The Study Session meeting scheduled for 2020-10-13 at Remote

Transcript

The Study Session meeting scheduled for 2020-10-13 at Remote

THIS IS COMMISSION PRESIDENT PETER STEINBRUECK CONVENING THE STUDY SESSION OF OCTOBER 13TH 2020
THE TIME IS APPROXIMATELY 9:02
WE'RE MEETING REMOTELY TODAY VIA TEAMS TO COMPLY WITH THE GOVERNOR'S SAFE START STAY HEALTHY ORDER IN ACCORDANCE WITH PROCLAMATION 2028
THIS MEETING IS BEING BROADCAST AND IS AVAILABLE FOR VIEWING THROUGH THE PORT WEBSITE PRESENT WITH ME TODAY ARE COMMISSIONERS BOWMAN, CHO AND ANY OTHER COMMISSIONERS PRESENT
LET ME GO AHEAD AND TAKE A ROLL CALL FOR THE RECORD
BEGINNING WITH COMMISSIONER BOWMAN
I'M HERE
THANK YOU
COMMISSIONER CALKINS HERE
THANK YOU
COMMISSIONER CHO
PRESENT
THANK YOU
COMMISSIONER FELLEMAN, HAVE YOU JOINED US? I'M TRYING TO GET ON SPEAKERPHONE BUT I AM HERE
WONDERFUL
THANK YOU
AND THEN OF COURSE, WE HAVE COMMISSIONER STEINBRUECK
WE DO HAVE A FULL BOARD TODAY, COMMISSIONER
EXCELLENT
THANK YOU ALL AND GOOD MORNING
TODAY'S MEETING IS STRUCTURED FOR OUR VIRTUAL FORMAT
WE'VE MADE SPECIAL ARRANGEMENTS TO PROVIDE FOR REMOTE PARTICIPATION FOR ALL OF OUR STAFF AND COMMISSIONERS
THIS IS OUR FIRST COMMISSION MEETING THROUGH THE TEAMS PLATFORM
I DIDN'T KNOW THAT
A FEW HOUSEKEEPING RULES, PLEASE NOTE THAT COMMISSIONERS HAVE THE ABILITY TO CONTROL THEIR MUTE AND UNMUTE FUNCTION
OKAY, I ASK THAT COMMISSIONERS KEEP THEMSELVES MUTED THROUGHOUT THE PRESENTATIONS UNTIL THE PRESIDER CALLS FOR QUESTIONS OR OR MEMBER REQUESTS TO BE RECOGNIZED
PLEASE REMEMBER TO RE-MUTE YOURSELF WHEN YOU'RE NOT SPEAKING
THIS IS TO CONTROL THE BACKGROUND NOISE THAT MAY BE DISRUPTIVE TO THE MEETING
YOU'RE ALSO ENCOURAGED TO USE THE CHAT BOX TO BE RECOGNIZED SO STAFF MAY NOTIFY THE PRESIDER OF THE REQUESTS TO SPEAK
COMMISSIONERS ARE ALSO ENCOURAGED TO HOLD QUESTIONS AS MUCH AS POSSIBLE UNTIL THE END OF THE RESPECTIVE PRESENTATION SEGMENTS IN ORDER TO GET THROUGH THIS AGENDA TODAY
WE HAVE A LONG DAY AHEAD
AND THANK YOU ALL FOR YOUR ATTENDANCE THIS MORNING
THE PURPOSE OF THIS BRIEFING IS TO CONTINUE THE DISCUSSION OF THE AVIATION CIP 2021-2025 PERIOD FROM SEPTEMBER 22ND STUDY SESSION
WE WILL ALSO DISCUSS THE AVIATION OPERATING BUDGET
I WILL NOW TURN TO YOUR EXECUTIVE DIRECTOR METRUCK TO INTRODUCE THE AGENDA AND PRESENTERS
COMMISSIONERS, GOOD MORNING
COMMISSIONERS, BY FAR THE PORT OF SEATTLE'S LARGEST INVESTMENTS IN CRITICAL INFRASTRUCTURE ARE AT THE AIRPORT
AS NOTED IN OUR LAST STUDY SESSION, WE ARE PLANNING TO SPEND ABOUT 3.3 BILLION DOLLARS ON A HUNDRED AND FORTY-ONE PROJECTS TO ENSURE SEA CONTINUES TO OPERATE SAFELY AND EFFICIENTLY OVER THE COURSE OF THE NEXT FIVE YEARS
THE STUDY SESSION TODAY IS A CONTINUATION OF THAT CONVERSATION AND WILL CONCLUDE THE DISCUSSION ON THE AVIATION CAPITAL IMPROVEMENT PLAN, PRESENT OUR PEER REVIEW RESULTS IN OUR FORECASTING METHODOLOGY, AND REVIEW THE AIRPORT'S OPERATING BUDGET
IT'S IMPORTANT FOR US TO HAVE A LONG-TERM VIEW OF THE AIRPORT
NOW MORE THAN EVER, WE MUST ASSESS THE LONG-TERM NEEDS FOR AIRPORT IMPROVEMENTS AND THE AIRPORT'S TREMENDOUS VALUE TO THE ECONOMY OF THE REGION AND THE STATE
EVEN IN THESE TOUGH TIMES, OUR AIRLINE PARTNERS ARE ADVOCATING FOR INVESTMENTS TO MEET THE NEEDS OF THE FUTURE
SEA IS VITAL TO OUR RECOVERY
WE APPRECIATE YOUR FEEDBACK AND QUESTIONS AT THE LAST STUDY SESSION
WE LOOK FORWARD TO CONTINUING THE CONVERSATION ABOUT THESE INVESTMENTS THAT ARE VITAL FOR OUR COMMUNITY
I'LL TURN OVER THE PRESENTATION TO MR LANCE LITTLE, MANAGING DIRECTOR OF AVIATION
LANCE? THANK YOU STEVE
GOOD MORNING COMMISSIONERS
YES
SO COMMISSION AS STEVE SAID, COMMISSIONERS, THIS IS A CONTINUATION OF THE STUDY SESSION THAT WE HAD LAST TIME
WE'RE GOING TO TRY TO START WHERE WE LEFT OFF
WE HAVE FUNDING THAT WE'RE GOING TO DISCUSS, WE HAVE THE FORECAS,T WE HAVE PEER REVIEW THAT WE'RE GOING TO DISCUSS AS WELL
BUT BEFORE, COMMISSION, I WANT TO SPEND JUST A FEW MINUTES TO DISCUSS TWO THINGS BECAUSE THERE'S A LOT OF QUESTIONS THAT CAME UP DURING AND AFTER THE MEETING WITH REGARDS TO THE LEVEL OF SERVICE AND VISION
SO I JUST WANTED TO SPEND A FEW MINUTES
I WANT TO START WITH AN APOLOGY BECAUSE I THINK BECAUSE WE BASICALLY DRINK THIS THING EVERY DAY AND WE HAVE THIS DISCUSSION EVERYDAY AMONGST OURSELVES
SOMETIMES WE TAKE IT FOR GRANTED THAT, YOU KNOW, WE ONLY PRESENT THIS INFORMATION TO COMMISSIONERS MAYBE ONCE OR TWICE A YEAR AND SOMETIMES THEY MAY NOT REMEMBER SOME OF THESE THINGS THAT WE PRESENT
SO WE REALLY NEED TO TO REALLY START BY REVISING CERTAIN THINGS
AND THE VIDEO WAS ONE OF THEM
THERE WAS QUESTION ABOUT THE VISION VIDEO, YOU KNOW, COMMISSION HAD JUST SEEN IT FOR THE FIRST TIME WHICH WAS TRUE, BUT I SHOULD HAVE STARTED BY EXPLAINING THAT THE VIDEO IS REALLY JUST ANOTHER REPRESENTATION OF THIS VISION THAT WE'VE BEEN SPEAKING ABOUT FOR SEVERAL YEARS, REPRESENTED SEVERAL TIMES AT BUDGET PRESENTATIONS OVER THE YEARS
SO I WANT TO GO BACK AND PUT THINGS INTO CONTEXT SO MAYBE THEY CAN CLEAR UP SOME OF THE QUESTIONS WITH REGARDS TO VISION
ALSO WANT TO SPEAK ABOUT LEVEL OF SERVICE
IF EVER WE SAY OUR AIM IS TO ACHIEVE A LEVEL OF SERVICE OPTIMUM
AND WE HAVE DONE EXCERPTS FROM THE LEVEL OF SERVICE CHART, BUT I JUST WANT TO SPEND A FEW MINUTES TO EXPLAIN THAT BEFORE WE GET INTO THE REST OF THE PRESENTATION
NEXT SLIDE, PLEASE
THE NEXT SLIDE BECAUSE I HAVE SPOKEN ABOUT THIS ALREADY
COMMISSIONERS, YOU HAVE SEEN THIS PRESENTATION SEVERAL TIMES
FOR THOSE OF YOU WHO HAVE BEEN AROUND FOR MANY YEARS, I THINK THIS IS PROBABLY THE FIRST TIME I DID A BUDGET PRESENTATION I PRESENTED THIS SLIDE
IT HAS A LITTLE BIT OF TWEAKS RIGHT NOW AND ONE OF THE REASONS WHY I DID IT IS BECAUSE I REALLY WANTED TO GET THE MESSAGE ACROSS THAT THE BUDGET IS NOT THE END
WE TALK ABOUT THE BUDGET AS IF IT'S THE FINAL PRODUCT
BUT IT REALLY ISN'T
THE BUDGET IS REALLY A MEANS TO AN END
THE END IS ALWAYS TO GET US TO OUR ULTIMATE VISION AND THE ULTIMATE GOALS THAT WE HAVE THAT SUPPORT THE CENTURY AGENDA AS APPROVED BY THE COMMISSION
AND SO WHEN WE DO OUR BUDGET, THE BUDGET HAS RESOURCES THAT WE NEED: THE MONEY, THE PEOPLE, THE EQUIPMENT THAT WE NEED TO EXECUTE THE ACTIVITIES THAT WE HAVE IN OUR BUSINESS PLAN AND OUR BUSINESS PLAN ACTIVITIES SUPPORT OUR THREE TO FIVE YEAR STRATEGIC PLAN WHICH SUPPORT THE VISION THAT WE HAVE FOR THE AIRPORT
AND OF COURSE THOSE VISIONS AND GOALS ARE IN ALIGNMENT WITH THE CENTURY AGENDA WHICH WE'RE GOING TO TALK ABOUT IN THE PRESENTATION A BIT LATER ON
SO JUST WANTED TO PUT THIS BACK OUT THERE TO SHOW EVERYBODY [INAUDIBLE] PRESENTATION THAT I'VE DONE OVER THE YEARS REALLY SURE HOW THE BUDGET IS ALIGNED WITH THE VISION AND WE HAVE ALSO SPOKEN ABOUT WHAT THE VISION IS NOT IN A VIDEO FORMAT, BUT IN TERMS OF OUTCOME AND METRICS
SO NEXT SLIDE PLEASE
AND AGAIN COMMISSIONERS, I HAVE SHOWN THIS CHART AS WELL DURING THE LAST PRESENTATION JUST TO REMIND COMMISSIONERS OF WHAT THE LONG-TERM VISION AND GOALS ARE THAT WE HAVE FOR THE AIRPORT
CAN SOMEONE MUTE? I THINK I HEAR SOMEONE SPEAKING
THE LONG-TERM VISION VISION AND OUTCOMES AND METRICS THAT WE HAVE FOR THE AIRPORT
SO THE VIDEO THAT WE SHOWED IS REALLY JUST ANOTHER REPRESENTATION OF IT, THE GRAPHICAL OR VIDEO REPRESENTATION OF WHAT WE HAVE ON THIS CHART GRAPH OVER THE YEARS
SO IF YOU LOOK AT FOR EXAMPLE, THE NUMBER 10, WHICH IS TO PROVIDE OPTIMUM LEVEL OF SERVICE WITH OUR FACILITIES, THAT'S [INAUDIBLE] WHAT THE VIDEO WAS SHOWING
WE HAVE OTHER LONG-TERM GOALS AND OBJECTIVES AND THAT WE HAVE ONE OF THEM IS TO GET SKYTRACK'S FIVE-STAR AIRPORT AND TO BE IN THE TOP TEN ASQ MEGA HUB AIRPORT 45 MINUTES TO GET FROM [INAUDIBLE] TO THE CHECKPOINT
YOU GUYS HAVE HEARD US SPEAK ABOUT IT
YOU SAW THE WALK FLY THROUGH THAT WE HAVE IN THE VIDEO
ONE OF OUR GOALS IS TO HAVE A MINIMUM CONNECT TIME OF 75 MINUTES
THAT'S GOING THROUGH INTERNATIONAL ARRIVALS AND MAKING YOUR CONNECTIONS ETC
SO THESE ARE THE LONG-TERM GOALS
THIS IS THE VISION THAT WE HAVE
THIS IS THE VISUAL REPRESENTATION THAT WE'VE SHOWN OVER THE YEARS AND THEN THE VIDEO WAS JUST ANOTHER FORM OF ACTUALLY REPRESENTING THIS
SO THAT'S WHAT THAT IS
SO MY APOLOGIES I PROBABLY SHOULD HAVE STARTED WITH THIS
NOW YOU HAVE ALL HEARD MYSELF AND THE TEAM SPEAK ABOUT ALL THE FACILITIES THAT WE'RE BUILDING
WE'RE TRYING TO REACH THIS OPTIMUM LEVEL OF SERVICE, RIGHT? SO I JUST WANT TO SPEND ANOTHER FEW MINUTES JUST TALKING ABOUT OPTIMUM LEVEL OF SERVICE
NEXT SLIDE, PLEASE
WE HAVE SHOWN EXCERPTS OF WHAT OPTIMUM LEVEL OF SERVICE MAY LOOK LIKE
I JUST WANT TO RUN BACK THROUGH IT AGAIN
PRIOR TO AIRPORT DEVELOPMENT REFERENCE MANUAL THAT'S WHAT ADRM IS, PRIOR TO ADDITION 10 LEVEL OF SERVICE AT AIRPORTS DEVELOPED BY IATA WAS EXPRESSED IN TERMS OF LEVEL OF SERVICE ABCDE AND F
BUT THE 10TH EDITION AND 11TH EDITION HAVE IT EXPRESSED IN TERMS OF OPTIMUM, SUB OPTIMUM, AND OVER-DESIGN
OPTIMUM AS WE WE'RE TARGETING, RIGHT AND YOU KNOW, JUST A QUICK FACT THAT I HAVE WHEN I'M DOING PRESENTATION OF SEATAC INSIDE AND OUTSIDE THE ORGANIZATION AND I'M ACTUALLY ASKED THIS QUESTION WHY ISN'T THE U.S
EVER IN THE TOP 10 AIRPORTS AROUND THE WORLD? WHY IS IT [INAUDIBLE] IT'S BAD DESIGN
IT'S NOT AN ACCIDENT
THOSE AIRPORTS ARE DESIGNED AND BUILT TO MEET THE LEVEL OF SERVICE, OVER-DESIGN
THERE'S NO AIRPORT, LARGEST AIRPORT IN THE U.S
THAT I'M AWARE OF, THAT'S DESIGN HAS BEEN FOR A LEVEL OF SERVICE ABOVE OPTIMUM
IT DOESN'T EXIST IN THE USA
SO THAT'S OUR TARGET
AND OPTIMUM, EVEN THOUGH IT'S LEVEL SERVICE C IT'S ACTUALLY A REALLY HIGH LEVEL AS YOU'LL SEE ON THE NEXT CHART
NEXT SLIDE, PLEASE
AND THERE'S A WHOLE LOT OF INFORMATION ON THIS
WE NORMALLY WE TAKE EXCERPTS FROM THIS TO SHOW WHAT LEVEL OF SERVICE WE'RE TARGETING BUT JUST AS AN EXAMPLE, IF YOU LOOK AT THE CHART AND MAYBE JUST FOCUS ON THE SECURITY CHECKPOINT LINE, THE SPACE THAT'S NEEDED IN OUR FACILITY FOR US TO MEET OPTIMUM, BUT ALSO THE TIME THAT IT WOULD TAKE WAS TO GO THROUGH THE SECURITY CHECKPOINT
5 TO 10 MINUTES
THAT'S AN EXAMPLE OF OPTIMAL
WE'RE NOWHERE NEAR THAT DURING PEAK HOURS
AND THIS IS DURING PEAK WE'RE TALKING, RIGHT, FOR ECONOMY CLASS
IT'S A 5 TO 10 MINUTES IN THAT IS AN EXAMPLE OF WHAT'S CONSIDERED OPTIMUM
AND THE AMOUNT OF SPACE THAT YOU NEED WHEN YOU'RE IN A WHOLE ROOM AREA OR HOW LONG IT WOULD TAKE YOU TO DO SELF BACKDROP ETC
SO OPTIMUM LEVEL OF SERVICE, EVEN THOUGH IT'S A LEVEL SERVICE C MIGHT SOUND LOW BUT IT'S ACTUALLY A VERY VERY HIGH LEVEL OF SERVICE
YOU LOOK AT THE TIME THAT IT WOULD TAKE WAS TO GET THROUGH IMMIGRATION, THE PASSPORT CONTROL AND IMMIGRATION, YOU'RE TALKING ONE TO FIVE MINUTES AND FIVE TO TEN MINUTES, RIGHT? THAT'S ONE OF THE REASONS WHY WE HAVE THE NEW INTERNATIONAL ARRIVALS FACILITY
WE'RE TRYING TO MEET THAT LEVEL
THAT'S ONE OF THE REASONS WHY WE HAVE A LARGE SATELLITE FACILITY AND WE'RE ADDING TWO HUNDRED THOUSAND SQUARE FEET
WE'RE TRYING TO REACH THAT OPTIMUM LEVEL OF SERVICE
WE THINK CONCOURSE A IS THERE ALREADY
SO IN THE FUTURE DESIGN, IN THE VIDEO, WE'RE LOOKING AT WIDENING D CONCOURSE AS AN EXAMPLE BECAUSE WE NEED TO HAVE SPACE TO MEET THAT OPTIMUM LEVEL OF SERVICE
AND THEN A FINAL CHARGE IS KIND OF EYE CANDY WITH A LOT OF INFORMATION IN IT REAL QUICK, BUT THIS FOCUSES EXCLUSIVELY ON OPTIMUM LEVEL UPS IN TERMS OF TIME FOR DEPARTURES AND ARRIVALS
SO IF YOU LOOK AT MAYBE AT THE TOP, WE'RE SAYING IF YOU'RE DEPARTING FROM THE AIRPORT, IT SHOULD TAKE YOU 1 TO 2 MINUTES TO GET YOUR BOARDING PASS AND TAG IN, RIGHT? BACKDROP SHOULD BE 1TO 5 MINUTES CHECK IN AT THE DESK SHOULD BE 10 TO 20 MINUTES
AND THEN GETTING THROUGH SECURITY CHECK POINT 5 TO 10 MINUTES
THAT'S WHAT OPTIMUM MEANS
IT HAS INTERNATIONAL PASSPORT DEPARTURE
WE DON'T HAVE THAT HERE IN THE US, BUT IT HAPPENS IN SEVERAL OTHER COUNTRIES
AND ALSO IN THE TIME THAT YOU SHOULD IF YOU GET A WIDE-BODY AIRCRAFT OR A NARROW BODY AIRCRAFT HOW LONG IT SHOULD TAKE TO GET TO THE BAGGAGE COVER, SO TO GET TO YOUR BAG
SO THIS IS WHAT THAT OPTIMUM LEVEL OF SERVICE LOOKS LIKE AND IT'S NOT EASY TO GET THERE, AS YOU CAN SEE FROM THIS
THE METRICS ARE A REALLY SOME SIGNIFICANT STRETCH GOALS AND THAT'S THE REASON WHY WE HAVE TO BUILD THE FACILITIES AND HAVE THE NUMBER OF GATES, THE NUMBER OF LANES ETC., TO GET TO THIS LEVEL OF SERVICE
THAT'S WHAT WE'RE TRYING TO DO
THAT'S WHAT THE VISION VIDEO THAT WE SHOWED WAS WAS REALLY TRYING TO SHOW
THAT WHEN WE GET TO THAT POINT, THIS IS WHAT THE FACILITY SHOULD LOOK AND FEEL LIKE
SO I HOPE THAT ANSWERS SOME OF THE QUESTIONS THAT COMMISSION HAD
I'LL BE GLAD TO ANSWER QUESTIONS ASSOCIATED WITH THIS AT THE END OF THE PRESENTATION OR WHENEVER YOU'D LIKE TO DO IT, COMMISSIONED STEINBREUCK
LET'S PAUSE AND SEE IF THERE ARE COMMISSIONER QUESTIONS AT THIS POINT
THANK YOU
WE'LL BEGIN WITH COMMISSIONER BOWMAN
GREAT
LANCE, JUST A QUICK QUESTION ON THE SLIDE THAT SAYS SEA STRATEGIC PRIORITIES PRIORITIES
I THINK IT'S SLIDE THREE
KEEP GOING
THERE WE GO
TERRIFIC
WE'VE SEEN THIS BEFORE AND I GENERALLY AGREE WITH IT
MY QUESTION IS WHERE CAN WE SEE AN ANNUAL SCORECARD TO SEE WHERE WE ARE IN TERMS OF ACHIEVING SOME OF THESE GOALS? I KNOW THAT WE'VE GOT MORE SPECIFIC KPI'S ATTACHED TO MOST THESE BUT I JUST DON'T RECALL THAT WE'RE SEEING THIS ANNUALLY
YOU'VE REFERENCED A COUPLE OF TIMES PROJECTS THAT HELP GET US CLOSER TO ONE OF THESE SPECIFIC PRIORITIES AND THAT'S HELPFUL
IT WOULD BE REALLY GREAT IF BOTH WE COULD SEE IT ON AN ANNUAL BASIS AND ALSO AS PROJECTS COME FORWARD UNDERSTAND HOW IT TIES TO THESE STRATEGIC PRIORITIES
SO TWO THINGS REALLY QUICKLY, COMMISSIONER, SO ON AN ANNUAL BASIS, WE ACTUALLY HAVE FOR THE AIRPORT METRICS ASSOCIATED WITH THAT
HOWEVER IN THE BUDGET PRESENTATION COMING UP, YOU'LL ACTUALLY SEE THE KPI'S AND HOW THEY'RE ALIGNED WITH THE CENTURY AGENDA OR AIRLINE WITH A LONG-TERM VISION AND THE ACTUAL KPI'S
WE'VE BEEN WORKING WITH MARINE FROM THE STRATEGIC PLANNING GROUP AND THAT INFORMATION, THOSE KPIS, I THINK THEY'RE GOING TO BE PROPERLY PRESENTED ON A QUARTERLY BASIS TO STEVE AND THE COMMISSION
SO YOU WILL BE ABLE TO SEE THOSE AND YOU'RE GOING TO SEE THAT IN THE NEXT BUDGET PRESENTATION RIGHT AFTER THIS
LANCE, I SAW THAT
I READ THROUGH ALL THE MATERIALS
MY QUESTION WAS JUST, I DON'T KNOW THAT I NEED TO SEE IT QUARTERLY, QUITE FRANKLY, I DON'T KNOW THAT THAT'S ACTUALLY VERY HELPFUL
BUT AT LEAST ANNUALLY FOR THE COMMISSION TO BE ABLE TO SEE HOW WE'RE MOVING IN THE RIGHT DIRECTION
I'LL TAKE THE ASQ
FOR EXAMPLE
WE'VE BEEN HOVERING
WE HAVEN'T MADE A TON OF PROGRESS ON THAT
I KNOW THAT THAT WAS PART OF THE REASON WHY YOU HIRED THE DIRECTOR OF CUSTOMER SERVICE SO THAT WE COULD MOVE THAT NUMBER UP, BUT IT WOULD JUST BE REALLY HELPFUL TO SEE THAT MORE ON AN ANNUAL BASIS
AND AGAIN, SEE HOW EACH PROJECT, MAJOR PROJECT, ALIGNS WITH THESE SPECIFIC GOALS
YEAH AND COMMISSIONER, YES TO MAYBE CLARIFY, WE ACTUALLY MADE SIGNIFICANT PROGRESS WITH ASQ
REMEMBER, WE HAD TARGETED FIVE SPECIFIC AREAS THAT WE WERE SHOOTING TOWARD AND ONE OF THEM WAS A SECURITY CHECKPOINT LANGUAGE
OUR NUMBERS ARE INCREASING SIGNIFICANTLY
THE OTHER WAS WI-FI AS ANOTHER EXAMPLE
OUR SCORES JUST JUMPED SIGNIFICANTLY AFTER WE COMPLETED WITH THE WI-FI
SO WE HAVE ACTUALLY MADE SOME SIGNIFICANT PROGRESS
AND ALSO CLEANLINESS OF THE AIRPORT AS WELL
