NEW ISSUE /BOOK-ENTRY ONLY In the respective opinions of Co‑Bond Counsel to the Airports Authority to be delivered upon the issuance of the Series 2011C-D Bonds, under existing law and assuming compliance by the Airports Authority with certain requirements of the Internal Revenue Code of 1986, as amended (the “Code”), that must be met subsequent to the issuance of the Series 2011C-D Bonds, with which the Airports Authority has certified, represented and covenanted its compliance, (i) interest on the Series 2011C Bonds is excluded from gross income for federal income tax purposes, except for any period during which such Series 2011C Bonds are held by a person who is a “substantial user” of the facilities financed or a “related” person, as those terms are used in Section 147(a) of the Code, but is an item of tax preference in calculating the federal alternative minimum tax liability of individuals, trusts, estates and corporations, and (ii) interest on the Series 2011D Bonds is excluded from gross income for federal income tax purposes and is not included in the computation of the federal alternative minimum tax imposed on individuals, trusts, estates and, subject to certain exceptions, corporations. Also, in the respective opinions of Co‑Bond Counsel to be delivered upon the issuance of the Series 2011C-D Bonds, under existing law, interest on the Series 2011C-D Bonds is exempt from income taxation by the Commonwealth of Virginia and is exempt from all taxation of the District of Columbia except estate, inheritance and gift taxes. See “TAX MATTERS” for a more detailed discussion.
$185,390,000 $10,385,000 Airport System Revenue Airport System Revenue Refunding Bonds Refunding Bonds Series 2011C Series 2011D (AMT) (Non-AMT) Dated: Date of Delivery Due: October 1, in the years as shown herein Interest on the Metropolitan Washington Airports Authority’s (the “Airports Authority”) Airport System Revenue Refunding Bonds, Series 2011C, in the principal amount of $185,390,000 (the “Series 2011C Bonds”) and Airport System Revenue Refunding Bonds, Series 2011D, in the principal amount of $10,385,000 (the “Series 2011D Bonds” together with the Series 2011D Bonds, the “Series 2011C-D Bonds”) will be payable on April 1, 2012, and semiannually thereafter on each April 1 and October 1. The Series 2011C-D Bonds are issuable only in fully registered form in denominations of $5,000 or any integral multiple hereof. When issued, the Series 2011C-D Bonds will be registered in the name of Cede & Co., as nominee of The Depository Trust Company, New York, New York (“DTC”), to which payments of principal and interest will be made. Purchasers will acquire beneficial interests in the Series 2011C-D Bonds, in principal amounts shown on the inside cover pages hereof, in book-entry form only. DTC will remit such payments to its participants who will be responsible for remittance to beneficial owners. See “THE SERIES 2011C-D BONDS – Book-Entry Only System. Proceeds of the Series 2011C Bonds, along with other available funds, will be used to (i) refund all of the Airports Authority’s outstanding Airport System Revenue and Refunding Bonds, Series 1998B, (ii) refund a portion of the Airports Authority’s outstanding Airport System Revenue Bonds, Series 2001A, (iii) fund a deposit to the Common Reserve Account in the Debt Service Reserve Fund to satisfy a portion of the debt service reserve requirement for the Series 2011C Bonds, the Series 2011D Bonds, and any other Common Reserve Bonds, and (iv) pay costs of issuing the Series 2011C Bonds. Proceeds of the Series 2011D Bonds, along with other available funds, will be used to (i) refund all of the Airports Authority’s outstanding Airport System Revenue Bonds, Series 2001B, (ii) fund a deposit to the Common Reserve Account in the Debt Service Reserve Fund to satisfy a portion of the debt service requirement for the Series 2011C Bonds, the Series 2011D Bonds and any other Common Reserve Bonds, and (iii) pay costs of issuing the Series 2011D Bonds. The Series 2011C-D Bonds will be issued under and secured by the Amended and Restated Master Indenture of Trust dated as of September 1, 2001, as amended (the “Master Indenture”), and the Forty-second Supplemental Indenture of Trust dated as of September 1, 2011 (the “Forty-second Supplemental Indenture” and, together with the Master Indenture, the “Indenture”), each between the Airports Authority and Manufacturers and Traders Trust Company (formerly Allfirst Bank), as the trustee (the “Trustee”). Except to the extent payable from the proceeds of the Series 2011C-D Bonds and any other moneys available for such payment, the Series 2011C-D Bonds are payable from, and secured by a pledge of, Net Revenues of the Airports Authority, as described herein, which pledge is on a parity with the pledge of Net Revenues made to secure the Airports Authority’s outstanding Bonds and other Bonds which may be issued in the future under the Indenture, as further supplemented. The Series 2011C-D Bonds will not be subject to acceleration upon an event of default or otherwise. THE SERIES 2011C-D BONDS SHALL NOT CONSTITUTE A DEBT OF THE DISTRICT OF COLUMBIA OR OF THE COMMONWEALTH OF VIRGINIA OR ANY POLITICAL SUBDIVISION THEREOF NOR A PLEDGE OF THE FAITH AND CREDIT OF THE DISTRICT OF COLUMBIA OR OF THE COMMONWEALTH OF VIRGINIA OR ANY POLITICAL SUBDIVISION THEREOF. THE ISSUANCE OF THE SERIES 2011C-D BONDS UNDER THE PROVISIONS OF THE DISTRICT ACT AND THE VIRGINIA ACT SHALL NOT DIRECTLY, INDIRECTLY, OR CONTINGENTLY OBLIGATE THE DISTRICT OF COLUMBIA OR THE COMMONWEALTH OF VIRGINIA OR ANY POLITICAL SUBDIVISION THEREOF TO ANY FORM OF TAXATION WHATSOEVER. THE AIRPORTS AUTHORITY HAS NO TAXING POWER. The Series 2011C-D Bonds will mature on October 1 in the years and in the principal amounts, and will bear interest at the rates, as shown herein. The Series 2011C-D Bonds are subject to optional redemption prior to maturity, as more fully described herein. The Series 2011C-D Bonds are not subject to mandatory sinking fund redemption. The Series 2011C-D Bonds are offered when, as and if issued and received by the Underwriters. Legal matters with respect to the issuance of the Series 2011C-D Bonds are subject to the approval of Co‑Bond Counsel to the Airports Authority, Hogan Lovells US LLP, Washington, D.C., and Lewis, Munday, Harrell & Chambliss, Washington, D.C. Certain legal matters will be passed upon for the Airports Authority by Philip G. Sunderland, Esquire, Vice President and General Counsel to the Airports Authority and for the Underwriters by their Co-Counsel Saul Ewing LLP, Washington, D.C. and McKenzie & Associates, Washington, D.C. It is expected that the Series 2011C-D Bonds will be available for delivery through the facilities of DTC in New York, New York, on or about September 29, 2011. This cover page contains certain information for quick reference only. It is not a summary of this Official Statement. Investors must read the entire Official Statement to obtain information essential to making an informed investment decision, paying particular attention to thematters discussed in Part II, “CERTAIN INVESTMENT CONSIDERATIONS.” J.P. Morgan BofA Merrill Lynch Barclays Capital Citigroup Loop Capital Markets, LLC Morgan Keegan Morgan Stanley Siebert Brandford Shank & Co., LLC Wells Fargo Securities September 21, 2011
Metropolitan Washington Airports Authority
$185,390,000 Airport System Revenue Refunding Bonds Series 2011C (AMT)
Year Principal Interest October 1 Amount Rate Yield CUSIP† No. 2012 $7,075,000 2.000% 0.380% 592646 Y98 2013 7,255,000 3.000 0.920 592646 Z22 2014 7,475,000 4.000 1.270 592646 Z30 2015 7,770,000 4.000 1.640 592646 Z48 2016 8,085,000 4.000 2.090 592646 Z55 2017 8,410,000 4.000 2.460 592646 Z63 2018 8,745,000 5.000 2.780 592646 Z71 2019 9,185,000 5.000 3.060 592646 Z89 2020 9,640,000 5.000 3.360 592646 Z97 2021 10,125,000 5.000 3.530 592646 2A0 2022 10,630,000 5.000 3.730* 592646 2B8 2023 11,160,000 5.000 3.910* 592646 2C6 2024 11,715,000 5.000 4.090* 592646 2D4 2025 12,305,000 5.000 4.230* 592646 2E2 2026 22,220,000 5.000 4.340* 592646 2F9 2027 23,335,000 5.000 4.440* 592646 2G7 2028 10,260,000 5.000 4.520* 592646 2H5
______* Priced to the par call date on October 1, 2021. † Copyright 2007, American Bankers Association. The CUSIP numbers are provided by Standard & Poor’s, CUSIP Service Bureau, a division of The McGraw-Hill Companies, Inc. The CUSIP numbers are being provided solely for the convenience of Bondholders only at the time of issuance of the Series 2011C Bonds and the Airports Authority and the Underwriters do not make any representation with respect to such numbers or undertake any responsibility for their accuracy now or at any time in the future. The CUSIP number for a specific maturity is subject to being changed after the issuance of the Series 2011C Bonds as a result of various subsequent actions including, but not limited to, a refunding in whole or in part of such maturity or as a result of the procurement of secondary market portfolio insurance or other similar enhancement by investors that is applicable to all or a portion of certain maturities of the Series 2011C Bonds.
Metropolitan Washington Airports Authority
$10,385,000 Airport System Revenue Refunding Bonds Series 2011D (Non-AMT)
Year Principal Interest October 1 Amount Rate Yield CUSIP† No. 2012 $370,000 2.000% 0.400% 592646 2J1 2013 380,000 2.000 0.670 592646 2K8 2014 390,000 2.000 0.870 592646 2L6 2015 400,000 3.000 1.140 592646 2M4 2016 405,000 3.000 1.520 592646 2N2 2017 420,000 4.000 1.830 592646 2P7 2018 435,000 3.000 2.120 592646 2Q5 2019 455,000 4.000 2.470 592646 2R3 2020 470,000 3.250 2.730 592646 2S1 2021 485,000 4.000 2.910 592646 2T9 2022 505,000 4.250 3.120* 592646 2U6 2023 525,000 4.250 3.300* 592646 2V4 2024 550,000 4.500 3.490* 592646 2W2 2025 575,000 4.500 3.630* 592646 2X0 2026 600,000 4.000 3.760* 592646 2Y8 2027 625,000 5.000 3.860* 592646 2Z5 2028 655,000 5.000 3.960* 592646 3A9 2029 690,000 4.000 4.060 592646 3B7 2030 710,000 4.000 4.130 592646 3C5 2031 740,000 5.000 4.220* 592646 3D3
______* Priced to the par call date on October 1, 2021. † Copyright 2007, American Bankers Association. The CUSIP numbers are provided by Standard & Poor’s, CUSIP Service Bureau, a division of The McGraw-Hill Companies, Inc. The CUSIP numbers are being provided solely for the convenience of Bondholders only at the time of issuance of the Series 2011D Bonds and the Airports Authority and the Underwriters do not make any representation with respect to such numbers or undertake any responsibility for their accuracy now or at any time in the future. The CUSIP number for a specific maturity is subject to being changed after the issuance of the Series 2011D Bonds as a result of various subsequent actions including, but not limited to, a refunding in whole or in part of such maturity or as a result of the procurement of secondary market portfolio insurance or other similar enhancement by investors that is applicable to all or a portion of certain maturities of the Series 2011D Bonds.
METROPOLITAN WASHINGTON AIRPORTS AUTHORITY
1 Aviation Circle Washington, D.C. 20001-6000 (703) 417-8700
MEMBERS OF THE AIRPORTS AUTHORITY
Charles D. Snelling, Chairman Honorable Thomas M. Davis III, Vice Chairman Robert Clarke Brown Richard S. “Dickie” Carter Honorable William W. Cobey Jr. Frank M. Conner III Honorable H.R. Crawford Michael A. Curto Shirley Robinson Hall Dennis L. Martire Michael L. O’Reilly Mame Reiley Warner H. Session
SENIOR MANAGEMENT
President and Chief Executive Officer ...... John E. Potter Executive Vice President and Chief Operating Officer ...... Margaret E. McKeough Vice President and Secretary to the Board of Directors ...... Quince T. Brinkley, Jr. Vice President and General Counsel ...... Philip G. Sunderland Vice President for Finance and Chief Financial Officer ...... Andrew T. Rountree Vice President for Audit ...... Valerie Holt Vice President for Engineering ...... Frank D. Holly, Jr. Acting Vice President for Communications ...... Mark Treadaway Vice President for Information Systems & Telecommunications ...... George R. Ellis Vice President for Business Administration ...... Steven C. Baker Vice President for Air Service Planning & Development ...... Mark Treadaway Vice President for Human Resources ...... Arl Williams Vice President and Airport Manager - Reagan National Airport ...... J. Paul Malandrino, Jr. Vice President and Airport Manager - Dulles International Airport ...... Christopher U. Browne Vice President for Public Safety ...... Elmer H. Tippett, Jr.
AIRPORTS AUTHORITY CONSULTANTS
Co-Bond Counsel ...... Hogan Lovells US LLP Lewis, Munday, Harrell & Chambliss
Financial Advisor ...... Jefferies & Company, Inc.
Airport Consultant ...... LeighFisher
This Official Statement is provided in connection with the issuance of the Series 2011C-D Bonds referred to herein and may not be reproduced or be used, in whole or in part, for any other purpose. The information contained in this Official Statement has been derived from information provided by the Airports Authority and other sources which are believed to be reliable.
The Underwriters have provided the following sentence for inclusion in this Official Statement. The Underwriters have reviewed the information in this Official Statement in accordance with, and as part of, their respective responsibilities to investors under the federal securities law as applied to the facts and circumstances of this transaction, but the Underwriters do not guarantee the accuracy or completeness of such information.
No dealer, broker, salesman or other person has been authorized by the Airports Authority, or the Underwriters to give any information or to make any representations other than those contained in this Official Statement, and, if given or made, such information or representations must not be relied upon as having been authorized by any of the foregoing. This Official Statement does not constitute an offer to sell or the solicitation of an offer to buy, nor shall there be any sale of, the Series 2011C-D Bonds by any person in any jurisdiction in which it is unlawful for such person to make such offer, solicitation or sale. The information and expressions of opinion herein speak as of their date unless otherwise noted and are subject to change without notice. Neither the delivery of this Official Statement nor any sale made hereunder shall under any circumstances create any implication that there has been no change in the affairs of the Airports Authority since the date hereof.
Neither the United States Securities and Exchange Commission nor any state securities commission has approved or disapproved of the Series 2011C-D Bonds or passed upon the adequacy or accuracy of this Official Statement. Any representation to the contrary is a criminal offense.
The order and placement of information in this Official Statement, including the appendices, are not an indication of relevance, materiality or relative importance, and this Official Statement, including the appendices, must be read in its entirety. The captions and headings in this Official Statement are for convenience only and in no way define, limit or describe the scope or intent, or affect the meaning or construction, of any provision or section in this Official Statement.
THIS OFFICIAL STATEMENT IS BEING PROVIDED TO PROSPECTIVE PURCHASERS EITHER IN BOUND PRINTED FORM (“ORIGINAL BOUND FORMAT”) OR IN ELECTRONIC FORMAT ON THE FOLLOWING WEBSITE: www.MuniOS.com. THIS OFFICIAL STATEMENT MAY BE RELIED UPON ONLY IF IT IS IN ITS ORIGINAL BOUND FORMAT OR AS PRINTED IN ITS ENTIRETY DIRECTLY FROM SUCH WEBSITE.
IN CONNECTION WITH THIS OFFERING, THE UNDERWRITERS MAY OVER ALLOT OR EFFECT TRANSACTIONS WHICH STABILIZE OR MAINTAIN THE MARKET PRICE OF THE SERIES 2011C-D BONDS AT A LEVEL ABOVE THAT WHICH OTHERWISE MIGHT PREVAIL IN THE OPEN MARKET. SUCH STABILIZING, IF COMMENCED, MAY BE DISCONTINUED AT ANY TIME.
