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Revised as of 4/21/2014-changes to slides 7, 15, 43, and 64 Sea-Tac Airport Capital Program Overview / Plan of Finance International Arrivals Facility NorthSTAR Purpose and Desired Outcomes Primarily, a background briefing in anticipation of future requests for authorization International Arrivals Facility (IAF) NorthSTAR Other Concurrence re addition of gates at North Satellite (NorthSTAR) 2 CAPITAL PROGRAM OVERVIEW AND PLAN OF FINANCE 3 Drivers and Other Planning Factors of Major Capital Projects Principal driver: Adequate capacity Must also balance: Rate/confidence in demand grow Peak facility use How offset capital needs with operational changes or technology Sustainability project elements "Lumpy" investments vs. long life Risk of over- or under-building Cost impacts on customers Financing capacity IAF and NorthSTAR are classic examples of balancing act 4 Drivers of Sea-Tac's Capital Program Sea-Tac is in an enviable and challenging position of needing to add capacity to meet needs of growing economy and increasing air travel demand Major focus on building "just in time" or, at least, not late Initial capital costs will drive growth in cost per enplanement (CPE), debt/enplanement These metrics will come down as airlines more intensely use facilities 5 Sea-Tac Growing Faster than Most Airports 2013 passenger enplanements indexed to 2001 activity U.S. large hub airports (>= 60% O&D enplanements) (2001 = 100) Enpl Airport Name Code O&D Index John F Kennedy Int'l JFK 72% 155 Fort Lauderdale/Hollywood Int'l FLL 90% 137 Ronald Reagan Washington National DCA 76% 133 San Francisco Int'l SFO 72% 120 Seattle-Tacoma Int'l SEA 69% 118 Orlando Int'l MCO 87% 116 Baltimore/Washington Int'l BWI 67% 116 Mc Carran Int'l LAS 77% 114 San Diego Intl SAN 88% 113 Logan Int'l BOS 87% 112 La Guardia LGA 88% 107 Newark Liberty Int'l EWR 69% 103 Tampa Int'l TPA 86% 101 Los Angeles Int'l LAX 69% 101 Honolulu Int'l HNL 75% 94 O&D: percentage of domestic passenger enplanements that begin trip at airport. Sources: FAA; USDOT OD1A database 6 Role of Sea-Tac in 21st century vs. Midwest airports, post-1978 Former connecting hubs Current connecting hubs - Intermountain West Current connecting hubs O&D city; Asian gateway 7 Drivers of Major Capacity Projects 8 Capital Program Delivery Track Record: 1998-2008 Overall Performance Without Third Third Runway Runway Program Program 1999 Baseline Budget $1,628,896,700 $773,362,000 Additions (Reductions) (45,127,778) 355,248,430 Final Baseline Budget $1,583,768,922 $1,128,610,430 Actuals at Completion $1,546,113,165 $974,337,572 Overall Under-run Phase 1 $37,655,757 $154,272,858 1999 2008 capital program completed under budget After US ACOE and WA DOE finalized permit requirements, Third Runway was completed on-time and under budget 9 2014-2023 Capital Program Figures in $000s Projects 2014-18 2019-23 2014-23 Total NorthSTAR * 367,588 90,677 458,265 International Arrivals Facility 315,903 27,969 343,872 Checked Baggage Optimization 187,000 127,688 314,688 Runway 16C/34C 99,224 0 99,224 Four Major Projects 969,715 246,334 1,216,048 Aero Allowance 98,000 421,316 519,316 Non-Aero Allowance 50,000 112,089 162,089 Other Projects 459,668 70,493 530,161 Total - Current 1,577,383 850,232 2,427,615 Total - Oct 1, 2013 1,531,260 853,126 2,384,386 Change since Plan of Finance 46,123 (2,894) 43,229 * NorthSTAR budget includes possible NSAT gate additions. 