9a. 2020 Aviation Division Business Plan and Budget Presentation
Item No. 9a_supp . Meeting Date: June 11, 2019 Aviation Division 2020 2024 Long Range Plan 2020 Business Plan & Budget Preview June 11, 2019 Outline Strategy to Budget process Vision/Goals SWOT: strengths, weaknesses, opportunities & threats 2024 objectives & strategies 2020 Budget preview Preliminary 2020 2024 forecast 2 Strategy To Budget Process Century Agenda Vision/Goals 5- 10 Years Strategic Planning SWOT Gap Objectives & Strategies 3 5 Years (Long Range Plans) Implementation 2020 Business Plan 2020 Budget Annual 2020 Performance Plans 3 Strategic Priorities: Vision/Goals AV Priorities Vision/Long-term Goals Safety Airfield Composite Safety Score = 35 100% of employees go home safely Zero discrepancies on TSA audit Security Zero breaches Zero incidents of intentional harm Employees Be a high performance organization 100% of staff understands how their work contributes to success of Airport and Port Innovation & Lean process improvements and innovation ingrained in Port's culture Efficiencies Asset Management Achieve critical asset uptime of 99% Social Responsibility Sustainable share of Port economic opportunities go to disadvantaged businesses Customer Skytrax 5-Star ranking Service ASQ index score in top 5 of large hub airports Environment & All Part 150 noise study commitments met, innovative noise reduction techniques explored Sustainability Achieve Port goals for GHG emission for 2030 and 2050 Financial Port can operate, maintain and upgrade facilities to accommodate regional demand while Performance maintaining competitive CPE, manageable debt levels, and adequate debt service coverage Facility Planning & Provide facilities to meet demand for passenger and cargo service. Capital Projects Provide optimum level of service (at peak times). 4 SWOT: Industry/Business Context Opportunities: Regional economy remains strong, driving demand for air service U.S. Airlines remain profitable, but 2018 down from 2017 Technology, facial recognition, AI Threats: Trade war/tariffs with China Ground Transportation mode shifts Delays to airport expansion Construction costs remain high 5 SWOT: Sea-Tac Airport Strengths: Two hub airlines: Alaska and Delta account for 71% of passengers Growing international service: 4 new services in 2019 IAF will open in 2020, NSAT complete in 2021, ADR program Port of Seattle staff Weaknesses: Current facilities not designed for passenger/traffic levels Construction impacts customer service Port processes: hiring, procurement, commission review & approval Employees approaching retirement age, challenges filling key positions 6 Projecting Growth in Passengers Passengers (000s) 70,000 6.2% growth in 2018 60,000 3% 50% growth from 2012 - 4% 2018 50,000 40,000 4% growth in 2019 30,000 3% growth for 2020 20,000 SAMP growth 10,000 assumptions through - 2029 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025 2026 2027 2028 2029 7 Strategic Challenges Optimize use of terminal space/facilities Improve customer service in congested facilities, during construction Improve airfield safety in spite of increased traffic/utilization Add future terminal/gate capacity Balance investment in existing facilities while preserving capital capacity for facility growth Maintain debt service coverage levels: increase non- aeronautical revenues and manage cost growth 8 Key Priorities for 2020-2024 CUSTOMER SERVICE FACILITIES/CAPACITY FINANCIAL EMPLOYEES 9 Customer Service 2024 OBJECTIVES: IMPROVE OVERALL CUSTOMER SATISFACTION SCORE EACH YEAR Achieve Skytrax 4-Star Ranking Exceed 5-year average ASQ score for all six key service attributes DEPARTING PASSENGERS Roadway to through security checkpoints < 45 minutes (security checkpoint wait < 20 minutes) Aircraft taxi wait time < 20 minutes ARRIVING INTERNATIONAL PASSENGERS Minimum Connect Time < 75 Minutes 10 Customer Service STRATEGIES Improve customer communication tools Train all airport employees (POS and others):WE ARE SEA Lean techniques to improve movement processes Data driven approach to prioritization Targeted facility investments for capacity, efficiency, safety and appearance Technology:more and better information 11 Facilities/Capacity 2024 OBJECTIVES Achieve Optimum level of service for all facilities Maintain functionality of existing facilities Add needed capacity to facilitate growth STRATEGIES Expand Checkpoint capacity move checkpoint 1 to bag claim Evaluate other main terminal optimization proposals Expand C-1 building Move United off of Concourse A Complete environmental review and permitting of SAMP Near-Term Projects Develop critical asset uptime measures Complete asset condition assessments Review and prioritize projects to meet needs and preserve capital capacity Integrate sustainable practices 12 Financial 2024 OBJECTIVES Grow non-aeronautical revenues to $317 million Maintain