PART I TABLE OF CONTENTS
INTRODUCTION ...... I-1 AIRPORTS AUTHORITY INDEBTEDNESS The Airports Authority ...... I-2 FOR THE AVIATION ENTERPRISE ...... I-17 The Airports ...... I-3 Outstanding Bonds of the Airports Operation of the Dulles Toll Road Authority for the Aviation and Construction of the Dulles Enterprise ...... I-17 Metrorail Extension ...... I-4 Subordinated Bonds for the Use of the Series 2011C-D Bond Aviation Enterprise ...... I-17 Proceeds ...... I-4 Commercial Paper Program for the Security and Source of Payment ...... I-5 Aviation Enterprise ...... I-18 Redemption of the Series 2011C-D Interest Rate Swaps for the Aviation Bonds ...... I-5 Enterprise ...... I-18 Certain Investment Considerations ...... I-5 Special Facility Bonds ...... I-20 The Airports Authority’s Capital AIRPORTS AUTHORITY FINANCIAL Construction Program for the INFORMATION...... I-20 Airports ...... I-5 General ...... I-20 Funding of the Capital Construction Aviation Enterprise Fiscal Years Program for the Airports ...... I-6 Ended December 31, 2006 Series 2011A Bonds and Series through 2010 ...... I-20 2011B Bonds ...... I-6 Management’s Discussion of Report of the Airport Consultant ...... I-7 Financial Information ...... I-23 Debt Service Coverage Unaudited Fiscal Year 2011 Results Forecast ...... I-7 through May 31, 2011 ...... I-26 Recent Changes to Information in Net Remaining Revenue ...... I-29 Part II of the Official Statement ...... I-9 The Aviation Enterprise Budget ...... I-30 Prospective Financial Information ...... I-9 Aviation Enterprise Fiscal Year Changes from the Preliminary 2011 Budget ...... I-30 Official Statement ...... I-10 TAX MATTERS ...... I-31 Miscellaneous ...... I-10 LEGAL MATTERS ...... I-33 THE SERIES 2011C-D BONDS ...... I-11 LITIGATION ...... I-33 General ...... I-11 RATINGS ...... I-35 Book-Entry Only System ...... I-11 UNDERWRITING ...... I-35 Redemption of the Series 2011C-D RELATIONSHIP OF PARTIES...... I-36 Bonds ...... I-11 MISCELLANEOUS ...... I-36 Security and Source of Payment ...... I-12 General ...... I-12 Debt Service Reserve Fund ...... I-12 Additional Bonds ...... I-13 Other Indebtedness ...... I-13 Events of Default and Remedies; No Acceleration or Cross Defaults ..... I-13 Estimated Sources and Uses of Funds ...... I-14 Refinancing Plan ...... I-14 DEBT SERVICE SCHEDULE...... I-15
- i -
PART II TABLE OF CONTENTS
THE 2001-2016 CCP ...... II-19 THE AIRPORTS AUTHORITY ...... II-1 Overview ...... II-19 General ...... II-1 Reagan National Airport ...... II-21 Senior Management ...... II-2 Dulles International Airport ...... II-21 Employees and Labor Relations ...... II-5 Deferred Projects ...... II-22 Lease of the Airports to the Airports Environmental Approvals ...... II-26 Authority ...... II-5 PLAN OF FUNDING FOR THE 2001-2016 Regulations and Restrictions CCP ...... II-27 Affecting the Airports ...... II-7 Funding Source: Bond Proceeds ...... II-27 Historical Operating Funding Source: Federal and State Restrictions ...... II-7 Grants ...... II-27 Additional Security Funding Source: PFCs ...... II-28 Restrictions at Reagan CERTAIN AGREEMENTS FOR USE OF National Airport ...... II-7 THE AIRPORTS ...... II-30 Possible Future Restrictions on Airport Use Agreement and Reagan National Airport ...... II-8 Premises Lease ...... II-30 Federal Funding Regulations ...... II-8 Terminal Concession Agreements ...... II-32 Noise Abatement Programs ...... II-9 Rental Car Facility Agreements ...... II-32 Risk Based Auditing ...... II-9 THE AIRPORTS SERVICE REGION AND Insurance ...... II-9 AIRPORTS ACTIVITY ...... II-33 THE BONDS ...... II-10 The Airports Service Region ...... II-33 Security and Source of Payment for Airlines Serving the Airports ...... II-35 the Bonds ...... II-10 Airports Activity ...... II-36 General ...... II-10 Historical Enplanement Activity ...... II-36 Rate Covenant ...... II-11 Reagan National Airport ...... II-37 Irrevocable Commitment of Dulles International Airport ...... II-38 Certain Passenger Facility Baltimore/Washington International Charges ...... II-12 Thurgood Marshall Airport ...... II-44 Flow of Funds ...... II-13 FINANCIAL CONDITION OF CERTAIN Additional Bonds ...... II-15 AIRLINES SERVING THE AIRPORTS ..II-45 Book-Entry Only System ...... II-16 General ...... II-45 Method of Selecting the Bonds for US Airways ...... II-45 Redemption ...... II-16 United/Continental ...... II-45 Notice of Redemption ...... II-17 Delta ...... II-45 THE AIRPORTS AUTHORITY’S Other Airlines Serving the FACILITIES AND MASTER PLANS ...... II-17 Airports ...... II-46 Facilities at Reagan National PFCs ...... II-47 Airport and Dulles International Information Concerning the Airlines ....II-47 Airport ...... II-17 CERTAIN INVESTMENT Reagan National Airport ...... II-17 CONSIDERATIONS ...... II-48 Dulles International Airport ...... II-18 General ...... II-48 The Airports Authority’s Master Airline Consolidations ...... II-48 Plans ...... II-19 Airlines Serving the Airports ...... II-49 Reagan National Airport ...... II-19 Cost of Aviation Fuel ...... II-49 Dulles International Airport ...... II-19 Economic Conditions ...... II-49 - ii -
Geopolitical Risks ...... II-50 APPENDICES Aviation Safety and Security Concerns ...... II-50 APPENDIX A – Report of the Airport Aviation Security Requirements and Consultant ...... A-1 Related Costs ...... II-50 APPENDIX B – Definitions and Summary Certain Factors Affecting the of Certain Provisions of the Indenture ...... B-1 Airports ...... II-51 APPENDIX C – Summary of Certain Regulations and Restrictions Provisions of the Airport Use Agreement and Affecting the Airports ...... II-51 Premises Lease ...... C-1 Effect of Bankruptcy on the Airline APPENDIX D – Book-Entry Only System .. D-1 Agreement ...... II-51 APPENDIX E – Proposed Form of Opinions Enforceability of Rights and of Co-Bond Counsel ...... E-1 Remedies and Bankruptcy ...... II-52 APPENDIX F – Form of Continuing Availability of Designated Disclosure Agreement ...... F-1 Passenger Facility Charges ...... II-52 Airports Authority Insolvency ...... II-52 Expiration and Possible Termination of Airline Agreement ....II-53 Limitations on Bondholders’ Remedies ...... II-53 Cost and Schedule of Capital Construction Program ...... II-53 Competition ...... II-54 Travel Substitutes ...... II-54 Other Key Factors ...... II-54 Forecasting Risk ...... II-55 Forward Looking Statements ...... II-55 REPORT OF THE AIRPORT CONSULTANT ...... II-55 CONTINUING DISCLOSURE ...... II-56 FINANCIAL ADVISOR ...... II-57 INDEPENDENT ACCOUNTANTS ...... II-57 PROSPECTIVE FINANCIAL INFORMATION...... II-57
- iii -
Part I
of the
OFFICIAL STATEMENT
relating to
METROPOLITAN WASHINGTON AIRPORTS AUTHORITY
$185,390,000 $10,385,000 Airport System Revenue Airport System Revenue Refunding Bonds Refunding Bonds Series 2011C Series 2011D (AMT) (Non-AMT) INTRODUCTION This Official Statement is furnished in connection with the issuance of the Metropolitan Washington Airports Authority’s (the “Airports Authority”) Airport System Revenue Refunding Bonds, Series 2011C, to be issued in the principal amount of $185,390,000 (the “Series 2011C Bonds”) and Airport System Revenue Refunding Bonds, Series 2011D, to be issued in the principal amount of $10,385,000 (the “Series 2011D” together with the Series 2011C Bonds, the “Series 2011C-D Bonds”).
The Series 2011C-D Bonds will be issued under and secured by the Amended and Restated Master Indenture of Trust dated as of September 1, 2001, as previously supplemented and amended (the “Master Indenture”), and the Forty-second Supplemental Indenture of Trust dated as of September 1, 2011 (the “Forty-second Supplemental Indenture” and, together with the Master Indenture, the “Indenture”), each between the Airports Authority and Manufacturers and Traders Trust Company, successor to Allfirst Bank, as the trustee (the “Trustee”). The Series 2011C-D Bonds, the Airports Authority’s outstanding bonds previously issued under the Master Indenture, and any additional bonds to be issued under the Indenture, as may be further supplemented, are referred to collectively in this Official Statement as the “Bonds.”
This Official Statement consists of the cover page, the inside cover pages, the table of contents, Part I, Part II and the appendices. Part I and Part II and all appendices should be read in their entirety. Part I of the Official Statement contains, among other things, information relating to the specific terms of the Series 2011C-D Bonds and the Airports Authority’s financial information. Part II of the Official Statement contains certain provisions applicable to all Bonds, information regarding the Airports Authority, the Airport Use Agreement and Premises Lease (the “Airline Agreement”), the Airport Service Region and the Airports’ activity, certain factors affecting the air transportation industry, the financial condition of certain airlines serving the Airports, the Airports Authority’s capital construction program for Ronald Reagan Washington National Airport and Washington Dulles International Airport (the “Capital Construction Program” or the “CCP”), the plan of funding for the CCP and certain investment considerations.
I-1
Part I of the Official Statement should be read together with Part II of the Official Statement. Unless otherwise defined in Part I, all terms used herein shall have the same meanings set forth in APPENDIX B – “Definitions and Summary of Certain Provisions of the Indenture.” Part II has not been updated since September 9, 2011 and provides information only as of such date.
The Airports Authority
The Airports Authority is a public body politic and corporate, created with the consent of the Congress of the United States by the District of Columbia Regional Airports Authority Act of 1985, as amended, codified at D.C. Code §9-901 et seq. (2001) (the “District Act”), and Chapter 598 of the Acts of Virginia General Assembly of 1985, as amended, codified at Va. Code §§5.1-152 to 178 (2001) (the “Virginia Act” and, together with the District Act, the “Acts”). Pursuant to an Agreement and Deed of Lease effective June 7, 1987, as amended (the “Federal Lease”), the Airports Authority assumed operating responsibility for Ronald Reagan Washington National Airport (“Reagan National Airport”) and Washington Dulles International Airport (“Dulles International Airport” and, together with Reagan National Airport, the “Airports”) upon the transfer of an initial 50-year leasehold interest in the Airports from the United States federal government to the Airports Authority in accordance with the Metropolitan Washington Airports Act of 1986 (Title VI, P.L. 99-500, as reenacted in P.L. 99-591, effective October 18, 1986, as amended by P.L. 102-240, effective December 18, 1991, and P.L. 104-264, effective October 9, 1996), codified at 49 U.S.C. §§49101-49112 (collectively, the “Federal Act”). The Federal Lease was amended in 2003 to extend its term to 2067. See Part II, “THE AIRPORTS AUTHORITY – Lease of the Airports to the Airports Authority.”
The members of the Airports Authority’s Board of Directors (the “Board”) are:
Name Appointing Authority Term Expires Charles D. Snelling, Chairman President of the United States May 30, 2012 Honorable Thomas M. Davis III, Vice Chairman Governor of Virginia November 23, 2016 Robert Clarke Brown President of the United States November 22, 2011 Richard S. “Dickie” Carter Governor of Maryland November 30, 2014 Honorable William W. Cobey Jr. President of the United States May 30, 2010* Frank M. Conner III Governor of Virginia November 23, 2012 Honorable H.R. Crawford Mayor of the District of Columbia January 5, 2013 Michael A. Curto Governor of Maryland November 30, 2016 Shirley Robinson Hall Mayor of the District of Columbia January 5, 2015 Dennis L. Martire Governor of Virginia November 23, 2014 Michael L. O’Reilly Governor of Virginia November 23, 2012 Mame Reiley Governor of Virginia November 23, 2014 Warner H. Session Mayor of the District of Columbia January 5, 2017
The Board operates through several standing committees including Finance, Audit, Executive and Governance, Legal, Business Administration, Strategic Development, Dulles Corridor, and Planning and Construction. Primary oversight over financing activities is provided by the Finance and Audit
* The Board members whose terms have expired will continue to serve in their current capacity until they are reappointed or their replacements are appointed by the appropriate governing body.
I-2
Committees. The Chairman of the Board’s Finance Committee is Robert Clarke Brown and Finance Committee members are Frank M. Conner III, H.R. Crawford, Thomas M. Davis III, Mame Reiley, and Charles D. Snelling (ex officio). The Chairman of the Board’s Audit Committee is William W. Cobey Jr., and the Audit Committee members are Frank M. Conner III, Shirley Robinson Hall, and Charles D. Snelling (ex officio).
The Airports
Reagan National Airport was opened for service in 1941. It is located on approximately 860 acres along the Potomac River in Arlington County, Virginia, approximately three miles from Washington, D.C. It has three interconnected terminal buildings, three runways and 44 aircraft gates. As of July 2011, Reagan National Airport was served by 28 airlines, including 10 major/national airlines, 15 regional/commuter airlines, one cargo and two foreign flag carriers. During the first seven months of 2011, total enplanements (including military and general aviation) at Reagan National Airport increased 6.3% compared to the first seven months of 2010. US Airways and its regional affiliates accounted for 38.7% of enplanements at Reagan National Airport from January through July 2011. See Part II, “THE AIRPORTS AUTHORITY’S FACILITIES AND MASTER PLANS – Facilities at Reagan National Airport and Dulles International Airport” and “THE AIRPORT SERVICE REGION AND AIRPORTS ACTIVITY.”
Dulles International Airport was opened for service in 1962. It is located on approximately 11,830 acres (exclusive of the Dulles Access Highway) in Fairfax and Loudoun Counties, Virginia, approximately 26 miles west of Washington, D.C. In addition to a main terminal, it has four midfield concourses (A, B, C and D), four runways and approximately 123 aircraft gates. As of July 2011, Dulles International Airport was served by 46 airlines, including 6 major/national airlines, 15 regional/commuter airlines, 22 foreign flag carriers and three all-cargo carriers. During the first seven months of 2011, total enplanements (including military and general aviation) at Dulles International Airport decreased by 1.0% compared to the first seven months of 2010. United Airlines (“United”) maintains a domestic hub and an international gateway operation at Dulles International Airport. On October 1, 2010, United and Continental Airlines (“Continental”) completed the merger of the two airlines. While United and Continental intend to merge the two airlines into a single entity that will operate under the United brand, they expect to operate the airlines separately until mid-2012. United, Continental and their regional affiliates accounted for 65.9% of domestic and international enplanements at Dulles International Airport from January through July 2011. See Part II, “THE AIRPORTS AUTHORITY’S FACILITIES AND MASTER PLANS – Facilities at Reagan National Airport and Dulles International Airport,” “THE AIRPORTS SERVICE REGION AND AIRPORTS ACTIVITY,” and “FINANCIAL CONDITION OF CERTAIN AIRLINES SERVING THE AIRPORTS.”
In May 2011, Delta Air Lines (“Delta”) and US Airways submitted a proposal to the Federal Aviation Administration (“FAA”) that was designed to satisfy FAA’s anti-competitive concerns with a previous slot-swap proposal submitted in 2009. In this May 2011 proposal, Delta agreed to an arrangement whereby it would give 42 of its slot pairs at Reagan National Airport to US Airways plus the rights to two daily flights to Sao Paulo, Brazil in 2015, and US Airways would give 132 of its slot pairs at New York- LaGuardia Airport (“LaGuardia”) to Delta. The two airlines also agreed to relinquish 16 LaGuardia slots and 8 Reagan National Airport slots to new market entrants. The completion of the slot swap transaction of Delta and US Airways received government approval on July 21, 2011 on the condition that the airlines complete the slot swap transaction in phases, and both Delta and US Airways have accepted such conditional approval.
I-3
Operation of the Dulles Toll Road and Construction of the Dulles Metrorail Extension
On November 1, 2008, the Virginia Department of Transportation (“VDOT”) transferred operational and financial control of the Dulles Toll Road (the “DTR”) from VDOT to the Airports Authority for a term of 50 years, upon the terms and conditions set forth by the Master Transfer Agreement dated December 29, 2006, and the Permit and Operating Agreement dated December 29, 2006 (collectively, the “VDOT Agreements”), each entered into by and between VDOT and the Airports Authority. In exchange for the rights to the revenues from operation of the DTR and certain other revenues described in the VDOT Agreements (collectively, the “DTR Revenues”), the Airports Authority agreed to (i) operate and maintain the DTR, (ii) cause the design and construction of the extension of the Metrorail from the Falls Church station in Fairfax County, along the Dulles Corridor to Dulles International Airport and beyond into Loudoun County (the “Dulles Metrorail Extension Project”) and (iii) make other improvements in the Dulles Corridor consistent with VDOT and regional plans. The Airports Authority is solely responsible for setting toll rates and collecting tolls, and its rate setting mechanism is pursuant to its regulations and consultation with the Dulles Corridor Advisory Committee.
The Airports Authority has established a Dulles Corridor Enterprise Fund, which accounts for the activity of the DTR and the Dulles Metrorail Extension Project separately from the activity of the Airports. The Airports Authority is constructing the Dulles Metrorail Extension Project in two phases. The cost of Phase 1, which is approximately 50% complete, is estimated at $2.75 billion; the cost of Phase 2, on which construction has not started, is currently being estimated by the Airports Authority. The Dulles Metrorail Extension Project is expected to be funded with a combination of toll road revenue bonds secured by a pledge of DTR Revenues, federal grants and contributions from local jurisdictions. The majority of the Airports Authority's contribution of 4.1% of total project cost is expected to be funded by Passenger Facility Charges ("PFCs") revenues. As of the date of this Official Statement, the Airports Authority has issued approximately $1.3 billion of Dulles Toll Road Revenue Bonds, and expects to issue at least $1.5 billion of additional Dulles Toll Road Revenue Bonds to complete the Dulles Metrorail Extension Project. The actual amount of additional Dulles Toll Road Revenue Bonds remains subject to the final development of Phase 2 costs, and final determination of additional funding sources that may be available.
Use of the Series 2011C-D Bond Proceeds
Proceeds of the Series 2011C Bonds, along with other available funds, will be used to (i) refund all of the Airports Authority’s outstanding Airport System Revenue and Refunding Bonds, Series 1998B, (ii) refund a portion of the Airports Authority’s outstanding Airport System Revenue Bonds, Series 2001A, (iii) fund a deposit to the Common Reserve Account in the Debt Service Reserve Fund to satisfy a portion of the debt service reserve requirement for the Series 2011C Bonds, the Series 2011D Bonds and any other Common Reserve Bonds, and (iv) pay costs of issuing the Series 2011C Bonds.