THE RESTROOM SCORES JUMPED AFTER, YOU KNOW, WE BROUGHT GINA ON BOARD AND SHE REALLY PUT THE NEW CONTRACT IN PLACE
SO WE MADE SOME SIGNIFICANT IMPROVEMENTS IN THE ASQ SCORES
WE PRESENT THESE WHEN WE DO THE BUDGET PRESENTATION, SO MAYBE WE JUST NEED TO FIND A WAY TO HIGHLIGHT THOSE A LITTLE BIT MORE
THAT'D BE GREAT
THANKS
COMMISSIONER STEINBRUECK
I SEE YOUR HAND UP, WOULD YOU LIKE TO HAVE A QUESTION AT THIS TIME? I DO BUT I'LL LET COMMISSIONER FELLEMAN GO AHEAD OF ME
THANK YOU
IF WE COULD STAY WITH THE ROLL CALL ORDER THAT WILL HELP ME OUT SIGNIFICANTLY
[LAUGHTER] ONTO COMMISSIONER CAULKINS
ALL RIGHT, LET'S STAY WITH THE ROLL CALL ORDERED THEN NO QUESTIONS FOR ME RIGHT NOW
THANK YOU
COMMISSIONER CHO, QUESTIONS FOR? NO, THIS IS GOOD
THANK YOU
THANK YOU, AND THEN COMMISSIONER FELLEMAN
THANK YOU
COMMISSIONER FELLEMAN FOR QUESTIONS
OKAY, HE TEXTED ME INDICATING HE HAD A QUESTION TO ASK
I HAD TO MUTE ALL THE PHONE NUMBERS
WE WERE HAVING SOME BACKGROUND NOISE
THERE WE GO
WONDERFUL COMMISSIONER FELLEMAN? ALL RIGHT
THANKS
THANK YOU AND PARDON MY BACKGROUND NOISE PREVIOUSLY
JUST TO FOLLOW UP ON COMMISSIONER BOWMAN'S COMMENT
ONE OF THE STRATEGIC VISION PRIORITIES REGARDING THE COMMUNITY THAT PERHAPS HAS EVOLVED SINCE THIS WAS FIRST CREATED HAD TO DEAL WITH AIR QUALITY MONITORING AS WELL AS
SO LIKE, THE WAY IT READS RIGHT NOW ALL PART 150 COMMITMENTS MET, ADDITIONAL NOISE AND AIR QUALITY MONITORING, AS WELL AS REDUCTION MEASURES EXPLORED AND IMPLEMENTED
IT'S JUST THAT WE'VE GOTTEN SO MUCH RECENT INVOLVEMENT IN BOTH AIR AND NOISE MONITORING, I JUST THOUGHT THAT MIGHT BE SEEN AS PART OF OUR COMMUNITY STRATEGIC PRIORITIES
THAT'S A VERY GOOD POINT COMMISSIONER FELLEMAN
THE THINGS THAT YOU SEE ON THE CHART HERE ARE JUST EXAMPLES OF WHAT WE'RE GOING TO GET DONE
IF WE PUT EVERYTHING IN EACH CATEGORY, THERE WOULD JUST BE TOO MANY THINGS ON THE PAGE
IF YOU NOTICE SOME OF THE MEASUREMENTS THAT WE HAVE IN THIS THAT HAVE BEEN CHANGED OR MODIFIED OVER THE YEARS
SO OTHER THINGS LIKE WHAT YOU JUST MENTIONED, COMMISSIONER, WILL BE INCLUDED IN COMMUNITY
WE JUST CAN'T PUT EVERYTHING ON THE CHART HERE BECAUSE JUST BE TOO MANY THINGS ON IT
I APPRECIATE THAT
I JUST THINK IT'S ALL GOOD FOR US TO BE ABLE TO, WE HAVE BEEN DOING PROGRESS AND SO TO THE DEGREE WE CAN RECOGNIZE THAT, I THINK IT'S RESPONSIVE TO THE COMMUNITY
COMMISSIONER, GOOD POINT
IF YOU LOOK AT FOR EXAMPLE, WHAT'S INCLUDED IN ALL OF THE PART 150 COMMITMENTS, THERE'S A WHOLE LOT OF ACTIVITIES INCLUDED IN THAT
A WHOLE LOT OF THINGS THAT WE'RE GOING TO GET DONE UNDER THE PART 150 COMMITMENTS THAT WE HAVE
ALL RIGHT, THERE WAS JUST THE INCLUSION OF THE AIR QUALITY WAS REALLY THE BIG MOMENT MONITOR
BUT THANK YOU
THANK YOU
THANK YOU
AND THEN MOVING TO COMMISSIONER STEINBRUECK
OKAY
THANK YOU
AND I HAVE A COUPLE OF QUESTIONS AND COMMENTS HERE AT THIS STAGE
REFERRING TO COMMISSIONERS QUESTIONS ON THE STRATEGIC PRIORITIES I, TOO, AM INTERESTED IN SEEING AN ANNUAL SCORECARD EVALUATIVE APPROACH TO THIS
THAT WE CAN FOLLOW AND TRACK OUR PROGRESS
I ASSUME, DIRECTOR LANCE, THAT YOU HAVE A MUCH LONGER MORE DETAILED SET OF GOALS UNDER EACH OF THESE ITEMS I THINK YOU REFERRED TO THAT
WHAT I SEE MISSING HERE JUST STANDOUTS FOR ME UNDER ENVIRONMENT AND SUSTAINABILITY, THERE'S A LOT MORE TO IT THAN SIMPLY ADDRESSING THE GREENHOUSE GAS CHALLENGES SUCH AS WATER CONSERVATION, RECYCLING, GREEN BUILDING MATERIALS, REUSE HEALTHY ENVIRONMENT, HVAC SYSTEMS, ALL KINDS OF THINGS THAT I THINK SHOULD BE PART OF THE ENVIRONMENT AND SUSTAINABILITY GOALS
SO I SUSPECT YOU HAVE MORE UNDER THAT HEADING BESIDES ACHIEVEMENTS IN GREENHOUSE GAS EMISSIONS AND EFFORTS AROUND SUSTAINABLE AVIATION FUEL
UNDER CUSTOMER EXPERIENCE, I WOULD EXPECT TO SEE SOME QUALITY OF EXPERIENCE ALSO AS PART OF A RESPONSE THERE, NOT JUST THROUGH PUT
WHAT YOU'VE LISTED PRIMARILY HAS TO DO WITH, THIS IS NOT A CATTLE BARN AIRPORT AND WE DON'T WANT IT TO BE
THROUGH PUT IS EXTREMELY IMPORTANT BUT SO ARE THINGS LIKE BATHROOMS, ARTWORK, THE WHOLE EXPERIENCE AS A DESTINATION HUB AIRPORT, THE PHYSICAL AND ARCHITECTURAL ENVIRONMENT
ALL OF THOSE THINGS TO ME ARE VERY IMPORTANT THINGS THAT PEOPLE REMEMBER FOR BETTER OR WORSE
SO I'LL STOP THERE FOR NOW
GOOD POINT COMMISSIONER
AGAIN, MAYBE ONE OF THE THINGS I'LL HAVE TO ASK THE TEAM TO DO IS TO ACTUALLY SEND YOU AND THE REST OF THE COMMISSIONERS ALL THE ACTIVITIES THAT ARE INCLUDED UNDER ALL OF THESE
YOU'LL SEE SOME OF THEM IN THE NEXT PRESENTATION BUT FOR EXAMPLE, COMMISSIONER, SKYTRAX FIVE RANKING
TO GET TO SKYTRAK FIVE RANKING, EVERYTHING THAT YOU JUST MENTIONED WE HAVE TO HAVE
TOP CLASS RESTROOMS, CONCESSIONAIRES, WAIT TIME
YOU NAME IT
THE QUALITY OF SERVICE THAT WE TALKING ABOUT ALSO TO GET INTO THE TOP 10 ASQ U.S MAJOR HUB AIRPORT
WE HAVE TO MEET ALL OF THOSE AND MORE
SO THERE'S A WHOLE LIST OF THINGS, AS I SAID, IF WE PUT IT ON THIS CHART IT WOULD PROBABLY BE FIVE SIX PAGES
SO WHAT I THINK WOULD BE GOOD IS TO ACTUALLY GET THAT INFORMATION TO YOU GUYS SO YOU CAN SEE ALL THE ACTIVITIES THAT ARE LISTED UNDER THESE IN DETAIL
OKAY, EXCELLENT
THANK YOU
WE CAN MOVE ON
OKAY, I THINK I'M GOING TO HAND OVER TO BORGEN NEXT FOR FUNDING
THANK YOU LANCE
GOOD MORNING COMMISSIONERS
LET'S SLIDE ONTO THE NEXT SLIDE, PLEASE? THIS IS A LOOK AT OUR CASH FLOWS OUT OVER THE NEXT FIVE YEARS AND AS ORIGINALLY INTENDED THIS WOULD HAVE FOLLOWED THE PRESENTATION AS IT ENDED ON SEPTEMBER 22ND WHERE WE DESCRIBED ALL OF THE DIFFERENT CAPITAL PROJECTS
THIS IS REALLY THE CASHFLOW REPRESENTATION OF THOSE AND AS LANCE INDICATED, WE HAVE A VERY AMBITIOUS PROGRAM OVER THE NEXT FIVE YEARS AND WE ANTICIPATE SPENDING 3.3 BILLION
AT THE TOP OF THE PAGE YOU SEE THE THREE MEGA PROJECTS AND YOU CAN SEE THAT TWO OF THEM ARE WINDING DOWN AS WE COMPLETE THEM: THE INTERNATIONAL ARRIVALS FACILITY AND THE NORTH SATELLITE
BUT THE BAGGAGE OPTIMIZATION PROGRAM CONTINUES AND AS WE DISCUSSED LAST TIME, THERE ARE A NUMBER OF ONGOING AND NEW PROJECTS THAT WILL BE THE SOURCE OF OUR SPENDING OVER THE NEXT FIVE YEARS
WANTED TO POINT OUT ONE OTHER THING
NEAR THE BOTTOM OF THE PAGE THERE'S A LINE ITEM CALLED CIP CASH FLOW ADJUSTMENT RESERVE AND LIKE LAST YEAR WHEN WE FIRST IMPLEMENTED THIS, THIS IS REALLY A TOOL, A BUDGETARY TOOL THAT WE ARE USING TO MAKE OUR 2021 CASH FLOWS MORE ACCURATE
AND IN OTHER WORDS AT THIS POINT IN TIME, IF WE ADDED UP ALL THE INDIVIDUAL PROJECT CASH FLOWS, WE WOULD BE LOOKING AT SPENDING A 549 MILLION DOLLARS
WE FULLY EXPECT THAT MOST PROJECTS ARE MOVING AHEAD, BUT THERE WILL BE SOME SITUATIONS WHERE THINGS GET DELAYED
IT COULD BE A BID BUST, IT COULD BE A DELAY IN OPERATIONAL IMPACTS, OR ANY NUMBER OF ITEMS THAT CAN DELAY PROJECTS
AND SO WE HAVE REDUCED THE SPENDING FOR 2021 AT THE TOP LEVEL, NOT AT THE INDIVIDUAL PROJECT LEVEL, JUST AS A WAY OF COMING UP WITH A MORE REASONABLE ESTIMATE FOR WHAT WE THINK WE WILL LIKELY SPEND NEXT YEAR AND THAT WOULD BE THE 464 MILLION DOLLARS
THIS IS A ZERO SUM THING
SO WE JUST ADD THOSE CASH FLOWS BACK IN 2022 AND 2023
IT'S JUST A BALANCING MECHANISM RECOGNIZING THAT OUR CASHFLOW ESTIMATING FOR THE FIRST YEAR OF ANY PROGRAM TENDS TO BE SLIGHTLY OPTIMISTIC
ON THE NEXT SLIDE IF WE COULD MOVE AHEAD, WE'LL SHOW HOW WE'RE GOING TO TRY TO FUND ALL OF THIS
SO JUST TO ALIGN YOU WITH WHAT THE COLORS ARE, THE LIGHT GREEN WHICH TAKES UP MOST OF THIS SLIDE IS FUTURE BONDS, THE PURPLE IN 2021 IS OUR EXISTING BOND PROCEEDS, AND THE BLUE AT THE VERY BOTTOM IS CASH, OR THE AIRPORT DEVELOPMENT FUND
SO THE SIMPLE MESSAGE HERE IS THAT WE ARE GOING TO PAY FOR MOST OF OUR CAPITAL SPENDING OVER THE NEXT FIVE YEARS WITH REVENUE BONDS AND THAT IN ORDER TO COMPLETE OUR SPENDING EVEN FOR NEXT YEAR WE'RE GOING TO NEED TO ISSUE BONDS AND THAT'S IMPORTANT BECAUSE AS YOU'LL SEE IN OUR NEXT PRESENTATION WE LOOK AT OUR OPERATING BUDGET
WE ARE VERY FOCUSED AT IMPROVING OUR DEBT SERVICE COVERAGE AND REBUILDING OUR CASH BALANCES SO THAT WE CAN DEMONSTRATE THAT WE CONTINUE TO BE A SOLID ORGANIZATION AND A GOOD RISK FOR INVESTORS WHO WANT TO PURCHASE OUR BONDS
I WOULD ALSO SAY THAT PASSENGER FACILITY CHARGES OR PFC'S HISTORICALLY IS A VERY IMPORTANT FUNDING SOURCE FOR AIRPORTS AND IT IS FOR US
BUT WE'RE AT A STAGE NOW WHERE OUR FUNDING PLAN CALLS FOR THE VAST MAJORITY OF OUR PFC'S TO BE USED TO PAY DEBT SERVICE
AND THAT'S WHY IT DOESN'T SHOW UP HERE AS PART OF A SORT OF DIRECT CONSTRUCTION CAPITAL SPENDING FUNDING SOURCE
BUT THE BOTTOM LINE HERE IS THAT BONDS WILL BE OUR PRIMARY FUNDING SOURCE OF THE NEXT FEW YEARS
THE BOTTOM FOOTNOTE THERE TALKS ABOUT FAA GRANTS
THAT'S ALWAYS IMPORTANT
WE SEEK OUT AS MUCH AS WE POSSIBLY CAN AND GOING FORWARD WE STILL HAVE THAT THAT PLAN, IT'S JUST THAT WHEN YOU LOOK AT A 3.3 BILLION DOLLAR PROGRAM, IT'S STILL A RELATIVELY SMALL PART OF OUR FUNDING
NEXT SLIDE, PLEASE
SO WANTED TO JUST TALK BRIEFLY ABOUT SOME OF THE MII PROVISIONS, OR MAJORITY IN INTEREST PROVISIONS OF OUR LEASE AGREEMENT
I WOULD JUST START BY THE FEDERAL GUIDELINES UNDER RATES AND CHARGES POLICY, AIRPORTS ARE REQUIRED TO CONSULT WITH AIRLINES ON CAPITAL PROJECTS
BUT AS PART OF A LEASE AGREEMENT, WE HAVE GIVEN AIRLINES SOME ADDITIONAL RIGHTS AND UNDER OUR LEASE AGREEMENT IT'S REALLY A RIGHT TO VOTE TO DISAPPROVE A PROJECT
SO IF A MAJORITY IN INTEREST OF AN AIRLINES GROUP, WHICH IS 55% OF THE NUMBER AND FIFTY FIVE PERCENT OF THE REVENUES IN EACH COST CENTER, IF THAT MAJORITY IN INTEREST VOTES DOWN A PROJECT, IT CAN DELAY THE PROJECT BY UP TO 12 MONTHS
AND THE VOTING PROVISIONS ALLOW THE AIRLINES TO VOTE ON AERONAUTICAL PROJECTS WHERE THE RATE BASE COSTS ARE 10 MILLION DOLLARS OR MORE
WE USE PFC'S OR GRANTS THOSE COSTS ARE NOT PART OF THE RATE BASE SO THAT DIMINISHES IT
SO NOT ALL PROJECTS THAT ARE OVER 10 MILLION DOLLARS ARE NECESSARILY SUBJECT TO AN MII
ANOTHER PROVISION IS IF THE COSTS GO UP BY MORE THAN 10% PRIOR TO THE START OF CONSTRUCTION, THAT CAN TRIGGER A NEED FOR ANOTHER MII VOTE AND THAT'S WHAT WE SAW WITH THE BAGGAGE OPTIMIZATION PROJECT LAST YEAR
AND FINALLY, THERE ARE CERTAIN PROVISIONS IN THE AGREEMENT WHERE CERTAIN PROJECTS ARE EXEMPT FROM MII VOTES SO NOT EVERYTHING REQUIRES IT
SO THIS WAS ON HERE BECAUSE I UNDERSTAND THERE WERE SOME QUESTIONS AND I'D BE HAPPY TO PAUSE AT THIS POINT IF THERE ARE ANY QUESTIONS ON THE FUNDING PLAN
LET'S DO ROLL CALL
THANK YOU
BEGINNING WITH COMMISSIONER BOWMAN FOR QUESTIONS
GREAT
THANKS
GETTING BACK TO SLIDE NUMBER 9, ESSENTIALLY THE ROLL-UP, WE'VE GOT SOME, I WOULDN'T SAY CONSIDERABLE, WE'VE GOT SOME CIP RESERVES IN THERE
CAN YOU HELP ME UNDERSTAND? I'M GOING TO JUST GOING TO USE THE IAF AS AN EXAMPLE
WHAT WE HAVE LEFT IN THERE FOR 202
I KNOW THAT WE STILL HAVE SOME OUTSTANDING ISSUES WITH THE CONTRACTOR ON THAT PROJECT AND WE'RE LOOKING AT SOME POTENTIAL COST INCREASES ON BAGGAGE OPTIMIZATION AS WELL
WHERE DO WE HAVE MONEY IN THIS FIVE-YEAR CIP TO COVER THOSE ADDITIONAL COSTS? IS THAT IN THE RESERVES? YES
OKAY
AND SO AT SOME POINT IT WOULD BE HELPFUL, I DIDN'T SEE IT IN THE INFORMATION PROVIDED, BUT I'D LOVE TO HAVE A BETTER SENSE OF HOW MUCH IS SET ASIDE FOR EACH OF THOSE PROJECTS SINCE I KNOW THE RISK IN TERMS OF GOING OVER VARIES CONSIDERABLY ON EACH PROJECT
YEAH, I CAN JUST SAY IN TERMS OF THE LINE ITEM THAT'S THERE THAT SAYS CIP RESERVES, THAT'S REALLY A BUDGETARY TOOL
IT IS NOT PRE-DESIGNATED TO ANY INDIVIDUAL PROJECT
OKAY
THE PROJECT TEAM COULD SPEAK MORE SPECIFICALLY BUT INSIDE THE BUDGET FOR THE PROJECTS THERE ARE SOME RESERVES
ALL RIGHT, AND THAT'S NOT WHAT THIS OVERALL CIP RESERVE IS
RIGHT? NO, I'M VERY FAMILIAR WITH THE RESERVES WITHIN THE INDIVIDUAL PROJECTS BUT I KNOW THAT A COUPLE OF THEM LIKE THE IAF IS CLOSE TO MEETING ITS BUDGET BUT WE STILL HAVE SOME CONSIDERABLE RISK OUTSTANDING WITH THE CONTRACTOR
AND SO I'M WONDERING WHERE THAT MONEY MIGHT COME FROM
WELL, THE MONEY WOULD COME FROM WE WOULD ISSUE MORE BONDS TO COMPLETE THE PROJECT
FROM A FUNDING STANDPOINT
OKAY, NO MORE QUESTIONS RIGHT NOW
THANK YOU
MOVING TO COMMISSIONER CALKINS FOR QUESTIONS
THANK YOU
MICHELLE BORGEN, I'M GOING TO ASK A HYPOTHETICAL AT RISK OF JINXING THE PROCESS AND I DON'T BELIEVE THAT SHENFIELD IS ON THE CALL RIGHT NOW, BUT IT'S ABOUT THE MAYBE 25 TO 50 PERCENT CHANCE THAT SOMETIME IN THE NEXT YEAR THERE WILL BE AN ADDITIONAL STIMULUS OR RELIEF ACT FROM THE FEDERAL GOVERNMENT THAT MAY PROVIDE ADDITIONAL FUNDING TO AIRPORTS AROUND THE COUNTRY
OR TO OTHER ASPECTS OF THE AVIATION INDUSTRY
AND I'M WONDERING HOW THAT MIGHT IMPACT OUR CAPITAL BUDGET
THE ORIGINAL CARES ACT I THINK WAS PREDOMINANT OPERATIONS, BUT I'M WONDERING IF SOMETHING LIKE THAT MIGHT IMPACT A CAPITAL BUDGET AND IF SO, HOW WOULD WE PRIORITIZE WHERE THOSE MONIES WENT? THE WAY I WILL ANSWER THAT IS TO SAY THAT I DON'T THINK THAT ADDITIONAL RELIEF WOULD AFFECT OUR LIST OF PROJECTS THAT WE GO AHEAD WITH
IT WILL AFFECT HOW WE PAY FOR THOSE PROJECTS OR IT WILL EFFECT ULTIMATELY THE COST IMPACT OF THOSE PROJECTS
SO, FOR EXAMPLE, I HAVE A SOME SLIDES LATER WE'LL TALK ABOUT HOW WE ARE USING THE CARES MONEY
AND TO SOME EXTENT WE'VE SPLIT IT BETWEEN PAYING FOR DEBT SERVICE AND PAYING FOR OPERATING COSTS
AND YOU KNOW WITHOUT KNOWING EXACTLY WHAT TYPE OF RELIEF WE MAY RECEIVE GOING FORWARD AND WHAT TYPE OF RESTRICTIONS MAY BE APPLIED TO IT, I WOULD LIKE TO THINK WE WOULD HAVE THAT SAME KIND OF FLEXIBILITY IN 2021 TO DO THE SAME THING
SO IF WE GOT SOME ADDITIONAL RELIEF WE CAN USE THAT MONEY TO INCREASE OUR DEBT SERVICE COVERAGE, INCREASE OUR CASH BALANCE, AND REDUCE THE COST TO OUR CUSTOMERS AND WHETHER THEY BE AIRLINES OR NON AERO TENANTS, WE'D BE ABLE TO YOU KNOW, I THINK HELP ALL OF OUR BUSINESSES IN THAT WAY, BUT I DON'T BELIEVE THAT WE WOULD GO BACK AND SAY GOSH WITH THIS ADDITIONAL RELIEF WE COULD SPEND MORE
WHAT YOU'RE LOOKING AT ON THIS SLIDE IS A VERY AMBITIOUS PROGRAM, AND I'M NOT SURE WE WOULD GREENLIGHT ANY ADDITIONAL PROJECTS JUST BECAUSE WE'VE GOT SOME ADDITIONAL RELIEF COMING
I THINK WHAT YOU'RE LOOKING AT HERE IS A FAIRLY AMBITIOUS PLAN THAT'S CONSISTENT WITH OUR STRATEGY OF TAKING A LONG-TERM VIEW AND TO ACHIEVE THE GOALS THAT LANCE WAS TALKING ABOUT WE ARE GOING TO NEED TO CONTINUE WITH THIS CAPITAL PROGRAM, SPEND SIGNIFICANTLY, AND BRING OUR LEVEL OF SERVICE UP OVER TIME
BUT IT'S GOING TO TAKE MANY YEARS TO GET THERE
GREAT
THANK YOU SO MUCH
MOVING TO COMMISSIONER CHO FOR QUESTIONS IN LINE WITH WHAT RYAN WAS ASKING BUT A LITTLE MORE DETAIL IF IN A HYPOTHETICAL SITUATION WE WERE TO RECEIVE A GRANT FROM THE FAA OR THE FEDERAL GOVERNMENT THAT OBVIOUSLY IS NOT FACTORED INTO THE UNDERWRITING THAT HAPPENS FOR THESE REVENUE BONDS, RIGHT? WE CAN'T REASONABLY EXPECT THAT GRANT BECAUSE USUALLY IT PROBABLY HAPPENS AFTER THE PROJECT STARTS
AND SO IF WE WERE TO RECEIVE A GRANT FROM THE FEDERAL GOVERNMENT, DOES THAT MONEY GET APPLIED TO THE REVENUE BOND PAYMENTS OR DOES IT GET APPLIED TO THE ACTUAL CONSTRUCTION COSTS? AND IF WE WERE TO ACTUALLY APPLY TO THE CONSTRUCTION COSTS, WHAT DO WE DO WITH THE MONEY WE'VE SAVED? DO WE JUST PAY BACK OUR INVESTORS EARLY OR HOW DOES THAT WORK? OKAY
I'LL START WITH TRADITIONALLY WHEN WE GET GRANTS FROM THE FAA WHICH WE HAVE FOR MANY MANY YEARS