competitive airline costs (CPE) vs. western gateway hubs Maintain debt service coverage >1.4x Sufficient capital capacity to maintain/improve existing facilities and implement SAMP near-term projects STRATEGIES Add dining, retail and lounge space at C-1 Building Develop additional duty free space Market based rates for non-aeronautical businesses Develop alternatives for future vehicles access fees 13 Employees 2024 OBJECTIVES: Increase employee engagement by 3% annually 100% of staff have talent development plans Annual Employee turnover rate < 10% STRATEGIES: Each department develops work plans based on employee engagement survey results Talent development/management Implement 20% of Shark Tank innovation ideas 14 Other 2024 Objectives Environment & Sustainability: Noise: Existing Part 150 commitments 90% complete Updated Part 150 underway Innovative noise reduction techniques explored Implement StART recommendations Sustainability: Scope 1 GHG reduction by 50% Energy conservation of at least 10% Implement Scope 3 GHG measures Compliance: Meet or exceed agency requirements for stormwater leaving Port-owned or operated facilities 15 Other 2024 Objectives (Cont.) Safety: Achieve airfield composite safety score of 28.5 Achieve 90% safety evaluation score annually 5% annual improvement in employees going home safely Security: Zero discrepancies on annual TSA audit Innovation & Efficiency: 30% of employees submit ideas 10 high priority Shark Tank innovation ideas implemented Achieve annual goal of 10 efficiencies implemented 16 Other 2024 Objectives (Cont.) Social Responsibility refine and achieve goals for: DBE, eliminate disparities, if any ACDBE, eliminate disparities, if any WMBE Cargo: Meet regional demand, develop L-Shaped property 17 2020 Capital Budget Preview Major New Projects: Address seismic deficiencies of SSAT to permit upgrades/reuse (~$260 million) Add checkpoint lane capacity - new Checkpoint 1 at bag claim level to add additional lanes ($TBD) Add ADR, lounge and office space vertically expand C-1 (+~$200 million) Airline realignment ($TBD) move United off of Concourse A Include all existing Part 150 noise projects ($TBD) Designate reserve/allowance for renewal and replacement (~$300 million) Refine overall CIP reserve/allowance consistent with long-term capital capacity Evaluating/prioritizing ~50 new project requests and ~30 existing projects 18 2020 Operating Budget Preview New costs: Taxi curbside contract (~$2 million) + FTEs O&M for IAF (~$1.5 2.0 million) + FTEs Maintenance for cargo buildings (~1.0 million) +FTEs New FTES (Maintenance, Operations, Customer Service, other) Ongoing multi-year non-baseline initiatives: Advanced planning (~$5 million) Infrastructure master plan (~$3 million) Asset management (~$2 million) Airfield/airspace study (~$1 million) Complete SAMP Environmental review ($TBD) 19 Staffing Resource Needs Airport is continuing to grow Intense utilization of existing facilities New and expanded facilities and equipment: IAF, cargo buildings 2017 Staffing study anticipated the need for 151 FTEs for 2018 2021. 109 added 2018 2019, 42 remaining from recommended additions New needs have emerged 2020 proposed FTEs still under review New requests will be reviewed against strategic priorities 20 2020 Budget Preview Aero revenues driven by Fcst Fcst Percent new assets: IAF, O&M costs In $ millions 2018 2019 2020 Change Non-aero revenue growth Revenues driven by parking, ADR Aero 291 368 400 9% O&M growth: Non-aero 258 265 282 6% New Facilities Total 549 633 682 8% New FTEs O&M 319 369 377 2% Ongoing planning, studies NOI 230 264 305 16% $11 million ERL reduction Capital Spending 579 704 830 18% Peak capital spending CPE ($) 10.79 13.22 13.96 6% CPE growing as Passengers (Mil) 49.8 51.8 53.3 3% anticipated 21 2020 Operating Budget Risks/Issues Potential for Sea-Tac Consortium to take over employee busing function Limited space available at Airport Office Building may trigger need to densify or lease space Security checkpoint staffing challenges Timing/scope of airline realignment (move UA off of Concourse A) and impact on expense & capital budget IAF costs recovered in FIS rate use of PFCs to manage rate increase 22 Financial Forecast: 2020 - 2024 Fcst Preliminary Forecast In $ millions 2018 2019 2020 2021 2022 2023 2024 CPE will rise as Revenues expected Aero 291 368 400 466 509 528 561 Non-aero 258 265 282 291 300 310 317 Capital budget Total 549 633 682 757 809 838 878 does not O&M 319 369 377 395 413 432 453 include SAMP NOI 230 264 305 362 396 406 425 Key measures Capital Spending 579 704 830 618 493 377 336 indicate CPE ($) 10.79 13.22 13.96 16.22 17.58 18.04 19.00 considerable Debt Service Cov 1.65 1.68 1.56 1.50 1.54 1.51 Debt/Enplane. 117 130 143 149 150 149 capital capacity Passengers (Mil) 49.8 51.8 53.3 53.9 54.5 55.1 55.7 23
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