Proceeds of the Series 2011D Bonds, along with other available funds, will be used to (i) refund all of the Airports Authority’s outstanding Airport System Revenue Bonds, Series 2001B, (ii) fund a deposit to the Common Reserve Account in the Debt Service Reserve Fund to satisfy a portion of the debt service requirement for the Series 2011C Bonds, the Series 2011D Bonds and any other Common Reserve Bonds, and (iii) pay costs of issuing the Series 2011D Bonds.
I-4
Security and Source of Payment
The Series 2011C-D Bonds are secured on a parity with other Bonds issued under the Indenture by a pledge of the Net Revenues derived by the Airports Authority from the operation of the Airports, all as described in the Indenture. Upon the issuance of the Series 2011C-D Bonds, the Series 2011A Bonds (as defined below) and the Series 2011B Bonds (as defined below), approximately $5.3 billion aggregate principal amount of Bonds will be outstanding. In addition, the Airports Authority at any time can draw up to $250 million of the Airport System Revenue Commercial Paper Notes, Series One (the “Series One CP Notes”) and up to $21 million of the Airport System Revenue Commercial Paper Notes, Series Two (the “Series Two CP Notes” and, together with the Series One CP Notes, the “CP Notes”) under the credit facilities it currently has in place. See “AIRPORTS AUTHORITY INDEBTEDNESS FOR THE AVIATION ENTERPRISE – Outstanding Bonds of the Airports Authority for the Aviation Enterprise” and “– Commercial Paper Program for the Aviation Enterprise.” The principal sources of Net Revenues are the rates and charges generated under the Airline Agreement between the Airports Authority and airlines that have executed the Airline Agreement (the “Signatory Airlines”), fees received from non-signatory airlines using the Airports and payments under concession contracts at the Airports. For a description of the Airports Authority’s irrevocable commitment of designated PFCs revenue to pay Debt Service on certain Bonds, see Part II, “THE BONDS – Security and Source of Payment for the Bonds – Irrevocable Commitment of Certain Passenger Facility Charges.” See also Part II, “CERTAIN AGREEMENTS FOR USE OF THE AIRPORTS.”
The Bonds do not constitute a debt of the District of Columbia or of the Commonwealth of Virginia or any political subdivision thereof, or a pledge of the faith and credit of the District of Columbia or of the Commonwealth of Virginia or any political subdivision thereof. The Airports Authority has no taxing power. See Part II, “THE BONDS – Security and Source of Payment for the Bonds – General,” and APPENDIX A – “Definitions and Summary of Certain Provisions of the Indenture” hereto.
Redemption of the Series 2011C-D Bonds
The Series 2011C-D Bonds are subject to optional redemption, prior to maturity, as described under “THE SERIES 2011C-D BONDS.” The Series 2011C-D Bonds are not subject to mandatory sinking fund redemption.
Certain Investment Considerations
The Series 2011C-D Bonds may not be suitable for all investors. Prospective purchasers of the Series 2011C-D Bonds should read this entire Official Statement and give careful consideration to certain factors affecting the air transportation industry and the Airports, including cost of aviation fuel, air transportation security concerns, national and global economic conditions, geopolitical risks, financial condition of airlines serving the Airports, regulations and restrictions affecting the Airports, cost and schedule of the CCP, expiration and possible termination of the Airline Agreement, limitations on Bondholders’ remedies, competition and other key factors impacting the Airports. See Part II, “FINANCIAL CONDITION OF CERTAIN AIRLINES SERVING THE AIRPORTS” and “CERTAIN INVESTMENT CONSIDERATIONS.”
The Airports Authority’s Capital Construction Program for the Airports
Under the CCP, the Airports Authority has constructed and will continue to construct many of the principal elements of the Reagan National Airport and Dulles International Airport Master Plans, as defined
I-5
herein, that are necessary for the operation and development of the Airports, and will renovate certain existing facilities. See Part II, “THE AIRPORTS AUTHORITY’S FACILITIES AND MASTER PLANS.”
As part of its periodic CCP review process, the Airports Authority from time to time makes adjustments to the scope, timing and size of the CCP. The projects included in the active portion of the CCP, all of which are scheduled for completion by the end of 2016 (except for the Dulles International Airport Metrorail station which is expected to be completed in 2017) are collectively referred to herein as the “2001-2016 CCP.” Due to a number of factors, including economic conditions and increases in the cost of aviation fuel and the impact of those factors on the financial condition of airlines, in September 2008, the Airports Authority deferred certain 2001-2016 CCP projects and revised the scope of other 2001-2016 CCP projects, resulting in a $2.22 billion reduction in the cost of the 2001-2016 CCP. See Part II, “THE 2001- 2016 CCP.”
Based on actual and projected expenditures through 2016, the 2001-2016 CCP currently is estimated to cost approximately $5.1 billion (in inflated dollars). The Airports Authority expended approximately $4.1 billion of the $5.1 billion total estimated cost of the 2001-2016 CCP between January 2001 and June 2011. Most of the projects in the 2001-2016 CCP are expected to be completed by the end of 2014. All of the 2001-2016 CCP projects that require majority-in-interest (“MII”) approval from Signatory Airlines have received such approval. For a more detailed discussion of the CCP, the 2001-2016 CCP and sources of funding for the 2001-2016 CCP, see Part II, “THE 2001-2016 CCP” and “PLAN OF FUNDING FOR THE 2001-2016 CCP.”
Funding of the Capital Construction Program for the Airports
The Airline Agreement between the Airports Authority and each Signatory Airline defines capital expenditures and permits the Airports Authority to recover the costs of such capital expenditures within Airline Supported Areas (as defined in the Airline Agreement) from the rates and charges imposed under the Airline Agreement. Under the Airline Agreement, the Signatory Airlines are deemed to have consented to the funding of the capital projects under the CCP that require their consent unless an MII disapproves such capital projects. See APPENDIX C – “Summary of Certain Provisions of the Airport Use Agreement and Premises Lease.” Costs of capital projects not located in Airline Supported Areas are paid from other available Airports Authority funds.
The Airports Authority plans to finance the 2001-2016 CCP for the Airports, the cost of which is currently estimated at $5.1 billion (in inflated dollars), with a combination of Bonds, CP Notes, PFC revenues, federal and state grants and other available Airports Authority funds. Approximately $3.0 billion of the 2001-2016 CCP was funded with previously issued Bonds. After the issuance of the Series 2011A Bonds (as defined below) and the Series 2011B Bonds (as defined below), the Airports Authority expects to issue approximately $173.2 million of Additional Bonds, which will generate approximately $126.0 million of construction funds for the 2001-2016 CCP. The Airports Authority expects to fund the remainder of the costs of the 2001-2016 CCP with approximately $608.6 million of grants and $1.2 billion of PFC revenues. See “The Airports Authority’s Capital Construction Program for the Airports” and Part II, “PLAN OF FUNDING FOR THE 2001-2016 CCP.”
Series 2011A Bonds and Series 2011B Bonds
The Airports Authority on September 21, 2011 issued its Airport System Revenue and Refunding Variable Rate Bonds, Series 2011A (the “Series 2011A Bonds”), in an initial principal amount of
I-6
$233,635,000 million to (i) pay a portion of the costs of certain capital projects at the Airports, (ii) pay capitalized interest on the Series 2011A Bonds and certain outstanding Bonds, (iii) refinance a portion of the Airports Authority’s outstanding Airport System Revenue Commercial Paper Notes, Series One, (iv) refund a portion of the Airports Authority’s outstanding Airport System Revenue Variable Rate Bonds, Series 2002C, and refund a portion of the Airports Authority’s outstanding Airport System Revenue Variable Rate Bonds, Series 2009A, and (v) pay costs of issuing the Series 2011A Bonds. The Airports Authority sold the Series 2011A Bonds to Wells Fargo Bank, N.A., acting as Lead Arranger and Syndication Agent, PNC Bank, National Association, and Union Bank, N.A. as direct funded indexed obligations of the Airports Authority. The Airports Authority also issued on September 21, 2011, its Airport System Revenue and Refunding Variable Rate Bonds, Series 2011B (the “Series 2011B Bonds”), in an initial principal amount of $207,640,000 million to (i) pay a portion of the costs of certain capital projects at the Airports, (ii) refund a portion of the Airports Authority’s outstanding Airport System Revenue Variable Rate Bonds, Series 2002C, and (iii) pay costs of issuing the Series 2011B Bonds. The Airports Authority sold the Series 2011B Bonds to Citibank, N.A. as direct funded indexed obligations of the Airports Authority.
Report of the Airport Consultant
The Airports Authority retained LeighFisher to serve as the airport consultant (the “Airport Consultant”) in connection with the issuance of the Series 2011C-D Bonds, the Series 2011A Bonds and the Series 2011B Bonds. The Airport Consultant, together with its subconsultants, MAC Consulting, LLC and Airport Strategies, LLC, prepared the Report of the Airport Consultant dated September 9, 2011 (the “Report of the Airport Consultant”). The Report of the Airport Consultant is included in APPENDIX A and takes into consideration the issuance of the Series 2011C Bonds and the Series 2011D Bonds in the expected aggregate principal amount of approximately $176 million, the issuance of the Series 2011A Bonds in the expected aggregate principal amount of approximately $234 million, the issuance of the Series 2011B Bonds in the expected aggregate principal amount of approximately $208 million, and the future Bonds in the expected aggregate principal amount of approximately $173 million. The Report of the Airport Consultant has not been updated to reflect the final pricing terms of the Series 2011C-D Bonds, the Series 2011A Bonds, or the Series 2011B Bonds. The Airport Consultant has provided its consent to include the Report of the Airport Consultant in “Appendix A” hereto. See Part II, “REPORT OF THE AIRPORT CONSULTANT” and APPENDIX A – “Report of the Airport Consultant.”
Debt Service Coverage Forecast
The following table sets forth forecasts of the Airports Authority’s Net Revenues and debt service coverage for the period from 2011 through 2016. The minimum debt service coverage required by the rate covenant set forth in the Indenture is 1.25x. Debt service coverage is calculated as the ratio of Net Revenues available annually to pay debt service to the Annual Debt Service requirement for the Bonds. See Part II, “THE BONDS – Security and Source of Payment for the Bonds – Rate Covenant.” The Net Revenues of the Airports Authority are forecast to exceed the rate covenant requirement in each year of the forecast period. For information regarding the Airports Authority’s actual Annual Debt Service requirements on outstanding debt, see “DEBT SERVICE SCHEDULE.”
The forecasts in the following table are based on: (i) assumed debt service on approximately $176 million of the Series 2011C Bonds and the Series 2011D Bonds, $234 million of the Series 2011A Bonds, and $208 million of the Series 2011B Bonds; (ii) assumed debt service on $66.4 million of the outstanding Series 2003D Bonds, $134.7 million of the outstanding Series 2009D Bonds, $170 million of the
I-7
outstanding Series 2010C Bonds, $170 million of the outstanding Series 2010D Bonds, and approximately $39 million of the CP Notes bearing interest at a variable rate assumed to be outstanding after the issuance of the Series 2011C-D Bonds†; (iii) the actual debt service on approximately $4.24 billion of other outstanding Bonds; and (iv) assumed debt service on approximately $173 million of future Bonds that the Airports Authority expects to issue in 2012 and 2013 to finance completion costs of the 2001-2016 CCP. The information in the table is based on the Airports Authority’s irrevocable commitment of $35 million of Designated Passenger Facility Charges (as such term is defined herein) per year in each year from 2011 through 2016 plus the intended commitment of $25 million in 2011 and $5 million per year in each year from 2012 through 2016 of additional Designated Passenger Facility Charges to pay Annual Debt Service on the Bonds, thereby reducing Annual Debt Service by such combined amount in each year for the purpose of calculating debt service coverage during the forecast period. See Part II, “THE BONDS – Security and Source of Payment for the Bonds – Irrevocable Commitment of Certain Passenger Facility Charges” and Part II, “PLAN OF FUNDING FOR THE 2001-2016 CCP – Funding Source: PFCs.”
As noted in the following table, debt service coverage is forecast to decrease from 1.35x in 2011, to 1.30x in 2012. For a more detailed explanation of the forecast decrease in debt service coverage and of the assumptions behind the calculations of debt service coverage, see APPENDIX A – “Report of the Airport Consultant.”
[Remainder of page intentionally left blank]
† The above assumed debt service excludes the debt service on the refunded Series 2002C Bonds and Series 2009A Bonds.
I-8
Forecast Debt Service Coverage1 ($000’s)
Series 2011C-D Bonds, Series Less 2011A Bond and Outstanding CP Notes Series 2011B Additional Total Bonds Net Bonds Debt Bonds Bonds Irrevocable Intended Debt Coverage Year Revenues Debt Service Service Debt Service Debt Service PFC2 PFC2 Service2 All Debt 2
2011 $387,445 $346,960 $283 $274 – ($35,000) ($25,000) $287,516 1.35 2012 $442,687 $331,675 $1,446 $46,402 – ($35,000) ($5,000) $339,522 1.30 2013 $457,204 $334,252 $1,450 $53,526 $1,323 ($35,000) ($5,000) $350,552 1.30 2014 $468,482 $335,582 $1,455 $54,796 $3,442 ($35,000) ($5,000) $355,275 1.32 2015 $490,255 $342,773 $1,464 $56,352 $10,626 ($35,000) ($5,000) $371,216 1.32 2016 $492,310 $342,641 $1,464 $53,315 $11,119 ($35,000) ($5,000) $371,539 1.33 ______1 Totals may not add due to rounding. 2 Debt service in each year is net of Designated Passenger Facility Charges in the annual amount of $35 million irrevocably committed to the payment of debt service on PFC Eligible Bonds plus the intended commitment of $25 million in 2011 and $5 million per year of additional Designated Passenger Facility Charges in each year from 2012 though 2016 to be used towards the payment of debt service on PFC Eligible Bonds. Source: Report of the Airport Consultant.
The forecasts set forth in the Report of the Airport Consultant are based on assumptions as discussed in APPENDIX A – “Report of the Airport Consultant.” The Report of the Airport Consultant should be read in its entirety for an understanding of the forecasts and the underlying assumptions. The Report of the Airport Consultant has been included herein in reliance upon the knowledge and experience of LeighFisher as the Airport Consultant and its subconsultants. As stated in the Report of the Airport Consultant, any forecast is subject to uncertainties; therefore, there will be differences between the forecast and actual results, and those differences may be material. See Part II, “CERTAIN INVESTMENT CONSIDERATIONS,” “REPORT OF THE AIRPORT CONSULTANT” and APPENDIX A – “Report of the Airport Consultant” for a discussion of factors, data and information that may affect forecasts related to the air transportation industry and the Airports.
Recent Changes to Information in Part II of the Official Statement
Part II of this Official Statement has not been updated since September 9, 2011. Certain items referred to in Part II of this Official Statement have changed since September 9, 2011. Such changes include the date to which FAA’s reauthorization and the FAA’s airport development grants under its AIP program have been extended, which date is currently January 31, 2012. In addition, on September 14, 2011, the Avis Budget Group abandoned its bid for Dollar Thrifty Automotive Group, Inc.
Prospective Financial Information
The Report of the Airport Consultant included in APPENDIX A of this Official Statement was prepared by the Airport Consultant and contains prospective financial information. This prospective financial information was not prepared with a view toward compliance with the published guidelines of the Securities and Exchange Commission or the guidelines established by the American Institute of Certified Public Accountants for preparation and presentation of prospective financial information. Other prospective financial information included in this Official Statement, including summaries of prospective financial information from the Report of the Airport Consultant and budget information (See “AIRPORTS
I-9
AUTHORITY FINANCIAL INFORMATION – Aviation Enterprise Fiscal Year 2011 Budget”), has been prepared by, and is the responsibility of, the Airports Authority's management. PricewaterhouseCoopers LLP, independent accountants, has neither examined nor compiled this prospective financial information and, accordingly, PricewaterhouseCoopers LLP does not express an opinion or offer any other form of assurance with respect thereto. The PricewaterhouseCoopers LLP report included in the Airports Authority’s 2010 CAFR (as defined below) relates to the Airports Authority’s historical financial information. It does not extend to the prospective financial information and should not be read to do so.
Changes from the Preliminary Official Statement
This Official Statement includes certain information that was not available for inclusion in the Preliminary Official Statement dated September 9, 2011, including par amounts, maturities, interest rates, yields, prices, debt service amounts, use of proceeds of the Series 2011C-D Bonds, CUSIP numbers, redemption terms and prices and other information dependent on such matters and not known at the time of the Preliminary Official Statement, and additional information relating to a legislative proposal entitled the American Jobs Act of 2011 which, for tax years beginning on or after January 1, 2013, could result in additional federal income tax being imposed on certain holders of state or local bonds, including the Series 2011C-D Bonds, if enacted. See “TAX MATTERS” herein.
Miscellaneous
This Official Statement contains brief descriptions of, among other things, the Series 2011C-D Bonds, the Airports Authority, the Airports and the CCP. Such descriptions do not purport to be comprehensive or definitive. All references in this Official Statement to documents are qualified in their entirety by reference to such documents, and references to the Series 2011C-D Bonds are qualified in their entirety by reference to the forms of the Series 2011C-D Bonds included in the Forty-second Supplemental Indenture.