THOSE GRANTS ARE SPECIFICALLY DESIGNATED FOR APPROVED PROJECTS AND THEY BECOME PART OF THE CONSTRUCTION FUNDING OF THOSE PROJECTS
AND SO IF YOU HAD A 10 MILLION DOLLAR PROJECT AND YOU'VE GOT A FOUR MILLION DOLLAR GRANT YOU'D ONLY SPEND SIX MILLION DOLLARS OF AIRPORT MONEY AND WHETHER THOSE WERE BONDS OR CASH OR WHATEVER AND THAT WOULD BE THE FUNDING PLAN
WITH THE CARES MONEY IT WAS A LITTLE DIFFERENT
THEY GAVE US THE MONEY KNOWING THAT WE WERE EXPERIENCING TREMENDOUS REVENUE SHORTFALLS
AND SO THEY GAVE US FLEXIBILITY TO USE THE CARES MONEY THAT WE'VE NEVER HAD WITH FEDERAL GRANTS
WE COULD USE THAT MONEY FOR ANY LEGAL USE OF AIRPORT REVENUES, WHICH MEANT WE GET TO CHOOSE THAT WE CAN USE TO PAY DEBT SERVICE BECAUSE WE DON'T HAVE ENOUGH REVENUE COMING IN OR WE DON'T HAVE ENOUGH PFCS COMING IN OR WE COULD USE IT TO PAY OPERATING COSTS AND WE TYPICALLY DON'T HAVE THAT KIND OF FLEXIBILITY
AND THAT'S WHY WHEN COMMISSIONER CAULKINS ASKED THE QUESTION OF A HYPOTHETICAL ABOUT NEXT YEAR DEPENDING ON THE STRINGS ATTACHED OR THE RULES SURROUNDING THE USE OF THE MONEY THAT WILL DICTATE HOW WE ELECT ULTIMATELY USE THAT AND HOW WE COULD USE IT BUT TO THE EXTENT THAT WAS SIMILAR TO THE CARES MONEY, WE HAVE A LOT OF FLEXIBILITY, WHAT I WOULD LIKELY DO IS OR RECOMMEND A PLAN THAT CONTINUES WHAT WE'VE DONE THIS YEAR WHICH IS TO USE IT TO PAY DEBT SERVICE AND OPERATING COSTS AND THAT ALLOWS US TO REDUCE THE COSTS THAT WE THEN CHARGE THE AIRLINES OR THE COST THAT WE NEED TO RECOVER FROM OTHER TENANTS AS WELL
SO IT CAN HELP US ACROSS THE BOARD
BUT I WOULD NOT USE IT TO FUND PROJECT CONSTRUCTION COSTS I DON'T BELIEVE
THAT WOULD BE SORT OF A LAST ALTERNATIVE USE FOR IN MY MIND
OUTSIDE OF THE CONTEXT OF COVID JUST IN GENERAL IF WE WERE TO RECEIVE GRANTS FOR CAPITAL PROJECTS THAT FUND THAT FUNDING I ASSUME IS EITHER PROVIDED AFTER THE BUDGET IS SET AND WE COMMENCED THE PROJECT OR IT'S A REIMBURSEMENT
SO TO ANSWER IT'S REIMBURSEMENT
SO IF IT'S A REIMBURSEMENT, IT WON'T HAPPEN UNTIL WE SPEND THAT MONEY
RIGHT? CORRECT
SO IT'S NOT LIKE WE'RE GETTING THE MONEY UP FRONT, WE'RE GETTING IT TOWARDS THE END
MOST LIKELY
YEAH, THAT IS TRUE FOR THE CARES MONEY, YOU KNOW, WE HAD TO SPEND OUR MONEY FIRST AND THEN WE COULD USE THE CARES MONEY TO REIMBURSE US OURSELVES
AND THAT'S HOW THAT'S HOW GRANTS WORK
BUT WHEN IT COMES TO REVENUE BONDS, WOULD THAT MONEY BE USED? I'M JUST TRY TO UNDERSTAND WHERE THAT MONEY WOULD GO LIKE FLOWING
WOULD HAVE FLOW TO REVENUE PAYMENTS OR WHAT IT ACTUALLY FLOWED TO? BECAUSE IF YOU TAKE OUT THE DEBT YOU'VE TAKEN ANOTHER DEBT
IT'S NOT LIKE, YOU KNOW, IT'S NOT LIKE BECAUSE IT'S IT WOULD BE USED TO PAY THE ANNUAL DEBT SERVICE COST NOT REPLACE THE ISSUANCE OF THE BONDS
OKAY
SO, YOU KNOW, WE HAVE SIGNIFICANT ANNUAL DEBT SERVICE PAYMENTS THAT WE HAVE TO MAKE AND HAVING THE CARES MONEY TO BE ABLE TO REPLACE SOME OF OUR LOST REVENUES AND LOST PFCS WAS ABSOLUTELY CRITICAL TO OUR FINANCIAL WELL-BEING THIS YEAR
OKAY, SO IT DOESN'T GO BACK TO PAYING THE PRINCIPAL
IT JUST GOES BACK TO OUR MONTHLY PAYMENTS
[CROSSTALK] BUT OUR ANNUAL PAYMENTS PART OF WHICH IS PRINCIPAL AND PART OF WHICH IS INTEREST, RIGHT? OKAY, GOTCHA
AND BORGEN, COMMISSION CHO IF I COULD MAYBE JUST ADD ONE HISTORICALLY, BASED ON THE CONDITION FOR THE CARES ACT MONEY WE MAY BE ABLE TO USE IT FOR DEVELOPMENT PROJECT
BUT YOU'D HAVE TO GET, YOU HAVE TO DO AN ADDITIONAL APPLICATION AND I THINK YOU HAVE TO GET PERMISSION SPECIFICALLY FROM THE FAA TO DO THAT
YEAH, THAT'S THE OTHER THE CONDITIONS OF THE CARES ACT
LANCE IS CORRECT
IT'S AN ALLOWABLE USE JUST WE HAD SO MANY OTHER HIGHER PRIORITIES THAT THAT WOULD HAVE BEEN THE LOWEST PRIORITY USE
THANK YOU
AND MOVING TO COMMISSIONER FELLEMAN FOR QUESTIONS OR COMMENTS
THANKS, MICHELLE, BORGEN
I'M ALSO SEEING AND I DON'T HAVE THE SLIDE NUMBER IN FRONT OF ME, BUT THERE ARE SEVERAL PROJECTS THAT ARE OUR MAYBE NOT HAVE CONSTRUCTION PROJECTS BUT OPERATIONAL THINGS THAT ARE RECOMMENDED FOR NOT GOING FORWARD SUCH AS TEN MILLION DOLLARS FOR MONITORING OF THE OPERATIONS OF THE BUILDING FROM AN ENVIRONMENTAL PERSPECTIVE
AND I WAS JUST YOU KNOW, AND THERE WAS A WHOLE LIST OF PROJECTS THAT WERE RECOMMENDED
FOR EITHER DELAY OR YOU KNOW ABANDONMENT
SO I'M JUST WONDERING WOULDN'T WOULDN'T THESE WINDFALLS THAT WE'RE TALKING ABOUT HELP RESTORE SOME OF THOSE THINGS? IT'S POSSIBLE
MAYBE I SPOKE TOO QUICKLY WHEN I SAID WE WOULD STICK WITH THIS PROGRAM
IT REALLY DEPENDS ON THE AMOUNT OF THEIR RELIEF AND THE STRINGS THAT ARE ATTACHED TO IT
BUT I THINK THAT WHAT WE'RE PROPOSING HERE IS THE CAPITAL PLAN THAT WE THINK IS MOST PRUDENT IN THIS ENVIRONMENT AND GIVEN OUR LONG TERM GOALS AND EVERY YEAR THEY'RE ALL IS GOING TO BE OTHER REQUESTS AND OTHER OTHER OPPORTUNITIES TO SPEND MONEY, BUT WE COME TO YOU EVERY YEAR WITH WHAT WE FEEL ARE THE HIGHEST PRIORITY ITEMS PART OF IT IS A CAPACITY TO DELIVER AS WELL
YOU KNOW, WHEN I LOOK OUT AT THESE CASH FLOWS OF SIX TO SEVEN TO EIGHT HUNDRED MILLION A YEAR, THIS IS A VERY AMBITIOUS PROGRAM
BEING ABLE TO COMPLETE THIS IS GOING TO BE A SUBJECT OF A LITTLE LATER IN THIS PRESENTATION WHEN WE TALK ABOUT THE PEER REVIEW RECOMMENDATIONS, WE REALIZE THERE'S A LOT OF THINGS THAT WE NEED TO DO TO ENHANCE OUR ABILITY TO DELIVER AND EXECUTE THIS PROGRAM
PERHAPS IT'S REALLY NOT PART OF THE CIP CONVERSATION, BUT THERE WERE PROJECTS PUT FORWARD RECOMMENDED BY STAFF TO MOVE ON THAT ARE BEING RECOMMENDED TO NOT MOVE FORWARD ON THIS YEAR DUE TO THESE BUDGETARY SHORTFALLS
SO I WOULD HOPE THAT WE WOULD TAKE A REVISIT AND LIKE FOR EXAMPLE THE EARLY ON IN THE ENS COMMITTEE THE NEED FOR MONITORING WAS VERY CLEAR AND SOMETHING THAT THE STAFF PRIORITIZED
AND IT HAS BEEN RECOMMENDED NOT TO MOVE FORWARD ON
SO AGAIN, I WOULD LIKE TO UNDERSTAND AS THESE DECISIONS ARE MADE WHAT OF THOSE PROJECTS THAT ARE BEING ASKED TO DEFER AND AGAIN, IT MAY BE MORE OPERATIONAL BUT IT STILL MONITORING REQUIRES PURCHASES EQUIPMENT
THAT'S A CONVERSATION
I'D LIKE TO LOOK AT THAT LIST AS TO WHAT THINGS YOU'VE MAINTAINED THAT NEED TO BE CONTINUALLY DEFERRED OR NOT
OKAY
AND THEN MOVE INTO COMMISSIONER STEINBRUECK
OKAY
THANKS
COUPLE OF QUESTIONS HERE AND SOME REALLY HIGH LEVEL QUESTION HERE IS WHAT, BORGEN, WOULD YOU SAY IS OUR THEORETICAL DEBT LIMIT WITH PROJECTED REVENUES OVER THE NEXT FIVE YEARS? HOW MUCH CAN WE SPEND? HOW MUCH ARE WE SPENDING? HOW MUCH DEBT ARE WE CARRYING RIGHT NOW? SO WE'VE GOT AROUND APPROXIMATELY THREE BILLION DOLLARS AND OUR CAPACITY IS YOU KNOW BASED ON REALLY A COMBINATION OF METRICS THAT WE LOOK AT BUT MOST OF OUR COSTS GO INTO A RATE BASE AND WE CHARGED THE AIRLINE'S FOR THE DEBT SERVICE
THAT'S PART OF THE CAPITAL COSTS, PART OF THE RATE BASE
SO WE INCREASE OUR CAPITAL OUR DEBT SERVICE, INCREASE OUR AIRLINE REVENUES OR TO AN AIRLINE THE COST
AND SO THE METRICS THAT WE TYPICALLY LOOK AT AND TRYING TO ASSESS OUR OVERALL CAPITAL CAPACITY WOULD BE A, OUR DEBT SERVICE COVERAGE B, OUR OVERALL DEBT LEVEL AND IT'S TYPICALLY LOOKED AT AMONG AIRPORTS AS SORT OF A DEBT / ENPLANED PASSENGER
THEN THE THIRD PIECE WOULD BE LOOKING AT THE AIRLINE COST, OR CPE, COST PER ENPLANEMENT
AND AGAIN THAT WOULD BE LOOKED AT IN COMPARISON WITH OTHER PEER AIRPORTS BECAUSE AT SOME POINT, YOU KNOW, IF YOU SPEND MORE, YOU BORROW MORE, YOU CHARGE THE AIRLINE MORE, YOUR COSTS ARE GOING UP, YOUR DEBT LEVELS ARE GOING UP
THE ONE THING WE CAN SAY IS THAT NO AIRPORT IN THE US AND CERTAINLY NO MAJOR HUB HAS GONE BANKRUPT
SO IT'S REALLY KIND OF LIKE A UTILITY AND I THINK WE HAVE TO BE VERY THOUGHTFUL
AND WE HAVE TO BE CAREFUL, BUT I THINK WE ALSO ACKNOWLEDGE THAT WE HAVE SOME FAIRLY SIGNIFICANT CAPACITY IN THE LONG TERM
CERTAINLY OUR CAPACITY HAS BEEN HURT THIS YEAR AND WE'RE GOING TO BE BUILDING IT BACK
BUT TO THE EXTENT THAT WE CAN GET BACK TO OUR 2019 PASSENGER LEVELS BY OUR CURRENT FORECAST IS 2024 AND TO THE EXTENT THAT WE CAN BUILD BACK OUR NON AERONAUTICAL REVENUES, WE'RE BUILDING BACK THE CASH FLOW THAT GIVES US THE DEBT SERVICE COVERAGE, HELPS US GENERATE MONEY SO THAT WE CAN PAY FOR THINGS AND ACHIEVE THOSE METRICS
THE LONG-TERM SORT OF 10 TO 15-YEAR CAPACITY, YOU KNOW, WE'RE GOING TO BE UPDATING OUR FORECASTS AS WE BETTER UNDERSTAND THIS RECOVERY AND THAT WILL HELP SHAPE OUR THINKING ABOUT THE LONG-TERM CAPACITY
BUT IT'S IT'S MULTIPLE MULTIPLE BILLIONS BEYOND WHAT WE'RE SHOWING HERE IS ULTIMATELY OUR CAPACITY AND EVEN THAT I WILL SAY IS SOMETHING THAT'S BEEN CHANGING OVER THE LAST FIVE YEARS OR SO
IT USED TO BE THAT A COST PER ENPLANEMENT OF $20 WAS AT THE HIGH END
AND EVEN BEFORE COVID THERE WERE A NUMBER OF MAJOR HUB AIRPORTS THAT WERE FORECASTING CPES IN THE 30 TO 40 DOLLAR RANGE AND O'HARE AIRPORT HAD A PROJECTION OF A $43 CPE
SO THE BENCHMARKS THAT WE'VE HISTORICALLY USED KEEP MOVING UP
SO I'LL JUST SAY THAT ULTIMATE CAPITAL CAPACITY IS NOT A PRECISE NUMBER BUT IT'S A VERY BIG NUMBER
ALSO IT DIRECTLY AFFECTS HOW COMPETITIVE IF YOU WILL SEATAC IS VERSUS OTHER AIRPORTS WITH THE ADDED CHARGES THAT ARE NECESSARY COVER THAT DEBT, BUT IT IS BASICALLY THE SKY'S THE LIMIT
IT SOUNDS LIKE AS FAR AS WHAT THE TRAFFIC WILL BEAR AND YOU HAVE THE SUPPORT OF THE AIRLINES TO INCREASE DEBT CARRYING CAPACITY THROUGH THE PASSENGER FEES AND VARIOUS OTHER SORT OF SOURCES
SO AND SO WE CURRENTLY ARE CARRYING APPROXIMATELY 3 BILLION IN DEBT, OR IS IT MORE THAN THAT? IT'S ABOUT 3 BILLION
OKAY
AND YOU SAID THAT BOND FINANCING WAS THE PRIMARY SOURCE, BUT IN FACT BOND FINANCING IS PAID FOR THROUGH THE PASSENGER FEE AND GATE AND ALL THE OTHER REVENUES, CORRECT? AND YES, YEAH
SO WHEN WE ISSUE BONDS THEIR REVENUE BONDS, AND WE REPAY THE DEBT SERVICE WITH ALL THE REVENUES WE GENERATE AT THE AIRPORT
MOST FROM THE NON-AERONAUTICAL SIDE, BUT CERTAINLY SOME OF THEM AROUND THE AERONAUTICAL SIDE TO ITS
YEAH
I WANT TO ASK YOU FOR IF FOR A BREAKOUT OF AERONAUTICAL SIDE VERSUS NON AERONAUTICAL IN TERMS OF CONTRIBUTION TO DEBT SERVICE
I'D LIKE TO UNDERSTAND THE RELATIONSHIP THERE
HOW MUCH OUR PARKING, OUR CONCESSIONS, ALL OTHER NON AERONAUTICAL SUPPORTING DEBT SERVICE
THE OTHER THING I WOULD BE INTERESTED IN IS ALSO SEEING THAT COMPARATIVE ANALYSIS OF OTHER HUB AIRPORTS THAT YOU USE AS SORT OF A GUIDE POST IN TERMS OF KEEPING US IN LINE BASICALLY WITH OTHER AIRPORTS IN THAT REGARD
AND I LASTLY I WANT TO ASK YOU IT WHEN THE AIRLINES DON'T AGREE WITH A ITEM IN THE BUDGET ITEM IN THE M III KNOW THERE'S A DELAY BUT WHAT HAPPENS DURING THAT DELAY IT HOW IS IT USUALLY RESOLVED? AND I'M GLAD TO HEAR WE HAVE A PARTICIPATORY APPROACH HERE THAT EXTENDS BEYOND WHAT WERE LEGALLY REQUIRED TO DO
SO THE WHOLE CONCEPT OF THE MII IS REALLY I'LL JUST SAY MORE CONTRACTUAL VERSION OF WHAT WERE REQUIRED TO DO ANYWAY, WHICH IS TO CONSULT
AND THE IDEA IS AND WE DO THIS ANYWAY, I MEAN, WE ALWAYS PRESENT TO THE AIRLINES OUR FUTURE CAPITAL PROJECTS WELL IN ADVANCE OF AN MII TO GIVE AN UNDERSTANDING OF WHAT'S COMING
WE SHOW THEM THE SAME DETAILED BUDGET PRESENTATIONS WE GIVE YOU WE GIVE TO THE AIRLINES
SO THEY'RE FAMILIAR WITH OUR CAPITAL PROGRAM AND THEN WE BRING FORWARD A PROJECT AND IT'S A PROJECT THAT MEETS THE CRITERIA AND THEY ACTUALLY GET TO VOTE THEN WE HAVE THAT VOTE
IN THE CASES WHERE THEY VOTE IT DOWN, IT GIVES BOTH PARTIES AN OPPORTUNITY TO GO BACK AND TAKE A GOOD HARD LOOK AT WHAT WE'RE DOING, WHY WERE DOING IT, AND IF THERE ARE ANY CHANGES THAT WE WOULD CONTEMPLATE AND THAT'S THE ESSENCE OF WHAT A CONSULTATION IS ALL ABOUT
AND SO, YOU KNOW, I'D SAY WITH EACH PROJECT IF WE WENT BACK AND LOOKED AT THOSE THAT HAVE BEEN VOTED DOWN I THINK WE'VE APPROACHED IT DIFFERENTLY, YOU KNOW WITH BAGGAGE OPTIMIZATION I KNOW ALASKA AIRLINES HAD SOME IDEAS ABOUT WHAT THEY THOUGHT TO SAVE SOME MONEY AND WE'VE LOOKED AT A NUMBER OF THINGS FELT IT WAS IMPORTANT TO MOVE AHEAD WITH IT
ABOUT HOW WE CAN SAVE MONEY BUT AT THE END OF THE DAY WE STILL AT THE END OF THE WAITING PERIOD WE DID PROCEED AND AWARD THE CONTRACT
OKAY
THANKS
I'LL TURN IT BACK TO MICHELLE
COMMISSIONER
STEINBRUECK, WE DO HAVE JEFFREY BROWN WOULD LIKE TO ADD SOME COMMENTS TO SOME OF THE QUESTIONS FROM COMMISSIONERS
YES
I JUST NEED TO HIGHLIGHT SOME CHALLENGES WE HAD USING CARES GRANT FOR CAPITAL PROJECTS AND THAT'S RESPONSE TO THE QUESTIONS FROM COMMISSIONERS CHO AND CALKINS
SO TYPICALLY WHEN YOU HAVE A FAA FUNDED PROJECT, YOU HAVE TO CONSIDER THE NEED FOR PROCESS FOR ADVANCED REVIEW
WE HAVE TO USE FAA'S SPECS ALSO TO USE A DBE PROGRAM INSTEAD OF A WINDOW
TYPICALLY TAKES ABOUT THREE YEARS ONCE A PROJECT IS CONSIDERED FAA FUNDED BEFORE YOU COULD HAVE DRAWN DOWN SO WITH THOSE CHALLENGES WE DIDN'T THINK IT WAS BEST INTEREST TO USE CARES GRANT FOR CAPITAL PROJECTS
AND IF A PROJECT HAS STARTED DESIGN AND CONSTRUCTION IS CERTAINLY CANNOT RETROACTIVE APPLY FAA FUNDING TO A PROJECT THAT WAS NOT FAA FUNDED BEFORE
ALL RIGHT
HOPEFULLY THAT PROVIDE SOME CLARIFICATION WHY WE DID NOT USE CARES GRANT FOR THE CAPITAL PROJECTS WE HAVE LISTED HERE
COMMISSIONER STEINBREUCK I HAVE NO OTHER QUESTIONS AT THIS TIME FROM MEMBERS IF WE WOULD LIKE TO CONTINUE
YES
LET'S CONTINUE WITH THE PRESENTATION
THANK YOU
OKAY, GOOD MORNING COMMISSIONERS
I'M KERI STEPHENS WITH AVIATION CAPITAL PROGRAMS I THINK WE'RE PROBABLY RUNNING A LITTLE BIT BEHIND SCHEDULE AND I'M WORRIED THAT BORGEN'S GOT STILL THE OPERATING BUDGET THAT HE HAS TO GO THROUGH
SO WE'LL TRY TO GO THROUGH THIS PRETTY FAST
WE TALKED ABOUT SOME OF THIS AT THE LAST STUDY SESSION
THESE RECENTLY PROPOSED PROJECTS ARE IMPORTANT AND THEY HAVE STRONG MOMENTUM AND OUR DIRECTORS FEEL THAT THEY NEED TO HAVE VISIBILITY IN THE CAPITAL PLAN AND BECAUSE THEY WILL BE PROGRESSING FORWARD, YOU KNOW, WE STILL HAVE QUITE A BIT OF WORK TO DO TO IRON OUT THE DETAILS
SO ZONE SIX AND SEVEN RENOVATION
THIS IS A PROJECT THAT WE'VE BEEN WORKING ON WITH ALASKA TO RENOVATE THE NORTH END OF THE TICKET LOBBY
THE CONCEPT FOCUSES ON A BETTER PASSENGER EXPERIENCE AND MORE MOBILE TICKETING PROCESS
THE SECURITY CHECKPOINT AT THE NORTH END IS ALSO RECONFIGURED FOR BETTER FLOW AND WE ARE CURRENTLY WORKING WITH THEM TO ENHANCE THEIR CONCEPT TO MAKE SURE THAT PROVIDES THE NEEDED EFFICIENCIES AND BENEFITS FOR THE TICKET LOBBY AS A WHOLE
NEXT SLIDE, PLEASE
THE AIRLINE REALIGNMENT SCENARIOS CAME TO A CONCLUSION LATE LAST YEAR AND WE ACTUALLY PLACED THIS PROGRAM INTO THE CAPITAL PLAN THIS YEAR, BUT WITH COVID AND THE SIGNIFICANT DECREASE IN INTERNATIONAL DEMAND, WE PUT THE PROGRAM ON HOLD
UNDERSTANDING OUR PROJECTIONS FOR GROWTH AND THE FACT THAT THIS WORK WILL TAKE UNTIL 2024 TO COMPLETE IT'S IMPORTANT THAT THIS PROJECT IS BACK IN THE CAPITAL PLAN
IT ALSO HAS A BENEFIT TO THE SOUTH SATELLITE RENOVATION PROJECT IN THAT PROVIDES ADDITIONAL GATE FLEXIBILITY
THIS PICTURE DISPLAYS A POTENTIAL FUTURE GATE ALLOCATION
I WOULDN'T PUT TOO MUCH THOUGHT INTO IT SINCE WE DON'T KNOW WHAT OUR FUTURE ALLOCATIONS REALLY LOOK LIKE
THE MAIN POINT IS TO MOVE UNITED, A DOMESTIC CARRIER HERE IN SEATTLE, OFF OF INTERNATIONAL CAPABLE GATES AND OVER TO THE B CONCOURSE
LOOKS LIKE I GOT A QUICK QUESTION
MAYBE
WE DO FROM WE DO
FROM COMMISSIONER BOWMAN
JUST A REALLY QUICK QUESTION