10 2014-2023 Capital Program: Sample of Other Projects Figures in $000s 2014-18 2019-23 2014-23 Total Aircraft RON Parking 38,082 38,082 Noise Program 35,273 35,273 Emergency Backup Power 30,119 30,119 Service Tunnel Renovation 23,404 4,137 27,541 Vertical Conveyance 21,351 21,351 Modernization GSE Electrical Charging Stations 17,352 17,352 Cargo 6 Enhancements 6,006 6,006 Wireless Coverage - Ramps 2,890 2,890 Concourse D Roof Replacement 3,227 3,227 Other Projects (115) 281,964 66,356 348,320 Total 459,668 70,493 530,161 11 Funding Strategy: Another Balancing Act Maximize use of grants and PFCs to minimize rate base costs to airlines Maintain minimum cash balance of 10 months O&M (approximately $200 million) Maintain minimum debt service coverage of 1.25x Grow non-aero revenue and net income to reduce amount of required debt Issue debt only as needed; vast majority of debt service paid by airline rates and charges Maintain focus on key metrics vs. peer airports Cost per enplaned passenger (CPE) Debt/enplaned passenger 12 Plan of Finance Figures in $000s Plan of Finance - October 2013 Current Funding Source 2014-18 2019-23 Total ($) Total (%) Total ($) Total (%) Existing Bonds 24,189 0 24,189 1% 30,224 1% CFC 4,332 0 4,332 0% 1,976 0% PFC 86,329 38,669 124,998 5% 197,385 8% Grants 169,051 13,036 182,087 8% 212,979 9% Tax levy - HSD Noise 3,549 1,708 5,257 0% 10,998 0% Future Bonds 1,054,298 557,988 1,612,286 68% 1,592,832 66% ADF 189,512 241,725 431,237 18% 381,221 16% Total 1,531,260 853,126 2,384,386 100% 2,427,615 100% ADF (cash) derived from net income principally non- airline sources 13 Project Costs Recovered by Users of Specific Facilities Project funding sources drive costs to various cost centers/rate bases -- paid by users of that cost center. For example: Runway 16C: Airline landing fee Baggage Optimization: Airline baggage system rates NorthSTAR: Increases costs of terminal Shared 77% airlines / 23% concessions Airline share spread among all airlines principally in gate cost center IAF: FIS rate base, paid by international carriers 14 Runway 16C Figures in $000s Figures in $000's Funding Source 2014-18 2019-23 Total ($) Total (%) Rate Base (%) AIP 26,180 0 26,180 26% 0% Future Bonds 73,044 0 73,044 74% 100% Total 99,224 0 99,224 100% Airlines pay all non-grant-funded costs in landing fees. 15 Baggage Optimization Figures in $000s Funding Source 2014-18 2019-23 Total ($) Total (%) Rate Base (%) TSA Grant 89,100 4,100 93,200 30% 0% Future Bonds 97,900 123,588 221,488 70% 100% Total 187,000 127,688 314,688 100% TSA has committed $93 million in grants Airlines pay all non-grant-funded costs via Bag Claim, Bag Makeup and FIS rates. 16 NorthSTAR Figures in $000s Funding Source 2014-18 2019-23 Total ($) Total (%) Rate Base (%) ADF 1,788 0 1,788 0% 100% PFC 0 5,303 5,303 1% 0% Future Bonds 365,800 85,374 451,174 98% 100% Total 367,588 90,677 458,265 100% Costs included in Terminal cost center 23% of terminal costs allocated to concessions 77% paid by all airlines, primarily in gates and bag make-up cost centers AAG will pay only its pro rata share of airline costs 17 International Arrivals Facility Figures in $000s Funding Source 2014-18 2019-23 Total ($) Total (%) Rate Base (%) ADF 63,571 5,034 68,605 20% 100% PFC 126,642 9,330 135,972 40% 0% Future Bonds 125,690 13,605 139,295 41% 0% * Total 315,903 27,969 343,872 100% * Assumes revenue bond debt service paid by PFCs Acronyms: IAF = International Arrivals Facility; FIS = Federal Inspection Services (facility) All IAF costs roll into FIS cost center paid by users of facility (international flights) Using Plan of Finance to keep FIS fees competitive with other airports May use portion of AIP entitlement grants when available 18 Passenger Facility Charge Use SLOA III established FIS/IAF as separate cost center Port clear in negotiations of plans to use financing strategy to ensure FIS