The Report of the Airport Consultant is included in APPENDIX A. A copy of the audited financial statements of the Airports Authority as of December 31, 2010, and December 31, 2009, and for the years then ended, which includes financial statements and management’s discussion and analysis thereof and footnotes thereto, is contained in the Airports Authority’s Comprehensive Annual Financial Report of 2010 (“2010 CAFR”) which was filed with the Municipal Securities Rulemaking Board under its Electronic Municipal Market Access System (“EMMA”) and can also be found at www.mwaa.com/311.htm and www.dacbond.com and is hereby incorporated into this Official Statement by reference. Definitions and a summary of certain provisions of the Indenture are included in APPENDIX B. A summary of certain provisions of the Airline Agreement between the Airports Authority and the Signatory Airlines is included in APPENDIX C. A description of the book-entry system maintained by DTC is included in APPENDIX D. The proposed form of the opinions to be delivered to the Airports Authority by Co-Bond Counsel, Hogan Lovells US LLP and Lewis, Munday, Harrell & Chambliss, in connection with the issuance of the Series 2011C-D Bonds is included in APPENDIX E. The Airports Authority has executed a Continuing Disclosure Agreement (the “Disclosure Agreement”) with Digital Assurance Certification L.L.C. (“DAC”), the form of which is included in APPENDIX F, to assist the Underwriters in complying with the provisions of Rule 15c2-12 (“Rule 15c2-12”), promulgated by the United States Securities and Exchange Commission (the “SEC”) under the Securities Exchange Act of 1934, as amended, and as in effect as of the date hereof, by providing annual financial and operating data, and material event notices required by Rule 15c2-12. See Part II, “CONTINUING DISCLOSURE” and APPENDIX F – “Form of Continuing Disclosure Agreement.”
The information in this Official Statement is subject to change without notice, and neither the delivery of this Official Statement nor any sale made hereunder shall under any circumstances create
I-10
an implication that there has been no change in the affairs of the Airports Authority or the Airports since the date hereof. This Official Statement is not to be construed as a contract or agreement between the Airports Authority or the Underwriters and purchasers or owners of any of the Series 2011C-D Bonds.
Inquiries regarding information about the Airports Authority and its financial matters contained in this Official Statement may be directed to Andrew T. Rountree, Vice President for Finance and Chief Financial Officer, at (703) 417-8700, or email at [email protected]. Certain financial information with respect to the Airports Authority, including the Master Indenture, also may be obtained through the Airports Authority’s website at www.mwaa.com/311.htm and through the website of DAC at www.dacbond.com. DAC serves as Disclosure Dissemination Agent for the Airports Authority. See Part II, “CONTINUING DISCLOSURE.”
THE SERIES 2011C-D BONDS
General
The Series 2011C-D Bonds are being issued in two separate Series under the Indenture. Each of the Series 2011C-D Bonds will be dated their date of delivery, which will be on or about September 29, 2011, will bear interest from that date, payable beginning on April 1, 2012, and semiannually thereafter on each April 1 and October 1 at the interest rates, and will mature on October 1 in the years, set forth on the inside cover pages of this Official Statement. The Series 2011C-D Bonds will be issued in denominations of $5,000 or integral multiples thereof and will be subject to optional redemption prior to maturity as described below under “Redemption of the Series 2011C-D Bonds.” The Series 2011C-D Bonds are not subject to mandatory sinking fund redemption.
Book-Entry Only System
The Series 2011C-D Bonds will be issued as fully registered bonds without coupons and are initially to be registered in the name of Cede & Co., as nominee for DTC as Securities Depository for the Series 2011C-D Bonds. For more information regarding the Book-Entry Only System, see Part II, “THE BONDS – Book-Entry Only System” and APPENDIX D – “Book-Entry Only System.”
NEITHER THE AIRPORTS AUTHORITY, THE UNDERWRITERS, NOR THE TRUSTEE WILL HAVE ANY RESPONSIBILITY OR OBLIGATION TO DTC PARTICIPANTS, TO INDIRECT PARTICIPANTS, OR TO ANY BENEFICIAL OWNER WITH RESPECT TO (i) THE ACCURACY OF ANY RECORDS MAINTAINED BY DTC, CEDE & CO., ANY DTC PARTICIPANT, OR ANY INDIRECT PARTICIPANT; (ii) ANY NOTICE THAT IS PERMITTED OR REQUIRED TO BE GIVEN TO THE OWNERS OF THE SERIES 2011C-D BONDS; (iii) THE SELECTION BY DTC OR ANY DTC PARTICIPANT OR INDIRECT PARTICIPANT OF ANY PERSON TO RECEIVE PAYMENT IN THE EVENT OF A PARTIAL REDEMPTION OF ANY SERIES 2011C-D BONDS; (iv) THE PAYMENT BY DTC OR ANY DTC PARTICIPANT OR INDIRECT PARTICIPANT OF ANY AMOUNT WITH RESPECT TO THE PRINCIPAL OR REDEMPTION PREMIUM, IF ANY, OR INTEREST DUE WITH RESPECT TO ANY SERIES 2011C-D BONDS; (v) ANY CONSENT GIVEN OR OTHER ACTION TAKEN BY DTC AS THE OWNER OF THE SERIES 2011C-D BONDS; OR (vi) ANY OTHER MATTER RELATING TO DTC OR THE BOOK-ENTRY ONLY SYSTEM.
Redemption of the Series 2011C-D Bonds
The Series 2011C-D Bonds maturing on and after October 1, 2022 are subject to optional redemption prior to maturity by the Airports Authority, on and after October 1, 2021, in whole or in part, by
I-11
lot, at any time, at 100% of the principal amount of the Series 2011C Bonds and the Series 2011D Bonds to be redeemed plus interest accrued to the date fixed for redemption.
For information regarding the method of selecting the Series 2011C-D Bonds for redemption and information regarding the notice of redemption, see Part II, “THE BONDS – Method of Selecting the Bonds for Redemption” and “THE BONDS – Notice of Redemption” as well as APPENDIX B – “Definitions and Summary of Certain Provisions of the Indenture.”
Security and Source of Payment
General
The Series 2011C-D Bonds are secured (i) on a parity with other Bonds issued by the Airports Authority under the Indenture by a pledge of Net Revenues derived by the Airports Authority from the operation of the Airports and (ii) by the Series 2011C-D Bond proceeds deposited in certain segregated funds held by the Trustee. No property of the Airports Authority is subject to any mortgage for the benefit of the owners of the Series 2011C-D Bonds. The Series 2011C-D Bonds shall not constitute a debt of the District of Columbia or of the Commonwealth of Virginia or any political subdivision thereof or a pledge of the faith and credit of the District of Columbia or of the Commonwealth of Virginia or any political subdivision thereof. The Airports Authority has no taxing power. For information regarding the Rate Covenant and other provisions of the Indenture, see Part II, “THE BONDS – Security and Source of Payment for the Bonds” and APPENDIX B – “Definitions and Summary of Certain Provisions of the Indenture.”
Debt Service Reserve Fund
Under the Indenture, the Airports Authority has covenanted to deposit, or cause to be deposited at closing, amounts sufficient to maintain the Common Reserve Account (herein referred to as the “Common Reserve Account”) in the Debt Service Reserve Fund in an amount equal to the Common Debt Service Reserve Requirement for the Series 2011C-D Bonds and any other Common Reserve Bonds outstanding (the “Common Debt Service Reserve Requirement”). Any other Series of Bonds may be secured with amounts on deposit in the Common Reserve Account if the Trustee receives from an Airports Authority Representative written directions to include such additional Bonds as “Common Reserve Bonds” on a parity with the Series 2011C-D Bonds. The Common Debt Service Reserve Requirement will be recalculated in connection with such written directions. “Common Reserve Bonds” means any other Series of Bonds issued under the Indenture and designated in writing to the Trustee by an Airports Authority Representative as being secured by amounts on deposit in the Common Reserve Account on a parity with the Series 2011C-D Bonds and any other Common Reserve Bonds. The “Common Debt Service Reserve Requirement,” in part, means an amount equal to the lesser of (i) 10% of the stated principal amount of the Series 2011C-D Bonds and any other Common Reserve Bonds; (ii) the Maximum Annual Debt Service on the Series 2011C-D Bonds and any other Common Reserve Bonds in any Fiscal Year; or (iii) 125% of the average Annual Debt Service for the Series 2011C-D Bonds and any other Common Reserve Bonds. The Common Debt Service Reserve Requirement is $132,050,416.79. To meet the Common Debt Service Reserve Requirement the Airports Authority will combine funds from prior Debt Service Reserve Accounts for the refunded bonds and Series 2011C-D Bonds proceeds totaling $12,270,704.03 to satisfy the debt service requirement for the Series 2011C-D Bonds and any other Common Reserve Bonds. See “Estimated Sources and Uses of Funds.”
Under conditions specified in the Indenture, the Airports Authority may fund the Debt Service Reserve Requirement for any Series of Bonds, including the Series 2011C-D Bonds, by delivering a letter of credit or other credit facility to the Trustee in substitution for, or in lieu of, moneys to be held in the Debt
I-12
Service Reserve Fund for such Series. The Indenture requires that the provider of any such credit facility have a credit rating in one of the two highest rating categories by two Rating Agencies (as defined therein). In the event the Debt Service Reserve Requirement is funded with a letter of credit or other credit facility, there will be no interest earnings on the account in the Debt Service Reserve Fund for such Series of Bonds. See the description under the heading “Debt Service Reserve Fund Deposit” in APPENDIX B – “Definitions and Summary of Certain Provisions of the Indenture.”
The Trustee is required to draw on the Common Reserve Account in the Debt Service Reserve Fund whenever the amount held in the Interest Account or the Principal Account for Common Reserve Bonds is insufficient to pay interest on or principal of the Common Reserve Bonds on the date such payments are due. To the extent not needed to maintain the balance therein equal to the Common Debt Service Reserve Requirement, earnings on investments of the Common Reserve Account in the Debt Service Reserve Fund shall be transferred after each Bond Payment Date to the Revenue Fund.
If the amount on deposit in the Common Reserve Account in the Debt Service Reserve Fund at any time is less than the Common Debt Service Reserve Requirement, such deficiency is required to be made up as set forth in Part II, “THE BONDS – Security and Source of Payment for the Bonds – Flow of Funds.”
Additional Bonds
Subject to certain terms and conditions, additional Bonds may be issued from time to time to finance the Airports Authority’s CCP and to refund certain Bonds and other indebtedness of the Airports Authority. Additional Bonds will be equally and ratably secured on a parity with the Series 2011C-D Bonds and other Bonds outstanding at the time of issuance. See Part II, “THE BONDS – Security and Source of Payment for the Bonds – Additional Bonds,” “PLAN OF FUNDING FOR THE 2001-2016 CCP” and APPENDIX B – “Definitions and Summary of Certain Provisions of the Indenture.”
Other Indebtedness
In addition to financing its CCP with the proceeds of Bonds, the Airports Authority is authorized under the Indenture to issue other debt to finance its capital needs. The Indenture permits the Airports Authority at any time to issue (a) bonds, notes or other obligations payable from and secured by revenues other than Revenues and Net Revenues, including, but not limited to, Special Facility Bonds, and (b) bonds, notes or other obligations payable from Net Revenues, including revenue anticipation notes, on a basis subordinate to the Bonds, including Subordinated Bonds. For a more detailed discussion on the Airports Authority’s Subordinated Bonds, the commercial paper program, interest rate swaps, and Special Facility Bonds, see “AIRPORTS AUTHORITY INDEBTEDNESS FOR THE AVIATION ENTERPRISE.”
Events of Default and Remedies; No Acceleration or Cross Defaults
“Events of Default” and related remedies under the Indenture are described in the summary of certain provisions of the Indenture attached as APPENDIX B, in particular in the section “Defaults and Remedies.” The occurrence of an Event of Default does not grant any right to accelerate payment of the Series 2011C-D Bonds to either the Trustee or the Holders of any Bonds. An Event of Default with respect to one Series of Bonds will not be an Event of Default with respect to any other Series unless such event or condition on its own constitutes an Event of Default with respect to such other Series. The Trustee is authorized to take certain actions upon the occurrence of an Event of Default, including initiating proceedings to enforce the obligations of the Airports Authority under the Indenture. Since (a) Net Revenues are Revenues net of all amounts needed to pay Operation and Maintenance Expenses, and (b) the Airports Authority is not subject to involuntary bankruptcy proceedings, the Airports Authority may
I-13 [THIS PAGE INTENTIONALLY LEFT BLANK]
continue collecting Revenues indefinitely and applying them to the operation of the Airports, even if an Event of Default has occurred and no payments are being made on the Series 2011C-D Bonds.
Estimated Sources and Uses of Funds
The following table sets forth the estimated sources and uses of the proceeds of the Series 2011C-D Bonds and other available funds of the Airports Authority.
Series 2011C Bonds Series 2011D Bonds SOURCES: Par Amount of Bonds $185,390,000 $10,385,000 Net Premium 14,492,358 613,462 Airports Authority Funds1 16,336,307 1,494,737
Total Sources2 $216,218,665 $12,493,199
USES: Deposit to the Redemption Account for the Series 1998B Bonds $31,053,363 − Deposit to the Redemption Account for the Series 2001A Bonds 171,812,257 − Deposit to the Redemption Account for the Series 2001B Bonds − 11,758,249 Deposit to the Common Reserve Account 11,630,727 639,977 Underwriters’ Discount and Costs of Issuance 1,722,318 94,973
Total Uses2 $216,218,665 $12,493,199
______1 Amounts from the refunded bonds’ prior debt service accounts and debt service reserve accounts. 2 Totals may not add due to rounding.
Refinancing Plan
A portion of the proceeds of the Series 2011C Bonds will be deposited into a Redemption Account held by the Trustee to redeem all of the Series 1998B Bonds. Pursuant to a Refunding Agreement dated as of September 1, 2011, relating to the Series 1998B Bonds, the Trustee may use such amount, together with other funds of the Airports Authority, to purchase permitted investments that mature at such times and in such amounts as will be sufficient to pay the principal of, the redemption price and accrued interest, if any, on the Series 1998B Bonds being redeemed on October 22, 2011.
A portion of the proceeds of the Series 2011C Bonds will be deposited into Redemption Accounts held by the Trustee to redeem certain maturities of the Series 2001A Bonds. Pursuant to a Refunding Agreement dated as of September 1, 2011, relating to the Series 2001A Bonds, the Trustee may use such amounts, together with other funds of the Airports Authority, to purchase permitted investments that mature at such times and in such amounts as will be sufficient to pay the principal of, the redemption price and accrued interest, if any, on such Series 2001A Bonds being redeemed on October 1, 2011.
I-14
A portion of the proceeds of the Series 2011D Bonds will be deposited into a Redemption Account held by the Trustee to redeem all of the Series 2001B Bonds. Pursuant to a Refunding Agreement dated as of September 1, 2011, relating to the Series 2001B Bonds, the Trustee may use such amount, together with other funds of the Airports Authority, to purchase permitted investments that mature at such times and in such amounts as will be sufficient to pay the principal of, the redemption price and accrued interest, if any, on the Series 2001B Bonds being redeemed on October 1, 2011.
DEBT SERVICE SCHEDULE The following table sets forth (i) the actual debt service on the Series 2011C-D Bonds, (ii) actual debt service on approximately $4.1 billion of outstanding fixed rate Bonds, (iii) the assumed debt service on outstanding variable rate debt consisting of $233.6 million of the outstanding Series 2011A Bonds, $207.6 million of the outstanding Series 2011B Bonds, $66.4 million of the outstanding Series 2003D Bonds, $134.7 million of the outstanding Series 2009D Bonds, $170 million of the outstanding Series 2010C Bonds, $170 million of the outstanding Series 2010D Bonds, and $271 million of the CP Notes, which is the maximum amount of the CP Notes available to be drawn by the Airports Authority under the credit facilities it currently has in place†. As of August 31, 2011, the Airports Authority had outstanding $88.5 million of the available $271 million of authorized CP Notes. The Airports Authority expects that after the issuance of the Series 2011A Bonds there will be outstanding $38.5 million of the available $271 million of authorized CP Notes.