WHERE IN THE BUDGET IS THE LINE ITEM FOR THE AIRLINE REALIGNMENT? IT WOULD BE CALLED POST IAF AIRLINE REALIGNMENT
I SAW A POST
OKAY
THANK YOU
OKAY, NEXT SLIDE
THANKS
OKAY
SO LOUNGE WORK ENCOMPASSES A NEW STRUCTURE FOR LOUNGE SPACE ON A CONCOURSE AND LOUNGE RELOCATION AND ADR UPGRADE AT THE SOUTH SATELLITE
DELTA HAS DEVELOPED A DESIGN FOR THE STRUCTURE WHICH WOULD ALSO ALLOW THE PORT CLUB TO EXPAND
THE LOUNGE EXPANSION WAS IN GREAT DEMAND PRE- COVID
WE BELIEVE IT WILL BE IN DEMAND AGAIN IN THE FUTURE
GIVEN THE 2024 OPERATIONAL DATE WE ARE SHOWING A POSITIVE BUSINESS CASE FOR THIS
SO WITH THAT I'LL TAKE QUESTIONS
WE'LL TAKE ROLL CALL QUESTIONS
BEGINNING WITH COMMISSIONER BOWMAN
NO OTHER QUESTIONS, THANK YOU
THANK YOU
MOVING TO COMMISSIONER CALKINS
NONE FOR ME
THANK YOU
COMMISSIONER CHO
I'M GOOD AS WELL
THANK YOU
THANK YOU COMMISSIONER FELLEMAN
NOT FOR ME
THANK YOU
THANK YOU
COMMISSIONER STEINBREUCK, DID YOU HAVE ANY FURTHER QUESTIONS? I DO
REGARDING THE AIRLINE REALIGNMENT ITEM THAT YOU SAID HAS BEEN POSTPONED DUE TO A DOWNTURN IN TRAVEL AND COVID
WOULD IT NOT SEEM NOW WOULD BE THE TIME DURING THAT DOWNTURN TO PREPARE FOR THE OPENING OF IAF AND TO ALIGN THE REALIGNMENT WITH THAT OPENING
SO I HAVE A HARD TIME UNDERSTANDING WHY WE WOULD POSTPONE THAT PROJECT
I DON'T KNOW WHAT THE DOLLAR COST IS TO IT AGAINST OTHER PRIORITIES, BUT IT WOULD SEEM TO ME NOW IS THE ABSOLUTE BEST TIME TO MOVE FORWARD AND I'D LIKE A LITTLE BIT MORE EXPLANATION OF THAT AND WHERE WE SEE THAT AT THIS POINT
YEAH
SO I THINK WE'RE IN TOTAL AGREEMENT WITH YOU
I THINK YOU KNOW BACK IN APRIL AND MAY WAS WHERE WE HAD PUT IT INTO THE THE CAPITAL PLAN AND THEN IN APRIL AND MAY WE HAD ACTUALLY PUT IT ON HOLD BECAUSE OF THE YOU KNOW THE DOWNTURN AND WE DIDN'T ACTUALLY KNOW A LOT AT THAT POINT OF HOW DEMAND WOULD BE COMING BACK
SINCE WE'RE NOW SEEING OUR DEMAND MEETING OUR PROJECTIONS WE'VE BASICALLY COME TO THE UNDERSTANDING THAT WE NEED TO MOVE FORWARD ON THIS PROGRAM
SO WITHIN THE LAST MONTH, YOU KNOW, BASICALLY MONTH AND A HALF WE ACTUALLY PUT IT BACK IN AND ARE PROGRESSING FORWARD WITH IT
OKAY
I HADN'T HEARD OF THAT UPDATE, BUT I'M VERY PLEASED TO HEAR THAT
SO THE OTHER QUESTION I HAVE HAS TO DO WITH THE LOUNGES AND THE RELATIONSHIP TO OUR ADR TENANTS
WHEN WE ADD MORE LOUNGES IT SEEMS TO ME THAT WE ARE TAKING SOME OF THE MARKET AWAY FROM ADR RESTAURANTS AND CONCESSIONS
HOW WAS THAT RELATIONSHIP BALANCED IN AN EQUITABLE WAY? AND DOES IT NOT CHANGE THE DEMAND FOR THE OTHER SERVICES THAT ARE PROVIDED
I MAY HAVE A DIFFICULT TIME TRYING TO ANSWER THAT
MAYBE JEFFREY OR LANCE MIGHT BE ABLE TO? LET ME MAKE AN ATTEMPT AT IT
SO COMMISSIONER, IF YOU LOOK AT THE THE STUDY THAT WAS DONE BY THE AIRPORT DINING AND RETAIL GROUP IN TERMS OF HOW IN TERMS OF SQUARE FOOT PER PASSENGERS THAT WE HAVE
WE'RE WAY WAY WAY WAY BELOW WHAT WE NEED
AND ALSO TWO THINGS: THE TYPICAL TRAVELER THAT GOES TO A LOUNGE IS NOT THE TRAVELER THAT WILL MIND WAITING IN THE YOU KNOW IN THE WHOLE ROOM AREAS OR OVER IN THE IN THE FOOD COURT
THEY ARE TYPICALLY BUSINESS TRAVELERS AND LEISURE TRAVELERS
SORRY BUSINESS TRAVELERS AND YOU KNOW FIRST CLASS AND BUSINESS TRAVELERS
THAT GOES TO THE LOAN THEY WE ARE WOEFULLY UNDER SQUARE FOOTAGE IN BOTH THE LOUNGES AND IN OUR AIRPORT DINING AND RETAIL
SO EVEN WHEN WE BUILD THESE FACILITIES HERE AND WE EXPAND THE AIRPORT DINING AND RETAIL PROGRAM, WE STILL REALLY WANT HAVE ENOUGH SQUARE FOOT
IF WE EVER GET BACK TO 2019 NUMBERS AND ENPLANEMENTS AND CONTINUE TO GROW THEREAFTER
SO WE HAVE MORE THAN ENOUGH IN TERMS OF LOUNGES AND AIRPORT AND DINING RETAIL TO MEET THE NEEDS OR THE DEMANDS THAT WE ARE SEEING WITH THE NUMBER OF ENPLANEMENTS COMING TO THE AIRPORT OR WE ANTICIPATE THAT WILL COME BACK THROUGH THE AIRPORT
SO JUST FOLLOW UP THERE QUICKLY AND WE CAN MOVE ON BUT THE ADR TENANTS DON'T SEEM TO AGREE WITH YOU ON THAT
THEY HAVE WRITTEN US A LETTER QUESTIONING THE MARKETING STUDY AND THE FACT THAT THE STREET PRICING IS NOT TOO DIFFERENT RIGHT NOW FROM WHAT THEY'RE ALLOWED TO CHARGE AND THAT THEY FEEL THAT BECAUSE OF THE DOWNTURN AND THE LONG TERM THAT THEY ARE INCREASINGLY STRUGGLING WITH LESS MARKET SHARE I GUESS OR LOWER MARKET DEMAND
SO WHEN WAS THAT STUDY DONE? AND IS IT TIMELY TO DO AN UPDATE? THAT SAID IT WAS DONE EVEN BEFORE I GOT HERE
THIS MASTER PLAN HAS BEEN IMPLEMENTED, I UNDERSTAND, BASICALLY ALL THE OTHER UNITS THE FINAL PHASE OF THAT MASTER PLAN WAS WITH THE LAST AIRPORT GROUP
AND THERE IS SOME CONCERN THAT I AGREE WITH
IN TERMS OF THE DEMAND RIGHT NOW, YES, I WOULD AGREE
IF WE WERE TO START OPENING UP BRAND-NEW LOUNGES NOW, BRAND NEW AIRPORT DINING AND RETAIL PROGRAM RIGHT NOW, YES, I WOULD AGREE
BUT IF YOU LOOK AT THESE PROJECTS COMMISSIONERS, THESE PROJECTS ARE YEARS DOWN THE ROAD, RIGHT? THESE LAUNCHES THAT YOU'RE LOOKING AT ARE GOING TO BE YEARS DOWN THE ROAD
THE C1 BUILDING IS GOING TO BE 2027
SO NONE OF THESE FACILITIES ARE FACILITIES THAT WE'RE OPENING RIGHT NOW
WE'RE NOT OPENING ANY NEW FACILITY
EVEN THE INTRODUCTORY KIOSKS THAT WE DISCUSSED THAT'S GOING TO BE SEVERAL MAYBE THREE FOUR YEARS DOWN THE ROAD BEFORE WE EVEN HAVE THOSE OPEN
ALL RIGHT
OKAY, THANK COMMISSIONER, WE'RE AWARE OF THOSE CONCERNS THAT YOU RAISED AND I WISH DON HUNTER WAS ON THE CALL SO HE COULD RESPOND TO IT
BUT SOME OF THOSE CONCERNS RAISED BY THE CONCESSIONAIRES ARE VALID AND DON IS WORKING ON A PLAN TO DO RESPOND TO ADDRESS THOSE CONCERNS
IN FACT, WE MADE A PRESENTATION TO COMMISSIONERS SAM CHO AND CALKINS AT LAST IN AVIATION COMMITTEE MEETING
OKAY
ALL RIGHT
THANKS VERY MUCH
WE HAVE MEETINGS SCHEDULED WITH EACH OF THE OTHER COMMISSIONERS TO BRIEF YOU ON THE, IF IT'S NOT DONE YET, THE ADR MASTER PLAN OR THE END OF THE MASTER PLAN, RIGHT? OKAY, GOOD
THANKS
COMMISSIONER STEINBRUECK
CAN I HAVE A QUICK QUESTION? OH, YEAH
SURE
I DIDN'T SEE YOUR HAND UP
THANKS FRED
I'M SORRY
JUST IN LIGHT OF THE THE MOVABLE CHAIRS WITH UNITED AND ALL, IS IT FUNDAMENTAL TO PART TO THAT A LOUNGE ISSUE AND THEN SPEAKING TO THE POINT THAT YOU RAISED? IN ORDER TO MOVE UNITED WE NEED TO HAVE A LOUNGE FOR THEM TO HAVE SO THAT CONTINUES THE MOVE AROUND THE AIRPORT
BUT REGARDING, YOU KNOW, LOUNGE AVAILABILITY
THE SEQUENCE OF EVENTS IS SOMETHING THAT I WAS JUST WONDERING
WHAT REALLY GOES FIRST FOR THE ALIGNMENT? YOU'RE RIGHT COMMISSIONER
IN ORDER TO MOVE UNITED THERE'S SOME WORK WE HAVE TO DO
NOT ONLY A CLUB FOR UNITED BUT ALSO WRAP OFFICE SPACE FOR THEM
SO THERE IS A SERIES OF CHAIRS AS YOU SAY OR DOMINO'S HAS TO FALL BEFORE WE COULD MOVE THE CARRIER TO CONCOURSE A
TO CONCOURSE B
YEAH
YEAH
SORRY TO MOVE UNITED CONCOURSE B HERE
YES
SO I'M JUST WONDERING WHAT IS THE FIRST DOMINO THAT HAS TO FALL? FOR THE AIRLINE REALIGNMENT PIECE? YES
SO BASICALLY, YOU KNOW, FIRST OF ALL WE HAVE TO START BUILDING OUT SPACE AND YOU KNOW SORT OF WE HAVE EXCESS SPACE AVAILABLE UNDERNEATH THE B CONCOURSE
WE HAVE TO START BUILDING OUT SPACE IN THE B CONCOURSE SO THAT WE CAN START MOVING SOME OF UNITED SUPPORT SERVICES OVER THERE
THANK YOU
COMMISSIONER STEINBREUCK, TIME CHECK
IT'S 10:03 CURRENTLY FOR THE PURPOSES OF YOUR AGENDA
THANK YOU
WE NEED TO KEEP MOVING
ALL RIGHT, SO OKAY
SO I MAKE THIS VERY QUICK
KNOW THAT YOU HAVE SEEN THE VISION FROM LANCE LAST OF THE SESSION
YOU HAVE SEEN THE FUNDING PLAN FROM OUR BORGEN AND KERI'S PRESENTED THE CAPITAL IMPROVEMENT PROJECTS AND NOW IT'S TIME TO TALK ABOUT HOW WE DELIVER THIS PROJECT
SO BACK IN 2019 WE REALIZED THAT WE'RE GOING TO GO THROUGH A PERIOD OF SUSTAINED CAPITAL IMPROVEMENTS
MAY BE UP TO 10 YEARS OR MORE
SO WHAT WE WANTED TO DO IS LEARN FROM OTHER PEER AIRPORTS HOW THEY WERE STRUCTURED TO DELIVER THEIR CIP
SO WE BASICALLY WANT TO UNDERSTAND FROM PEER AIRPORTS
THE FOLLOWING SLIDE GIVE YOU THE LIST OF THE AIRPORTS, BUT THE SCALE AND MAGNITUDE OF THEIR PAST CURRENT AND FUTURE
CIP, HOW THEY WERE STRUCTURED AND DELIVERED THEIR CIP, AND DELIVERY METHODS THAT THEY USE TO DELIVER THOSE TYPE OF PROJECTS
ALSO WHAT LESSONS THEY LEARN FROM THEIR CIP EXPERIENCE AND FINALLY WHAT RECOMMENDATIONS WILL MAKE TO SEATAC FOR DELIVERY OF THEIR CIP
SO NEXT SLIDE, PLEASE
SO BACK IN NOVEMBER 10TH, NOVEMBER 2019
WE GATHER TO SEE EXECUTIVES FROM THESE AIRPORTS IN THIS CITY OR SOME INTERNATIONAL AIRPORT FROM JAMAICA AND A NUMBER OF LARGE AIRPORTS IN THE UNITED STATES
SAN DIEGO DID NOT COME ATTEND A PEER REVIEW HOWEVER, WE HAD A CONFERENCE CALL WITH THEM
ALSO PARTICIPATING IN THE PEER REVIEW WAS THE ERP THE COMMISSION'S EXECUTIVE REVIEW PANEL, ALL FINANCIAL CONSULTANTS AND A LOT OF PORTS STAFF FROM AIRPORT AND FROM THE FROM THE CORPORATE SIDE AS WELL
SO WE IT WAS CONDUCTED OVER THREE DAYS AT THE CITY OF SEATAC AND THEN GO TO NEXT SLIDE, PLEASE
NEXT
THANK YOU AND THEN BASED ON HEARING FROM THE AIRPORTS AND WE PRESENTED OUR CIP TO THE AIRPORT
THEY MADE SOME RECOMMENDATIONS ALONG THESE LINES LISTED ON THIS SLIDE
FIRST RECOMMENDATION WAS TO PRESENT THIS VISION IS LANCE DID
SO THE INTENT WAS TO PRESENT TO THE COMMISSIONERS WHERE WE WANT TO BE IN THE NEXT 10 OR 20 YEARS AND HOW THE PROJECTS ARE CONNECTED TOGETHER IN ORDER TO DELIVER TO MEET THAT VISION
THEY ALSO MADE RECOMMENDATIONS ON THE ORGANIZATIONAL STRUCTURE
I THINK IMPORTANTLY THEY REALIZED THAT THE RESPONSIBILITY FOR DELIVERING CIP FOR THE AIRPORT WAS DISTRIBUTED AMONGST DIFFERENT DEPARTMENTS
AND FOR THOSE AIRPORTS THAT WAS, THEIR, MOST OF THOSE AIRPORTS HAVE ONE PERSON THAT WAS RESPONSIBLE FOR THE CAPITAL DEVELOPMENT
SOME PEOPLE HELPED THEM ACHIEVE THEM AND OFFICER OF THE CHIEF EXECUTIVE [INAUDIBLE] THERE WAS TO STREAMLINE AND CENTRALIZE THE RESPONSIBILITY FOR THE DELIVERY OF THEIR CIP
AND IN TERMS OF CIP DELIVERY METHODS
THE RECOMMENDATION WAS THAT WE SHOULD NOT DISCOUNT ON ANY SPECIFIC OR PARTICULAR DELIVERY METHOD BUT DELIVERY METHOD CHOSEN SHOULD BE ONE THAT'S BEST SUITED FOR THE PROJECT, WHAT IT'S DESIGNED, THEIR [INAUDIBLE] IN WASHINGTON OR PROGRESSIVE DESIGN BUILD OR A P3 WATER PER DELIVERY METHOD
YOU SHOULD LOOK AT IT AND SEE WHAT THE PERMIT IS BEST SUITED FOR DELIVERING THAT PRODUCT
THEN ABOUT PROCESS IMPROVEMENTS AND THIS IS PART WHERE, THE PROCESS WE USE HERE FOR THE IPOS
THEY WERE CUMBERSOME AND THEY THINK THAT THE PROCESS USES FOR COMMISSION APPROVAL FOR EXAMPLE WAS INEFFICIENT AND TIME-CONSUMING AND WE SHOULD DO SOME DEEPER DIG INTO THOSE PROCESSES AND SO WHERE IMPROVEMENTS WE COULD DO
ANOTHER RECOMMENDATION WAS THEY MADE WAS TO INCREASE THE AMOUNT DELEGATION OF AUTHORITY FROM FROM 300,000 FOR EXAMPLE UP TO A MILLION DOLLARS
I THINK YOU HAVE HEARD THAT ONE FROM STEVE IN THE PAST
THE 300,000 LIMIT IS REALLY SMALL COMPARED TO SIZE OF CIP AND THE AMOUNT OF WORK YOU PUT IN TO GET INTO THAT APPROVAL OF THE SOMETIME IN THIS IN EXCESS OF THAT APPROVAL LEVEL
SO I THINK WE SHOULD REVISIT THAT DELEGATION OF AUTHORITY AMOUNT
AND THEN NOT SURPRISED IS THE PROGRAM CONTROLS
SO PROGRAM CONTROL INVOLVES COST ESTIMATING, SCHEDULING, REPORTING AND INFORMATION FLOW
RECOMMENDATION THAT WE SHOULD PROBABLY LOOK AT THE DASHBOARD USE FOR EXAMPLE TO COMMUNICATE THE INFORMATION OR PROJECTS UPWARDS AND ORGANIZATION HOW THE REPORTING IS DONE AND WHEN IT'S DONE
IN TERMS OF COST ESTIMATING THEY RECOMMEND THAT WE USE A MORE RECENT BASE COST ESTIMATING
THAT'S REFLECTIVE OF THE RISK THAT THE PROJECT WILL TAKE AND YOU KNOW, I JUST COULD SEE FROM FROM SOME PROJECTS WHERE OUR COST ESTIMATES SOMETIME
YOU KNOW, IT'S NOT IN LINE WITH THE SCOPE OF WORK A LOT OF EFFORT IN TO DELIVER THE PROJECT
SO I THINK THAT WE SHOULD IMPROVE OUR COST ESTIMATING AS WELL AS SCHEDULING
SCHEDULING PERFORMANCE NEEDS TO BE IMPROVED
SO THOSE CAN HIGHLIGHT NOTES ON THE MAIN RECOMMENDATIONS OF THE FROM PEER REVIEW AND IF YOU GO TO THE NEXT SLIDE FOR NEXT STEPS
SO THE NEXT STEP IS WE WANT TO ENGAGE OUR OWN HUMAN RESOURCES DEPARTMENT AND ALSO A MEMBER OF THE EXECUTIVE GROUP PANEL TO LOOK AT THE RECOMMENDATIONS MADE BY THE PEER REVIEW AND DEVELOP AN IMPLEMENTATION PLAN OF WHICH OF THOSE RECOMMENDATIONS WE'LL INSTITUTE AND THAT WORK TO BE DONE
UNFORTUNATELY BECAUSE OF COVID-19 WE HAD TO SUSPENDED WORK ON PEER RECOMMENDATIONS BUT WE INTEND TO TAKE THAT UP VERY SOON AND CONTINUE TO WORK ON THE RECOMMENDATIONS
AND WITH THAT I TURN IT OVER FOR QUESTIONS
OKAY
WE'LL START WITH COMMISSIONER BOWMAN FOR QUESTIONS ON THIS SEGMENT
NO QUESTIONS
THANK YOU
THANK YOU COMMISSIONER CALKINS
NONE FOR ME EITHER
THANKS
THANK YOU
COMMISSIONER CHO
I'M GOOD
THANK YOU
THANK YOU
COMMISSIONER FELLEMAN
NO FOR ME, THANK YOU
COMMISSIONER STEINBRUECK
I HAVE TWO QUESTIONS: ONE
I'M CURIOUS WHY SALT LAKE CITY WAS NOT ON THE LIST OF PEER HUB AIRPORTS
SECOND QUESTION HAS TO DO WITH THE PROJECT DELIVERY
I MUST HAVE MISSED THE RECOMMENDATIONS ON PROJECT DELIVERY METHODS FROM THE PEER GROUP
ALL RIGHT
SO YOUR FIRST QUESTION WE'RE GOING TO SALT LAKE CITY
WE DID REACH OUT TO A NUMBER OF DIFFERENT AIRPORTS
I THINK WE REACH OUT TO MAYBE ABOUT 30 AIRPORTS AND JUST BASED ON WHO RESPONDED
SO SALT LAKE DIDN'T, AND WE TRY TO REACH OUT TO CHICAGO AND SAN DIEGO
SAN DIEGO, THEY COULD NOT MAKE IT BUT THEY OFFERED A CONFERENCE CALL
SO THAT'S THE REASON WHY SOME AIRPORTS
ALRIGHT
OKAY
AND YOUR SECOND QUESTION? A PROJECT DELIVERY METHOD RECOMMENDATIONS FROM THE PEER GROUP
SO THE RECOMMENDATION WAS SPECIFIC THAT WE SHOULD NOT DISCOUNT, DESPITE OUR BAD EXPERIENCE WITH PROGRESSIVE DESIGN PILLAR FOR EXAMPLE, WE SHOULD NOT DISCOUNT JUST COSTS OVER EXPERIENCE
WE SHOULD GO BACK AND LOOK AT THE PROJECTS AND SEE IS IT THE BEST FIT FOR THE PROJECT
IT MAY NOT BE
BECAUSE WE NEED TO LOOK AT THE OF CULTURE FOR EXAMPLE, BUT WE SHOULD NOT DO A WHOLESALE DISARM DISCOUNTED ANY DELIVERY WITH-- YEAH, I UNDERSTAND
THERE'S NO ONE METHOD THAT IS FOR EVERY PROJECT AND APPROACH
I WOULD GUESS THAT THIS PEER GROUP HAD LITTLE IF NO EXPERIENCE WITH THE PROGRESSIVE DESIGN-BUILD DELIVERY METHOD SINCE IT'S RELATIVELY NEW AND WOULD NOT REALLY HAVE PERHAPS AN INFORMED POSITION ON THAT APPROACH THAT WE EXPERIENCED WITH IAF
BUT I WOULD SAY EVERY PROJECT IS DIFFERENT SO
YEAH, I WOULD NOT SAY THAT BECAUSE SAN DIEGO HAD SOME GOOD SUCCESS WITH PROGRESSIVE THIS TIME
SOME OF THE AIRPORTS WERE DIFFERENT
SOMETHING SIMILAR I THINK WAS DFW
I THINK ONE OF THE ONE OF THE FLORIDA AIRPORTS AS WELL JEFFREY, WAS IT ORLANDO? THE FORT LAUDERDALE
FORT LAUDERDALE? YES, ALL RIGHT
THANK YOU
COMMISSIONER FELLEMAN? I SEEM TO RECALL THE EXPERT PANEL'S PRIMARY RECOMMENDATION HAD TO DO WITH DEALING WITH THIS NEW APPROACH THAT THERE HAD TO BE A GREATER LEVEL OF TRUST TO DEFER TO THE THE BUILDER AND THAT THERE WAS SORT OF A DYNAMIC THAT YOU KNOW I THINK I THINK PORT STAFF ARE MORE INCLINED TO YOU KNOW VERIFY EVERYTHING THEIR DUE DILIGENCE BUT FOR THAT APPROACH TO WORK I THINK THAT WAS ONE OF THE BIGGER RECOMMENDATIONS
WAS THERE, AM I RECALLING THAT CORRECTLY AND IF THERE'S ANY FURTHER LESSONS LEARNED BEYOND THAT? YES YES YOU'RE RIGHT MR FELLEMAN
IF YOU GO DEEP INTO THE DETAILS OF THE PEER REVIEW ONE OF THE ASSESSMENT MADE OF THE PORT OF SEATTLE IS THAT WE ARE RISK ADVERSE
IN A WAY YOU KNOW WE TEND TO PROCEEDING CAUTIOUSLY YOU KNOW MAYBE IT'S A FROM THE AUDIT OF MANY YEARS AGO BUT THE PORT OF SEATTLE GENERALLY IS VERY RISK AVERSE AND IT IS DISPLAYED IN THE CULTURE WE HAVE HERE AT PORT