airline fee remained competitive Since 1992, Sea-Tac spent $972 million in PFCs to fund capital program and debt service 57% spent on airfield; 43% on terminal projects None spent on international facilities (i.e., FIS) With projected allocation to IAF, 1990-2023 PFC use to support international service will be ~11% 19 Comparative FIS Rates Airport 2013-2014 Comments Denver $6.65 Not cost recovery. Increase 2 -3% per year. Portland $6.00 Rate based on the number of passengers. San Francisco $8.96 Average cost per passenger derived from international facility joint use fee. Los Angeles $9.50 Signatory rate Vancouver $12.42 FIS fee derived from terminal fee as well as a per aircraft turn fee for international flights. Sea-Tac 2014 $5.76 Signatory rate, full cost recovery 2019 $11.00 With planned use of PFCs 2019 $25.00 Without use of PFCs 20 Passenger Facility Charge Use Figures in $000s PFC USES 2014 2015 2016 2017 2018 2019 PFC Backed Bonds Debt Service Third Runway, Conc A, STS 18,770 18,770 18,767 18,915 20,129 20,128 Revenue Bond Debt Service Third Runway 20,794 25,099 25,901 28,240 28,240 28,430 Conc A & STS 9,595 4,781 3,675 1,336 1,337 3,927 Baggage systems (prior projects) 3,095 3,920 4,224 4,224 4,223 4,223 IAF 11,405 NorthSTAR - - Total 33,485 33,800 33,800 33,800 33,800 47,985 TOTAL USED FOR DEBT SERVICE 52,255 52,570 52,567 52,715 53,929 68,114 Pay-Go Funding Noise 922 926 2,770 - 1,491 - Baggage System (prior costs) 5,000 5,000 5,000 5,000 5,000 5,000 IAF 50,850 47,235 14,924 13,633 - NorthSTAR 2,568 Total pay-go 5,922 56,776 55,005 19,924 20,124 7,568 TOTAL USES 58,176 109,346 107,572 72,639 74,053 75,682 21 Cost per Enplanement (CPE) Impact Cost Per Enplanement (CPE) $18.00 $16.00 $14.00 $12.00 $10.00 $8.00 CPE Growth Rate (2012-2022) Nominal $ 2.6% $6.00 Constant $ 0.6% (1999 base year) $4.00 1999 2001 2003 2005 2007 2009 2011 2013 2015 2017 2019 2021 2023 Cost Per Enplanement (CPE) Inflation Adjusted CPE (1999 base year) 22 CPE Comparison - Current 2012 CPE For 22 Peer Airports $30.00 $25.00 $20.00 $15.00 26.75 25.55 24.94 $10.00 19.40 17.25 15.74 14.58 14.28 13.45 13.23 13.14 12.70 11.90 $5.00 10.80 10.15 10.13 9.54 8.10 6.54 6.50 5.64 4.13 $0.00 JFK EWR IAD MIA LGA SMF SFO BOS LAX SEA ORD SJC DEN PDX PHL IAH DTW SAN DFW MSP PHX SLC 23 CPE Comparison - Future $35.00 $30.00 $25.00 CPE Future CPE $20.00 $15.00 $10.00 $5.00 $0.00 IAD JFK EWR ORD LAX MIA SFO SMF LGA SEA BOS DFW DEN PHL PDX SJC SAN DTW IAH MSP SLC PHX 24 Past and Future Debt Levels Sea-Tac Airport $3,500 Figures in $millions Debt/Enplaned Passenger $200 Existing Debt New Debt $3,000 $180 $160 $2,500 $140 $2,000 $120 $100 $1,500 2 2 2 2 $80 2 2 2 0 0 0 0 0 0 0 0 1 1 2 0 1 1 $1,000 5 $60 0 4 0 5 4 9 $40 $500 $20 $0 $0 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 25 Debt Per Enplaned Passenger 2012 Peer Airports Debt Per Enplaned Passenger - 2012 Peer Airports $400 Airports that 356 serve as major $350 341 hubs have a $300 higher 260 percentage of $250 connecting traffic 215 and thus lower $200 190 debt per 157 153 148 $150 133 enplaned 116 114 105 93 passenger $100 92 89 74 $50 0 $0 SJC IAD SMF ORD SFO DFW SEA DEN DTW LAX BOS PHX IAH MSP PHL SAN SLC 26 Summary Current capital program needed to meet future demands and safe operations Plan of Finance is appropriate and affordable Future debt and CPE levels within industry norms Strategic use of PFCs is critical to managing rate base balance among cost centers Port has ability to adjust allocation of funding sources as conditions and/or priorities change 27 INTERNATIONAL ARRIVALS FACILITY 28 International Arrivals Facility What are the problems? How will we measure success? Elements of the solution How can operational improvements help? What facility improvements are required? How did we define scope? How build "just in time?" How best deliver project? 