Debt Service on Maximum Available Series2011C-D Series One Outstanding and Series Bonds Debt Two CP Total Debt Series2011C Series2011D Service1 Notes2 Service Bond Year 2011A 2011B Principal Interest Principal Interest 2012 $16,682,025 $20,410,406 $7,075,000 $8,642,499 $370,000 $407,325 $339,007,837 $17,848,293 $410,443,384 2013 19,757,619 20,428,156 7,255,000 8,453,250 380,000 397,675 339,265,261 17,848,293 413,785,254 2014 19,702,119 20,435,431 7,475,000 8,235,600 390,000 390,075 340,187,705 17,848,293 414,664,222 2015 19,647,644 20,446,776 7,770,000 7,936,600 400,000 382,275 341,262,734 17,848,293 415,694,322 2016 19,598,202 20,456,053 8,085,000 7,625,800 405,000 370,275 341,130,948 17,848,293 415,519,571 2017 19,552,552 20,467,353 8,410,000 7,302,400 420,000 358,125 343,370,567 17,848,293 417,729,290 2018 19,509,472 20,484,538 8,745,000 6,966,000 435,000 341,325 345,288,611 17,848,293 419,618,239 2019 19,477,725 20,496,243 9,185,000 6,528,750 455,000 328,275 338,389,244 17,848,293 412,708,529 2020 19,440,610 20,511,558 9,640,000 6,069,500 470,000 310,075 338,257,027 17,848,293 412,547,062 2021 19,412,117 20,524,118 10,125,000 5,587,500 485,000 294,800 343,260,447 17,848,293 417,537,275 2022 12,660,522 5,557,786 10,630,000 5,081,250 505,000 275,400 344,820,115 17,848,293 397,378,365 2023 12,643,686 5,557,786 11,160,000 4,549,750 525,000 253,938 334,660,145 17,848,293 387,198,597 2024 12,638,445 5,557,786 11,715,000 3,991,750 550,000 231,625 333,595,424 17,848,293 386,128,322 2025 12,623,633 5,557,786 12,305,000 3,406,000 575,000 206,875 282,928,111 17,848,293 335,450,698 2026 12,624,019 5,557,786 22,220,000 2,790,750 600,000 181,000 274,434,385 17,848,293 336,256,233 2027 12,618,185 5,557,786 23,335,000 1,679,750 625,000 157,000 275,021,999 17,848,293 336,843,012 2028 12,615,668 5,557,786 10,260,000 513,000 655,000 125,750 281,113,614 17,848,293 328,689,111 2029 12,625,536 5,557,786 - - 690,000 93,000 280,046,188 17,848,293 316,860,802 2030 12,631,379 5,557,786 - - 710,000 65,400 292,937,630 17,848,293 329,750,488 2031 12,627,496 5,557,786 - - 740,000 37,000 345,959,475 17,848,293 382,770,049 2032 12,633,411 5,557,786 - - - - 326,750,495 17,848,293 362,789,985 2033 12,642,707 5,557,786 - - - - 303,159,995 17,848,293 339,208,781 2034 12,654,218 5,557,786 - - - - 281,018,626 17,848,293 317,078,923 2035 5,166,780 5,557,786 - - - - 249,013,001 17,848,293 277,585,859 2036 4,473,326 5,557,786 - - - - 143,579,692 17,848,293 171,459,097 2037 4,479,527 5,557,786 - - - - 64,840,402 17,848,293 92,726,007 2038 4,487,657 5,557,786 - - - - 64,865,667 17,848,293 92,759,402 2039 6,402,254 5,557,786 - - - - 64,884,992 17,848,293 94,693,325 2040 - 5,557,786 - - - - 10,916,765 17,848,293 34,322,843 2041 - 5,557,786 - - - - - 17,848,293 23,406,078
Total3 $382,028,535 $315,816,343 $185,390,000 $95,360,149 $10,385,000 $5,207,213 $7,963,967,100 $535,448,781 $9,493,603,120
______1 Interest on the $51.66 million portion of the Series 2011A Bonds that refunded a portion of the Series 2002C Bonds, which are the subject of the Swap Agreement entered into on July
† The above assumed debt service excludes the debt service on the refunded Series 1998B Bonds, Series 2001A Bonds, Series 2001B Bonds, Series 2002C Bonds and Series 2009A Bonds.
I-15
31, 2001 (the “2001 Swap Agreement”), has been calculated using a rate of 4.45%, representing the fixed rate payable by the Airports Authority pursuant to the 2001 Swap Agreement. Interest on the $125 million portion of the Series 2011A Bonds has been calculated using a rate of 3.86%, representing the fixed rate payable by the Airports Authority pursuant to the Swap Agreement entered into on May 13, 2005 (the “2005 Wachovia Swap Agreement”). Interest on the $56.975 million portion of the Series 2011A Bonds that refunded the Series 2009A Bonds has been calculated using a rate of 4.10%, representing the fixed rate payable by the Airports Authority pursuant to the Swap Agreement entered into on June 15, 2006 (the “2006 JPMorgan/BofA Swap Agreement”). Interest on the $117.64 million portion of the Series 2011B Bonds that refunded the remaining portion of the Series 2002C Bonds, which are not subject to the 2001 Swap Agreement, has been calculated using an assumed interest rate of 4%. Interest on the $90 million portion of the Series 2011B Bonds has been calculated using an assumed interest rate of 4%. Interest on the $102.4 million portion of the Series 2010C Bonds has been calculated using a rate of 4.10%, representing the fixed rate payable by the Airports Authority pursuant to the 2006 JPMorgan/BofA Swap Agreement. Interest on the remainder of the Series 2010C Bonds, which are not subject to the 2006 JPMorgan/BofA Swap Agreement, has been calculated using an assumed interest rate of 4%. Interest on the Series 2010D Bonds has been calculated using a rate of 4.11%, representing the fixed rate payable by the Airports Authority pursuant to an additional Swap Agreement entered into on June 15, 2006 (the “2006 Wachovia Swap Agreement”). Interest on the Series 2009D Bonds has been calculated using a rate of 4.10%, representing the fixed rate payable by the Airports Authority pursuant to the 2006 JPMorgan/BofA Swap Agreement. Interest on the Series 2003D Bonds has been calculated using an assumed interest rate of 4%. For more information regarding the 2001 Swap Agreement, the 2005 Wachovia Swap Agreement, the 2006 JPMorgan/BofA Swap Agreement, and the 2006 Wachovia Swap Agreement see “AIRPORTS AUTHORITY INDEBTEDNESS FOR THE AVIATION ENTERPRISE – Interest Rate Swaps for the Aviation Enterprise.”
2 Notwithstanding the actual amount of the CP Notes outstanding as of the date of this Official Statement, for the purpose of debt service calculations it is assumed that $271 million of the CP Notes are outstanding, which is the maximum amount the Airports Authority can draw from the credit facilities it currently has in place. Annual Debt Service on the CP Notes is determined by assuming (a) the CP Notes are to be amortized over a 30-year period beginning on the date of calculation, (b) level debt service, and (c) for the tax-exempt portion, the interest rate is equal to the rate published by The Bond Buyer as the Bond Buyer 25 Revenue Bond Index which was 5.13% as of August 26 2011, and an interest rate equal to Bloomberg's taxable fair market yield for a 30 year maturity and a AA rating of 4.80% as of August 31, 2011 applied to the taxable portion.
3 Totals may not add due to rounding. Source: Airports Authority records and Jefferies & Company, Inc.
[Remainder of page intentionally left blank]
I-16
AIRPORTS AUTHORITY INDEBTEDNESS FOR THE AVIATION ENTERPRISE
Outstanding Bonds of the Airports Authority for the Aviation Enterprise
The following table lists the Airports Authority’s Bonds that are outstanding as of September 29, 2011. The table does not include the Series One CP Notes or the Series Two CP Notes in the total authorized aggregate amount of $271 million. Originally Issued Outstanding as of Series of Bonds Par Amount September 29, 2011 2001A* 286,165,000 74,300,000 2002A 222,085,000 191,480,000 2002B 27,915,000 1,275,000 2002C* 265,735,000 12,970,000 2002D 107,235,000 91,565,000 2003A 185,000,000 161,375,000 2003B 44,135,000 29,075,000 2003C 52,565,000 38,585,000 2003D 150,000,000 66,350,000 2004A 13,600,000 13,550,000 2004B 250,000,000 245,000,000 2004C-1 97,730,000 31,300,000 2004C-2 111,545,000 94,195,000 2004D 218,855,000 184,875,000 2005A 320,000,000 272,410,000 2005B 19,775,000 19,775,000 2005C 30,000,000 30,000,000 2005D 11,450,000 7,650,000 2006A 300,000,000 245,000,000 2006B 400,000,000 375,320,000 2006C 37,865,000 36,765,000 2007A 164,460,000 142,540,000 2007B 530,000,000 444,670,000 2008A 250,000,000 229,965,000 2009A* 163,175,000 1,320,000 2009B 236,825,000 234,150,000 2009C 314,435,000 309,435,000 2009D 136,825,000 134,715,000 2010A 348,400,000 348,400,000 2010B 229,005,000 229,005,000 2010C 170,000,000 170,000,000 2010D 170,000,000 170,000,000 2010F-1 61,820,000 61,820,000 2011A 233,635,000 233,635,000 2011B 207,640,000 207,640,000 2011C 185,390,000 185,390,000 2011D 10,385,000 10,385,000
Total $6,563,650,000 $5,335,885,000 ______*A portion of the outstanding Series 2001A Bonds are being refunded with a portion of the Series 2011C Bond proceeds, and a portion of the outstanding Series 2002C Bonds and Series 2009A Bonds were refunded with a portion of the Series 2011A Bonds and the Series 2011B Bonds.
Subordinated Bonds for the Aviation Enterprise
Currently, there are no outstanding Subordinated Bonds. The Airports Authority, however, has the ability to issue additional debt on a subordinated basis to the Bonds, but currently has no plans to do so. Under the Indenture, Subordinated Bonds are to be secured by a pledge of the Airports Authority’s Net Revenues, which pledge is to be subordinated to the pledge of Net Revenues securing the Bonds.
I-17
Commercial Paper Program for the Aviation Enterprise
The Airports Authority has authorized a commercial paper program in an aggregate principal amount not to exceed $500 million outstanding at any time. The Airports Authority currently has in place two credit facilities allowing the Airports Authority to support the issuance of up to $271 million in CP Notes at any given time.
The issuance of up to $250 million of the Series One CP Notes is authorized pursuant to the Amended and Restated Eleventh Supplemental Indenture dated as of November 1, 2004, as further amended on March 1, 2005, March 1, 2007, January 1, 2010, and March 1, 2011 by and between the Airports Authority and the Trustee. The Series One CP Notes are structured as Short Term/Demand Obligations under the Indenture and secured by certain pledged funds including Net Revenues on a parity with other Bonds. They are further secured by an irrevocable direct pay letter of credit issued by JPMorgan Chase Bank, N.A. which expires in March 13, 2014. The Airports Authority’s obligation to repay amounts drawn under such letter of credit is secured by a promissory note issued by the Airports Authority to JPMorgan Chase Bank, N.A. and is secured by and payable from Net Revenues and other pledged funds on a parity with the Series One CP Notes, the Series Two CP Notes and other Bonds. After the refinancing of $50 million of Series One CP Notes with a portion of the Series 2011A Bonds proceeds, $17.5 million of Series One CP Notes will be outstanding.
The issuance of up to $21 million of the Series Two CP Notes is authorized pursuant to the Twenty- second Supplemental Indenture dated as of January 1, 2005, as amended as of March 1, 2007 and as of October 1, 2009, by and between the Airports Authority and the Trustee. The Series Two CP Notes are structured as Short Term/Demand Obligations under the Indenture and are secured by certain pledged funds including Net Revenues on a parity with other Bonds. They are further secured by an irrevocable direct pay letter of credit issued by Landesbank Baden-Württemberg, acting through its New York Branch, (“LBBW”), which expires on December 29, 2015, but allows LBBW under certain circumstances to terminate the facility on the tenth anniversary of the agreement, beginning on January 12, 2015. The Airports Authority’s obligation to repay amounts drawn under such letter of credit is secured by a promissory note issued by the Airports Authority to LBBW and is secured by and payable from Net Revenues and other pledged funds on a parity with the Series One CP Notes, the Series Two CP Notes and other Bonds. Currently, $21 million of the Series Two CP Notes are outstanding.
Interest Rate Swaps for the Aviation Enterprise
The Airports Authority has entered into a number of interest rate swap agreements (collectively, the “Swap Agreements”) to hedge against potential future increases in interest rates. All of the Airports Authority’s Swap Agreements (i) were entered into in connection with the planned issuance of variable rate debt and represent floating-to-fixed rate agreements and (ii) were written on a forward-starting basis to either hedge future new money Bonds or to synthetically advance refund Bonds that could not be advance refunded on a conventional basis because of their tax status. With respect to the Swap Agreement that has not yet become effective, the Airports Authority has the ability to terminate the agreement, extend the effective date of the agreement or allow the agreement to become effective. Should the Airports Authority decide to terminate a Swap Agreement, depending on market conditions at the time of the decision, the Airports Authority may be required to make a termination payment to the counterparty or may receive a termination payment from a counterparty. The chart below provides summary information with respect to the Airports Authority’s current Swap Agreements.
I-18
Airports Authority’s Current Swap Agreements
Rate Paid by Swap Original Outstanding Rate Paid by Nature of Airports Effective Trade Date Provider Notional Notional1 Counterparty Swap Authority Date 07/31/2001 Bank of America, N.A.2 $80,590,000 $55,550,000 72% LIBOR Refunding 4.45% 08/29/2002
06/15/2006 JPMorgan Chase Bank, N.A.5 $190,000,000 $187,070,833 72% LIBOR Hedge 4.10% 10/01/2009 Bank of America $110,000,000 $108,304,167 Future Borrowing
06/15/2006 Wachovia Bank, N.A. $170,000,000 $170,000,000 72% LIBOR Hedge 4.11% 10/01/2010 Future Borrowing
05/13/2005 Wachovia Bank, N.A.3, 4 $125,000,000 Forward 72% LIBOR Hedge 3.86% 10/01/2011 Starting Swap Future Borrowing
______
1 The outstanding notional amount as of September 1, 2011. 2 On June 9, 2011, Merrill Lynch Capital Services, Inc. transferred its role by novation as the swap provider under this swap agreement to Bank of America, N.A. 3 On January 1, 2009, Wells Fargo & Company acquired Wachovia Corporation. Notwithstanding this acquisition, Wachovia Bank remains in existence and continues to serve as a swap provider on this swap agreement.
4 On September 12, 2007, the Airports Authority (a) realized the market value of the Wachovia Bank swap and received $1,255,000 from Wachovia Bank, and (b) extended the start date of the swap from October 1, 2007, to October 1, 2011, with a new fixed swap rate of 3.86%. 5 On March 4, 2009, Bear Stearns Financial Products assigned its role as the swap provider under this swap agreement to JP Morgan Chase Bank, N.A.
The Board has adopted a policy governing the use of derivative products by the Airports Authority. A copy of the Board policy is available at www.mwaa.com/311.htm and www.dacbond.com. To manage its exposure to counterparty risk, the Airports Authority has entered into Swap Agreements only with counterparties having a rating of at least “A.” Standard and Poor’s (“S&P”) has assigned the Airports Authority an overall Debt Derivative Profile of “1” on a scale of “1” to “4,” with “1” representing the lowest risk and “4” representing the highest risk. Upon the issuance of the Series 2011C-D Bonds, the Series 2011A Bonds, and the Series 2011B Bonds approximately 20% of the Airports Authority’s outstanding Bonds and CP Notes will be in a variable rate mode and 80% of the Airports Authority’s debt will be conventional fixed rate. Of the variable rate debt of the Airports Authority, approximately 12% will be synthetic fixed rate and approximately 8% will be unhedged variable rate.
The Airports Authority’s obligations under the Swap Agreements constitute Junior Lien Obligations of the Airports Authority secured by a pledge of the Airports Authority’s Net Revenues that is subordinate to the pledge of Net Revenues securing the Bonds and any Subordinated Bonds issued in the future. Termination payments owed by the Airports Authority under the Swap Agreements, if any, would be payable from funds subordinated to the payment of Bonds, CP Notes, Subordinated Bonds and Junior Lien Obligations.
In 2008, the Airports Authority implemented the Governmental Accounting Standards Board (“GASB”) Statement No. 53, Accounting and Financial Reporting for Derivative Instruments (“GASB 53”). The Airports Authority’s swap agreement with Bank of America, N.A. described in the table above has been reviewed for hedge effectiveness pursuant to the requirements of GASB 53 and found not to be an effective hedge under GASB 53. The Airports Authority’s forward-starting swap agreement with Wachovia Bank as described in the table above has also been reviewed for hedge effectiveness pursuant to the requirements of GASB 53 and found not to be an effective hedge under GASB 53. Consistent with paragraph 29 of GASB 53, the hedge effectiveness of the forward-starting swap was evaluated as if current payments under the swap were being made and they were associated with variable rate bonds that had been issued. As required by GASB 53, the monthly change in the fair value of the swap is recorded as investment income or loss in the Statements of Revenues, Expenses and Changes in Net Assets. See
I-19
“AIRPORTS AUTHORITY FINANCIAL INFORMATION” and the Airports Authority’s financial report as of, and for, the years ended December 31, 2010 and 2009 – Interest Rate Swaps, which is contained in the Airports Authority’s 2010 CAFR which was filed with EMMA and can also be found at www.mwaa.com/311.htm and www.dacbond.com.
Special Facility Bonds
Special Facility Bonds are generally defined as any revenue bonds, notes or other obligations of the Airports Authority other than Bonds, Subordinated Bonds or Junior Lien Obligations, issued to finance any Special Facility, as defined in the Indenture, that are payable from and secured solely by the proceeds of such obligations and by rentals, payments and other charges payable by the obligor under the applicable Special Facility Agreement, as defined in the Indenture. As of the date of this Official Statement, no Special Facility Bonds of the Airports Authority are outstanding.
AIRPORTS AUTHORITY FINANCIAL INFORMATION
General
The Airports Authority’s financial report as of, and for, the years ended December 31, 2010 and December 31, 2009, is contained in the Airports Authority’s 2010 CAFR which was filed with EMMA and can also be found at www.mwaa.com/311.htm and www.dacbond.com, includes three financial statements: the Statements of Net Assets; the Statements of Revenues, Expenses and Changes in Net Assets; and the Statements of Cash Flows. The financial statements are prepared in accordance with accounting principles generally accepted in the United States of America as promulgated by GASB principles.
The Airports Authority’s financial statements for the year ended December 31, 2010 and December 31, 2009 included two Enterprise Funds. The Aviation Enterprise Fund encompasses the two Airports, Reagan National Airport and Dulles International Airport. The Dulles Corridor Enterprise Fund, which commenced November 1, 2008, encompasses the Dulles Toll Road and the Metrorail Extension Project. The Management’s Discussion provided in this Official Statement concerns only the Aviation Enterprise. The Airports Authority’s most recent audited financial statement is contained in the 2010 CAFR which was filed with EMMA and can also be found at www.mwaa.com/311.htm and www.dacbond.com.
Aviation Enterprise Fiscal Years Ended December 31, 2006 through 2010
Historical Statements of Revenues, Expenses and Changes in Net Assets for the Aviation Enterprise Fund for the five Fiscal Years ended December 31, 2006 through 2010, are set forth on the following table. These amounts were derived from the Airports Authority’s audited historical financial statements.