AS OPPOSED TO FORT LAUDERDALE, WHICH TAKES ALL SORTS OF RISK
FORT LAUDERDALE IS PROBABLY EXTREME [LAUGHS] BUT THE POINT IS IF WE EMBRACE THIS APPROACH WE HAVE TO APPROACH IT WITH SOME SOMETHING IN BETWEEN THESE TWO
YES
I THINK THE RECOMMENDATION COMMISSIONER FELLEMAN WAS WE NEED TO LOOK AT EACH INDIVIDUAL PROJECT AND THEN DETERMINE WHAT THE DELIVERY METHOD IS FOR EACH OF THOSE PROJECTS VERSUS JUST SAY, YOU KNOW, ALL OUR PROJECTS ARE GOING TO BE DESIGNED BASED OR DESIGNED WITH A LARGE ECCM
THEY'RE SAYING JUST LOOK AT EACH PROJECT AND THEY HAVE SOME CRITERIA IN THE DOCUMENTATION THAT SAYS IF THE PROJECT MEETS THESE CRITERIA THEN THIS IS THE THE PROJECT DELIVERY METHOD THAT PROBABLY BEST FIT.BUT THEN YOU HAVE TO TAKE A WHOLE BUNCH OF THINGS INTO CONSIDERATION FOR EACH OTHER PROJECTS AS WELL
ALL RIGHT
SO IF YOU'RE GOING TO DO PROGRESSIVE VALUE OF DESIGN-BUILD YOU HAVE TO BE ABLE TO LET GO A LITTLE BIT
SO IT MAY BE APPROPRIATE FOR SOME PROJECTS OVER THE OTHER BUT TO IMPLEMENT IT SUCCESSFULLY THAT'S WHAT'S IMPORTANT TO HAVE THE LESSON LEARNED I THINK
YEAH, COMMISSIONER
STEINBRUECK
I DON'T HAVE ANY FURTHER QUESTIONS QUEUED UP RIGHT NOW FROM COMMISSIONERS IF WE'D LIKE TO PROCEED
IT'S NOW 10:15
YEAH, HOW MUCH TIME REMAINING HERE FOR UNTIL 11:00
ARE WE GOING TO 11? WE ARE SCHEDULED THROUGH 11
I THINK I'D HAVE TO LOOK
BELIEVE WE'RE TRYING TO GET YOU OUT AS SOON AS POSSIBLE BECAUSE YOU HAVE A NEXT MEETING COMING
YEAH, WE HAVE AN EXECUTIVE SESSION WITH SEVERAL ITEMS OKAY
THANKS WE'LL KEEP GOING THEN
CAN YOU HEAR ME? RIGHT? YES, WE CAN GO AHEAD
MICHAEL
THANK YOU
YES, GOOD MORNING COMMISSIONERS
I'M MICHAEL DROLLINGER WITH THE BUSINESS INTELLIGENCE DEPARTMENT AND I APPRECIATE THE OPPORTUNITY TO BRIEF YOU ON THE DEVELOPMENT OF ACTIVITIES SCENARIOS FOR FINANCIAL AND BUSINESS PLANNING
IN THE NEXT 6 MINUTES OR SO
I'LL WALK YOU THROUGH THE SCENARIO DEVELOPMENT PROCESS AS WELL AS A QUICK LOOK AT THE LATEST FORECAST UPDATE
SO THIS IS A FAMILIAR TERRITORY TO ME AS I'VE BEEN INVOLVED IN THE DEVELOPMENT OF SHORT AND LONG TERM AVIATION PROJECTIONS AND FORECASTS AT SEA FOR ABOUT THE LAST 15 YEARS
I'LL FIRST COVER THE FORECASTING PROCESS PRE AND POST COVID AS THEY ARE DISTINCTLY DIFFERENT
SO PRE COVID TRADITIONAL AVIATION DEMAND FORECASTS USE ECONOMIC METRIC MODELS THAT UTILIZE EXPLANATORY VARIABLES INCLUDING MAYBE MACRO ECONOMIC AND DEMOGRAPHIC FACTORS
AND DEMAND FORECAST TYPICALLY LOOK OUT 10 TO 20 YEARS
NOW THE POST COVID ACTIVITY SCENARIOS THAT ARE THE TOPIC OF TODAY'S BRIEFING ARE NOT MEANT TO BE FORECASTS OF WHAT IS MOST LIKELY TO HAPPEN
INSTEAD THEY ARE MEANT TO BE INDICATIVE OF POSSIBLE PATHS OR OUTCOMES OUT OF MANY
SO I STARTED THE ACTIVITY SCENARIO WORK BACK IN MARCH AND HAVE BEEN UPDATING AND REFINING THE ANALYSIS MONTHLY SINCE THEN AND WILL CONTINUE WITH THAT CADENCE FOR THE FORESEEABLE FUTURE
NEXT SLIDE PLEASE
SO THIS SLIDE SUMMARIZES KIND OF THE COMPONENTS OF THE ACTIVITY SCENARIO DEVELOPMENT
SO THE FIRST COLUMN ARE REALLY INPUTS AND DATA AND THE PUBLISHED ADVANCED AIRLINE FLIGHT SCHEDULE IS REALLY THE FOUNDATION OF THE ANALYSIS
IT'S ONLY CURRENT AT THIS POINT ABOUT MAYBE 30 TO 45 DAYS OUT
SO I ALSO USE A BROAD SET OF DATA FROM REALLY WIDE VARIETY OF SOURCES THAT I UPDATE CONTINUOUSLY LEVERAGING A LARGE NETWORK OF INDUSTRY CONNECTIONS AND AVIATION AND THE LOCAL BUSINESS COMMUNITY THAT VARIOUS COLLEAGUES AT THE PORT HAVE
SO THIS IS NOT THE WORK OF ONE BUT THE WORK OF MANY ALWAYS SEEKING OUT RELEVANT INSIGHTS TO FINE-TUNE THE SHORT AND MID-RANGE RECOVERY OUTLOOK
THE NEXT COLUMN HAS SOME OF THE ASSUMPTIONS THAT ARE PLUGGED INTO THE ACTIVITIES SCENARIOS
SOME THAT YOU MIGHT EXPECT LIKE PASSENGER LOAD FACTOR AND AVERAGE AIRCRAFT SEAT SIZE AND TIME TO RETURN TO PRE- COVID LEVELS
SO AND THEN FINALLY THE ACTIVITY SCENARIOS COLUMN
I'M ONLY SPEAKING TO THE BASELINE TODAY, BUT KNOW THAT THERE ARE A RANGE OF OUTCOMES ON EITHER SIDE A HIGH AND A LOW AND BECAUSE OF THE GREAT LEVEL OF UNCERTAINTY IN THE CURRENT ENVIRONMENT THOSE RANGES CAN BE PRETTY BIG
SO THIS EFFORT IS REALLY A MIX OF QUANTITATIVE ANALYSIS WITH MUCH MANUAL ADJUSTMENT BASED ON NON-QUANTIFIABLE TRENDS AND OF COURSE PROFESSIONAL JUDGMENT
MY APPROACH TO THESE EFFORTS HAS ALWAYS BEEN QUITE CONSERVATIVE
I DON'T OFTEN GET ACCUSED OF BEING TOO OPTIMISTIC
THE BASELINE SCENARIO FOR 2020 AND 2021 USED IN BUDGET DEVELOPMENT WAS INITIALLY PREPARED BACK IN MAY AND REGULARLY UPDATED SINCE TO REFLECT EVOLVING TRENDS
SO WE'RE GOING TO MAYBE SKIP THE NEXT SLIDE IN THE INTEREST OF TIME
NEXT SLIDE, PLEASE
THANK YOU
THE NEXT COUPLE OF SLIDES CAPTURE AIRLINE CAPACITY AND TSA CHECKPOINT ACTIVITIES SINCE MARCH AND REALLY THE KEY TAKEAWAY IS THAT AFTER AN INITIAL BUMP IN THE SPRING AND EARLY SUMMER THE RECOVERY AS LARGELY STALLED
SO, HOW'S THIS RESHAPE THE BASELINE SCENARIO? NEXT SLIDE PLEASE
AGAIN, YOU CAN SEE IN THE DAILY SCREENING VOLUMES, THEY'VE BEEN LARGELY FLAT SINCE JULY
SLIDE
AND THE AIRLINE LOAD FACTORS OR PERCENT OF SEATS FILLED HAS BEEN PRETTY FLAT EVEN SLIGHTLY DECLINING IN AUGUST AS WHEN FLIGHTS WERE ADDED
NEXT SLIDE
OKAY, THIS SLIDE SHOWS THE MAY BASELINE SCENARIO
IT'S REALLY THE FOUNDATION FOR THE FOR THE BUDGET AS WELL AS BELOW IT YOU'LL SEE THE LATEST UPDATE PREPARED IN SEPTEMBER
IF YOU LOOK AT THE GRAPHS THE DISTINCTIONS LOOK PRETTY SUBTLE IN THOSE LINE GRAPHS, BUT THERE ARE TWO MAJOR DIFFERENCES BETWEEN THE SCENARIOS DEVELOPED IN MAY AND THE SEPTEMBER UPDATE
BUT IF YOU LOOK AT THE YEAR-END TRAFFIC DECLINE IN BOTH SCENARIOS, THEY'VE ACTUALLY STAYED WITHIN A VERY SMALL RANGE
THE ONE FOR THE BUDGET ASSUMES THAT 61% [INAUDIBLE] SEPTEMBER OF 89 PERCENT DECLINE IN 2020, BUT I'D LIKE YOU TO FOCUS YOUR ATTENTION ON THE BOTTOM GRAPH
SO THE SEPTEMBER UPDATE REALLY REFLECTS THE QUICKER ACTIVITY RECOVERY THAT WE SAW IN THE FIRST MONTHS AFTER FINDING A MAP BOTTOMING OUT IN APRIL AND THEN BUT THEN ALSO A FLATTENING RECOVERY THAT'S OCCURRED LATE IN THE THIRD QUARTER AND FOURTH QUARTER OF 2020
AND MOVING A LITTLE TO THE TO THE RIGHT IN THAT GRAPH ALSO IN THE SEPTEMBER UPDATE THE 2021 RECOVERY IS NOW FOCUSED ON THE THIRD AND FOURTH QUARTER OF 21 RATHER THAN THE FIRST AND SECOND QUARTER OF 2021 REFLECTING THE ANTICIPATED COURSE OF THE PANDEMIC AS WE KNOW IT NOW
NEXT SLIDE
HERE'S WHAT THE REMAINDER OF 2020 LOOKS LIKE BASED ON THE LATEST SEPTEMBER BASELINE SCENARIO UPDATE
TWO QUICK POINTS HERE
SEPTEMBER ACTUALS, WHICH ARE NOT REFLECTED ON THIS SLIDE ACTUALLY JUST CAME IN AND A LITTLE WEAKER THAN ANTICIPATED
BUT AS SEEN ON THE CHART, YOU KNOW, I DO STILL EXPECT A BUMP IN NOVEMBER AND DECEMBER TRAFFIC BECAUSE OF THE HOLIDAY TRAVEL
AND THE SECOND POINT IS LIKELY NOT SURPRISING TO YOU AND THAT IS THAT INTERNATIONAL
RECOVERING MUCH MORE SLOWLY
I WOULD EXPECT THE YEAR-END INTERNATIONAL PASSENGERS ARE FORECAST TO BE DOWN SEVENTY-SEVEN PERCENT VERSUS 2019
NEXT SLIDE
SO MY FINAL POINTS, I WON'T SPEND MUCH TIME ON RISKS TO THIS FORECAST SINCE I COULD HAVE FILLED SEVERAL SLIDES WITH THE FACTORS INFLUENCING THE OUTCOMES
I WANT TO EMPHASIZE THAT WHILE THERE MAY BE A TENDENCY TO WANT TO FOCUS ON SHORT-TERM TRAFFIC TRENDS ONLY I'M ALSO LOOKING AT THE LONGER VIEW THAT IS 2021 TO 2025 AND ASSESSING THE STRUCTURAL CHANGES IN TRAVEL DEMAND THAT THIS PANDEMIC MAY BE CAUSING AND AS THOSE BECOME CLEARER, WEAVE THEM INTO THE YOU OF POTENTIAL OUTCOMES
AGAIN THANKS FOR THE OPPORTUNITY TO SHARE TODAY, AND I'D BE HAPPY TO TAKE ANY QUESTIONS
COMMISSIONER STEINBRUCK, WOULD YOU LIKE TO TAKE QUESTIONS AT THIS TIME OR MOVE TO? LET'S SEE IF THERE ARE ANY QUESTIONS AND THEN WE'LL MOVE FORWARD
THIS IS ALWAYS AN IMPORTANT OPPORTUNITY HERE FOR COMMISSIONERS
CERTAINLY
BEGINNING WITH COMMISSIONER BOWMAN
GREAT
THANK YOU
UM, NOT REALLY ANY QUESTIONS
FIRST OF ALL MICHAEL I WANT TO THANK YOU AND COMPLIMENT YOU FOR GIVING ME ADDITIONAL INFORMATION ON FRIDAY ABOUT THESE ASSUMPTIONS
I'VE BEEN ASKING
IT'S VERY VERY HELPFUL TO UNDERSTAND THE INPUTS AS OPPOSED TO JUST SORT OF HAVING ROLE UP, WHICH IS WHAT WE'VE HAD SOME TIMES IN THE PAST
SO IT GIVES ME A LOT MORE CONFIDENCE
AND AS I SAID ON FRIDAY REALLY APPRECIATE YOUR MORE CONSERVATIVE APPROACH, I GUESS I AM CONCERNED HOWEVER THAT WE NEED TO KEEP A CLOSE WATCH ON OUR LOCAL ECONOMY
PRIOR TO YOUR MOST RECENT ASSUMPTION WAS, OR AFTER YOUR MOST RECENT ASSUMPTION WAS THE BOEING ANNOUNCEMENT OF MOVING TO SOUTH CAROLINA, AND I'VE JUST CONTINUED TO URGE OUR CEO TO REACH OUT TO OUR MAJOR EMPLOYERS IN THE REGION TO GET A BETTER SENSE FROM THEM ABOUT THEIR BUSINESS TRAVEL PLANS IN ADDITION TO MICHAEL THE GOOD WORK THAT YOU DO REACHING OUT TO THE PUGET SOUND TRAVEL ASSOCIATION
BUT I THINK SHORT ANSWER IS OR SHORT VERSION IS THAT I THINK ARE OUR ECONOMY IS TAKING A TURN FOR THE WORSE AND I'M ASSUMING THAT YOU'RE TAKING THAT INTO CONSIDERATION
CORRECT, THANK YOU
THANK YOU MOVING TO COMMISSIONER CALKINS
I WANT TO SAY HOW REASSURED I FEEL KNOWING WE HAVE MICHAEL ON STAFF DOING THIS WORK BECAUSE THIS IS EXACTLY THE KIND OF ANALYSIS WE NEED TO TRY TO GET A FORECAST THAT HELPS US MAKE THE DECISIONS THAT WE NEED TO MAKE FOR 2021 AND BEYOND
MY QUESTION I THINK YOU ANSWERED WITH THE FINAL SLIDE, WHICH IS WHAT ARE WE WATCHING OVER THE NEXT FEW MONTHS TO SEE WHEN CAPACITY WILL INCREASE? I THINK WE'VE GOT A LITTLE BIT OF A CHICKEN OR EGG PROBLEM IN AVIATION WHERE YOU KNOW AIRLINES DON'T WANT TO BRING ON ADDITIONAL CAPACITY UNTIL THEY SEE PASSENGERS RETURN
PASSENGERS ARE OFTEN SORT OF GOADED BACK BECAUSE CAPACITY INCREASES AND TICKET PRICES GET A LITTLE BIT MORE AFFORDABLE
SO WHAT OTHER THINGS SHOULD WE WATCH FOR TO SEE WHEN AIRLINES MIGHT BRING MORE OF THEIR FLEETS BACK ONLINE? THAT'S A GREAT QUESTION
SO THERE'S A NUMBER OF THINGS THAT WE OF COURSE WATCH
THE ADVANCED SCHEDULES, WE ALSO CERTAINLY CONSULT WITH THE CARRIERS
THERE A NUMBER OF INDIVIDUALS AT THE PORT THAT HAVE CLOSE CONTACTS WITH THE MAJOR CARRIERS AND WE LEVERAGE THOSE VERY ACTIVELY
EVEN LISTENING TO AIRLINES FINANCIAL QUARTERLY CALLS, LIKE DELTA'S CALL THIS MORNING THAT I LISTENED TO GIVES YOU SOME INSIGHT ABOUT THE THE SENIOR LEADERSHIP THINKING GOING FORWARD AND WHAT THEY'RE ALSO LOOKING FOR AS INDICATORS OF DEMAND RESUMING
SO THERE'S IT'S A PRETTY BROAD RANGE OF INTELLIGENCE THAT WE KIND OF KEEP OUR EAR TO THE GROUND ON TO START LOOKING FOR THOSE SIGNS OF RECOVERY AND THEN START TO FACTOR THAT INTO THE DIFFERENT SCENARIOS
ALWAYS LOOKING ON THE CONSERVATIVE SIDE
YEAH, AND YOU KNOW, WE'VE TALKED A LOT ABOUT OUR OVERALL NUMBER FOR PASSENGERS FOR 2021 I THINK I HAVE GONE THROUGH PHASES FROM A DEEPLY PESSIMISTIC PHASE EARLY ON IN THIS TO THEN A MORE OPTIMISTIC PHASE KIND OF IN THE SUMMER MONTHS AS WE DID SEE EVEN A QUICKER RETURN TO PASSENGER LEVELS THAN WE'D ANTICIPATED
BUT NOW AGAIN SEEING THIS KIND OF STAGNATION AND I HEARD AN INTERVIEW THIS WEEKEND WITH BILL GATES I THINK IT WAS ON MEET THE PRESS, WAS A SHORT INTERVIEW, BUT ONE OF THE THINGS HE SAID REALLY CAUSED ME TO PAUSE WHICH IS I HAVE BEEN HOPING FOR A VACCINE AS SOON AS POSSIBLE BECAUSE THAT REALLY FEELS LIKE THE WAY THAT WE RETURN TO NORMALCY AS QUICKLY AS POSSIBLE
BUT HIS EXPERIENCE IS SOMEBODY WHO'S NOW DEEPLY ENMESHED IN GLOBAL HEALTH IS THAT THIS PROBLEM, THIS FIRST ROUND OF VACCINES, IS UNLIKELY TO BE FULLY EFFECTIVE
AND SO EVEN IF WE DO GET A VACCINE AND IT'S WIDELY DISTRIBUTED, IT WON'T MEAN THE END OF THE PANDEMIC IMMEDIATELY
IT'LL MEAN YOU KNOW THAT WE'RE ABLE TO PROBABLY PUSH INTO MORE ASPECTS OF RECOVERY, BUT IT'S NOT AS IF FLIP A SWITCH AND WE'RE BACK TO NORMALCY AS SOON AS THERE'S A VACCINE DISCOVERED
SO THAT'S SOMETHING I'M PUTTING INTO MY OWN ANALYSIS ABOUT HOW OPTIMISTIC WE OUGHT TO BE FOR 2021 AS WELL
THANK YOU COMMISSIONER CALKINS
MOVING TO COMMISSIONER CHO
YES, THANK YOU
YOU KNOW ONE QUESTION THAT I WANTED TO ASK IT RELATES BACK TO PREVIOUS [MICROPHONE MALFUNCTION] IS THAT WHEN IT COMES TO OUR BONDING CAPACITY UNDERWRITERS WILL OBVIOUSLY BE LOOKING AT THIS DATA TO SEE WHETHER OR NOT WE WILL HAVE PFCS AND THE REVENUE TO ACTUALLY SERVICE THE DEBT
WILL THEY BE USING OUR FORECAST OR WHAT IS THE INDUSTRY STANDARD IN TERMS OF BEING ABLE TO FORECAST REVENUE OR PASSENGER VOLUMES AT AIRPORTS? I ASSUME THEY DON'T THEY WON'T JUST TAKE OUR WORD UP FOR IT
RIGHT? THEY'LL DO THEIR INDEPENDENT STUDIES? I THINK BORGEN WOULD BE THE BEST PERSON TO ADDRESS THAT QUESTION, BORGEN? SURE, YOU KNOW, I THINK THAT IT'S A COMBINATION OF A LOT OF THINGS
EVERY AIRPORT IS A LITTLE DIFFERENT
EVERY EVERY MARKET SECTOR IS A LITTLE DIFFERENT
BUT CERTAINLY THE RATING AGENCIES WILL PRODUCE THEIR OWN REPORTS AND THEIR OWN ESTIMATES OF WHAT'S GOING ON NATIONWIDE
I DON'T THINK THEY ACTUALLY GO TO THE TROUBLE OF DOING A SEPARATE FORECAST FOR EACH AND EVERY AIRPORT, BUT THEY'RE GOING TO LOOK AT ALL THE INDUSTRY SOURCES
THEY'RE GOING TO LOOK AT WHAT WE PROVIDE AND YOU KNOW FROM MY PERSPECTIVE, THE WORK THAT MICHAEL DOES PUTS US IN A GOOD POSITION TO BE ABLE TO EXPLAIN WHY WE BELIEVE OUR FORECAST IS WHAT IT IS AND THE RISKS AND CONDITIONS SURROUNDING IT
SO, I THINK WE'RE VERY WELL SERVED
THANK YOU
MOVING TO COMMISSIONER FELLEMAN FOR ANY QUESTIONS OR COMMENTS
THANK YOU MICHAEL
I APPRECIATE THE FACT THAT THERE WAS THIS ANALYSIS BASED ON AIRPORTS OF OUR SIZE AND THE RATIO OF DOMESTIC VERSUS INTERNATIONAL FLIGHTS AND THE FACT THAT WE SEEM TO HAVE CONSIDERABLY LESS EXPOSURE ON THE INTERNATIONAL MARKET DOES PROVIDE SOME LEVEL OF OPTIMISM ASSOCIATED WITH OUR RECOVERY RATE
THE POINT THAT COMMISSIONER CALKINS MADE ABOUT MISTER GATES' OBSERVATION THAT YOU KNOW, WHAT'S GOING ON IN EUROPE IS PRETTY CLEAR THE MUTATION RATE OF THIS VIRUS IS GOING TO MAKE IT QUITE A CHALLENGE AND SO YOU KNOW REPEATED VACCINATION SEEMS TO BE THE LIKELIHOOD AND SO AND THEN, YOU KNOW, JUST GETTING IT OUT TO THE COMMUNITY BEFORE YOU HAVE THIS MASS IMMUNITY
IT DOES LOOK LIKE A LONGER SLOG
SO WHILE THE DOMESTIC PROPORTION SEEMS TO BE AN ENCOURAGING SIGN THIS NASTY VIRUS CONTINUES TO WEIGH ON US
SO, THANK YOU
AND THE COMMISSIONER STEINBRUECK
I JUST WANT TO DO A QUICK TIME CHECK
YOUR NEXT SEGMENT ON THE AVIATION
OPERATING BUDGET IS 50 MINUTES LONG AND WE HAVE 30 MINUTES LEFT OF THIS MEETING
I WILL SEGUE TO YOU FOR ANY QUESTIONS THAT YOU MIGHT HAVE ON THE SEGMENT
DID YOU SAY THE NEXT SEGMENT IS 15 OR 50 MINUTES? 50
WE DON'T HAVE 50 MINUTES AND I THINK IT'S MORE IMPORTANT THAT WE HAVE COMMISSIONER OPPORTUNITY FOR COMMISSIONERS TO ASK QUESTIONS AS GO FORWARD
SO LET'S DO IT
WE LET'S TRY TO GET THROUGH WHAT WE CAN BUT BE SURE TO SAVE TIME FOR COMMISSION QUESTIONS
CERTAINLY
WE'LL END AT 11 A.M
WHICH IS WHEN WE TAKE A 5 MINUTE BREAK BETWEEN THIS AND THE EXECUTIVE SESSION
DID YOU HAVE ANY FOLLOW-UP QUESTIONS ON THIS? NO, IN THE INTEREST OF TIME WE CAN MOVE ALONG
THANK YOU
THANK YOU
OKAY, GOOD MORNING
AGAIN COMMISSIONERS
THE GOOD THING IS THAT THERE ARE SEVERAL SLIDES IN THIS BUDGET PRESENTATION THAT'S IN THE PREVIOUS ONE AND IN MICHAEL'S PRESENTATION, SO WE'LL SKIP THOSE WHEN WE GET TO THEM SO COMMISSIONERS WE'RE GOING TO BORGEN AND MYSELF WE'RE GOING TO PRESENT IN THE 2020 PRELIMINARY BUDGET 2021 RATHER PRELIMINARY BUDGET
NEXT SLIDE
AND I'M GOING TO GO THROUGH IT FAST
SO COMMISSIONERS HAVE TIME TO ASK QUESTIONS
