Baltimore/Washington International Airport

2004 C O M P E T I T I O N P L A N U P D A T E BALTIMORE/WASHINGTON INTERNATIONAL AIRPORT

BALTIMORE/WASHINGTON INTERNATIONAL AIRPORT (BWI) COMPETITION PLAN UPDATE

I. Statutory Requirements for Competition Plan

On April 5, 2000, the U.S. Congress passed the Wendell H. Ford Aviation Investment and Reform Act for the 21st Century (AIR-21). This act required certain large- and medium-hub airports to submit a Competition Plan in order for a new Passenger Facility Charge (PFC) to be approved for collection or a grant to be issued under the Airport Improvement Program (AIP) beginning in federal Fiscal Year 2001. On September 28, 2000, the Maryland Aviation Administration (MAA) submitted the first version of a Competition Plan for Baltimore/Washington International Airport (BWI) to the Federal Aviation Administration (FAA). Through correspondence and consultation with the FAA, the final version of BWI’s Competition Plan was approved as of February 13, 2001.

AIR-21 mandated that an airport’s Competition Plan be updated on an annual basis to keep up with ongoing events in the rapidly evolving aviation industry. On March 21, 2002, the MAA submitted the first version of its update to the Competition Plan. After correspondence and consultation with the FAA, the final version of BWI’s Competition Plan Update was approved as of August 29, 2002. According to Program Guidance Letter 03-01, dated November 19, 2002, the FAA has revised that mandate and now requires that airport Competition Plans must be updated every 18 months.

BWI’s February 2004 Competition Plan Update is intended to report new circumstances that have changed the competitive situation at BWI and to update the original submission of February 13, 2001 and the update of August 29, 2002.

II. Description of BWI Airport

BWI is one of three major airports serving the Washington-Baltimore metropolitan area. Washington Dulles International and Ronald Reagan Washington National airports also serve the area. BWI is located nine miles south of Baltimore and 26 miles north of Washington, D.C. It serves the fourth largest consumer population and travel market in the United States.

BWI currently has 71 gates, including 50 preferential-use gates and 21 common-use gates.1 Preferential-use gates are offered only to Signatory Airlines, i.e., airlines with a fully executed Basic Use and Lease Agreement (BULA) with the MAA. All gates are located in one 1.4 million-square-foot airport terminal, which includes four domestic concourses and one international concourse. The former Concourse A was demolished between November 2002 and February 2003, and is currently being rebuilt and expanded, so there are now only three domestic concourses.

III. 2002-2003 in Review

Over the past two years, the MAA has taken many important steps to improve competition at BWI:

• BWI is currently undergoing a $1.8 billion expansion program to provide additional convenient parking, improve vehicle and pedestrian access, and expand the capacity of the airport terminal. Highlights of the program include constructing an 8,400-space parking garage, consolidating rental car operations at a separate facility, widening and extending the upper and lower level terminal roadways, constructing new terminal access roadways, installing pedestrian skywalks over the terminal roadway and building over 500,000 square feet of additional terminal space. The Concourse A/B expansion project will create 11 new aircraft gates and provide BWI with increased concession, ticketing and baggage claim space. The final component of the expansion program is a terminal enhancement program, which will widen the ticket lobby and baggage claim areas and brighten and modernize the overall look of the terminal building.

• The MAA recovered 21 jet gates and 14 commuter terminal gates from US Airways. The recovery of these under-utilized gates, which were under a long-term preferential-use lease, has facilitated expansion of other airlines’ service at BWI. US Airways now has preferential-use rights to three jet gates and four of the 12 remaining commuter gates

1 Preferential-use arrangements exist where rights to a gate/holdroom and boarding device are granted during active loading and unloading on a priority basis, but not exclusively to a Signatory Airline. Common-use arrangements exist where the airport has complete control over use of the boarding device and the associated gate/holdroom (“boarding facilities”) and no tenant carrier has priority rights.

on Concourse D. Two commuter gates were lost due to reconfigured aircraft parking on Concourse D.

