can we ever improve the airport experience?raeswashington.org/raeswashington/bennett.pdf · 1...

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RONALD REAGANWASHINGTON NATIONAL DULLES TOLL ROAD DULLES METRORAIL

WASHINGTON DULLES INTERNATIONAL

Can We Ever Improve the Airport Experience?

James E. BennettPresident and Chief Executive Officer

Metropolitan Washington Airports Authority

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The Who•

Airport•

Transportation Security Administration

•

Customs and Border Patrol

•

Federal Aviation Administration

•

Airlines•

Concessions

The What•

Global Economic Uncertainty

•

Old Airport Facilities•

Lack of Runways•

Complex and Changing Facilities

Who / What Influences the Airport Experience?

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The Global Economic Climate

4



Real GDP 1940 -

2010

http://research.stlouisfed.org/fred2/graph/?s%5b1%5d%5bid%5d=GDPC1

5



Tracking the Global Recession: Economic Indicators-United States

2010 Federal Reserve Bank of St. Louis: research.stlouisfed.org

Data lasted 2010-02-19

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45

55

65

75

85

95

105

115

82 84 86 88 90 92 94 96 98 00 02 04 06 08 10*

Inde

x

U.S. Consumer Sentiment1981 –

2010

Source: University of Michigan, Delta Associates; February 2010.*Through January 2010.

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Airport Infrastructure needs:How it is Done

How Much and When?

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Aviation infrastructure development supported by enplanement growth

Increased activity generated revenue to pay the related debt

Since 2001, aviation growth been limited

Financing Aviation Infrastructure 1950-2001

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‐100000

0

100000

200000

300000

400000

500000

600000

700000

800000

900000

1954

1959

1964

1969

1974

1979

1984

1989

1994

1999

2004

2009

U.S enplanements1954 to 2009

U.S Enplanements1954 to 2009

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Which Comes First?Growth or Infrastructure

To improve the airport experience and provide for economic growth, infrastructure is needed

To pay for infrastructure, growth is needed

Resulting in new and old ways to Finance the Infrastructure:•

Stimulus –

government stepping in for shovel ready projects•

PFC increase –

legislative effort•

Public Private Partnerships

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2009 2010 2011 2012 2013 Total %

Large 11,099 11,951 11,052 10,193 10,977 55,273 58.6%

Medium 3,523 2,869 2,859 1,821 2,201 13,273 14.1%

Small 1,384 1,509 1,233 918 754 5,800 6.1%

Non-hub* 1,036 1,051 1,067 1,083 1,099 5,335 5.6%

Commercial Service* 201 204 207 210 213 1,035 1.1%

Reliever* 706 716 727 738 749 3,636 3.9%

GA* 1,932 1,961 1,990 2,020 2,050 9,953 10.6%

Total 19,880 20,262 19,136 16,983 18,045 94,305 100%

ACI-NA Airport Capital Needs(Millions of Current Year Dollars)

Note: Assumes a 1.5% annual increase in construction cost escalation.*FAA NPIAS data.

Source ACI-NA Capital Needs Study

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EXPENDITURES

DESCRIPTION 2009 2010 2011 2012-2016 Unscheduled

Ronald Reagan Washington National Airport $52,363,000 $53,963,000 $78,175,000 $75,456,000 $119,575,000

Washington Dulles International Airport $282,816,000 $205,679,000 $138,345,000 $490,230,000 $2,635,343,000

Total $335,179,000 $259,642,000 $216,520,000 $565,686,000 $2,754,918,000

SUMMARY BY FUNDING SOURCES/REQUIREMENTS

Capital Construction Program2010 Budget


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Real Investment

2010 Federal Reserve Bank of St. Louis: research.stlouisfed.org

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251,541,000 713,227,000 237,100,000 524,400,000 212,800,000 349,900,000 204,800,000 329,400,000 192,655,000 371,233,000 195,200,000 439,400,000 180,000,000 356,800,000 165,000,000 201,000,000 157,700,000 170,000,000 148,400,000 235,600,000 127,800,000 169,000,000 121,800,000 394,000,000 118,000,000 225,000,000 113,222,000 161,000,000

1991

1992

1993

1994

1995

1996

1997

1998

1999

2000

2001

2002

2003

2004

2005

2006

2007

2008

2009

2010

$0

$200,000,000

$400,000,000

$600,000,000

$800,000,000


Comparison of Growth in Annual Spend

Annual Operating Budget Annual Capital Budget

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Overall Passenger Satisfaction Rating of National Airport