29 Problem: Insufficient Capacity; Unacceptable "Front Door" FIS facility design capacity = 1200/hour 2014 peak summer schedule: ~1500/hour 2014 peak demand with Irregular Ops: ~2000/hour Passengers increasingly required to wait on board aircraft due to insufficient capacity Aircraft can wait up to 45 minutes for gate Baggage system lacks capacity due to small claim devices Minimum Connect Time (MCT) too long 30 Inadequate Capacity Unacceptable Customer Experience 31 Key Characteristics SSAT SSAT IAF 1973 2014 2018 Capacity (passengers/peak hour) 600 1200 ~1900 Scheduled passengers at peak hour NA ~1500 ?? Number of FIS accessible gates 2 11 18 Slow / Passenger flow Simple Intuitive confusing Single bag claim process No No Yes Curbside direct access No No Yes 32 Customer Service Impacts Hold on Hold in Hold for Total Minutes/ Board Corridor Gate Events Customer 2013 23 339 16 378 19 2012 25 78 0 103 18 2011 20 36 0 56 13 2010 19 0 NA 19 9 2009 4 0 NA 4 NA Source: Airport Operations Dept. logs 33 Inadequate Capacity: Passengers Cannot Proceed to FIS Frequency of "hold" events increasing 34 Customer Service Metrics Customer Service At Peak 1973 2013 IAF 2018 Hold on Boards: 0 23 0 Hold in Corridors: 0 339 0 Over Ramp Busing possible times/day: 0 2 (2014) 0 Lines at "Primary" (Passport Check): 0 Long Modest Crowding at Baggage International Carousels 0 Extreme Low Terminal Carousel 0 Medium Low Double Bag Handling: FIS & Bag Claim Yes Yes No STS Train Wait (Minutes): Low 4 (2nd train) N/A Minimum Connect Time (minutes): N/A 90 75 35 Demand/Capacity Mismatch Getting Worse SEA is among fastest growing international gateways; anticipate 600+ passengers per hour beyond capacity over the next 5 years International growth benefits airlines' domestic routes Airlines anticipating improvement; affects interest in Sea-Tac 154% 60% Source: airline reports and flight schedules 36 Elements of the Solution Operational improvements Expand Global Entry now 3.4% of passengers Automated Passport Control kiosks now "all" U.S. and Canadian passport holders 12 new CBP officers for Seattle (not all Sea-Tac) Enhanced FIS customer-oriented staffing Short-term capital improvements at SSAT Way finding -- stanchions in corridor Additional "international" gate (2015) Off-gate busing ability (seeking to avoid using) 37 Elements of the Solution -- CBP Wait Time Measures 2013 data (Jan-Dec) SEA MIA MCO DFW JFK IAH SFO Processed passengers 1,348,703 9,643,416 1,457,359 2,984,363 6,059,294 4,048,937 2,473,425 Average Wait Time 18 29 28 25 28 25 25 (minutes) Passengers with wait 19% 37% 36% 30% 30% 30% 29% time > 30 minutes Source: http://awt.cbp.gov/ TSA/CBP cooperation / effectiveness is high at STIA New CBP resources will flow to airports with worst problems 38 Elements of the Solution: Scope New International Arrivals Facility (IAF) 18 gates connected to IAF no waiting for gate Adequate primary processing no holds on board or corridor 6, then 8, bag claim carousels (vs. 4 today) Shorter time to domestic connections for passengers and bags Direct passenger access to landside (no double baggage pick-up) 39 Defined Scope with Airline Involvement 40 Airline Engagement Discussed 12 times over 4 years with AAAC Discussions over 24 months during SLOA III negotiations. 