AGAIN MAJOR FOCUS THAT YOU'RE GOING TO SEE US LOOK AT IS HOW WE'RE GOING TO BE USING PFCS AND CARES ACT MONEY, THE FINANCIAL FORECAST, REVENUES AERONAUTICAL AND NON AERONAUTICAL REVENUES, AND EXPENSES NEXT SLIDE
AND YOU'RE FAMILIAR WITH A BUDGET TIMELINE
I'M NOT SURE WHY EVERYTHING IS NOT SHOWING ON THE SCREEN, BUT WE CAN PROBABLY GO TO THE NEXT SLIDE AS WELL
IT'S JUST COMING IN
SO WE'RE HERE TO WE'RE AT THE OPERATING AND CAPITAL BUDGET BRIEFING WHICH IS TODAY
AND OF COURSE FIRST READING AND SECOND READING IN NOVEMBER
NEXT SLIDE
I JUST SPOKE ABOUT THIS
SO WE'LL JUST MOVE ON TO THE NEXT
AND AGAIN COMMISSIONER, I THINK THIS AND THE FOLLOWING SLIDE MAYBE ANSWER THE QUESTION I THINK COMMISSIONER BOWMAN AND COMMISSIONER STEINBRUECK ASKED EARLIER IN TERMS OF WHAT METRICS ARE WE GOING TO HAVE ASSOCIATED WITH THE MEASUREMENT ASSOCIATED WITH THE VISION AND THE LONG-TERM OBJECTIVES
AND AGAIN, THIS THIS REALLY HIGHLIGHTS THAT ALL THE ACTIVITIES ARE MOST OF THE ACTIVITIES THAT WERE UNDERTAKEN IS ACTUALLY ALIGNED WITH THE STRATEGIC OBJECTIVES OF THE ORGANIZATION, WHICH BASICALLY IS EMBODIED IN THIS CENTURY AGENDA AND WE'RE JUST GOING TO SHOW AN EXAMPLE, ONE EXAMPLE, BECAUSE THERE ARE WHOLE LOT, ONE EXAMPLE, OF HOW WE ARE ACTUALLY ALIGN WHAT WE'RE DOING AT AVIATION WITH THE COMMISSION CENTURY AGENDA AND WITH STEVE'S OBJECTIVES
NEXT SLIDE
SO IF WE JUST TAKE ONE OF THE EXAMPLE FROM THE CENTURY AGENDA, WHICH IS THE GOAL TO WHICH IS TO ADVANCE THE REGION AS A LEADER IN TOURISM DESTINATION AND OBJECTIVE 3 THERE'S THE CONTINUES TO IMPROVE OPERATIONAL EFFICIENCY AND CUSTOMER EXPERIENCE AT SEA
ONE OF THE THINGS WE HAD WHICH COMMISSIONERS YOU'RE FAMILIAR WITH WAS ALSO LAUNCHING THE SEA BRAND
AND THE PURPOSE OF LAUNCHING THAT BRAND WAS TO ACHIEVE WAS TO ATTAIN THE GOALS IDENTIFIED IN THE CENTURY AGENDA AND THE SPECIFIC ONE OF THE SPECIFIC OBJECTIVE THAT WE HAVE IS TO ATTEND SKYTRAK FOUR RANKING BY 2025
AS YOU SAW IN THE PREVIOUS PRESENTATION OUR OBJECTIVE IS TO GET TO SKYTRAK 5 RATING IN THE LONG TERM
THAT WOULD BE MAYBE OVER A 10-YEAR PERIOD BUT FOR 2025 WE'RE TRYING TO GET TO STEP SKYTRAK FOUR RANKING AND SKYTRAK FOUR RANKING AS I MENTIONED COMMISSION HERE'S A LOT ASSOCIATED WHETHER IT'S THE DRIVES COMING INTO THE AIRPORT, THE EFFICIENCY OF THE SECURITY CHECKPOINTS, THE LEVEL OF SERVICE THAT PASSENGERS EXPERIENCE WHILE THEY'RE GOING THROUGH THIS ENTIRE PROCESS, THE TYPE OF RESTROOMS WE HAVE, THE INTERNATIONAL ARRIVALS FACILITY
THAT IS INCLUDED IN ATTAINING A SKYTRAX FOUR RANKING AND THEY'RE NOT VERY MANY SKYTRAX FOUR RATED AIRPORTS IN NORTH AMERICA
VERY FEW
SO THAT'S ONE EXAMPLE OF THE ALIGNMENT
NEXT SLIDE
YEAH, AND I'VE GONE THROUGH THIS ALREADY HAS A SKIP THIS ONE AS WELL SO WE CAN MAKE UP SOME TIME
SWOT ANALYSIS
THIS WAS VERY INTERESTING
IN THE THE PREVIOUS DIAGRAM THAT WAS SHOWN WHERE WE SHOW THE WHOLE STRATEGY G2 BUDGET PROCESS AND WE SHOW THE STRATEGIC PLANNING AS WELL AS THE IMPLEMENTATION PORTION
THE SWOT ANALYSIS WAS REALLY A KEY COMPONENT
AND WHY DO WE DO A SWOT ANALYSIS? ONCE WE HAVE ESTABLISHED WHAT OUR LONG-TERM VISION IS AND ONCE WE HAVE ESTABLISHED WHAT THOSE GOALS ARE WE DO THIS GAP ANALYSIS
WE LOOK AT WE'RE TRYING TO GET TO VERSUS WHERE WE ARE
THERE'S A GAP, WE COME UP WITH STRATEGIES TO CLOSE THOSE GAPS
AND YOU KNOW THOSE STRATEGIES HAVE STRATEGIC OBJECTIVES INCLUDED IN IT
BUT WE DON'T OPERATE IN A VACUUM, RIGHT
WE HAVE THESE GOALS AND WE HAVE THESE ACTIVITIES THAT WE'RE THAT WE'RE GOING TO EMBARK ON TO GET TO THE GOALS
BUT THERE'S THIS WORLD AROUND US THAT WE HAVE TO TAKE INTO CONSIDERATION
AND THAT'S WHY WE DO A SWOT ANALYSIS, RIGHT? SO THE SWOT ANALYSIS LOOKS AT THE ENVIRONMENT, EXTERNAL OPPORTUNITIES AND THREATS
SO THEY'RE IN THEIR INTERNAL STRENGTHS AND WEAKNESSES THAT WE HAVE
SO TYPICALLY WE DO A SWOT ANALYSIS IN THE BEGINNING MAYBE OVER A THREE YEAR PERIOD AND THEN WE TWEAK IT SLIGHTLY EACH YEAR
THEY TWEAK THIS YEAR WAS TREMENDOUS
THERE ARE THINGS THAT JUST POPPED UP THAT WERE AS A MATTER OF FACT AT ONE POINT THAT WERE FOR EXAMPLE STRENGTHS TO US AND THEY ARE NOW WEAKNESSES TO US
THE PANDEMIC OF COURSE IS A MAJOR THREAT THAT WE HAVE RIGHT NOW
AND WHAT YOU'RE SEEING ON THE SCREEN IS REALLY WHAT WE CALL A SWOT PROFILE
IT'S A SUMMARY VERSION OF THE SWOT ANALYSIS
WHEN WE DO THE SWOT ANALYSIS
WE HAVE A LOT OF OPPORTUNITIES, THREATS WITNESSES ETC
BUT WE NARROW IT DOWN TO MAYBE THE TOP THREE TO FOUR OR THREE TO FIVE BECAUSE WE CAN'T FOCUS ON EVERYTHING AND THAT'S WHAT WE GET THE SWAT PROFILE THAT YOU'RE LOOKING AT
SO AS AN EXAMPLE, THE MAJOR THREAT, OF COURSE RIGHT NOW IS A PANDEMIC, THE AIRLINES IS IN TROUBLE
IF YOU LOOK AT OUR SWAT PROFILE LAST YEAR THAT WAS ACTUALLY AN OPPORTUNITY BECAUSE THE AIRLINES ARE DOING EXTREMELY WELL
SO A LOT OF CHANGE
NEXT SLIDE, PLEASE
SO THOSE ARE THE THINGS EXTERNAL TO THE ORGANIZATION
INTERNAL TO THE ORGANIZATION ARE OUR STRENGTHS
WEAKNESSES
NEXT SLIDE
RIGHT HERE.2 STRENGTHS AND WEAKNESSES
SO WHAT ARE THE THINGS INTERNAL THAT WE'LL REALLY NEED TO LEVERAGE IN ORDER TO MEET THOSE GOALS? WHAT ARE THE WEAKNESSES THAT WE NEED TO OVERCOME IN ORDER FOR US TO MEET THE GOALS? AND THE OPPORTUNITIES AND THREAT WHAT ARE THE THINGS THAT WE NEEDED TO MITIGATE, THE THREATS THAT WE NEED TO MITIGATE TO GET TO OUR GOALS? AND WHAT ARE SOME OF THE OPPORTUNITIES THAT WE HAVE TO TAKE ADVANTAGE OF TO GET TO OUR GOALS? TECHNOLOGY WOULD BE ONE OF THOSE AS WELL
SLIDE
MICHAEL SAID THIS ALREADY
WE'RE STILL EXPECTING TO END THE YEAR AT ABOUT 60-61 PERCENT AND OUR BUDGET IS BASED ON A 30% REDUCTION RELATIVE TO 2019 FOR THE 2021 BUDGET
THE 2021 BUDGET IS BASED ON A 30% REDUCTION AND I MUST SAY, YOU KNOW, DUE TO, AS AGAIN COMMISSIONERS, TO THE WORK THAT MICHAEL AND THE BUSINESS INTELLIGENCE TEAM HAS DONE
THEY'VE JUST BEEN REALLY ON POINT ON FORECAST SO FAR AND I KNOW IT'S THE DIFFICULT TIME TO DO FORECASTING
NEXT SLIDE
SO SOME OF THE UNIQUE CHALLENGES THAT WE FACE HERE
AGAIN 30% REDUCTION FOR 2021 RELATIVE TO 2019
OUR NON-AIR REVENUES ARE GOING TO BE DOWN 80 MILLION
I THINK IN 2019 WE'RE AT LIKE 269 MILLION
WE'RE ANTICIPATING 291 MILLION IN 2021 AND THAT'S A MAJOR DROP IN OUR REVENUES RIGHT HERE
WE HAVE YOU KNOW, IAF, A 450,000 SQUARE FOOT FACILITY THAT'S GOING TO BE OPEN
WE HAVE THE NORTH SATELITE AN ADDITIONAL 200,000 SQUARE FOOT THAT'S GOING TO BE OPEN
ALL OF THESE FACILITIES HAS TO HAVE SOME LEVEL OF MAINTENANCE NO MATTER HOW MANY PASSENGERS ARE COMING THROUGH THEM
AND OF COURSE FLY HEALTHY AT SEA JUST BASED ON OUR RESPONSE TO COVID
THINGS THAT ARE MAJOR CHALLENGES THAT WE HAVE THAT WE DIDN'T HAVE BEFORE
AND OF COURSE WHAT BORGEN SHOWED IN THE PREVIOUS PRESENTATION THAT CAPITAL INVESTMENT NEEDS GROWING
SO QUESTION COMMISSIONERS? I JUST HAVE A QUESTION ABOUT THE GROWING NUMBER OF FTES WHILE WE'RE HAVING A STEADY DECLINE IN PASSENGERS
SO WE HAVE A SLIDE THAT WE'RE GOING TO SPEAK TO THAT AS WELL
BUT AS YOU CAN SEE ON THIS ONE, WE'RE ACTUALLY FREEZING A HUNDRED AND TWO POSITIONS AND WE I'LL SPEAK TO IT AND BORGEN WILL SPEAK
OKAY NEXT SLIDE
THIS IS THE SLIDE THAT TYPICALLY GETS US IN TROUBLE BECAUSE EVEN THOUGH WE HAVE 10 STRATEGIC AREAS THAT WE'RE FOCUSING ON ONE OF THE QUESTIONS WE ASK OURSELVES WHAT IF FOR SOME REASON WE CAN GET EVERYTHING DONE? WHAT WOULD BE THE TOP THREE OR FOUR OR FIVE THINGS THAT WE ABSOLUTELY MUST GET DONE? AND WE ALWAYS GET IN TROUBLE HERE BECAUSE THERE'S ALWAYS SOMETHING ELSE THAT YOU COULD INCLUDE IN THE TOP THREE OF THE TOP FIVE
BUT SUFFICE TO SAY THOUGH WITHOUT A DOUBT RESTORING CONFIDENCE IN AIR TRAVEL
THAT IS TO ME IS ABSOLUTELY LIKE NUMBER ONE
IF WE DON'T HAVE PEOPLE TRAVELING AGAIN, IF IT DON'T RESTORE CONFIDENCE AND HAVE PEOPLE COMING THROUGH AIRPORTS AND TRAVELING ON AIRLINES AGAIN AND ALL THE AIRPORTS AND AIRLINES ARE FOCUSING ON THIS
THEN THERE IS NOTHING ELSE THAT WE'RE TRYING TO ACHIEVE THAT WE'RE GOING TO GET DONE
EMPLOYEES IS EXTREMELY IMPORTANT TO US
IF THEY'RE NOT ENGAGED WE'RE NOT GOING TO ACHIEVE THE GOALS
AND YOU'VE HEARD ME SAY IT OVER AND OVER AGAIN
IT TAKES CASH TO CARE
WE REALLY HAVE TO MEET OUR FINANCIAL GOALS THAT WE'RE TRYING TO ATTAIN
THE COMMUNITY EVEN THOUGH THERE'S HUGE BENEFITS FOR THE AIRPORT TO THE COMMUNITY WHETHER IT'S GOING TO 2.5 BILLION IN ECONOMIC IMPACT AND A HUNDRED AND FIFTY THOUSAND JOBS OR 440 MILLION IN STATE AND LOCAL TAXES THE COMMUNITIES ESPECIALLY THE ONES CLOSEST TO THE AIRPORT ARE DISPROPORTIONATELY IMPACTED AND SO WE HAVE TO ENSURE THAT WE YOU KNOW, WE ADDRESS THE NOISE AIR POLLUTION CONCERNS PARTICULARLY FOR THE COMMUNITIES CLOSEST TO US
AND OF COURSE AS I SAID BEFORE WE HAVE TWO BRAND NEW FACILITIES THAT WE MUST OPEN AND WE MUST OPEN SUCCESSFULLY
NEXT SLIDE
AND THIS IS A HIGHLIGHT OF THE PROPOSED BUDGET EDITIONS
IT IS A BIT MISLEADING BECAUSE IT GIVES THE IMPRESSION THAT WE'RE ADDING 18 MILLION DOLLARS TO THE BUDGET
AND YOU KNOW, THERE'S SOME ITEMS THAT ARE BRAND-NEW FOR EXAMPLE FLY HEALTHY AT SEA
SEE THAT AT EIGHT HUNDRED AND EIGHTY THOUSAND DOLLARS AS WELL AS THE NEW INTERNATIONAL ARRIVALS FACILITY FIVE MILLION DOLLARS
WE HAVE TO OPEN THOSE BUT THERE ARE OTHER ACTIVITIES THAT WE ACTUALLY TAKE OUT EACH YEAR AND WE ADD IT BACK
BECAUSE THEY ARE THERE FINITE PROJECTS, BUT THEY'RE NOT PERENNIAL ACTIVITY
THEY'RE NOT GOING TO BE FOREVER
THEY WON'T BE A PART OF THE BASIN
FOR EXAMPLE, THE MASTER PLAN EACH YEAR WE TAKE OUT THE MONEY ASSOCIATED WITH THE MASTER PLAN AND WE PROVIDE WHAT WE NEED FOR A PARTICULAR YEAR
SO EVEN THOUGH THE NUMBER SHOWS 18 MILLION ADDITION HERE WE'RE STILL REDUCING OUR SPENDING BUDGET BY 10% RIGHT
WE'RE TARGETING THAT 340 MILLION THAT BORGEN IS GOING TO SPEAK ABOUT
AND NEXT LET ME JUST ADDRESS THE QUESTION COMMISSIONER STEINBREUCK ASKED
WILL BE ON THE NEXT SLIDE AND I'LL ASK BORGEN TO CHIME IN AS WELL
PAYROLL IS ONE OF OUR BIGGEST EXPENSES
OVER A HUNDRED AND FIFTY MILLION DOLLARS
AND SO WE'RE FOCUSED HEAVILY ON FTES
AND AS YOU CAN SEE FROM HERE, WE ARE FREEZING A HUNDRED AND TWO AND OF THE 18 POSITIONS THAT WE ARE UNFREEZING BECAUSE WE THINK THESE ARE JUST REALLY CRITICAL
ONLY TWO OF THOSE FTES ARE NEW POSITIONS
BORGEN, I'M GOING TO HAND OVER TO YOU AT THIS POINT IF YOU JUST WANT TO ADD TO THAT AND THEN JUST TAKE ON THE REST OF THE PRESENTATION
YEAH, I THINK THAT AND I'LL SHOW ANOTHER SLIDE LATER THAT YOU PUTS THIS IN THE PROPER CONTEXT, BUT CLEARLY A FOUNDATION OF OUR STRATEGY IS TO REDUCE OUR OVERALL OPERATING COST WAS TO MANAGE PAYROLL COSTS AND WE'RE GETTING AT THAT NOT BY LAYOFFS, BUT BY PURPOSEFULLY KEEPING OVER 100 POSITIONS VACANT THROUGH THE YEAR AND NOT PUTTING ANY MONEY IN THE BUDGET FOR THOSE
YOU CAN SEE THAT'S THE EQUIVALENT OF ABOUT AN 8% REDUCTION IN OUR HEAD COUNT IF YOU WANTED TO LOOK AT SORT OF A YEAR-OVER-YEAR COMPARISON
NEXT SLIDE, PLEASE
AND HERE WE GET THE WALL OF NUMBERS AND I'M JUST GOING TO HIGHLIGHT A FEW THINGS THAT I'VE GOT IN YELLOW WHICH IS REPRESENTING THE CHANGE FROM THE 2020 BUDGET TO THE 2021 BUDGET
AND WHAT YOU SEE AT THE TOP IS THE AERONAUTICAL REVENUES
IT'S NOT HIGHLIGHTED IN YELLOW BECAUSE IT'S ACTUALLY NOT THAT MUCH OF A CHANGE
BUT MOST OF THE AERONAUTICAL REVENUES ARE COST RECOVERY AND WE ARE SEEING AN OVERALL REDUCTION IN THAT COST AND THEREFORE A REDUCTION IN THE REVENUES THAT WE COLLECT FROM THE AIRLINES
THE BIGGEST CHANGE IS THE NON AERONAUTICAL REVENUES
WHILE FOR 2021 WE ARE BUDGETING FOR 191 MILLION THIS IS UP TREMENDOUSLY FROM OUR FORECAST THIS YEAR OF A 116 BUT THE 91 MILLION SHOWS HOW FAR WE ARE BELOW THE 2020 BUDGET
SO WE HAVE A LONG WAY BACK
TOTAL OPERATING I THINK WE HAVE A QUESTION BORGEN
YES
GO AHEAD
COMMISSIONER BOWMAN? THANK YOU
BEFORE YOU GO ANY FURTHER BORGAN, CAN YOU HELP ME UNDERSTAND? SO I'M LOOKING AT 2019 ACTUALS FOR AERONAUTICAL REVENUES AND THEN I'M LOOKING AT 2021 PROPOSED
HOW IS THAT NUMBER BIGGER? SO AM I READING THIS PROPERLY THAT YOU'RE ANTICIPATING THAT AERONAUTICAL REVENUES IN 2021 WILL BE HIGHER THAN THE ACTUAL AERONAUTICAL REVENUES IN 2019
YES
AND THE AGAIN THE REASON AND I HAVE SOME SLIDES LATER ON THAT WILL SHOW YOU A BUILD-UP, BUT IT REALLY GETS BACK TO COST RECOVERY
AND A BIG ELEMENT OF THE COST RECOVERY IS THE CAPITAL COST AND SPECIFICALLY THE DEBT SERVICE AND IN THIS TIME PERIOD WE WILL HAVE OPENED THE NORTH SATELLITE AND THE INTERNATIONAL ARRIVALS FACILITY TWO ENORMOUS FACILITIES TWO EXTREMELY EXPENSIVE FACILITIES THAT DEBT SERVICE GOES INTO THE RATE BASE AND THE OPERATING COSTS GO TO THE RATE BASE
SO EVEN THOUGH WE'RE REDUCING OUR OPERATING COSTS THE CAPITAL COSTS ARE GOING GOING UP SIGNIFICANTLY AND BECAUSE WE HAVE A REDUCTION IN PFCS, WE CAN'T OFFSET AS MUCH
SO IT'S KIND OF LIKE A DOUBLE IMPACT
SO WE'RE DOING THE BEST WE CAN TO REDUCE AIRLINE COSTS AND I'LL SHOW YOU SOME OF THE THINGS WE'RE TRYING TO DO WITH CARES MONEY AS WELL AS PFCS A LITTLE BIT LATER, BUT YOUR INTERPRETATION THERE IS ACCURATE
THE OVERALL AIRLINE REVENUES WILL BE GOING UP FROM 2019 TO 2021 AND THAT'S THE RESULT OF DELIVERING THESE NEW FACILITIES
BORGAN, THAT IS SUPER HELPFUL
THANK YOU
ASKING MICHELLE TO MANAGE THE QUESTIONS
WE ONLY HAVE 10 MINUTES TO GO HERE
SO WE REALLY HAVE TO STAY ON TRACK GOOD
THANK YOU COMMISSIONER STEINBRUECK
I JUST WANT TO KNOW IT REALLY QUICKLY
I JUST GOT WORD THAT STAFF IS LOOKING TO RESCHEDULE THE EXECUTIVE SESSION PARTICIPANTS SO THAT WE COULD HAVE EXECUTIVE SESSION AFTER THE REGULAR MEETING SHOULD THE COMMISSION SO DESIRE
THAT'S NOT AN OPTION TODAY
OKAY
SO THE OTHER THING THAT WE CAN DO WE CAN CONTINUE THIS BUDGET BRIEFING [CROSSTALK] I WAS JUST GOING TO SAY WE CAN ACTUALLY ADD THIS TO THE END OF OUR REGULAR MEETING AGENDA AS THAT AGENDA IS PRELIMINARY AND WE CAN CONTINUE THIS CONVERSATION SHOULD WE GO LONG AS WELL
WE HAVE A COUPLE OF OPTIONS THERE COMMISSIONER
OKAY
I WOULD PREFER THAT WE DO THE EXECUTIVE SESSION AT THE SCHEDULED TIME THIS MORNING AT 11 AND CONTINUE THE BUDGET SESSION EITHER AFTER FULL COMMISSION TODAY OR AT ANOTHER DATE
OKAY
WELL YOU NEED TO MAKE THAT DECISION BEFORE THE END OF THIS CALL
I WOULD SUGGEST THAT WE ADD IT TO THE AGENDA FOR THE UPCOMING MEETING
OKAY, HOW MUCH REMAINING TIME DO WE NEED FOR THE PRESENTATION PORTION? I CAN QUICKLY AND YOU LET ME KNOW WHAT I NEED TO STOP AND ANSWER QUESTIONS
HOW'S THAT? HOW ABOUT FIVE MINUTES BECAUSE WE'RE RUNNING OUT OF TIME
SO I DON'T WANT TO RUSH STAFF
I WANT TO MAKE SURE THAT THE COMMISSION HAS TIME TO ANSWER THEIR QUESTIONS
ALL RIGHT
LET'S GO ON TO THE NEXT SLIDE, PLEASE
THIS IS JUST A GRAPHICAL REPRESENTATION OF THE AVIATION PORTION OF THE TOTAL OPERATING COST AND IT REALLY EXPLAINS WHAT LANCE DESCRIBED
GREEN REPRESENTS REDUCTION, RED REPRESENTS THE INCREASES AND YOU CAN SEE AN OVERALL REDUCTION OF THE AIRPORT BUDGET AND DOWN BELOW WE HAVE IT BROKEN OUT BETWEEN THE BASELINE EDITIONS AND THE NON RECURRING ITEMS NEXT SLIDE, PLEASE
THIS IS ANOTHER VIEW OF THE 18 MILLION ADS BROKEN OUT BY THOSE STRATEGIC PRIORITY CATEGORIES AND YOU CAN SEE BASELINE AND NON-RECURRING AND THE NUMBER OF FTES AND MOST OF THE COSTS AS LANCE SHOWED YOU FROM THE PREVIOUS SLIDE THEY'RE IN NEW FACILITIES AREA AND IN THE PLANNING GOING FORWARD
NEXT SLIDE, PLEASE
THE NEW FTES ARE HIGHLIGHTED IN BLUE