I-20
HISTORICAL FINANCIAL RESULTS STATEMENTS OF REVENUES, EXPENSES AND CHANGES IN NET ASSETS AVIATION ENTERPRISE FUND
Fiscal Year Ended 12/31/2006 12/31/2007 12/31/2008 12/31/2009 12/31/2010 OPERATING REVENUES Concessions $199,011,305 $217,486,823 $223,710,732 $217,413,676 $230,752,253 Rents 156,164,079 167,301,027 171,331,285 193,736,080 226,375,685 Design fees – – 20,363,189 – – Landing fees 73,375,458 78,682,496 82,289,545 96,934,558 101,637,867 Utility sales 11,248,988 11,778,736 13,348,545 13,227,161 12,464,920 Passenger fees 25,474,908 28,684,113 28,354,142 30,665,358 25,913,522 Other 5,893,899 6,542,935 11,547,405 6,476,626 6,730,469 471,168,637 510,476,130 550,944,843 558,453,459 603,874,716 OPERATING EXPENSES Materials, equipment, supplies, contract services, other 151,009,792 182,096,091 166,260,580 148,713,119 180,633,646 Impairment loss/design costs – – 80,027,390 – – Salaries and related benefits 113,870,907 128,465,267 136,508,033 140,138,903 148,273,682 Utilities 20,359,248 21,134,317 25,402,257 28,141,680 24,375,181 Lease from U.S. Government 4,689,858 4,830,121 4,958,280 5,066,069 5,101,119 Depreciation and amortization 133,106,378 142,030,354 164,855,381 184,828,233 215,620,434 423,036,183 478,556,150 578,011,922 506,888,004 574,004,062
OPERATING INCOME (LOSS) 48,132,454 31,919,980 (27,067,078) 51,565,455 29,870,654
NON-OPERATING REVENUES (EXPENSES) Passenger facility charges, financing costs (2,026,385) (3,968,842) (2,330,507) (944,806) 42 Investment income 45,035,158 55,557,746 38,332,399 15,428,262 20,912,856 Interest expense (96,999,795) (111,534,092) (143,787,276) (145,213,075) (212,689,835) Federal, state and local grants 948,658 1,415,153 1,192,743 Fair value gains (loss) on swaps (14,572,303) (24,577,653) (158,374,462) 103,731,481 (34,978,411) (68,563,325) (84,522,841) (265,211,188) (25,582,985) (225,562,605)
INCOME (LOSS) BEFORE CAPITAL CONTRIBUTIONS (20,430,871) (52,602,861) (292,278,266) 25,982,470 (195,691,951)
CAPITAL CONTRIBUTIONS Passenger facility charges 81,489,704 82,858,846 78,455,218 78,520,764 80,088,350 Federal and State grants 54,239,498 32,317,161 51,188,653 24,228,662 61,839,528 Other capital property contributed 1,231,551 3,498,173 – 2,977,990 650,000 136,960,753 118,674,180 129,643,871 105,727,416 142,577,878
NET ASSETS Increase (decrease) in net assets 116,529,882 66,071,319 (162,634,395) 131,709,886 (53,114,073) Total net assets, beginning of year 820,367,623 936,897,505 1,002,968,824 808,457,041 940,166,927 Restatement (31,877,388) (54,339,597) Total net assets, end of year $936,897,505 $1,002,968,824 $808,457,041 $940,166,927 $887,052,854
The Airports Authority’s 2010 CAFR restated its 2009 statements principally to correct the accounting for capitalized interest, depreciation, and the classification of certain assets and liabilities. These corrections have been reflected in the 2008 and 2009 results above. A summary of the restatement of operating expenses and non-operating expenses for years prior to 2008 is as follows: Increases in operating expenses Materials, equipment, supplies, contract services and other 5,603,232 Depreciation and amortization 24,485,472 Total increase in operating expenses 30,088,704 Changes in non-operating revenues (expenses) Investment income 214,521 Interest expense (2,003,205) Total increase in non-operating revenues (expenses) (1,788,684) Increase (decrease) in net assets, due to restatement ($31,877,388)
Source: Airports Authority records.
I-21
The Aviation Enterprise Fund has activity-based revenues which include non-airline fees, such as parking and rental car fees and airline fees such as landing fees, international arrival fees and passenger conveyance fees. Many factors and events have negatively affected the air transportation industry in the past several years, in particular the general economic downturn which began in 2007 and the resulting contraction in the economy. In response to this, the Aviation Enterprise has continued its effort to diversify its revenues, increase the number of carriers using the Airports and adhere to the principles of fiscal restraint.
The Airports recorded $603.9 million in operating revenues for 2010. This was a total increase from 2009 of $45.4 million. The Aviation Enterprise’s revenues are primarily derived from rents and charges for the use of the Airports Authority’s facilities and concession contracts at the Airports. The Airline Agreement requires the Signatory Airlines to pay actual costs while the majority of concessionaires pay a percentage of revenue or a minimum annual guarantee (“MAG”) payment.
In 2010, airline revenues, which consist of landing fees, terminal rents and passenger fees, increased $32.6 million from 2009, principally related to an adjustment in rates and charges due to an increase in debt service at Dulles International Airport for the Automated People Mover (the “AeroTrain”) that was placed into service in January 2010 and debt service for Concourse A renovations at Reagan National Airport. Prior-year transfers, used as an offset to airline rates and charges, decreased $4.2 million. Landing fees increased $4.7 million, or 4.9%, to $101.6 million. Rent revenue increased $32.6 million, a 16.8% increase from 2009. Passenger fees, including fees paid by the TSA decreased $4.8 million or 15.5%. The decline in passenger fees were driven by a decrease in passenger conveyance fees for mobile lounge use, which declined significantly as a result of the AeroTrain becoming operational in 2010. Expenses associated with the AeroTrain are included in terminal rents rather than being charged a separate passenger conveyance fee.
In 2010, other revenues of $6.7 million increased $254,000 from 2009, principally due to hotel shuttle fees, which were instituted in 2010.
The following table provides details of concession revenues by major category for the five Fiscal Years 2006 through 2010.
TOTAL CONCESSION REVENUES BY MAJOR CATEGORY AVIATION ENTERPRISE FUND
Year Ended Year Ended Year Ended Year Ended Year Ended 12/31/2006 12/31/2007 12/31/2008 12/31/2009 12/31/2010 Parking $109,067,495 $116,528,833 $115,105,856 $107,721,718 $110,150,989 Rental Cars 30,202,008 34,418,480 35,949,215 38,865,186 44,305,092 Terminal Concessions Food and beverage 12,755,501 14,985,742 15,860,110 15,626,929 16,474,539 Newsstand and retail 10,519,806 11,354,093 11,921,105 11,900,883 11,837,876 Duty free 2,928,684 3,422,389 3,810,294 2,881,047 3,200,337 Display advertising 6,300,000 7,356,054 7,737,054 8,243,796 11,652,665 In-flight catering 5,666,632 6,242,548 6,872,934 6,705,056 6,768,558 Ground Transportation1 4,784,097 6,368,761 6,913,108 8,020,195 Fixed base operator 10,583,623 11,985,065 12,712,051 12,353,018 12,560,170 All other1 10,987,556 6,409,522 7,373,352 6,202,935 5,781,832 Total $199,011,305 $217,486,823 $223,710,732 $217,413,676 $230,752,253
______1.In Fiscal Year ended December 31, 2006, Ground Transportation revenue was included in All other revenue. Source: Airports Authority records.
I-22
Management’s Discussion of Financial Information
In 2010, the Aviation Enterprise’s concession revenues increased $13.3 million or 6.1% from 2009. Concession revenues account for 38.2% of total operating revenues, down from 2009 by 0.7%. Parking revenues still rank as the Aviation Enterprise’s largest source of concession revenue providing $110.2 million in total revenues for 2010. This is an increase of $2.4 million from 2009 and reflects the general increase in passenger traffic. Rental car revenue of $44.3 million increased $5.4 million from 2009 and was the result of higher MAG amounts, as negotiated in contracts for both Reagan National Airport and Dulles International Airport in recent years. Ground transportation revenues of $8.0 million increased by $1.1 million, or 16%, and reflects a new taxi contract in place at Dulles International Airport and new taxi fees at Reagan National Airport. In 2010, display advertising generated $11.7 million in concession revenue, an increase of $3.4 million, or 41.4%, over 2009. Excluding car parking and rental car revenue, all other areas of concession revenue accounted for a combined net increase of $953,000 over 2009. This increase was largely attributed to an $848,000 increase in food and beverage revenue and a $319,000 increase in duty free revenue, which offset moderate declines in retail services and other concession revenues.
Concession revenue at Reagan National Airport increased by $9.8 million in 2010. Parking revenues increased $1.9 million from 2009 at Reagan National Airport. The parking garages at Reagan National Airport experienced a drop in average occupancy from 82.9% in 2008 to 75.8% in 2009 and 66.2% in 2010. Parking rates were increased in June 2008. Construction of an additional level to Parking Garages A, B and C was complete in March 2010. The drop in average occupancy in 2010 is a result of the addition of 1,424 new spaces to the parking inventory at Reagan National Airport.
Concession revenue at Dulles International Airport increased $3.5 million from 2009. In 2010, parking revenues were $66.5 million, an increase of $0.5 million from 2009. Overall activity for public parking decreased 1.75% in 2010 compared to 2009. Total exits for 2010 were 2.76 million compared to 2.8 million in 2009. There are 27,423 public parking spaces at Dulles International Airport, with 19,108 surface and 8,315 garage spaces, as well as 6,595 additional employee parking spaces. Food and beverage revenue increased 4.6% over 2009 to $8.9 million resulting from increased enplanement activity in 2010.
The following table provides details of total operating expenses by major category for the five Fiscal Years ended December 31, 2006 through 2010.
[Remainder of page intentionally left blank]
I-23
TOTAL OPERATING EXPENSES BY MAJOR CATEGORY AVIATION ENTERPRISE FUND
Year Ended Year Ended Year Ended Year Ended Year Ended 12/31/2006 12/31/2007 12/31/2008 12/31/2009 12/31/2010 Materials, supplies, equipment, contract services and other $151,009,792 $182,096,091 $166,260,580 $148,713,119 $180,633,646 Impairment loss/design costs – – 80,027,390 – – Salaries and related benefits 113,870,907 128,465,267 136,508,033 140,138,903 148,273,682 Utilities 20,359,248 21,134,317 25,402,257 28,141,680 24,375,181 Lease from United States Government 4,689,858 4,830,121 4,958,280 5,066,069 5,101,119 Depreciation and amortization 133,106,378 142,030,354 164,855,381 184,828,233 215,620,434 Total $423,036,183 $478,556,150 $578,011,922 $506,888,004 $574,004,062
A summary of the restatement of operating expenses for years prior to 2008 is as follows:
Increases in operating expenses Materials, equipment, supplies, contract services and other $5,603,232 Depreciation and amortization 24,485,472 Total increase in operating expenses $30,088,704
Source: Airports Authority records.
Operating expenses for the Aviation Enterprise Fund for fiscal year ended December 31, 2010 were $574.0 million, which is an increase of $67.1 million or 13.2% over 2009.
The largest contributing factor to the increase in operating expenses was a 21.5% increase in materials, equipment, supplies and contract services, which increased $31.9 million in 2010. Record snow events at both Airports in February resulted in a $5.2 million increase in contractual snow removal costs as well as a $2.1 million increase in snow removal supplies. In addition, contracted operations of the AeroTrain resulted in a $7.3 million increase in 2010, while changes in contracted custodial and armed guard services at both Airports resulted in increases of $2.0 million and $1.6 million, respectively.
The Aviation Enterprise continued its process of implementing a new Enterprise Resource Planning (“ERP”) system. In March 2009, the Airports Authority selected Oracle EBusiness Solutions as the ERP software. According to accounting principles as promulgated in GASB Statement No. 51, Accounting and Financial Reporting for Intangible Assets (“GASB 51”), the Aviation Enterprise was in the developmental stage of the implementation program in early 2009 and expensed the costs through the Statements of Revenues, Expenses and Changes in Net Assets. In March 2009, the Airports Authority began capitalizing costs associated with the ERP, including implementation costs, and as of December 31, 2010, $38.2 million was included in work in progress for the ERP project.
Salaries and related benefits expenses increased $8.1 million from 2009 to $148.3 million in 2010. When compared to 2009, health insurance expenses of $14.1 million increased $592,000 and salary compensation, including full-time, part-time, holiday and overtime pay, increased $4.2 million. Overtime expenses increased by $2.7 million, with the increase primarily related to record snowstorms experienced in February 2010. The Aviation Enterprise continues its funding of the Other Post-Employment Benefits (“OPEB”) program and recorded $8.3 million in expenses for 2010 and $6.6 million in expenses for 2009. The contribution percentages to the Aviation Enterprise’s retirement plans increased to 7.5% in 2010 from
I-24
6.4% of eligible earnings in 2009 for the general plan and increased to 16.0% in 2010 from 13.0% of eligible earnings in 2009 for the police and firefighter plan.
The Aviation Enterprise’s utility expenditures for 2010 were $24.4 million, a decrease of $3.8 million from 2009. In 2009, fuel prices began to moderate throughout the world resulting in a leveling of the cost of utilities purchased by the Airports Authority, and in 2010, the Airports Authority joined an energy consortium, which further reduced utility expenses.
Depreciation and amortization expenses in 2010 were $215.6 million, representing an increase of $30.8 million from 2009. In 2009, the Airports Authority completed and put into service at Dulles International Airport the passenger security mezzanine, which was the first element of the AeroTrain and the first phase of the expanded International Arrivals Building (“IAB”). In January 2010, the AeroTrain became operational at Dulles International Airport, and in November 2010, the Aviation Enterprise completed the second phase of the IAB expansion.
In 2010, the Aviation Enterprise had operating income of $29.9 million, which was a $21.7 million decrease from 2009. The results primarily reflect the increase in materials, supplies, and services as well as the increase in depreciation and amortization expense as compared to 2009.
Non-operating revenues declined $98.5 million and non-operating expenses increased $101.5 million as compared to 2009. Non-operating revenue in 2010 was comprised of $20.9 million in investment income and $1.2 million of federal, state, and local grants. Non-operating expenses totaled $247.7 million and were comprised of interest expense of $212.7 million and $35.0 million in fair value losses on swaps. The change in fair value on swaps for 2009 was a gain of $103.7 million. This gain resulted from a positive change in fair value of $139.5 million less $35.0 million in swap termination payments made on April 1, 2009 and the write-off of unamortized swap issuance costs of $0.7 million. On April 1, 2009, concurrent with the issuance of the Airports Authority’s Aviation System Revenue Bonds, Series 2009B, the Airports Authority terminated the two Bank of Montreal swaps with an effective date of July 15, 2009, and the Wachovia Bank swap with an effective date of July 15, 2009 and made a combined termination payment of $35.0 million.
Capital contributions include PFCs, federal and state grants, and other capital property acquired. PFC revenue for 2010 was $80.1 million, which was an increase of $1.6 million as compared to 2009. This increase in receipts reflects the gradual rebound in air travel that was experienced at both Airports in 2010, as well as in the aviation industry as a whole.
Federal and state grants were $61.8 million in 2010, and $24.2 million in 2009. In 2010, the Aviation Enterprise received $20.4 million in Airport Improvement Program (“AIP”) grants primarily for the construction of the fourth runway at Dulles International Airport, and in 2009 received American Recovery and Reinvestment Act (“ARRA”) grants of $4.0 million for Runway Rehabilitation at Dulles International Airport and $18.7 million for TSA Surveillance closed circuit TV and In-line Baggage Explosive Detection Systems. The Airports Authority also received $15.7 million from TSA for In-line Baggage Explosive Detection Systems.
The change in net assets is an indicator of the overall fiscal condition of the Aviation Enterprise. Net assets decreased in 2010 by $53.1 million. This decrease includes the $35.0 million fair value loss on the swaps described above.
I-25
Unaudited Fiscal Year 2011 Results through May 31, 2011 The unaudited Fiscal Year 2011 results through May 31, 2011 for the Aviation Enterprise Fund are set forth below. This information has been prepared by management of the Airports Authority. FINANCIAL RESULTS STATEMENTS OF REVENUES, EXPENSES AND CHANGES IN NET ASSETS AVIATION ENTERPRISE FUND (unaudited) Five Month Period Ended Five Month Period May 31, 2010 Ended Restated May 31, 2011 OPERATING REVENUES Concessions $91,541,893 $93,023,416 Rents 93,485,613 110,727,066 Landing fees 38,469,105 43,417,596 Utility sales 5,356,493 5,324,735 Passenger fees 9,370,669 10,924,745 Other 4,823,241 3,591,052 243,047,014 267,008,610 OPERATING EXPENSES Materials, equipment, supplies, contract services, and other 71,799,748 73,837,600 Salaries and related benefits 63,142,072 62,796,917 Utilities 9,776,415 10,678,212 Lease from U.S. Government 2,120,500 2,144,500 Depreciation and amortization 88,482,933 94,493,866 235,321,668 243,951,095
OPERATING INCOME 7,725,346 23,057,515
NON-OPERATING REVENUES (EXPENSES) Passenger facility charges, financing costs 41 – Investment income 8,496,243 9,484,805 Interest expense (88,514,883) (101,862,268) Federal, state and local grants – 22,443 Unrealized swap gain (loss) (36,162,920) (11,224,359) (116,181,519) (103,580,910)
INCOME (LOSS) BEFORE CAPITAL CONTRIBUTIONS (108,456,173) (80,521,864)
CAPITAL CONTRIBUTIONS Passenger facility charges 35,710,984 34,928,755 Federal and State grants 9,515,630 14,776,509 Other capital property contributed – – 45,226,614 49,705,264 NET ASSETS Increase (decrease) in net assets (63,229,559) (30,816,600) Total net assets, beginning of period, restated 940,166,927 887,052,854 Total net assets, end of period $876,937,368 $856,236,257 ______Totals may not add due to rounding.