24.0%

56.1%54.1%

60.5%

52.1% 51.3%

60.7%

56.1%54.6%

52.7%

48.5% 49.7% 49.8%47.1%

0%

20%

40%

60%

80%

100%

PD1-31997

PD4-61997

CY1998

CY 1999 CY 2000 PD1-32001

PD3-62002

CY 2003 CY 2004 CY 2005 CY 2006 CY 2007 CY 2008 PD1-32009

Excellent (A+, A, A-)

Overall Rating of National Airport

New National Airport opening

Events of 9/11

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Traditional Methods of Airport Infrastructure Financing

Bonds: Leverage defers payment to users of facilities

Passenger charges: Current users of facilities pay “toll” for pay-go or leverage payments

Grants: Government participates in infrastructure development by providing a form of equity capital

Revenue: Airport operator contributes equity to lower cost or accomplish other goals

62%

25%

13%

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How will Airport Operators Accomplish Needed Infrastructure Development in the Current

Economic Climate?

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Unit TerminalsAirports lease land to airlines for terminal development

JFKLGA

NewarkBoston

ChicagoHouston

Airlines construct and maintain facilities under long term lease

Airports lose control over facilities and have competing terminals on airport

Use of grants and PFC limitedAirline bankruptcy further complicates arrangements

Airline have limited ability to finance terminals

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Privatized Airports

Argentina, Australia, Austria, Bahamas, Bolivia, Cambodia, Canada, Chile, China, Colombia, Denmark, Dominican Republic, Germany, Hungary, Italy, Japan, Malaysia, Mexico, New Zealand, Singapore, South Africa and Switzerland.

Current activity in privatized airport investments

Private Equity to Leverage required: 50/50 formerly 20/80−Both Available Equity and Leverage in limited supply

Chicago Midway− Investors pulled out of privatization paying a $126 million penalty to the City. −Chicago to repackage the plan

Gatwick−BAA sold Gatwick to Ferrovial−Ferrovial sold

Gatwick for £1.5BN to GIP, 25% less than plan, a £142m charge −GIP promised to upgrade services at Gatwick with IPOs

Previous IPOs

Vienna

Schiphol Concession Agreement

Third party contract with airport to build terminal−Terminal 4 at JFK

Airport Management can be in multiple forms

Private Methods of Financing Airports

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Hochtief

Airport

TAV Airports Holding Company

Skonto

Buve

Aecon

Concessions

Africa Israel Investments

Morgan Stanley Infrastructure Partners

Global Infrastructure Partners (GIP),(GE and Credit Suisse)−

GIP owns London City Airport

Citigroup Infrastructure Investors,

Vancouver Airport Services

Babcock and Brown

Borealis Infrastructure;

Venice Airport

Macquarie Capital Group

Current Private Interest in Airport Development

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US Airports have limited results with privatization.• Indianapolis

− BAA returned the airport to government management• Stewart Airport

−

In 2007 PANYNJ acquired remaining 93 years of concession

from National Express Group

Airports in the US enjoy low cost infrastructure financing− Tax exempt bonds provide low cost financing − Grants, PFCs provide equity contributions

Airport communities have a strong interest in airport management− Airports viewed as economic engines to community − Airlines have strong presence in airport communities

Private Airport Development in the U.S has been limited

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To Move Forward a Combination of Old And New Methods of Infrastructure Development is RequiredPrivate concession opportunities

Airport provide the airfield, utility, transportation connections

Concession develops terminal gates and contract with directly with airline

Negotiate variance on the theme to make it work.

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Conclusion

There is no single best method to improve the Airport Experience

The model of infrastructure Development based on continuing growth and healthy airlines is changing

Airports need to be creative in finding new solutions to age old issues of facility investment

WASHINGTON DULLES INTERNATIONAL AIRPORT

Main Terminal station B Gate station

A Gate Station C Gate Station

Security Checkpoints AeroTrain

WASHINGTON DULLES INTERNATIONAL AIRPORT

Concourse B expansion 4th Runway

International Arrivals Building Expansion

Dulles Corridor Metrorail Project

Dulles Toll Road New Airport Traffic Control Tower

Ronald Reagan Washington National Airport Dulles Corridor Metrorail Project

Washington Dulles International AirportDulles Toll Road

can we ever improve the airport experience?raeswashington.org/raeswashington/bennett.pdf · 1...

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