THERE'S AN ART PROGRAM COORDINATOR AND A BIOMETRIC ANALYST TO HELP WITH THE AIR EXIT PROGRAM
THE OTHERS ARE JUST RESTORING FTES THAT HAD BEEN FROZEN
MOST OF THEM ARE OPERATIONAL AS WE EXPECT OPERATIONS TO COME BACK
WE ADD BUS DRIVERS
WE HAD PARKING CASHIERS
AIR FIELD OPERATIONS SPECIALIST
JUST POSITIONS THAT WE NEED TO SUPPORT REBOUNDING OPERATIONS
NEXT SLIDE, PLEASE
OVERALL EXPENSES, AIRPORT, AND THE CENTRAL SERVICES COSTS
BOTTOM LINE IT'S COMING IN TEN PERCENT LOWER AND THOSE ARE REALLY ACROSS THE BOARD AND IN ALL AREAS
SO IT'S BEEN A CONSISTENT PORT WIDE EFFORT TO MANAGE DOWN THE COST
NEXT SLIDE, PLEASE
AND NOW I WOULD JUST WANT TO TALK A LITTLE BIT ABOUT THE CARES MONEY AND WE'VE TALKED ABOUT IT BEFORE BUT IT'S REALLY ALL ABOUT HELPING THE PORT BOOST ITS DEBT SERVICE COVERAGE, HELPING US INCREASE OUR CASH BALANCE, AND ALSO HELPING OUR BUSINESS PARTNERS, WHETHER IT BE AIRLINES OR IN THIS CASE RENTAL CAR COMPANIES AS WELL BECAUSE WE ARE GOING TO USE SOME OF THE CARES MONEY FOR THE RENTAL CAR FACILITY,
BUT YOU CAN SEE THAT WE'RE REALLY TRYING TO MANAGE A LOT OF DIFFERENT CHALLENGES AND OUR STRATEGY IS LAID OUT HERE AND I'LL SHOW YOU WHAT WE'RE DOING ON THE NEXT SLIDE
SO THE KEY REALLY IS TO MAKE SURE WE KEEP OUR DEBT SERVICE COVERAGE ABOVE 125
AND WE'VE GOT A AN ESTIMATE THAT FOR 2020 AND 2021
WE WILL BE AT 135 AND 136
AND THIS IS WHERE WE REALLY WANT TO BE RIGHT NOW IN THIS SITUATION BECAUSE THE TOP LINE THAT'S HIGHLIGHTED IN YELLOW DEBT SERVICE COVERAGE IN THE RATE BASE IS 0
AS LONG AS WE STAY ABOVE 125 THAT IS ZERO
WE REALLY NEED TO STAY ABOVE 125
LOWER YELLOW YOU CAN SEE HOW WE'RE DISTRIBUTING THE USE OF THE CARES MONEY BETWEEN 2020 AND 2021 AND HOW ITS SPLIT BETWEEN DEBT SERVICE AND O&M AND WE'LL SHOW YOU IN A SUBSEQUENT SLIDE SOME OF THE IMPACT ON RATES, BUT WE'RE REALLY TRYING TO BALANCE THE IMPACT ON OUR CUSTOMERS WHILE ACHIEVING OUR GOALS
AND THE OTHER THING WE'RE TRYING TO DO BY BOOSTING OUR CASH BALANCE
WE EXPECT FOR 2021 TO BE BACK TO APPROXIMATELY 321 MILLION DOLLARS WHICH WOULD REPRESENT ABOUT 11 MONTHS OF O&M WHICH IS HIGHER THAN OUR CURRENT TARGET, BUT WE'RE AIMING TO GET TO 12 AND THAT'S WHAT WE'RE GOING TO STRIVE TO DO AND GET TO ACTUALLY 18 MONTHS BY 2025
NEXT SLIDE, PLEASE
AND HERE'S ANOTHER VIEW OF IT BY COST CENTER SO YOU CAN SEE HOW WE'RE TRYING TO MAKE SURE WE COVER THOSE COST CENTERS THAT ARE LARGELY DRIVEN BY ACTIVITY MEANING THE AIRFIELD
BECAUSE THE RATES ARE BASED ON LANDED WEIGHT AND THAT'S OBVIOUSLY DOWN
FIS IS INTERNATIONAL ARRIVALS WHERE IT'S BASED ON INCOMING INTERNATIONAL PASSENGERS WAY DOWN
AND OBVIOUSLY WE'VE GOT SOME NON AIRLINE CHALLENGES AS WELL
SO IT'S REALLY BEEN TRYING TO BALANCE OUR MANY NEEDS
NEXT SLIDE, PLEASE
NOW TALKING ABOUT PFCS
WHAT I'D REALLY LIKE TO DO IS JUMP AHEAD TWO SLIDES, PLEASE
TO SLIDE 25
THESE ARE ALL THE DETAILS IN THE BACKGROUND, BUT WE'RE REALLY TRYING TO DO IS TO TALK ABOUT WHAT I WHAT I SAID BEFORE AND REALLY FOLLOW THE ESSENCE OF THE COMMISSION MOTION FROM 2015, WHICH IS TO TRY TO CREATE A BALANCED LEVEL FIELD FOR ALL THE AIRLINES
AND WE'RE DOING THAT
I SEE A QUESTION
COMMISSIONER BOWMAN
THANK YOU
THANK YOU
THIS IS A LOT OF INFORMATION AND I THINK THAT THERE MIGHT BE AN OPPORTUNITY WOULD BE A GOOD CHANCE TO NOT AT THIS SESSION BUT PROVIDE THE COMMISSION SOME A LITTLE BIT MORE BACKGROUND ON THIS AND I'M WONDERING IF YOU'RE ANTICIPATING GETTING COMMISSIONED INPUT AND OR APPROVAL ON THIS BECAUSE THE SCENARIOS ARE FAIRLY SIGNIFICANTLY DIFFERENT
YEAH, SO I'LL JUST I'LL TELL YOU RIGHT NOW
WHAT WE'RE PROPOSING IS THIS BALANCED RATE GROWTH SCENARIO AND WE HAD A DISCUSSION WITH THE AIRLINES LAST WEEK
REALLY WHAT THIS REPRESENTS IS WHAT WE KIND OF CALL RATE TRIAGE FOR 2020 AND 2021
AND THEN WE TRY TO GET BACK TO A SORT OF A NORMAL SITUATION BY 2022 AND 2023, BUT IT REALLY SHOWS THAT WE'RE TRYING TO USE PFCS TO MITIGATE SORT OF THE GREATEST RATE
INCREASES AND OBVIOUSLY IF YOU LOOK AT SCENARIO ONE, WHICH HIGHLY FAVORS FIS WE CAN GET THE FIS RATE DOWN TO $15 WHICH YOU SEE IN THE THIRD LINE UP
BUT THAT COMES AT A COST OF HAVING THE LANDING FEE GO UP TO OVER $5
SO THE ALTERNATIVE EXTREME OVER IN SCENARIO 3 IS TO OR EVEN SCENARIO TWO IS TO HAVE THE FIS BE THE LOWEST PRIORITY AND THAT WOULD PRODUCE AN FIS IS RATE OF FORTY FOUR DOLLARS, WHICH IS VERY HIGH COMPARED TO OUR CURRENT RATE OF LITTLE OVER $8
SO THE BALANCE RATE GROWTH PLAN IS SOMETHING THAT WE'RE TRYING TO
WE'RE RECOGNIZING THAT WE CAN'T SOLVE ALL OUR PROBLEMS OUR COSTS HAVE GONE UP
OUR RATES ARE GOING UP
WE'RE GOING TO TRY TO DO IT IN A REASONABLY BALANCED WAY
THE FIS RATE WILL BE HIGHER THAN WE'D BEEN PREVIOUSLY TARGETING BUT IN DOING SO IT ALLOWS US TO APPLY MORE PFCS TO THE LANDING FEE WHICH ALL AIRLINES PAY AND SO WE'LL BE BRINGING THAT DOWN
AND AS WE GET INTO 2022, IT WOULD BE OUR EFFORT TO FURTHER REDUCE THE LANDING FEE AND THEN FOR 2023 AND BEYOND YOU CAN SEE WE'RE LOOKING AT SINGLE DIGIT RATE INCREASES AND THAT'S WHAT WE REALLY MEAN BY GETTING OURSELVES TO A BALANCE RATE GROWTH WHERE WE CAN HAVE SOMEWHAT MODERATE RATE INCREASES GOING FORWARD, BUT WHEN YOU'RE IN A COST RECOVERY MODE, AND WE'RE BUILDING BILLIONS OF DOLLARS OF OF ADDITIONAL FACILITIES, OUR COSTS ARE GOING TO BE GOING UP
AND THAT IS THAT IS THE REALITY OF OUR CURRENT SITUATION
NEXT SLIDE, PLEASE
LET ME TAKE A LITTLE QUICK TIME CHECK BREAK HERE
IT'S 1055
WE COULD CONTINUE THIS UNTIL 11:30 AND I UNDERSTAND THAT THE OUTSIDE COUNSEL AND THE EXEC SESSION ARE AVAILABLE LATER THIS AFTERNOON
WHAT ARE THE PREFERENCES? WHAT OUR COMMISSIONERS PREFERENCES HERE TO CONTINUE AVIATION NOW POSTPONED EXEC SESSION? WE NEED A BREAK BETWEEN WHATEVER WE DO HERE AND THE FULL COMMISSION MEETING AT NOON
LET ME RUN THROUGH THAT ROLL CALL
OKAY? COMMISSIONER BOWMAN? OOPS, HOLD ON
SORRY ABOUT THAT
MY PREFERENCE WOULD BE TO CONTINUE ON WITH THIS SINCE OUR BRAINS ARE ALREADY HERE
I'M SURE THE STAFF COULD WRAP IT UP IN THE NEXT 20 MINUTES
THANK YOU
FASTER THAN THAT
ACTUALLY
YES COMMISSIONER CALKINS
YEAH, IF WE COULD GET THROUGH THIS IN 15 OR 20 MINUTES AND THEN SHIFT IMMEDIATELY TO EXEC SESSION
THAT WOULD BE MY PREFERENCE
SO JUST AS A POINT OF CLARITY WHAT EXECUTIVE SESSION BE CONTINUED TO 11:30 OR AFTER THE REGULAR MEETING COMMISSIONER STEINBRUECK? WELL, I DON'T KNOW THAT WE HAVE ENOUGH TIME BETWEEN THIS AND THE REGULAR MEETING TO DO THE FULL EXEC SESSION
AND THAT WOULD PRECLUDE HAVING A BREAK
SO I THINK COMMISSIONERS WILL NEED A BREAK BEFORE 12
THE OPTION IS TO POSTPONE THE EXEC SESSION TO LATER THIS AFTERNOON
I'VE JUST HEARD WORD THAT LEGAL COUNSEL CAN REARRANGE THE OUTSIDE COUNSEL SCHEDULES TO ACCOMMODATE THAT PROBABLY AROUND 4:00, 4:30, WHENEVER WE GET THROUGH THE COMMISSION MEETING
WONDERFUL
I DO WANT TO ADD THAT WE WERE EXPECTING PUBLIC TESTIMONY TO BE LIGHTER THAN WE ANTICIPATED TODAY
SO I THINK THAT THAT WILL OFFSET LATER EXECUTIVE SESSION A LITTLE BIT
COMMISSIONER CHO YOUR FEELINGS HERE
I DON'T FEEL STRONGLY
EITHER WAY
I'LL JUST GO WITH WHAT THE PRESIDENT FEELS IS APPROPRIATE
THANK YOU
COMMISSIONER FELLEMAN
I WOULD NOT HAVE MY SCHEDULE WEIGH IN ON THIS TOO MUCH
BUT I DO KNOW THAT THERE'S TWO BRIEFINGS ON THE COMMISSION AGENDA AND THAT THAT COULD ALSO BE SOMETHING FLEXIBLE
AND SO MY PREFERENCE WOULD BE TO CONTINUE WITH THIS BRIEFING AS WE GO BUT LIKE I SAID, I CAN GET PULLED OFF THE PHONE AT ANY TIME
SO NO OTHER THINGS PRESSING ON ME
THANK YOU COMMISSIONER STEINBRUECK
I'M HEARING THAT EVERYBODY WOULD LIKE TO CONTINUE THIS SESSION AT THIS TIME AND HOLD EXECUTIVE SESSION AFTER THE REGULAR MEETING
LET'S NOT TRY TO SQUEEZE EXECUTIVE SESSION IN BEFORE NOON
SO LET'S LET'S DO THIS AND FINISH UP
I THINK COMMISSIONER BOWMAN'S RIGHT, WE NEED TO STAY FOCUSED HERE
THANK YOU
PLEASE PROCEED
OKAY
THANK YOU
WHAT WE'RE LOOKING AT HERE IS OUR NON AERONAUTICAL REVENUES AND THE DIFFERENT COLORS ON THE LEFT BOX SHOW OUR BIG COMPONENTS
PUBLIC PARKING IS OUR LARGEST SOURCE THAT'S IN BLUE AND YOU SEE RENTAL CAR ABOVE IT IN ORANGE AND WE GOT GROUND TRANSPORTATION IN GREY AND AIRPORT DINING AND RETAIL AND YELLOW
SO YOU CAN KIND OF SEE THE TRENDS LOOKING BACK TO OUR 2019 ACTUALS, WHERE WE THOUGHT WE WOULD BE IN 2020, WHERE WE CURRENTLY ARE, AND WHERE WE'RE ANTICIPATING TO BE NEXT YEAR
AND THE GRAPH ON THE RIGHT REALLY TRIES TO PUT THIS IN RELATIVE TERMS JUST LOOKING AT THE REVENUES PER ENPLANEMENT AND WHICH ONES ARE DOING RELATIVELY WELL
AND YOU KNOW THE GOOD NEWS IS THAT OUR TWO BIGGEST REVENUE SOURCE
IS ARE ACTUALLY HOLDING UP PRETTY WELL ON A PER EMPLOYMENT BASIS
YOU CAN AS YOU CAN SEE BY THE RELATIVELY FLAT LINES
RENTAL CAR IS IS DOWN BUT FROM 2020 TO 2021 WE SEE IT AT FLATTENING OUT
I THINK THE OTHER NOTABLE DROP IS GROUND TRANSPORTATION
IT DOESN'T STAND OUT A WHOLE LOT BUT IT IS A DOWNWARD SLOPE AND WE ARE SEEING LESS INTEREST IN AND PASSENGERS TO HAVE SHARED RIDES IN THAT RESPECT
SO THIS GIVES A LITTLE BIT OF A FLAVOR OF WHAT'S GOING ON WITH OUR WITH OUR DIFFERENT BUSINESSES
AND I WILL SAY IN THE APPENDIX OF THIS PRESENTATION
WE HAVE DETAILED SLIDES FOR EACH AND EVERY ONE OF THESE BUSINESSES
YOU CAN SEE WHAT IS REALLY HAPPENING IN EACH OF THEM
THERE'S A LITTLE BIT OF A STORY THAT GOES WITH EACH ONE BUT I THINK IN GENERAL LOOKING AT THIS THE KEY TAKEAWAY IS THAT PARKING IS HOLDING UP REASONABLY WELL AND AIRPORT DINING AND RETAIL IS HOLDING UP REASONABLY WELL, PER PASSENGER BASIS
SO THAT'S A GOOD SIGN AS WE AS WE MOVE INTO THE RECOVERY AND NEXT YEAR AND BEYOND
NEXT SLIDE, PLEASE
THESE ARE THE ACTUAL NUMBERS THAT CORRESPOND TO THE TO THE GRAPHS ON THE PREVIOUS PAGE
AND I THINK THAT THE NUMBERS AT THE BOTTOM THAT REALLY STAND OUT ARE THE NET OPERATING INCOME OF A HUNDRED AND FIFTY-FOUR MILLION WAS WHAT WE WERE EXPECTING AND OUR FORECAST FOR THIS YEAR IS A LITTLE OVER FOUR MILLION
AND OUR BUDGET FOR NEXT YEAR SUGGEST 85 MILLION
SO YES, WE'RE SEEING AN IMPROVEMENT BUT WE HAVE A LONG WAY TO GO TO GET BACK AND TO THE TO THE QUESTION BEFORE ABOUT DIFFERENCE BETWEEN AERONAUTICAL AND NON AERONAUTICAL, THE NON AERONAUTICAL IS OUR BIGGEST SOURCE OF CASH FLOW AND OUR MOST IMPORTANT SORT OF RESOURCE TO MAKE SURE THAT WE CAN GENERATE THE CASH WE NEED AND TO KEEP THE AIRLINE RATES FROM GOING UP TOO MUCH
NEXT SLIDE, PLEASE
SO THIS THIS SLIDE FOCUSES ON THE AERONAUTICAL SIDE OF THE BUSINESS AND THE COST DRIVERS
AND BECAUSE THE RATE BASIS AND THIS IS A COMBINATION OF ALL OF THE AIRLINE RATE BASIS PUT TOGETHER AS IF THEY WERE ONE, BUT IT DOES SHOW ON THE TOP WE SEE THE OPERATING AND MAINTENANCE COSTS AND THEY'RE GOING DOWN FOR NEXT YEAR, BUT THEN WE SEE THE OFFSET
THE CARES MONEY THAT HAS REDUCED THEM FURTHER
AND THEN WE LOOK AT THE GROSS DEBT SERVICE SO BEFORE I SAID, WHAT'S DRIVING THE AIRLINE COST? IT'S REALLY THIS GROSS DEBT SERVICE
IT WENT FROM A HUNDRED SEVENTY FOUR MILLION IN 2020 UP 293 MILLION FOR NEXT YEAR
YOU CAN SEE THE PFC OFFSETS THAT WE ANTICIPATED FOR 2020 ARE MUCH LESS
WE'VE BEEN ABLE TO SUPPLEMENT THAT WITH CARES MONEY AND THAT'S BEEN GREATLY HELPFUL
IN THE PREVIOUS SLIDE
I SHOWED THAT WE WERE RESERVING SOME CARES MONEY FOR 2021 SO THAT WE COULD ONCE WE MAKE SURE WE'RE HITTING OUR DEBT SERVICE COVERAGE TARGET AND ONCE WE'VE SORT OF MANAGE TO GET THE AIRLINE DEFICIT DOWN, THEN WE COULD APPLY SOME MONEY INTO 2021 TO REDUCE RATES
AND THAT'S REALLY WHAT WE'RE DOING
SO THE NET DEBT SERVICE IS STILL GOING UP BY 10 MILLION AND THAT'S REALLY, YOU KNOW, ONE OF THE DRIVERS
SO YOU CAN SEE OVERALL WE'RE SHOWING A REDUCTION IN AN AERONAUTICAL
REVENUES FROM 2020 BUDGET TO 2021 AND THAT'S IN SPITE OF THE FACT THAT WE'RE BRINGING ON NEW FACILITIES, HAVE HIGHER DEBT SERVICE, AND WE'VE ABSORBED THE INCREASED OPERATING COSTS FROM THE NORTH SATELLITE IN THE IAF AS WELL IN OUR REDUCED O&M COSTS
SO WE'RE DOING THE BEST WE CAN TO BE SENSITIVE TO THE AIRLINES
BUT SOME OF THESE COSTS ARE RATHER UNFORGIVING
WE HAVE TO PAY THE DEBT SERVICE
NEXT SLIDE, PLEASE
AND THIS IS LOOKING AT IT FROM A NET OPERATING INCOME STANDPOINT AND LOOKING AT EACH OF THE MAJOR COST CENTERS
AND THEREFORE YOU CAN SEE A LITTLE BIT WHAT'S GOING ON INSIDE THE AIRFIELD MOVEMENT AREA
THIS IS WHERE WE CHARGE THE LANDING FEE
APRON AREA IS A SMALL AREA SPREAD ACROSS ALL AIRLINES
THE TERMINAL RENTS IS A NUMBER OF DIFFERENT COST CENTERS AND THEN YOU SEE THE FEDERAL INSPECTION SERVICES AREA
SO THE OVERALL COSTS OF FIS WON'T BE GOING UP COMPARED TO 2020
BUT THE REASON THE RATES ARE GOING UP IS BECAUSE THE VOLUME IS DOWN SO MUCH
WE JUST DON'T HAVE AS MUCH INTERNATIONAL TRAFFIC AND IT'S BASED ON THE DEPLANING INTERNATIONAL PASSENGERS THAT ACTUALLY USE THE FACILITY
NEXT SLIDE
PLEASE WELL, WE'LL STAYING HERE FOR ONE MORE MOMENT, BUT IT GET ALL THE WAY DOWN AT THE BOTTOM LINE
GO BACK ONE MORE
SO THE BOTTOM LINE IS THE NET CASH FLOW ON THE AERONAUTICAL SIDE AND YOU CAN SEE THAT EVEN IN 2019 WE DIDN'T ACTUALLY MAKE MUCH AND THAT WAS THE LAST YEAR OF REVENUE SHARING
IF I SHOWED YOU THIS FOR 2018 THE CASH FLOW ON THE AERONAUTICAL SIDE WOULD HAVE BEEN NEGATIVE BECAUSE WE WERE SHARING MORE REVENUE AND YOU'D SAY THAT THEREFORE ALL OF OUR NET CASH FLOW WAS COMING ON THE NON AERONAUTICAL SIDE
WITH THE ELIMINATION OF REVENUE SHARING WE STARTED TO SHOW POSITIVE CASH FLOW IN 2019 AND 2020 BUDGET WAS SHOWING A LOT MORE
THE FORECASTS MORE OR LESS BREAK EVEN FOR THE YEAR AND NEXT YEAR WILL START TO GENERATE SOME POSITIVE CASH FLOW AGAIN
BUT AGAIN, THIS IS MUCH LOWER THAN WHAT WE'RE ANTICIPATING ON THE NON AERONAUTICAL SIDE
NEXT SLIDE PLEASE
AND SO JUST SOME OPEN ISSUES THAT WE'VE DISCOVERED SOME ITEMS THAT WE NEED TO ADD TO OUR BUDGET THAT WERE NOT PART OF OUR ORIGINAL BUDGET
WE HAVE GONE THROUGH AN EXERCISE IN THE LAST WEEK TO ABSORB THESE
KEEP THE OVERALL BUDGET WITHIN OUR TARGET OF 340 MILLION AND THEN WE HAD TO CUT AN ADDITIONAL 800 THOUSAND TO ACHIEVE THIS
NEXT SLIDE, PLEASE
SO THE RISKS
YOU KNOW, MICHAEL DROLLINGER HIGHLIGHTED THE RISKS ASSOCIATED WITH OUR PASSENGER FORECAST AND OUR PASSENGER FORECAST IS REFLECTIVE OF THE SORT OF THE PATH TO RECOVERY AND OUR AIRLINE REVENUES AND MORE SPECIFICALLY ARE NON AIRLINE REVENUES, WHICH ARE SO IMPORTANT TO OUR OVERALL FINANCIAL PERFORMANCE
IN TERMS OF OTHER THINGS, JUST MANAGING THIS WHOLE RECOVERY AND HOW WE'RE GOING TO HANDLE THE PASSENGERS THAT COME BACK, WHAT WE'RE DOING WITH HEALTH SCREENING IN GENERAL, WHATEVER NEW REQUIREMENTS COME UP
WE RECOGNIZE THERE'S A LOT OF THINGS THAT WE DON'T KNOW NOW THAT WE WILL LIKELY NEED TO DEAL WITH NEXT YEAR
AND THE OTHER THING I WOULD HIGHLIGHT IS WHILE THE PORT IS NOT OFFERING ANY PAY INCREASES TO THE NON-REPRESENTED STAFF, WE HAVE BEEN BUDGETING UNDER THE ASSUMPTION THAT WE WILL ACHIEVE A SIMILAR SAVINGS ON THE REPRESENTED SIDE AND LABOR RELATIONS IS EMBARKED ON NEGOTIATIONS WITH UNIONS TO ACHIEVE THOSE SAVINGS, BUT THOSE SAVINGS ARE BUILT INTO THIS BUDGET
AND IN ADDITION TO HAVING NO CONTINGENCY WE ACTUALLY HAVE A NEGATIVE CONTINGENCY IN THE SENSE THAT WE HAVE A 1.5 PERCENT PAYROLL VACANCY
SO WE BASICALLY HAVE TO ACHIEVE PAYROLL SAVINGS OF OVER 2 MILLION DOLLARS JUST TO ACHIEVE OUR BUDGET
SO WE'RE STARTING WITH SOME RISKS
NO QUESTION
NEXT SLIDE, PLEASE
AND THEN HERE'S OUR FIVE-YEAR FORECAST
STATING IT AGAIN