I-26
The Aviation Enterprise’s financial results for the first five months of Fiscal Year 2011 reflect the stabilization of airport revenues and the results of cost and budget containment measures implemented because of the general economic slowdown experienced in 2010. Operating revenue for the five months ended May 31, 2011, were $267.0 million, an increase of $24.0 million or 9.9% compared to the same period in 2010.
Capital contributions include PFCs, federal and state grants and other capital property acquired by the Aviation Enterprise. For the five months ended May 31, 2011, PFC revenue of $34.9 million was below the same period in 2010 by 2.2%.
Through May 2011, the Aviation Enterprise’s net assets decreased $30.8 million reflecting operating income of $23.1 million, a non-operating loss of $103.6 million and capital contributions of $49.7 million.
The following table provides details of unaudited concession revenues by major category for the five months ended May 31, 2010 and May 31, 2011.
TOTAL CONCESSION REVENUES BY MAJOR CATEGORY AVIATION ENTERPRISE FUND (Unaudited) Five Months Five Months Ended Ended May 31, 2010 May 31, 2011 Net Change Parking $44,684,761 $44,357,948 ($326,813) Rental Cars 16,316,961 17,451,769 1,134,808 Terminal Concessions Food and beverage 6,519,719 6,725,042 205,323 Newsstand and retail 4,541,587 4,713,288 171,701 Duty free 1,220,696 1,374,251 153,555 Display advertising 4,617,116 4,611,541 (5,576) In-flight catering 2,595,113 2,790,629 195,516 Ground Transportation 3,507,394 2,872,396 (634,999) Fixed base operator 5,404,457 6,052,182 647,726 All other 2,134,089 2,074,370 (59,719) Total1 $91,541,893 $93,023,417 $1,481,524
______
1 Totals may not add due to rounding.
Source: Airports Authority records.
The Aviation Enterprise’s concession revenues through May 31, 2011 increased $1.5 million or 1.6% compared to the same period in 2010. As a percentage of operating revenues, concession revenue decreased to 34.8% compared to 37.7% in the same period in 2010. In the first five months of Fiscal Year 2011, parking revenues were the Aviation Enterprise’s largest source of concession revenue representing 47.7% of total concession revenues and 16.6% of operating revenues. For the five months ended May 31, 2011, parking revenue was $44.4 million, a decrease of 0.7% compared to the same period in 2010. Rental car revenues of $17.5 million increased $1.1 million or 7.0% compared to the same period in 2010, largely due to the increased MAG payments primarily at Reagan National Airport.
I-27
For the five months ended May 31, 2011, food and beverage revenue at the Airports of $6.7 million increased $205,000 and newsstand and retail concession revenue increased $172,000 when compared to the same period in 2010. For the five months ended May 31, 2011, duty free revenue increased $154,000 and display advertising decreased $6,000 when compared to the same period in 2010.
The following table provides details of unaudited operating expense by major category for the five months ended May 31, 2010 and May 31, 2011.
TOTAL OPERATING EXPENSES BY MAJOR CATEGORY AVIATION ENTERPRISE FUND (Unaudited) Five Months Ended May 31, 2010 Five Months Ended Restated May 31, 2011 Net Change Materials, supplies, equipment, contract services and other $71,799,748 $73,837,600 $2,037,852 Salaries and related benefits 63,142,072 62,796,917 (345,155) Utilities 9,776,415 10,678,212 901,797 Lease from United States Government 2,120,500 2,144,500 24,000 Depreciation and amortization 88,482,933 94,493,866 6,010,933 Total1 $235,321,668 $243,951,095 $8,629,427 ______
1 Totals may not add due to rounding. Source: Airports Authority records.
Operating expenses through May 31, 2011 were $244 million, which is an increase of $8.6 million or 3.7% compared to the same period in 2010. Materials, equipment, supplies, and other contract services increased $2 million or 2.8% reflecting increases in contracted operation services.
For the five months ended May 31, 2011, depreciation increased $6 million reflecting the addition of depreciable assets completed and placed in service since May 31, 2010. For the five months ended May 31, 2011, the Aviation Enterprise utility expenditures were $10.7 million, a $902,000 increase compared to the same period in 2010. This is as a result of higher fuel costs year over year.
For the five months ended May 31, 2011, salaries and related benefits decreased $345,000 compared to the same period in 2010 as a result of reduced overtime paid to employees during snow storms in 2011 as compared to the first quarter of 2010.
Through May 31, 2011, operating income was $23.1 million, an increase of $15.3 million from the same period in 2010. The change in operating results reflects the impact of a 9.9% increase in operating revenues, primarily as a result of higher rents and landing fee charges, and an increase in operating expenses of only 3.7%.
For the five months ended May 31, 2011, a non-operating loss of $80.5 million before capital contributions resulted from an unrealized swap loss and additional interest expense. This is a decrease in non-operating loss before capital contributions of $27.9 million compared to the same period in 2010. For the five months ended May 31, 2011, non-operating revenues of $9.5 million from investment income increased by $989,000 compared to the same period in 2010. The increase in investment income reflects a $3.3 million gain on bond investments ended May 31, 2011 compared to a $2.2 million gain on bond investments for the same five month period ending 2010.
I-28
For the five months ended May 31, 2011, non-operating expenses consisting of interest expense increased $13.3 million or 15.1% compared to the same period in 2010 as a result of projects funded by the Airports Authority’s Bonds that were placed in service since May 31, 2010.
Net Remaining Revenue
Set forth in the table below is the calculation of Net Remaining Revenue (“NRR”) and debt service coverage for the four Fiscal Years ended December 31, 2007 through 2010.
NET REMAINING REVENUE SCHEDULE AND CALCULATION OF DEBT SERVICE COVERAGE FOR AVIATION ENTERPRISE FUND (unaudited)
Year Ended Year Ended Year Ended Year Ended 12/31/2007 12/31/2008 12/31/2009 12/31/2010 Airline Revenues1 Landing and Apron Fees $99,541,668 $105,211,467 $119,287,409 $123,505,524 Rentals 219,559,128 221,785,366 238,165,641 260,190,931 Security & Other Fees 1,289,520 1,278,646 1,259,953 1,248,430 Other Rents 25,630,792 28,209,761 31,488,884 31,336,258 Utility Reimbursements 11,550,860 13,137,977 13,006,933 12,273,527 Concessions2 180,156,991 185,709,063 182,860,164 193,991,938 Investment Earnings 32,510,096 23,574,302 15,851,520 16,991,234 Other 6,496,583 8,231,513 6,330,988 6,731,649
TOTAL REVENUES1 576,735,638 587,138,095 608,251,492 646,269,491
O&M Expenses 260,303,941 265,135,432 267,174,359 298,054,824 Washington Ground Transportation – – – –
NET REVENUES 316,431,697 322,002,663 341,077,133 348,214,667
Debt Service on Bonds Issued under Master Indenture3 184,246,617 204,496,363 229,060,179 237,068,089
TOTAL DEBT SERVICE 184,246,617 204,496,363 229,060,179 237,068,089
O&M Reserve Requirement Increment 2,676,349 2,298,301 357,000 5,794,000 Federal Lease Payment 4,830,120 4,958,280 5,066,069 5,101,118
NET REMAINING REVENUE4 $124,678,611 $110,249,719 $106,593,885 $100,251,460
DEBT SERVICE COVERAGE4 1.72x 1.57x 1.49x 1.47x ______1 Includes credit for Signatory Airlines’ share of NRR from the prior year, which offsets the amount of rates and charges that are due from the Signatory Airlines in the respective fiscal year. 2 Concession Revenue for Washington Ground Transportation is not included. 3 Reflects actual amount of debt service paid on outstanding Bonds and CP Notes in the respective fiscal year. 4 Calculations of NRR and coverage are made in conformance with provisions of the Indenture and the Airline Agreement and are not determined in accordance with GAAP. Source: Airports Authority records.
I-29
The Aviation Enterprise Budget
The Aviation Enterprise’s annual budget is a financial planning tool outlining the estimated revenues and expenses for the Airports at certain passenger levels. The budget is not prepared according to GAAP. The President and Chief Executive Officer submits the Aviation Enterprise’s annual budget to the Board for approval. Budgetary controls and evaluations are affected by comparing actual interim and annual results with the budget, noting the actual level of passenger activities. The Airports Authority conducts quarterly reviews to ensure compliance with the provisions of the annual operating budget approved by the Board.
Operating revenues reached 97.1% of budget expectations in 2010, while in 2009, operating revenues reached 97.8% of budget expectations. Operating expenses reached 91.1% of budget authorization in 2010, while in 2009, expenses reached 90.8% of budget authorization. The Aviation Enterprise’s 2010 budget reflected a 9.5% increase in revenues and an 12.3% increase in expenses.
As a Percentage Budget Actual of Budget 2010 Revenues $566,638,000 $549,926,022 97.1% 2010 Expenses $318,292,000 $289,909,532 91.1%
2009 Revenues $517,645,000 $506,022,442 97.8% 2009 Expenses $283,530,100 $257,376,029 90.8%
Aviation Enterprise Fiscal Year 2011 Budget
The Aviation Enterprise’s Budget, which includes the 2011 Operations and Maintenance Budget (“2011 O&M Budget”), the 2011 Capital, Operating and Maintenance Investment Program Budget, and the 2011 Capital Construction Program Budget, was approved by the Board in December 2010 (the “2011 Budget”). The Airports Authority is committed to ensuring that adequate resources are available to efficiently and safely operate and maintain the Airports and believes that the 2011 Budget provides those resources.
The 2011 O&M Budget includes a 9.2% increase in operating revenues and a 2.3% increase in operating expenses (excluding debt service) over the 2010 O&M Budget. Budgeted revenues of $693.6 million for 2011 reflect a $58.6 million increase from 2010 budgeted revenues. Operating revenues received from the airlines are on a cost recovery basis.
Budgeted operating expenses for 2011 are $325.7 million, a $7.4 million or 2.3% increase over 2010 budgeted expenses of $318.3 million (excluding debt service and O&M Reserve Requirement). The total budgeted expenses for 2011, including debt service but excluding O&M Reserve Requirement, are $616.7 million, which is a $56.1 million or 10.0% increase over 2010 budgeted expenses of $560.6 million.
In the 2011 Budget, NRR is estimated at $92.5 million, a 6.5% increase over the 2010 budgeted amount. Under the Airline Agreement, NRR is allocated between the Aviation Enterprise and the Signatory Airlines according to an established formula. The Signatory Airlines’ share of NRR in 2010 (transfers included in the budgeted 2011 operating revenues) was $64.1 million. See Part II “CERTAIN AGREEMENTS FOR USE OF THE AIRPORTS – Airport Use Agreement and Premises Lease.”
I-30
TAX MATTERS
The following discussion is a summary of the opinions of Co-Bond Counsel to the Airports Authority that are to be rendered on the tax status of interest on the Series 2011C-D Bonds and of certain federal income tax considerations that may be relevant to prospective purchasers of the Series 2011C-D Bonds. This summary is based on existing law, including current provisions of the Internal Revenue Code of 1986, as amended (the “Code”), existing and proposed regulations under the Code, and current administrative rulings and court decisions, all of which are subject to change.
Upon issuance of the Series 2011C-D Bonds, Co-Bond Counsel to the Airports Authority, Hogan Lovells US LLP, and Lewis, Munday, Harrell & Chambliss, will each provide opinions, expected to be in the proposed forms set forth in APPENDIX D hereto, to the effect that, under existing law, (i) interest on the Series 2011C Bonds is excluded from gross income for federal income tax purposes, except for any period during which such Series 2011C Bonds are held by a person who is a “substantial user” of the facilities financed or a “related person,” as those terms are used in Section 147(a) of the Code, but is an item of tax preference in calculating the federal alternative minimum tax liability of individuals, trusts, estates and corporations, and (ii) interest on the Series 2011D Bonds is excluded from gross income for federal income tax purposes, and is not included in the computation of the federal alternative minimum tax imposed on individuals, trusts, estates and, except as provided in the following paragraph, corporations.
For corporations only, the Code requires that alternative minimum taxable income be increased by 75% of the excess (if any) of the corporation's adjusted current earnings over its other alternative minimum taxable income. Adjusted current earnings include interest on the Series 2011D Bonds. An increase in a corporation's alternative minimum taxable income could result in imposition of tax to the corporation under the corporate alternative minimum tax provisions of section 55 of the Code.
The foregoing opinions will assume compliance by the Airports Authority with certain requirements of the Code that must be met subsequent to the issuance of the Series 2011C-D Bonds. The Airports Authority will certify, represent and covenant to comply with such requirements. Failure to comply with such requirements could cause the interest on the Series 2011C-D Bonds to be included in gross income, or could otherwise adversely affect such opinions, retroactive to the date of issuance of the Series 2011C-D Bonds.
Certain of the Series 2011C-D Bonds (the “Discount Bonds”) are being offered and sold to the public in their original public offering at an original issue discount. Generally, original issue discount is the excess of the stated redemption price at maturity of any Discount Bond over the issue price of the Discount Bond. Co-Bond Counsel have advised the Airports Authority and the Underwriters that, under existing laws and to the extent interest on any Discount Bond is excluded from gross income for federal income tax purposes, the original issue discount on any such Discount Bond that accrues during the period such person holds the Discount Bond will be treated as interest that is excluded from gross income for federal income tax purposes with respect to such holder, and will increase such holder's tax basis in any such Discount Bond. Purchasers of any Discount Bond should consult their tax advisors regarding the proper computation and accrual of original issue discount. In particular, purchasers of any Series 2011C Bonds should be aware that the accrual of original issue discount in each year may be treated as an item of tax preference in calculating any alternative minimum tax liability.
If a holder purchases a Series 2011C-D Bond for an amount that is greater than its stated redemption price at maturity, such holder will be considered to have purchased the Series 2011C-D Bond
I-31
with “amortizable bond premium” equal in amount to such excess. A holder must amortize such premium using a constant yield method over the remaining term of the Series 2011C-D Bond, based on the holder’s yield to maturity. As bond premium is amortized, the holder’s tax basis in such Series 2011C-D Bond is reduced by a corresponding amount, resulting in an increase in the gain (or decrease in the loss) to be recognized for federal income tax purposes upon a sale or other disposition of the Series 2011C-D Bond prior to its maturity. No federal income tax deduction is allowed with respect to amortizable bond premium on a Series 2011C-D Bond. Purchasers of the Series 2011C-D Bonds with amortizable bond premium should consult with their own tax advisors regarding the proper computation of amortizable bond premium and the state and local tax consequences of owning such Series 2011C-D Bonds.
The opinions of Co-Bond Counsel also will provide to the effect that, under existing law, interest on the Series 2011C-D Bonds is exempt from income taxation by the Commonwealth of Virginia and is exempt from all taxation of the District of Columbia except estate, inheritance and gift taxes.
Other than the matters specifically referred to above, Co-Bond Counsel will express no opinions regarding the federal, state, local or other tax consequences of the purchase, ownership and disposition of the Series 2011C-D Bonds. Prospective purchasers of the Series 2011C-D Bonds should be aware, however, that the Code contains numerous provisions under which receipt of interest on the Series 2011C- D Bonds may have adverse federal tax consequences for certain taxpayers. Such consequences include the following: (1) Section 265 of the Code denies a deduction for interest on indebtedness incurred or continued to purchase or carry the Series 2011C-D Bonds or, in the case of financial institutions, a portion of a holder’s interest expense allocated to interest on the Series 2011C-D Bonds; (2) with respect to insurance companies subject to the tax imposed by Section 831 of the Code, Section 832(b)(5)(B)(i) reduces the deduction for loss reserves by 15% of the sum of certain items, including interest on the Series 2011C-D Bonds; (3) interest on the Series 2011C-D Bonds earned by certain foreign corporations doing business in the United States could be subject to a branch profits tax imposed by Section 884 of the Code; (4) passive interest income, including interest on the Series 2011C-D Bonds, may be subject to federal income taxation under Section 1375 of the Code for Subchapter S corporations that have Subchapter C earnings and profits at the close of the taxable year if greater than 25% of the gross receipts of such Subchapter S corporation is passive investment income; and (5) Section 86 of the Code requires recipients of certain Social Security and certain railroad retirement benefits to take into account, in determining the inclusion of such benefits in gross income, receipts or accrual of interest on the Series 2011C-D Bonds.
The IRS has an ongoing program of auditing state and local government obligations, which may include randomly selected bond issues for audit, to determine whether interest paid to the holders is properly excludable from gross income for federal income tax purposes. It cannot be predicted whether the Series 2011C-D Bonds will be audited. If an audit is commenced, under current IRS procedures the holders of the Series 2011C-D Bonds may not be permitted to participate in the audit process. Moreover, public awareness of an audit of the Series 2011C-D Bonds could adversely affect their value and liquidity.
Co-Bond Counsel will render their opinions as of the issuance date, and will assume no obligation to update their opinions after the issuance date to reflect any future facts or circumstances, or any future changes in law or interpretation, or otherwise. Moreover, the opinions of Co-Bond Counsel are not binding in the courts on the IRS; rather, such opinions represent Co-Bond Counsel’s legal judgment based upon their review of existing law and upon the certifications, representations and covenants referenced above.