29 airlines signed SLOA III that includes separate IAF cost center, with understanding during negotiations of Port intent to use a distinct IAF PFC funding plan Concourse A facility selected 41 Construction Options Sought best combination of (1) providing necessary long-term scope while (2) controlling costs Examined three options: Construct entire facility in one phase Construct in two phases with both including partial shell and related improvements Construct entire shell and only necessary near-term improvements in first phase; longer-term improvement in second phase 42 Construction: One Phase versus Two Phase Build All in One Phase Build in Two Phases Phase 1 Phase 2 43 Two Phase Construction Construct Full Shell; Build Out Interior In Two Phases Phase 1 Phase 2 Building full shell and only those improvements required for first 5 years is most cost-effective approach Subsequent contract to construct second phase of shell would require new procurement, new Port staffing, contractor mobilization, etc. More disruption of bus operation No laydown area, etc. 44 Traditional Design to Construction Process Cost Estimate Confidence Planning Estimate Budgeting Estimate Budget 30% Design Notebook: 60% Design 90% Design Engineer Estimate Bids Construction Contract Status 1 Status 2 Status 3 Status 4 Status 5 Prospective Biz Plan Committed Authorized Under Contract Timeline Status 1 Status 2 Status 3 Status 4 Status 5 Port Staff Business Notebook of Project Detailed Engineers bid Construction Costs rough Plan budgetary Estimates Estimate estimate estimate program estimate 45 Traditional Design to Construction Process IAF Initial Cost Estimates Cost Estimate Confidence Planning Estimate Budgeting Estimate Budget Notebook: 30% Design 60% Design 90% Design Engineer Estimate Bids Construction Contract Status 1 Status 2 Status 3 Status 4 Status 5 Prospective Biz Plan Committed Authorized Under Contract Timeline Status 1 Status 2 Status 3 Status 4 Status 5 Port Staff Business Notebook of Project Detailed Engineers bid Construction Costs rough Plan budgetary Estimates Estimate estimate estimate program estimate 46 Project Delivery Have examined multiple delivery options, including: Design/Bid/Build Lump Sum Design/Build Progressive Design/Build General Contractor/Construction Manager Extended briefing scheduled for May 6 to discuss options and provide more information on Progressive Design/Build 47 BAGGAGE OPTIMIZATION 48 Baggage Optimization Will Address Major Long-term Challenge Now accommodate 35 Million Annual Passengers (MAP) Will need to handle ~60 MAP Four of the existing six systems are nearing end of life Current configuration won't support operations past 45 MAP Expanding current configuration would remove aircraft gates 49 Baggage Optimization Existing Optimization 50 RUNWAY 16C/34C REPLACEMENT 51 Runway 16C/34C 52 RW 16C/34C Pavement Inspections 53 NORTHSTAR PROGRAM Update And Key Issues 54 Agenda Origins of Project Collaboration with Alaska Air Group and other airlines Project Status Key Current Issues 55 Origins of Project Port staff planning upgrade to NSAT to address seismic, HVAC, and other issues ~2008 - AAG approached Port with interest in focused operations at NSAT and enhanced customer experience 2010 - Airline realignment planning initiated to facilitate AAG relocation to NSAT Q4 2010 - AAG retains consultant to articulate NSAT vision Q3 2011 - AAG presents north end development program to Port Q2 2012 - Port/AAG Letter of Understanding creates NorthSTAR Program; Commission authorizes initial funding Q2 2012 - Preliminary Project Notebook; Commission briefing defines $300M NorthSTAR program 56 Collaboration with Airlines Since 2010 - Quarterly AAAC briefings re airline realignment Early 2012 AAAC briefed on $300M NorthSTAR Program Quarterly updates on progress of NorthSTAR program and specific projects; Q4 2013 NSAT expansion presented Four separate