,113 150,942 156,094 Other Revenue (Excl Fuel Hyd) 1,553 1,539 1,555 1,571 1,587 579 Total Revenue 351,706 348,576 359,599 380,941 408,067 420,804 Operating Expense 189,421 186,546 191,510 197,106 203,073 209,199 Net Operating Income (NOI) 162,285 162,030 168,089 183,835 204,994 211,605 Non-Operating Income 7,240 7,065 7,399 6,282 6,458 6,650 Available for Debt Service 169,525 169,095 175,488 190,117 211,452 218,255 Debt Service (151,899) (176,833) (182,964) (199,212) (218,275) (224,531) Debt Service paid by CFCs - 20,048 20,048 20,048 20,048 20,048 Debt Service paid by PFCs 33,762 32,257 32,785 34,114 35,590 37,096 Net Cash Flow 51,388 44,567 45,357 45,067 48,815 50,868 Key Measures Total Airport Coverage 1.43 1.36 1.35 1.31 1.30 1.30 Rates and Charges Coverage 1.00 1.00 1.00 1.00 1.00 1.00 Passenger Airline CPE 11.90 12.69 13.09 13.72 14.57 14.67 CPE - Nov. 2005 (SLOA) 14.15 14.87 15.47 16.49 16.69 17.65 Reduction in CPE (2.25) (2.18) (2.38) (2.77) (2.12) (2.98) CPE Forecast $22.00 $20.00 $18.00 CPE $16.00 $14.00 Nov-05 (SLOA) $12.00 Nov-08 Oct-09 Oct-09 $2010 $10.00 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019
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