THERE'S A LOT OF UNCERTAINTY OUT IN THE FUTURE
BUT WHAT YOU SEE IS THE CASH FLOWS AGAIN, THE AERONAUTICAL REVENUES ARE GOING UP RATHER SIGNIFICANTLY AND THAT'S BECAUSE WE'RE ADDING A LOT OF NEW FACILITIES AND THOSE COSTS GO INTO THE RATE BASE
THE NON AIRLINE REVENUES REFLECT THE REBOUND OF OUR BUSINESS
I WILL SAY THAT THE THE KEY LINE ITEMS HERE ARE CASH THAT'S AVAILABLE FOR DEBT SERVICE AND THEN WE SEE OUR NET DEBT SERVICE AND THEN WE SEE OUR NET CASH FLOW AND MUCH OF THIS CASH FLOW AS I SAID EARLIER IS GOING TO GO TOWARDS REBUILDING OUR CASH BALANCES SO THAT WE'RE IN A BETTER POSITION TO BE ABLE TO WITHSTAND SOME KIND OF A DOWNTURN LIKE WE ARE FACING NOW
BECAUSE IF WE HAD NOT HAD THE CARES MONEY WE WOULD BE IN A VERY DIFFERENT SITUATION
BUT BECAUSE OF THE CARES MONEY WE'RE GOING TO BE ABLE TO, IT APPEARS GET THROUGH THIS AND POSITION OURSELVES TO CONTINUE TO DELIVER ON THE FACILITIES WE NEED AND THAT THE REGION NEEDS
AT THE VERY BOTTOM YOU CAN SEE THE DEBT SERVICE COVERAGE AND THE CASH BALANCE LISTED IN TERMS OF MONTHS OF O&M
AND YOU CAN SEE OUR TARGET OF GETTING UP TO 18 MONTHS BY 2025 SO THAT WE HAVE A BETTER CHANCE OF WITHSTANDING A DOWNTURN
NEXT SLIDE, PLEASE
FINALLY JUST SUMMARIZING OUR OVERALL BUDGET
WE THINK THIS IS A CONSERVATIVE BUDGET MEANING WE HAVE CUT OUT AS MUCH AS WE CAN AND WE HAVE NOT ADDED BACK
WE'VE ONLY HAD IT BACK WHAT WE REALLY NEED
IT DOES PRESERVE JOBS
THERE'S NO LAYOFFS EMBEDDED IN THIS BUDGET
ALTHOUGH THE HUNDRED AND TWO FROZEN POSITIONS ARE REALLY OUR WAY OF REDUCING OUR PAYROLL COSTS AND REDUCING OUR HEADCOUNT
AS LANCE INDICATED, WE ARE GOING TO FUND OUR STRATEGIC PRIORITIES AND WE'VE DONE A LOT OF CALL IT ZERO-BASED BUDGETING TO REDUCE COSTS SO THAT WE COULD CREATE CAPACITY FOR NEW ITEMS WHILE BRINGING THE TOTAL COST DOWN APPROXIMATELY 10%
CONTINUE TO INVEST IN THE AIRPORT'S CAPITAL IMPROVEMENTS
WE FEEL THAT'S CRITICAL FOR THE REGION GOING FORWARD
AND FINALLY, YOU KNOW, AS I SHOWED IN THAT FUNDING SLIDE EARLIER, WE WILL BE DOING A BOND ISSUE IN 2021
WE REALLY WANT A POSITION OURSELVES FINANCIALLY TO DEMONSTRATE THAT WE'RE IN GOOD SHAPE AND CAN GO TO MARKET AND GET GOOD RATES
WE ALSO WILL HAVE AN OPPORTUNITY TO REFUND SOME BONDS IN 2021 AND THOSE SAVINGS ARE NOT BUILT INTO THE BUDGET BUT I ANTICIPATE WE WILL BE ABLE TO REALIZE SOME INTEREST RATE SAVINGS ON THOSE BONDS
NEXT SLIDE
ALL RIGHT
SO EVERYTHING ELSE IS IN THE APPENDIX, THERE'S DETAILS ON EVERY SINGLE ONE OF THE BUDGET REQUEST THAT ADD UP TO 18 MILLION
THERE'S 76 OF THEM AND THEY'RE ORGANIZED BY THOSE SAME STRATEGIC PRIORITIES
AND THEN AS I SAID BEFORE WE HAVE LOTS OF INFORMATION ON INDIVIDUAL NON AERONAUTICAL BUSINESS UNITS SO YOU CAN REALLY SEE WHAT'S GOING ON INSIDE EACH ONE OF THEM
BUT I'LL STOP HERE AND TAKE ANY QUESTIONS
THANK YOU
WE'LL START QUESTIONS WITH COMMISSIONER BOWMAN
VERY GOOD
THANK YOU
I ACTUALLY HAVE A LOT OF QUESTIONS BUT I'LL MAKE IT EASY AND SEND IT IN AN EMAIL
THANK YOU
COMMISSIONER CALKINS
THANKS, MICHELLE
MY FIRST QUESTION AND THIS MIGHT BE TO LANCE IS ON A SLIDE THAT YOU PRESENTED THE ON THE SWOT ANALYSIS
THE WEAKNESS AROUND PORT PROCESSES
I'M HOPING YOU COULD PROVIDE MORE INFORMATION ON THAT AND YOU KNOW, AS WE SUCCESS ISN'T DEFINED BY OUR CIRCUMSTANCES BUT HOW WE RESPOND TO OUR CIRCUMSTANCES
STRENGTHS AND THOSE ARE THINGS THAT WE CAN HAVE AN IMPACT ON SO I SEE THAT REALLY JUMPS OUT TO ME
I WANT TO KNOW HOW WE CAN ADDRESS THAT PARTICULAR WEAKNESS
I DON'T THINK THAT'S 30 SECOND ANSWER
I THINK THAT PROBABLY MEANS US MAYBE THROUGH THE AVIATION COMMITTEE OR COMMISSION IS A WHOLE SITTING DOWN AND THINKING ABOUT IT
BUT COULD YOU GIVE US A LITTLE BIT OF A DEEPER UNDERSTANDING ON THAT? YEAH, AND THANKS COMMISSIONER CALKINS
THERE ARE SEVERAL THINGS THAT WE LOOKED AT WHEN WE DID THE ANALYSIS
THE APPROVAL PROCESS JEFF MENTIONED
ONE OF THEM THAT CAME UP IN THE PEER REVIEW FOR EXAMPLE, STEVE'S AUTHORITY OF HAVING ONLY ONE 300,000 APPROVAL AUTHORITY THAT REALLY WHEN WE COMPARED TO OUR PEER AIRPORT WHERE SOMEONE IN STEVE'S POSITION OR EVEN MINE HAVE THE AUTHORITY TO APPROVE UP TO FOR EXAMPLE MILLION DOLLARS
AND JUST THE TIME THAT IT TAKES TO GO THROUGH THE COMMISSION CYCLE FOR APPROVAL
WHEN MORGAN SHOWED THE THE CAPITAL DEVELOPMENT PROGRAM AND ALSO THE QUESTION WAS ASKED IF WE GOT MORE CARES ACT MONEY
SOMETIMES WE COULD HAVE A BILLION DOLLARS
WE STILL COULDN'T EXECUTE THEM FAST ENOUGH BECAUSE THE PROCESS THAT WE HAVE HERE IS TOO TIME-CONSUMING
WE HAVE TO GO THROUGH TOO MANY STEPS TO GET APPROVAL TO GET CERTAIN THINGS DONE
SO IT WAS IT WAS A COMMISSION PROCESS, BUT IT WAS ALSO SOME OTHER PROCESSES THAT WE HAD INTERNALLY THAT YOU KNOW, WE HAVE LOOKED AT
IT'S JUST TOO CUMBERSOME AND IT TAKES TOO LONG FOR US TO GET STUFF DONE
AND MAYBE SOME OF THESE WERE PUT IN PLACE BECAUSE OF THE AUDIT THAT WAS DONE SOME TIME AGO
SO WE UNDERSTAND WHY IT WAS DONE
BUT WE'RE THINKING WE MAY HAVE TO RELOOK AT THESE BECAUSE WE JUST CAN'T EXECUTE FAST ENOUGH
[CROSSTALK]
THERE'S TWO SIDES TO THE COIN, YOU KNOW, SO WE CAN ASK [INAUDIBLE] WE HAVE TO BE ALSO
OKAY, WHAT DO WE NEED TO DO TO ALLOW THE COMMISSION'S CONFIDENCE IN OUR ABILITY TO DELIVER PROJECTS
YEAH I THINK THAT'S REALLY THAT'S THE FUNDAMENTAL DILEMMA THAT WE'RE FACING RIGHT AND I THINK I WAS REMINDED IN A SEPARATE CONVERSATION OF THE STRUGGLES WE FACE IN TRYING TO WIN POTENTIAL TENANTS FOR INSTANCE WHEN WE'RE COMPETING AGAINST THE PRIVATE MARKET
THAT THE TIME IT TAKES FOR US TO GET A PROJECT APPROVED AND CONSTRUCTED MEANS THAT WE LOSE OUT ON OPPORTUNITIES AND THAT'S DEEPLY TROUBLING FOR ME PARTICULARLY AS WE ENTER INTO A PERIOD NOT OF ECONOMIC BOOM BUT AS COMMISSIONER BOWMAN WAS SAYING PROBABLY A PERIOD OF PROLONGED WEAKNESS IN OUR ECONOMY AND WHERE WE NEED TO BE ABLE TO COMPETE EFFECTIVELY
I'M THINKING IN PARTICULAR ABOUT SOME SPACE THAT COULD HAVE BEEN LEASED FOR AIR CARGO USES, BUT WE LOST THAT OPPORTUNITY BECAUSE YOU KNOW, WE HAD TO QUOTE THEM THREE TO FIVE YEARS BEFORE ANYTHING VIABLE COULD BE PUT IN PLACE
AND SO THAT BUSINESS WAS LOST
BUT I DO WANT TO ASK AND MAYBE THIS IS A SOMETHING EXECUTIVE DIRECTOR METRUCK AND I CAN TALK ABOUT IN OUR NEXT ONE-ON-ONE
BUT WHAT WOULD IT LOOK LIKE TO DO A REVIEW OF THE THESE PROCESSES AND FIND WAYS TO STREAMLINE THEM WITHOUT LOSING THE APPROPRIATE COMMISSION OVERSIGHT AND ALSO RECOGNIZING THAT WE DO HAVE PROCESSES LIKE THE AUDIT COMMITTEE THAT IN PLACE TO SERVE A LOT OF THESE FUNCTIONS AND SO WE AS A COMMISSION NEED TO BE CAREFUL NOT TO CREATE REDUNDANT PROCESSES THAT BOG DOWN SYSTEMS SO THANK YOU FOR THAT
AND MY SECOND QUESTION IS MUCH MORE SPECIFIC
THE IDEA OF VIRTUAL QUEUING WAS MENTIONED AS ONE OF THE AREAS THAT WERE LOOKING AT
CAN YOU DESCRIBE WHAT THAT IS? WE ARE LOOKING AT TRAFFIC COMING BACK AND DUE TO RECOVERY PROCESSES WE ARE STILL REQUIRED TO HAVE SOCIAL DISTANCING WITHIN THE AIRPORT
JUST RECENTLY WE HAD A FEW DAYS WHERE WE HAD OVER 20,000 PEOPLE COMING THROUGH THE CHECKPOINT WHICH IS FAR FAR LESS THAN 60 TO 70 THOUSAND THAT WE HAVE SOME TIME DURING THE PEAK SUMMER
AND AFTER THE LINES WERE BACKING UP SIGNIFICANTLY
SO WE'RE SAYING EVEN IF WE GET BACK TO HALF OR TO TWO-THIRDS OF THE PASSENGERS THAT WE WOULD TYPICALLY HAVE, WE JUST DON'T HAVE ENOUGH SPACE FOR QUEUING RIGHT? SO WHAT WE'RE LOOKING AT IS CAN WE USE TECHNOLOGY? AND ONE OPTION IS VIRTUAL QUEUING AND THIS IS A CONCEPT THAT ORGANIZATIONS SUCH AS DISNEY USE IT
SO RATHER THAN YOU'RE IN THIS LINE WAITING YOU HAVE AN APP AND THE APP TELLS YOU WHEN IT'S YOUR TIME TO COME TO THE LINE
SO RATHER THAN HAVE PEOPLE, YOU KNOW BUNDLED UP IN THE COMMUNITY AREA, WHICH WE DON'T HAVE ENOUGH SPACE FOR, WE'LL NOT HAVE ENOUGH SPACE FOR IF SOCIAL DISTANCING IS REQUIRED, THERE'S AN APP AS AN EXAMPLE THAT YOU MIGHT DOWNLOAD AND YOU'LL BE NOTIFIED WHEN IT'S TIME TO COME TO THE LINE
SO YOU CAN BASICALLY BE ANYWHERE IN THE AIRPORT RATHER THAN BE IN THE LINE AT THE SECURITY CHECKPOINTS
SO THAT'S WHAT VIRTUAL THING IS
AND DAVE WILSON IS LEADING THAT EFFORT
I THINK TEN RESPONDENTS TO IT AND THEY'RE NARROWING IT DOWN TO LOOK AT MAYBE WHAT'S THE BEST SOLUTION GOING FORWARD? THANK YOU
AND THAT'S ALL I HAVE
THANK YOU
COMMISSIONER CHO
I'M GOING TO IN THE INTEREST OF TIME RESERVE MY QUESTIONS FOR LATER, PROBABLY VIA EMAIL
I'LL FOLLOW UP
THANK YOU
THANK YOU COMMISSIONER CHO
COMMISSIONER FELLEMAN
COMMISSIONER FELLEMAN
[INAUDIBLE] INDUSTRY AT LARGE AND I WAS JUST WONDERING BASED ON HOW CLOSE OUR PROJECTIONS ARE TO THEIR TO WHAT THEY'RE CURRENTLY FORECASTING AND THEN I JUST SAW AND I THINK IT'S PAGE 29 THAT YOU KNOW, THE LIST OF PROJECTS THAT ARE BEING DEFERRED
YOU KNOW, ONE OF THEM INCLUDES THIS LET ME JUST SEE THIS
ONE OF THE THINGS WAS WATER SYSTEM ALTERNATE SOURCE AND IT'S PUT IN UNDER THE CATEGORY OF FINANCIAL SUSTAINABILITY
AND THAT'S PROBABLY JUST THE TYPO
THAT'S IN IT PROBABLY AN ENVIRONMENTAL SUSTAINABILITY, BUT CORRECT ME IF I'M WRONG
SO ANYWAY, AS FAR AS THE PROJECT DEFERRED THAT THAT MIGHT JUST BE A WRONG LABEL BUT MORE MORE FUNDAMENTAL TO THE QUESTION AT HAND IS HOW MUCH DOES OUR FORECAST PARALLEL THAT WHICH BOEING JUST ARTICULATED? SO MAYBE I CAN JUMP IN HERE REAL QUICK AS I FORTUNATELY I WAS PART OF A PRESENTATION THAT BOEING DID YESTERDAY
I DO NOT HAVE THE SLIDES AVAILABLE BUT THEIR FORECAST WAS VERY VERY CLOSE TO THE FORECAST THAT MICHAEL PRESENTED
AND THEY THE OBSERVATIONS THAT THEY HAVE AS WELL WERE YOU KNOW WAS LEISURE TRAVEL AND DOMESTIC TRAVEL THAT WAS LEADING THE RECOVERY
BASICALLY RIGHT IN LINE WITH WHAT WE'RE DOING
THEY ALSO EXPLAIN WHY THEY LEFT AND IT REALLY HAD TO DO WITH
WITH COVID THEY HAD TO MAKE A DECISION AS TO WHICH LOCATION THEY WOULD THEY WOULD PRODUCE THEIR TRIPLE SEVEN AND MY UNDERSTANDING IS THE NORTH CAROLINA PLANT IS THE ONLY ONE THAT THEY COULD PRODUCE THE - 10
THAT WAS BECAUSE OF THE LENGTH OF THE FUSELAGE AND THAT'S THE REASON WHY THEY HAD TO DO IT
THEY HAD TO PICK ONE BUT THERE IS ONLY 1 LOCATION THAT THEY COULD PRODUCE THE - 10 AND THAT'S THE REASON WHY
THERE WAS NO OTHER POLITICAL REASON
THAT'S HOW THEY EXPLAINED IT, BUT THEIR FORECAST WAS REALLY IN LINE WITH WHAT MICHAEL PROVIDED EARLIER
[CROSSTALK] I CAN'T HELP BUT THINK THE LABOR COSTS WEIGHED ON THEM TOO
[INAUDIBLE] CHINA DOMESTIC AIR TRAVELING IS JUST SKYROCKETING AGAIN, BUT APART FROM CHINA AND AFRICA WHICH IS THE TWO EXTREMES WE'RE PRETTY MUCH TRACKING ALONG WITH THE REST OF THE WORLD
ALL RIGHT
THANK YOU VERY MUCH
THANK YOU COMMISSIONER FELLEMAN
MOVING TO COMMISSIONER STEINBRUECK FOR QUESTIONS OR COMMENTS
I'M GOING TO ASK THAT COMMISSIONERS WORK WITH STAFF IF THEY'RE EMAILING QUESTIONS TO AIRPORT STAFF REGARDING THE BUDGET SO THAT THEY CAN BE SHARED AND SO AND SOCIALIZED
I THINK WE BENEFIT FROM EACH OTHER'S QUESTIONS AND THE RESPONSES SO LET'S TRY TO HAVE A COORDINATED APPROACH TO THIS AS WE'VE DONE IN THE PAST
I'M GOING TO STOP THERE AND I SEE METRUCK HAS HIS HAND UP
YES COMMISSIONER
YEAH
I'M JUST GOING TO ADD TO THAT, COMMISSIONER STEINBREUCK
WHICH IS WE'LL COLLECT THOSE, YOU KNOW, WE'LL PUT THEM ALL INTO ONE QUESTION AND WHEN WE RESPOND WE'LL COPY ALL THE ALL THE COMMISSIONERS WHEN WE GET RESPONSES TO THOSE
THANK YOU
APPRECIATE THAT
ANOTHER ROUND OF QUESTIONS OR ARE WE REACHING THE END POINT HERE? I CAN RUN THROUGH ONE MORE TIME IF YOU WOULD LIKE
LET'S JUST MAKE SURE EVERYBODY HAS OPPORTUNITY ONE MORE TIME
CERTAINLY
THANK YOU
COMMISSIONER BOWMAN
NOPE
I'M GOOD FOR RIGHT NOW
THANK YOU
THANK YOU COMMISSIONER CALKINS
NO FURTHER AT THIS TIME
THANK YOU
COMMISSIONER CHO
NO FURTHER
THANK YOU
THANK YOU COMMISSIONER FELLEMAN
I'M GOOD FOR NOW
THANK YOU
I BELIEVE WE ARE GOOD TO GO COMMISSIONER STEINBRUECK
WELL WITH THAT DIRECTOR METRUCK, DO YOU HAVE ANY CLOSING COMMENTS AT THIS AT THIS TIME? LANCE ANY FINAL COMMENTS? YEAH, WELL, I JUST WANT TO SAY THANKS TO BORGAN AND THE TEAM AND ALL THE DIRECTORS
IT'S A LOT OF WORK AND BUSINESS INTELLIGENCE AND THIS THE ENTIRE TEAM HAS JUST REALLY RALLIED AROUND US UNDER THESE UNPRECEDENTED CIRCUMSTANCES TO COME UP WITH A 2021 BUDGET
IT WAS EXTREMELY DIFFICULT
BUT, YOU KNOW I SAT THROUGH MANY SESSION WITH A TEAM AND YOU KNOW, THEY'VE TAKEN THIS THING SERIOUS TO TRY TO CUT AS MUCH AS POSSIBLE THE EXPENSES
I KNOW SOME OF THE THINGS THAT WE'RE DOING IN OTHER AIRLINES ARE DEPENDENT ON AIRLINES YOU SPEAK TO MIGHT HAVE A DIFFERENT OPINION IN TERMS OF FOR EXAMPLE, HOW WE USE PSC'S, WE USED CARES ACT MONEY
BUT WE'RE REALLY TRYING TO FIND A BALANCED APPROACH AND TRY TO PRESENT A BUDGET THAT IS THAT IS FAIR TO ALL OUR TENANTS WITHIN THE AIRPORT BUT ALSO RESPONDS TO THE DIRE CIRCUMSTANCES THAT WE'RE FACING WITH THIS PANDEMICS
I JUST REALLY WANT TO SAY THANKS TO THE STAFF FOR ALL THE WORK THAT THEY'VE DONE IN GETTING THIS BUDGET AT LEAST THE PRELIMINARY BUDGET COMPLETED
COMMISSIONER, I'D LIKE TO THANK LANCE ON FOR HIS LEADERSHIP OF HIS TEAM IN DOING THIS EFFORT
AND I THINK THAT YOU KNOW, ONE OF THE BIG THINGS THAT WAS REFLECTED HERE IN BOTH LANCE'S REMARKS AND BORGEN'S REMARKS, WHICH IS THE UNCERTAINTY GOING FORWARD, ESPECIALLY IN THE SHORT TERM
AND DOING THAT CONSERVATIVE APPROACH TO DO THAT BUT THEN MAKING SURE THAT WE KEEP THAT LONG VIEW IN MIND
WHERE THEY WANT TO END UP
WHERE WE WANT TO END UP, YOU KNOW, BEYOND 21 AND 22, I THINK
THAT WAS ONE OF THE THINGS ESPECIALLY UNDER FORECASTING THAT MICHAEL TALKED ABOUT LONG RANGE FORECAST
WHERE THOSE ARE, YOU KNOW, THAT THERE'S GOING TO BE RECOVERY WITHIN THAT
THERE MAY BE UPS AND DOWNS AND UNCERTAINTIES WITH AND THAT AND HIS LANCE IS LOOKING AT THAT
HE'S GOING TO CONTINUE TO MONITOR THIS AND HAVE THOSE TRIGGERS AND BE ABLE TO RESPOND TO IT,IF SOMETHING DRIVES THAT WHICH IS DIFFERENT THAN WHAT WE EXPECT
SO THERE'S LOTS OF UNCERTAINTY OUT THERE, BUT THE TEAM CONTINUES BOTH IN AVIATION ACROSS THE PORT TO LOOK AT THAT UNCERTAINTY AND BE PREPARED TO ADJUST TO IT BECAUSE WE DON'T KNOW
WE HAD SOME THOUGHTS WHERE WE WOULD HAVE BEEN 7 MONTHS AGO NOW, BUT WE'RE NOT
WE'RE IN SOME PLACE THAT'S PROBABLY DIFFERENT THAN WHAT WE THOUGHT SEVEN MONTHS AGO
SO THERE'S CONTINUES TO BE UNCERTAINTY GOING FORWARD, BUT THE TEAM IS CONTINUING TO ANALYZE THAT AND ADAPT TO THAT
OKAY, VERY GOOD
AND I WANT TO ON BEHALF OF THE COMMISSION I'M SURE EXTEND GREAT THANKS TO AIRPORT STAFF FOR ALL OF YOUR WORK AND PRESENTING THESE BUDGET ISSUES AND CHALLENGES .THAT IT TRULY IS AN EXTRAORDINARY TIME WHICH WERE OPERATING UNDER THE UNCERTAINTY PRINCIPLE AND WILL PROBABLY CONTINUE TO HAVE TO MAKE ADJUSTMENTS AS WE GO FORWARD
THIS ITERATIVE PROCESS AS WELL, BUT IT'S GOOD TO BE PLANNING
IT'S GOOD TO BE CONSERVATIVE
IT'S GOOD TO TAKE ALL THE INFORMATION WE CAN GATHER AND TRY TO FORECAST AS BEST AS POSSIBLE WHAT THE FUTURE MAY HOLD
BUT NO QUESTION THAT THERE'S PLENTY OF UNCERTAINTY IS STILL REMAINS
WE HAVE I THINK CONCLUDED THIS SESSION IF THERE'S NO OBJECTION, I WILL CALL THE MEETING ADJOURNED
WE WILL RECONVENE AT NOON FOR THE FULL COMMISSION PUBLIC MEETING AND THEN WE WILL ADD TO THAT AFTER THE PUBLIC MEETING EXECUTIVE SESSION
SO I HOPE COMMISSIONERS CAN BE AVAILABLE LATER IN THE AFTERNOON SO THAT WE CAN GET THROUGH THE EXEC SESSION
OKAY
MEETING IS NOW ADJOURNED
THANK YOU.

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