MII approvals for NSAT Design, Refurbish Baggage, Concourse C Vertical Circulation & NorthSTAR Program Management As chair of AAAC, AAG discusses program with other airlines 57 Project Status 4 of 5 projects authorized and active Concourse C Vertical Circulation $18.5M - starting construction Baggage System $21.5M - awarding construction contract NSAT $208.3M - 15% design complete; 30% design initiated Main Terminal Improvements $29.2M in planning Concourse C & D Exterior Stairs $21.4M - still prospective project Briefing today / subsequent request to adjust scope $175.2M Five additional gates ($ budget increase) Design work underway consistent with expansion option AAG indicated support in October, 2013; now completing 2nd look Delta has requested additional gates 58 Key Issue Dual Doors Alaska Air Group is evaluating benefit of adding scope to facilitate "dual door" operations at some NSAT gates Allow passengers to enter/leave aircraft from front/rear doors Could shorten the time required to "turn" an aircraft Would require addition of stairs, escalators, elevators, ramp-level passenger holdrooms, aircraft rear entry ramps Major questions: Would this save sufficient time to justify AAG investment? Would this allow airport to handle more aircraft at peak and, thus, reduce need for one or more gates? AAG committed to finalize its assessment and get Port staff concurrence by May 9 59 Key Issue Add Five Parking Positions NSAT now has: 12 jet bridge-equipped gates 5 ramp loading positions for regional jets Current NorthSTAR NSAT scope: 15 jet bridge-equipped gates No (0) ramp loading positions for regional jets 2020 is first year completed NSAT will be available for peak summer period Airport last added gates in 2004 (replaced old 7-gate with new 14-gate Concourse A) One gate since "lost" at Concourse D due to relocation of AA (addition of 757s) and restriping to accommodate winglets 60 Growth in Common Use Facilities Port works intensely to delay need to add gates or expand other terminal facilities SLOA gate allocation process Common use gates 2000 2014 Common Use Gates 7 14 Airport Owned Passenger Loading Bridges 7 57 Common Use Baggage Make-Up Devices 1 16 Common Use Ticket Counters 0 62 61 Key Issue Add Five Parking Positions Analysis indicates NorthSTAR should include expanded NSAT Reached conclusion following intense and quite conservative flight and gate analysis Cross-checked assumptions/inputs to ensure Seattle market could support Consistent with current airline business / network strategies 62 North Satellite Expansion Phase II 63 Gate Demand Analysis -- Background In mid-2013 AAG provided Port team with 2017 forecasted flight schedule for use in determining AAG gate demand Project team (with consulting assistance) gated this schedule using AAG operational " rules;" determined NSAT peak gate demand required 4 additional parking positions / gates to satisfy anticipated growth. Peak airline activity (5:45-8:30 AM, 8:15-12:00 AM) determines total number of required gates Q4 2013, AAG indicated support for NSAT expansion as most viable option for expanding gate availability (to meet AAG gate demand by 2020) now confirming 64 Gate Demand Conservatisms Assessing whether need more gates in 2020 Used following airline schedule inputs Alaska: 2017 projected schedule (as provided in mid-2013) - 13 more departures than 2013 Delta: 2014 actual schedule 83 departures (not announced plans for 150 departures in 2017) Other domestic airlines: 2013 schedule International : Three more departures (beyond 2014 actuals) Assumed all gates available 24/7/365 No maintenance outages No construction impacts 65 12 ungated flights require 