PORT OF SEATTLE 
MEMORANDUM 
COMMISSION AGENDA             Item No.      5b 
Date of Meeting     March 1, 2011 

DATE:    February 17, 2011 
TO:     Tay Yoshitani, Chief Executive Officer 
FROM:    Nick Harrison, Senior Manager, Airport Operations 
James Schone, Director, Aviation Business Development 
Wayne Grotheer, Director, Aviation Project Management Group 
SUBJECT:  Common-Use Lounge Remodel at Seattle-Tacoma International Airport 
(CIP # C800203) 
Amount of This Request: $320,325    Source of Funds: Airport Development Fund 
State and Local Taxes Paid: $14,125   Jobs Created During Construction: 16 
Total Estimated Cost: $971,000 
ACTION REQUESTED: 
Request Port Commission authorization for the Chief Executive Officer to (1) authorize design
of the Common Use Lounge (Club International) and (2) competitively procure furnishings and
casework for the lounge. This authorization is for $320,325 of a total estimated project cost of
$971,000. 
SYNOPSIS: 
A premium common use lounge (Club International) for airlines serving the Airport is a much
needed facility that helps both existing and prospective carriers flying international routes meet
their business plan objectives, specifically the growth and profitability of routes, and allows them
to offer their passengers a superior pre-boarding experience comparable to competitors offering
branded lounges for premium passengers. Several airlines have expressed interest in using an
improved Club International, adding to the Port's existing customer base. Additionally, the Port
anticipates marketing the club directly to passengers on a pay-per-use basis as a new line of
business which would increase non-aeronautical revenues. 
This project relocates and remodels the Port's common-use lounge from the mezzanine level of 
the South Satellite to the departure level of the South Satellite (see Exhibit A). Design will be
completed by a consultant on an existing Indefinite Delivery Indefinite Quantity (IDIQ) contract.
This project is made possible by Delta Air Lines' construction of a new rooftop lounge and the

COMMISSION AGENDA 
Tay Yoshitani, Chief Executive Officer 
February 17, 2011 
Page 2 of 7 
subsequent vacation of its existing departure level facility in late 2011. The Port's common-use
lounge will occupy the vacated space. The new Club International will be similar in size to the
existing location, approximately 4,000 square feet. I mprovements consist largely of new
finishes, new furnishings and other minor cosmetic improvements. This project does not include
creation of any additional floor area. 
BACKGROUND: 
A high quality premium passenger lounge is an essential component of the airline services
targeted toward premium fare passengers on international flights. The Port's provision of a
common-use lounge in the international terminal ensures that both existing and prospective
international airlines can meet their business plan objectives, specifically profitability of routes.
British Airways and Delta Air Lines have their own branded lounges, but they open them up to
smaller airlines for additional revenue. Even with this accommodation of sub-tenants, there is
inadequate capacity to accommodate all the international carrier demand at the South Satellite. 
The Port is not trying to compete directly with the branded airline lounges; however, we
endeavor to improve the financial performance of Club International. The Port's Club
International meets a critical market need for those airlines that cannot justify building or leasing
their own facility and which cannot be accommodated as sub-tenants in the existing airline
branded lounges. 
The Port offered an unstaffed no-frills common-use club option to airlines for decades; however, 
this past year the Port changed the operating and business model for the common-use club in an
effort to improve the level of service. The Port solicited and selected a third party company to
provide management oversight, staffing, and food and beverage service. The fee model has also
changed from a fixed per-flight charge to an individual per-customer charge. We anticipate
marketing directly to passengers on a pay-per-use basis in addition to offering a competitive
product for current and prospective airlines. This direct-to-passenger marketing is an effort to
expand our potential customer base, and factored into the change in fee structure based on an
individual customer charge.
The viability of Club International's core business and efforts to grow the market is currently
hampered by three key facility factors: poor configuration, poor condition, and poor location.
The configuration challenges in the existing Club International are a result of it being divided
into two separate 2,000 square foot lounges. These separate facilities create challenges in
staffing, duplication of maintenance, and the hamper the Port's ability to offer a standard level of
service to our customers. The condition of the space is a concern because while one portion of
the facility was improved by the Port in the late 1990s, the other portion is still making use of
original furniture and finishes from SAS Scandinavian Airline's initial build-out at the
inauguration of service to Copenhagen decades ago. Most significantly, the location of Club
International does not meet the fundamental criteria our airlines customers and their premium
passengers desire and expect. Airlines and premium customers expect an airline lounge to be
close to the gate boarding area and offer views, daylight, and modern amenities. 
Delta's existing facility on the departure level of the satellite will become vacant when it moves
to the new lounge on the roof of the South Satellite in 2011. The Port wishes to capitalize on this