• Subsequent to the release of the gates by US Airways, some of those facilities were leased to fast-expanding AirTran Airways. AirTran now offers 31 daily departures from BWI to 12 destinations, including BWI’s only scheduled service to Dayton, Ohio; Ft. Myers, Florida; Freeport, Bahamas; and Rochester, New York.

• Some of the former US Airways gates were used to enable America West to move to Concourse D, improving their customer service and freeing up space in the International Concourse.

• In addition, some of the gates relinquished by US Airways enabled the MAA to move Continental, Northwest and United to Concourse D to allow for construction of the expanded Concourse A/B project for Southwest.

• The Airline Accommodation Committee (AAC), which has met biweekly for the past four years, continues to facilitate the entry of new carriers and help existing carriers make optimal use of existing airport gates and terminal space. The AAC was instrumental in the Airport’s negotiations with existing carriers for the use of the former US Airways gates on Concourse D.

• Southwest continues to expand its service at BWI, including its first transcontinental services (nonstop from BWI to Los Angeles, San Diego and San Jose).

• The Airport continues to work closely with several carriers as they continue to evaluate new or enhanced service from BWI. During the past two years, the Airport has obtained new nonstop service to six domestic markets (Dayton, Ohio; Hyannis, Massachusetts; Memphis, Tennessee; New London, Connecticut; San Diego, California; and San Jose, California) and three international markets (Cancun; Punta Cana; and Shannon, Ireland). Much of the new service has been added by new entrant carriers at BWI, such as AirTran, Midwest Airlines and Pan Am. Southwest also has increased its presence from BWI, adding new nonstop service to three unserved markets – Albuquerque, San Diego and San Jose. Since the last Competition Plan Update, Air Tran has increased from seven flights per day to 31 flights per day. AirTran has started new service to Dallas/Ft. Worth; Dayton, Ohio; Fort Lauderdale; Fort Myers; Freeport; Miami; Milwaukee; Rochester; and Tampa. Hooters Air began public charter service between BWI and Myrtle Beach in June 2003. USA 3000 has applied to serve Bermuda beginning in May 2004.

• Since the last Competition Plan Update, BWI has lost service to Atlantic City; Bangor, Maine; and Orlando Sanford. In addition, service to Cumberland and Hagerstown, Maryland, which began in December 2001, ceased in June 2003, when a State subsidy for the service ended. Laker Bahamas stopped twice-weekly service from BWI to Freeport following the initiation of daily AirTran service to that market. The Airport has not lost any other carriers since the last update.

• In 2002, negotiations commenced on a new BULA with the airlines serving BWI. These negotiations were completed in Spring 2003. The new BULA, which went into effect on June 1, 2003 for a five-year, one- month term, replaces the previous BULA that had been in place since the early 1970s. The new BULA allows for increased flexibility and efficiency in the use of airport facilities by air carriers, enhancing competition at the Airport. All intended Signatory Airlines have executed the BULA – AirTran, America West, American, Continental, Delta, Northwest and Southwest.

• A long-term lease with Southwest of certain Concourse B space, granting preferential-use rights to 10 gates, was cancelled, and the space was encompassed in the new BULA.

• A Memorandum of Understanding (MOU) was completed with Southwest in September 2001 and was amended in December 2002. This MOU relates to the financing, construction and lease of space in the new Concourse A/B, which is currently under construction. Southwest will have preferential use of all 26 gates in the new concourse. The space will be included in Southwest’s new BULA upon date of beneficial occupancy, which is slated to occur in Spring 2005.

• The installation of Common Use Terminal Equipment (CUTE) at common- use facilities and gates in the International Concourse is under way. We estimate this project will be completed by April 2004.

Copies of the complete 2004 Baltimore/Washington International Airport (BWI) Competition Plan Update can be obtained by contacting the MAA’s Office of Finance and Administration at 410-859-7576.