4 additional gates Examined Ability to Put Flights Elsewhere 12 "un-gated" AAG flights at the North Satellite at morning and evening peak Could gate 10 of 12 flights on Concourses A, B and SSAT if AAG were willing and no other growth Remaining un-gated flights means minimum of 2 additional NSAT gates (beyond 15 in scope) However, assumptions already out of date: Assumed 2013 to 2017 AAG growth of only 13 flights AAG 2014 schedule already up by 8 flights AAG indicates that 2017 departures likely substantially more than what assumed in analysis 67 Gate Demand Analysis "Reality Check" Evaluated whether analytic assumptions are beyond what Seattle market can support Used additional departures, seats and load factors (LF), to calculate growth of enplanements between 2013 and 2020 Equaled annual growth of: 1.0% -- 70% load factor 1.25% -- 85% load factor This compares to historical and projected passenger growth at Sea-Tac: 2010-2013: 2.9% (since recovery from recession) 2000-2013: 1.6% (includes impacts of 9/11; two recessions) FAA approved long-range forecast: 2.3% 68 Greater Concern May Be That NSAT Gate Expansion May Not Be Enough Since completion of analysis, both AAG and DL indicate they expect to grow faster AAG:Has announced more destinations from SEA We expect AAG will allocate more aircraft to Seattle routes DL: Remains committed to plans to grow to 150 daily departures in 2017 (~110 in 2015 and ~130 in 2016) Some of this growth could offset each other and some could "cannibalize" other airlines But very possible that Sea-Tac could see unusually fast growth for next few years (before settling back to long-term average growth) Strategic location as international gateway Seattle area economy is one of healthiest in nation Airlines far more disciplined; seek sustainable expansion 69 Risk of Underbuilding Gates During NorthSTAR NSAT is by far the best least expensive and most timely location to add gates If we waited until after completion of current NSAT scope to add gates, would: Need to take four gates out of service (airport would then have three fewer gates ~2021 to 2023 than today) Need to re-procure designers and contractors Airlines would have to load and unload significant number of passengers at remote gates with busing to/from the terminal North Satellite would remain severely constrained in customer amenities hold room capacity and concessions offerings 70 Implications of Building in Anticipation of Demand Pros: Construction closures less problematic Airlines do not limit plans due to capacity constraints Likely lower costs to airlines, measured as NPV Able to address shortage in concessions and other customer amenities Cons: Airline gate fees grow a little earlier Port costs (23% of terminal) increase earlier, offset by concessions revenue increases 71 Conclusion: Expand NSAT during NorthSTAR Very conservative assumptions underlie analysis demonstrating four gate shortfall Expanding North Satellite to provide 20 gates is all that is possible prior to having to "dogleg" NSAT for full expansion Least cost option; consistent with long-range airport expansion plan NSAT 15% design complete; good time to adjust scope Additional gates would provide some buffer between 20-gate NSAT and subsequent expansion Greatly enhances level of service for passengers -- increased concessions, holdrooms, and customer service areas 72 Next Steps re NSAT Expansion May 9, 2014 -Alaska Airlines final confirmation of scope re dual doors June 2014 - Majority in Interest vote of airlines July 22, 2014 - Request for Commission authorization to expand and complete design 73 Questions? 74
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