COMMISSION AGENDA 
Tay Yoshitani, Chief Executive Officer 
February 17, 2011 
Page 3 of 7 
opportunity by renovating this newly vacant lounge and reopening it as the new and improved
common-use Club International Lounge. This would resolve the configuration, condition, and
location challenges that exist with the current facility. This improved facility will provide an
attractive option for existing international airlines, as well as a key marketing tool for Port staff
to offer to potential carriers considering Sea-Tac for expansion of new international routes. 
Remodeling Club International in its current location would require a much more significant
renovation and capital investment and would not solve the problem that the current location of 
Club International is not suitable for an airline lounge. This opportunity to move Club
International, with a modest investment, will allow the Port to offer services equivalent to the
other two major airline clubs in the South Satellite. In addition, Delta Air Lines has asked to
lease the existing Club International space on the mezzanine and plans to remodel the area into a
new operations center and pilots base. This future Delta project would increase lease revenue to
the Port. 
PROJECT JUSTIFICATION: 
Project Objectives: 
Provide an improved common-use lounge facility with services and amenities that meet
current and prospective airline customer expectations. 
Improve the financial performance of Club International. 
Provide an improved lounge which may be key to successful marketing for new
international air service. 
Improve prospects for marketing directly to passengers on a pay-per-use basis. 
PROJECT SCOPE OF WORK AND SCHEDULE: 
Scope of Work: 
This project is located at the soon to be vacated Delta lounge on the departure level of South
Satellite. The project scope includes replacement of architectural finishes, furnishings, millwork,
restroom fixtures and partitions, and the installation of data cable for internet service. 
Schedule 
Begin Design                        1st Qtr 2011 
Purchase Furnishings and Fixtures            2nd Qtr 2011 
Advertise for Major Construction Contract       3rd Qtr 2011 
Begin Construction                     4th Qtr 2011 
Project Completion                     1st Qtr 2012

COMMISSION AGENDA 
Tay Yoshitani, Chief Executive Officer 
February 17, 2011 
Page 4 of 7 
FINANCIAL IMPLICATIONS: 
Budget/Authorization Summary: 
Original Budget                         $2,000,000 
Budget Decrease                       $1,029,000 
Revised Budget                         $971,000 
Previous Authorizations                        N/A 
Current request for authorization                $320,325 
Total Authorizations, including this request         $320,325 
Remaining budget to be authorized              $650,675 
The budget for this project decreased through a reduction of scope from a complete remodel to
essentially a replacement of finishes and furnishings. Major restroom improvements and the
addition of shower facilities were also removed from the project scope. 
Project Cost Breakdown:              This Request  Total Project 
Construction Costs                            $0     $ 453,300 
Port furnished equipment                   $148,700     $ 148,700 
Sales tax                                 $14,125      $ 57,000 
Outside professional services                  $72,000     $ 90,000 
Aviation PMG and other soft costs              $85,500     $ 222,000 
Total                                  $320,325     $ 971,000 
Budget Status and Source of Funds: 
This project is included in the 2011-2015 Capital Budget and Plan of Finance as a business plan
prospective project, CIP # C800203. The funding source will be the Airport Development Fund . 
Financial Analysis and Summary: 
CIP Category                   New/Enhancement 
Project Type                    Renewal & Replacement 
Risk adjusted Discount rate           9% 
Key risk factors                      Project delays would in turn delay
potential increased revenue generation
and reduce the NPV of the project. 
Potential cost overruns would reduce
the NPV. 
Revenue from club is based upon

COMMISSION AGENDA 
Tay Yoshitani, Chief Executive Officer 
February 17, 2011 
Page 5 of 7 
actual use via a per passenger fee.
Airline participation in club use can
fluctuate, thus the projected revenue
stream could change based on carriers'
decisions on use of the lounge. 
Project cost for analysis               $971,000 
Business Unit (BU)                 AV Business Development 
Effect on business performance            First year (2012) Net Operating Income
(NOI) projected at $430,000. 
Based on projected growth in expenses,
number of passengers, and lounge use
fee, long-term annual NOI is expected 
to be approximately $400,000. 
IRR/NPV                  IRR: 18% 
NPV: $1,700,000 
CPE Impact                  None, non-aeronautical project 
The Internal Rate of Return (IRR) and Net Present Value (NPV) calculations are based upon the
assumption of three carriers participating as regular customers. This reflects conservative
assumptions because the Port has received written interest from six different carriers in regards
to the proposed Club International facility. The IRR and NPV projections would drop to 5% and
($120,000), respectively, with only two carriers as regular customers. Conversely, four
participating carriers would increase the IRR and NPV to 19% and $2,000,000, respectively.
Please note that each carrier's passenger usage is different, and therefore the addition or removal
of various carriers has a different effect on the calculations. For example, some larger carriers
may have up to 1,000 monthly customers, while a smaller carrier may only have 200 monthly
customers. Additionally, in trying to be conservative, the oppo rtunity for direct to passenger
sales is conservatively understated in this analysis. 
Lifecycle Cost and Savings: 
The lifecycle cost and savings of this project will be determined as an element of design. 
Annual O&M implications will be validated during this design phase of the project.
ENVIRONMENT AND SUSTAINABILITY: 
This project demonstrates environmental sustainability by reusing existing facilities and
prolonging the life of existing Port assets. This improved Club International will allow for more 
suitable utilization of existing lounge facilities at the South Satellite. This reduces the potential
environmental impact of new construction that would occur if a new Port lounge were built or
individual air carriers built their own lounge facilities.

COMMISSION AGENDA 
Tay Yoshitani, Chief Executive Officer 
February 17, 2011 
Page 6 of 7 
STRATEGIC OBJECTIVES: 
The Club International Lounge Remodel project supports two of the Port's Strategies and
Objectives, notably: 
This project promotes the Port's strategic goals to "Ensure Airport Vitality" and "Be a Catalyst
for Regional Transportation Solutions" by providing international airlines with one of the facility
amenities they need to be profitable and grow their business. Additionally, attractive and
functional lounge facilities create an environment that can assist in marketing for new
international travelers and positions the Port to compete for international growth as air carriers
expand or change their flight routes. 
BUSINESS PLAN OBJECTIVES: 
The Port wishes to improve its common-use Club International lounge so that it meets the needs 
of current airline customers, supports the marketing for new airline customers to the Seattle 
market, and improves the prospects of marketing directly to passengers on a pay-per-use basis.
Port staff has determined that Club International should be moved to a more desirable location,
and have an attractive level of finishes and furnishings on par with airlines' premium passenger
expectations to do so. Port staff projects potential growth in airline customers from one to three
carriers with a move to the departure level, and with the proposed improvements. The number of
annual lounge users would grow from 9,400 to 36,500 annually based on this increased usage
from additional airlines. In its present condition, Club International is not profitable and is at
risk of losing current customers. Any market expansion and/or improved financial performance
is not feasible without reinvestment into Club International.
TRIPLE BOTTOM LINE SUMMARY: 
This project demonstrates environmental sustainability by reusing and updating an existing
airline club facility and converting it to a Port airport lounge that provides our airline customers
with the amenities they need to support and grow their business. It also provides pay per use
customers with a comfortable space to relax and recharge during air travel. Current customer
demand, as well as a new business plan supports the need for investment into Club International
to increase club use and create a positive net operating income. 
ALTERNATIVES CONSIDERED AND THEIR IMPLICATIONS: 
1.  The Port could perform minimal improvements to Club International in its existing
mezzanine level location. Minimally required improvements would include health code
upgrades to the kitchen, new furnishings, finishes, and data cabling. This would be a
relatively low cost alternative at $1,127,000. This alternative would improve the condition,
but would not improve the existing split configuration and the less than desirable location.
Additionally, this alternative would not allow Delta Air Lines to lease the potentially vacated
mezzanine level space for their operational needs. This alternative is not recommended. 
2.  The Port could completely remodel and update Club International in its existing mezzanine
level location. The initial cost estimate of $3,582,000 for a full renovation is expensive, but

COMMISSION AGENDA 
Tay Yoshitani, Chief Executive Officer 
February 17, 2011 
Page 7 of 7 
would improve both the condition and configuration of the facility. It would not, however,
improve the undesirable location of the facility. The mezzanine level location would still
suffer from a lack of natural daylight and separation from gate hold rooms even with a
significant capital investment. Additionally, as in Alternative 1, the opportunity to lease the
area to Delta Air Lines for their operational offices would be lost. This alternative is not
recommended. 
3.  The Port could create a new Club International facility on the roof of the South Satellite,
similar to the British Airways and Delta Air Lines lounges. A new facility on the roof of the
South Satellite is estimated to cost $5,419,000. This option would add new leasable space to
the South Satellite and still allow Delta to occupy the vacant mezzanine space. This
alternative, however, is not recommended because of the significant capital cost and the
availability of the soon to be vacated Delta Air Lines lounge on the departure level.
4.  The recommended alternative is to relocate Club International to the soon to be vacated 
Delta Air Lines lounge on the departure level of the South Satellite. At $971,000, this is the
most cost effective and best strategic alternative because it remedies all the configuration,
condition, and location challenges of the existing facility. This option also has the potential
to generate the most new revenue based on the significantly improved location. This
recommended action also frees up leasable space in the former Club International facility for
Delta Air Lines to move a large portion of their operational offices to the South Satellite from
the Main Terminal. Delta has specifically requested first consideration for this space. This
alternative is recommended. 
OTHER DOCUMENTS ASSOCIATED WITH THIS REQUEST: 
Exhibit A  Sea-Tac International Airport South Satellite Terminal. 
PREVIOUS COMMISSION ACTION: 
November 30, 2009: Commission Authorization for Architectural IDIQ for use by staff at
Seattle-Tacoma International Airport.