Amendments to federal and state tax laws are proposed from time to time and could be enacted, and court decisions and administrative interpretations may be rendered, in the future. For example, on
I-32
September 12, 2011, the Obama Administration released a legislative proposal entitled the American Jobs Act of 2011 which, for tax years beginning on or after January 1, 2013, could result in additional federal income tax being imposed on certain holders of state or local bonds, including the Series 2011C-D Bonds, if enacted. There can be no assurance that any such future amendments or actions will not adversely affect the value of the Series 2011C-D Bonds, the exclusion of interest on the Series 2011C-D Bonds from gross income, alternative minimum taxable income, state taxable income, or any combination thereof from the date of issuance of the Series 2011C-D Bonds or any other date, or that such changes will not result in other adverse federal or state tax consequences.
Prospective purchasers of the Series 2011C-D Bonds should consult their own tax advisors as to the applicability and extent of federal, state, local or other tax consequences of the purchase, ownership and disposition of the Series 2011C-D Bonds, including the potential consequences of any pending or proposed legislation, in light of their particular tax situation.
LEGAL MATTERS
Certain legal matters relating to the issuance of the Series 2011C-D Bonds are subject to the approving opinions of Co-Bond Counsel to the Airports Authority, Hogan Lovells US LLP, Washington, D.C., and Lewis, Munday, Harrell & Chambliss, Washington, D.C., which will be furnished upon the issuance of the Series 2011C-D Bonds. The form of such opinions are set forth in APPENDIX E of this Official Statement (the “Bond Opinion”). The Bond Opinion is limited to matters relating to the issuance of the Series 2011C-D Bonds and to the status of interest on the Series 2011C-D Bonds as described in “TAX MATTERS.” Hogan Lovells US LLP and Lewis, Munday, Harrell & Chambliss also serve as Co- Special Counsel to the Airports Authority to advise the Airports Authority in connection with the preparation of this Official Statement, and such firms will deliver opinions regarding certain matters to the Airports Authority and the Underwriters.
Certain legal matters were passed upon for the Airports Authority by Philip G. Sunderland, Esquire, Vice President and General Counsel of the Airports Authority, and for the Underwriters by their Co- Counsel Saul Ewing LLP, Washington, D.C. and McKenzie & Associates, Washington, D.C.
LITIGATION
The Airports Authority is involved in various claims and lawsuits arising in the ordinary course of business that are covered by insurance or that the Airports Authority does not believe to be material. The Airports Authority believes that any liability assessed against the Airports Authority as a result of pending claims and lawsuits that are not covered by insurance or reserves will not materially adversely affect the financial position of the Airports Authority. Except as described below, no litigation is pending or, to the knowledge of the Airports Authority, threatened against the Airports Authority (a) seeking to restrain or enjoin the issuance of the Series 2011C-D Bonds or the collection of Net Revenues pledged under the Indenture, or (b) in any way contesting or affecting any authority for the issuance of the Series 2011C-D Bonds, the validity or binding effect of the Series 2011C-D Bonds or the resolution of the Airports Authority authorizing and implementing the Series 2011C-D Bonds or the Indenture, or (c) in any way contesting the creation, existence, powers or jurisdiction of the Airports Authority, the validity or effect of the Federal Act, the Federal Lease, the Virginia Act or the District Act or any provision thereof, or the application of the proceeds of the Series 2011C-D Bonds.
I-33
In April 2011, two users of the Dulles Toll Road filed a lawsuit in federal district court in Virginia against the Airports Authority claiming that the setting of tolls by the Airports Authority violates various rights and privileges they enjoy under the United States Constitution. The claims presented by these plaintiffs assert, in various ways, that the tolls established by the Airports Authority amount to "taxes," and that the levying of "taxes" by an unelected body, like the Airports Authority's Board of Directors, violates numerous principles embedded in the federal constitution. The plaintiffs also seek to have the district court certify a class of all current and past users of the Dulles Toll Road since May 2005. In addition to declaratory and injunctive relief, the plaintiffs seek a refund to class members of tolls paid since May 2005 in excess of the toll rates then in effect.
In July 2011, in response to the Airports Authority's motion, the district court dismissed the plaintiffs' complaint. The court initially determined that plaintiffs lacked "prudential" standing to bring any of their claims. The court then proceeded to address each of the claims on the merits. The court concluded, specifically as to each claim, that it failed, as a matter of law, to state a valid claim as to which the court could grant any relief, and, generally, that the setting of tolls by the Airports Authority does not violate the federal constitution. Following the ruling, plaintiffs filed notice of their intent to appeal the dismissal to the United States Court of Appeals for the Federal Circuit. The Airports Authority intends to vigorously defend this appeal. Were plaintiffs to obtain a decision from the court of appeals reversing the district court and concluding that the Airports Authority's toll setting violates the federal constitution, the Airports Authority may be unable to comply with its agreements and obligations under the Dulles Toll Road bond indenture, which could include the inability to make timely payments of principal of and/or interest on the Airports Authority's bonds and notes issued for the Dulles Toll Road and Dulles Metrorail Extension Project.
In August 2009, two organizations filed a lawsuit in federal district court in Virginia against the Airports Authority and various federal and state agencies, challenging in a number of ways the Authority's power to operate the Dulles Toll Road, to finance the Dulles Metrorail Extension Project with Dulles Toll Road revenues, to set tolls on the Dulles Toll Road, and to construct the Dulles Metrorail Extension Project. In April 2010, the district court dismissed all counts and ruled that the plaintiff organizations lacked standing to pursue any of the counts. The district court also ruled, as to each count in the complaint, that the plaintiffs had not set out a valid legal claim as to which any relief could be granted.
In May 2010, a panel of the United States Court of Appeals for the Fourth Circuit affirmed the district court's dismissal of all counts. The panel concluded that the plaintiffs lacked "prudential" standing to bring all but one of counts; as to that count, in which plaintiffs claimed that the Airports Authority had violated the Virginia Freedom of Information Act, the panel affirmed the district court's dismissal, ruling that the Airports Authority, as an interstate compact entity, is independent of Virginia and its local governments and is, therefore, not subject to Virginia's Freedom of Information statute. In early May 2011, plaintiffs petitioned for a panel rehearing or a rehearing before the entire court of appeals. This petition remains pending. If the petition is granted, the Airports Authority intends to vigorously defend the decision reached by the panel.
Other suits have been filed in the past and may be filed in the future against the Airports Authority making claims contesting the Airports Authority's power to operate the Dulles Toll Road, to construct the Dulles Metrorail Extension Project and/or to charge tolls for use of the Dulles Toll Road. The Airports Authority is unable to predict the final result of any such lawsuits should they be filed. However, an adverse ruling in any of the suits would likely relate only to the Dulles Toll Road and would be unlikely to have a negative impact on the Airports Authority's operation of the Airports and its ability to generate
I-34
Revenues and pay debt service on the Bonds. See “CERTAIN INVESTMENT CONSIDERATIONS” herein.
RATINGS
Fitch Ratings (“Fitch”), Moody’s Investors Service, Inc. (“Moody’s”) and Standard & Poor’s Rating Service, Inc. (“S&P”) assigned the Series 2011C-D Bonds the ratings of “AA-,” “Aa3” and “AA-,” respectively. Fitch assigned the Airports Authority an “AA-” rating with “Stable Outlook” on January 4, 2006. Fitch upgraded the Airports Authority’s rating on August 27, 2007, to an “AA” rating with “Stable Outlook.” Fitch changed the outlook to “Negative Outlook” on July 8, 2010. Fitch changed the Airports Authority’s rating on September 9, 2011 to an “AA-” rating with “Stable Outlook.” Moody’s assigned the Airports Authority an “Aa3” rating with “Stable Outlook” on January 4, 2006. Moody’s changed the outlook to “Positive” on November 3, 2006. Moody’s changed the outlook to “Negative” on June 30, 2010. Moody’s affirmed the Airports Authority’s rating on September 8, 2011. S&P assigned the Airports Authority an “A+” rating with “Positive” outlook on January 3, 2006. S&P upgraded the Airports Authority’s rating on November 3, 2006, to an “AA-” rating with “Stable Outlook.” S&P affirmed the Airports Authority’s rating on September 9, 2011. The Airports Authority furnished to such rating agencies the information contained in this Official Statement and certain other materials and information about the Airports Authority. Generally, rating agencies base their ratings on such materials and information, as well as investigations, studies and assumptions by the rating agencies.
A rating, including any related outlook with respect to potential changes in such ratings, reflects only the view of the agency giving such rating and is not a recommendation to buy, sell or hold the Series 2011C-D Bonds. An explanation of the procedure and methodology used by each rating agency and the significance of such ratings may be obtained from the rating agency furnishing the same. Such ratings may be changed at any time, and no assurance can be given that they will not be revised downward or withdrawn entirely by any of such rating agencies if, in the judgment of any of them, circumstances so warrant. Any such downward revision or withdrawal of any of such ratings is likely to have an adverse effect on the market price of the Series 2011C-D Bonds.
UNDERWRITING
The underwriters of the Series 2011C-D Bonds are listed on the cover of this Official Statement, for whom J.P. Morgan Securities LLC acts as representative (the “Underwriters”), have agreed to purchase the Series 2011C Bonds and the Series 2011D Bonds, at a price of $198,887,001.05, and $10,940,998.22, respectively (consisting of $185,390,000 aggregate par amount of the Series 2011C Bonds, plus a net original issue premium of $14,492,357.65, less an underwriting discount of $995,356.60, and consisting of $10,385,000 aggregate par amount of the Series 2011D Bonds, plus a net original issue premium of $613,462.05, less an underwriting discount of $57,463.83) pursuant to the Bond Purchase Agreement, entered into by and between the Airports Authority and the Underwriters (the “Bond Purchase Agreement”). The Underwriters will be obligated to purchase all of the Series 2011C-D Bonds if any Series 2011C-D Bonds are purchased. The Underwriters reserve the right to join with other underwriters in the offering of the Series 2011C-D Bonds. The obligations of the Underwriters to accept the delivery of the Series 2011C-D Bonds are subject to various conditions set forth in the Bond Purchase Agreement.
The following two sentences were provided by J.P. Morgan Securities LLC (“JPMS”), acting as representative for the Underwriters, for inclusion in this Official Statement and the Airports Authority does not take any responsibility for, or make any representation as to, their accuracy or completeness. JPMS has
I-35
entered into a negotiated dealer agreement (the “J.P. Morgan Dealer Agreement”) with Charles Schwab & Co., Inc. (“CS&Co.”) for the retail distribution of certain securities offerings, including the Series 2011C-D Bonds, at the original issue prices. Pursuant to the J.P. Morgan Dealer Agreement, CS&Co. will purchase Series 2011C-D Bonds from JPMS at the original issue price less a negotiated portion of the selling concession applicable to the Series 2011C-D Bonds sold by CS&Co.
The following four sentences were provided by Morgan Stanley and Citigroup Inc., each an Underwriter of the Series 2011C-D Bonds, for inclusion in this Official Statement and the Airports Authority does not take any responsibility for, or make any representation as to, their accuracy or completeness. Morgan Stanley and Citigroup Inc., the respective parent companies of Morgan Stanley & Co. LLC and Citigroup Global Markets Inc., have entered into a retail brokerage joint venture. As part of the joint venture each of Morgan Stanley & Co. LLC and Citigroup Global Markets Inc. will distribute municipal securities to retail investors through the financial advisor network of a new broker-dealer, Morgan Stanley Smith Barney LLC. This distribution arrangement became effective on June 1, 2009. As part of this arrangement, each of Morgan Stanley & Co. LLC and Citigroup Global Markets Inc. will compensate Morgan Stanley Smith Barney LLC. for its selling efforts in connection with their respective allocations of the Series 2011C-D Bonds.
The following four sentences were provided by Wells Fargo Securities, an Underwriter of the Series 2011C-D Bonds, for inclusion in this Official Statement and the Airports Authority does not take any responsibility for, or make any representation as to, their accuracy or completeness. Wells Fargo Securities is the trade name for certain capital markets and investment banking services of Wells Fargo & Company and its subsidiaries, including Wells Fargo Bank, National Association. Wells Fargo Bank, National Association (“WFBNA”) has entered into an agreement (the “Distribution Agreement”) with Wells Fargo Advisors, LLC (“WFA”) for the retail distribution of certain municipal securities offerings, including the Series 2011C-D Bonds. Pursuant to the Distribution Agreement, WFBNA will share a portion of its underwriting compensation with respect to the Series 2011C-D Bonds with WFA. WFBNA and WFA are both subsidiaries of Wells Fargo & Company.
RELATIONSHIP OF PARTIES
In addition to serving as Co-Bond Counsel to the Airports Authority, Hogan Lovells US LLP serves as counsel to the Airports Authority on certain other matters. Manufacturers and Traders Trust Company (successor to Allfirst Bank) serves as the Trustee for the Bonds, the Series One CP Notes, the Series Two CP Notes and the Airports Authority’s Dulles Toll Road Revenue Bonds, as trustee for the Airports Authority’s pension plan and safe keeper of certain operating funds of the Airports Authority.
JPMorgan Chase Bank, N.A., provides a letter of credit to the Airports Authority to provide credit support for the Series One Notes, and J.P. Morgan Securities LLC serves as the commercial paper dealer for such Series One Notes. JPMorgan Chase Bank, N.A., also serves as a swap counterparty to the Airports Authority and provides a letter of credit to the Airports Authority to provide credit support for the Airports Authority Dulles Toll Road Commercial Paper Notes, Series One.
MISCELLANEOUS
The Trustee has not participated in the preparation of this Official Statement and takes no responsibility for its content. All of the appendices are integral parts of this Official Statement and must be read together with Part I and Part II of this Official Statement. The description of the Indenture does not
I-36
purport to be comprehensive or definitive, and prospective purchasers of the Series 2011C-D Bonds are referred to the Indenture for the complete terms thereof. Copies of the Indenture may be obtained from the Airports Authority. The text of the Master Indenture may be obtained from the Airports Authority’s website at www.mwaa.com/311.htm and www.dacbond.com. So far as any statements made in this Official Statement involve matters of opinion, forecasts or estimates, whether or not expressly stated, they are set forth as such and not as representation of fact. Historical data is presented for information purposes only and is not intended to be a projection of future results.
METROPOLITAN WASHINGTON AIRPORTS AUTHORITY
By /s/ Charles D. Snelling Charles D. Snelling Chairman
I-37
Part II
of the
OFFICIAL STATEMENT
relating to the
METROPOLITAN WASHINGTON AIRPORTS AUTHORITY
dated September 9, 2011
Part II of the Official Statement contains certain provisions applicable to all Bonds, including information regarding the Airports Authority, the Airline Agreement, the Airport Service Region and Airports activity, certain factors affecting the air transportation industry, the financial condition of certain airlines serving the Airports, the Airports Authority’s CCP, the plan of funding for the CCP and certain investment considerations. Part II of the Official Statement should be read together with Part I of the Official Statement. Unless otherwise defined in Part II, all terms used herein shall have the same meanings set forth in APPENDIX B – “Definitions and Summary of Certain Provisions of the Indenture.” Part II has not been updated since its date of September 9, 2011, to reflect any changes occurring since said date.
THE AIRPORTS AUTHORITY
General
The Airports Authority was created under the Virginia Act and the District Act, with the consent of the Congress of the United States, for the purpose of operating, maintaining and improving the Airports. In the Federal Act, Congress authorized the Secretary of Transportation (the “Secretary”) to lease the Airports to the Airports Authority. The Airports Authority is a public body politic and corporate, and is independent of the District of Columbia, the Commonwealth of Virginia and the federal government. The Airports Authority has the powers and jurisdiction set forth in the Acts, including the authority: (a) to plan, establish, operate, develop, construct, enlarge, maintain, equip and protect the Airports; (b) to issue revenue bonds for any of the Airports Authority’s purposes payable solely from the fees and revenues from the Airports pledged for their payment; (c) to fix, revise, charge and collect rates, fees, rentals and other charges for the use of the Airports; (d) to make covenants and to do such things as may be necessary, convenient or desirable in order to secure its bonds; and (e) to do all things necessary or convenient to carry out its express powers. The Airports Authority has no taxing power.
II-1
The Airports Authority also is empowered to adopt rules and regulations governing the use, maintenance and operation of its facilities. Regulations adopted by the Airports Authority governing aircraft operations and maintenance, motor vehicle traffic and access to Airports Authority facilities have the force and effect of law. The Airports Authority also is empowered to acquire real property or interests therein for construction and operation of the Airports. It has the power of condemnation, in accordance with Title 25 of the Code of Virginia, for the acquisition of property interests for airport and landing field purposes. On June 7, 1987 (the “Lease Effective Date”), operating responsibility for the Airports was transferred to the Airports Authority by the federal government pursuant to the Federal Lease. The Federal Lease is discussed in more detail below under “Lease of the Airports to the Airports Authority.”
The Acts provide that the Airports Authority shall consist of a 13-member Board of Directors (the “Board”). Five members of the Board are appointed by the Governor of Virginia subject to confirmation by the Virginia General Assembly, three are appointed by the Mayor of the District of Columbia subject to confirmation by the Council of the District of Columbia, two are appointed by the Governor of Maryland, and three are appointed by the President of the United States with the advice and consent of the Senate. Directors serve staggered six-year terms and each continues to serve until a successor is appointed. For a listing of the current members of the Board, see Part I – “INTRODUCTION – The Airports Authority.”
Senior Management
Airports Authority operations are conducted under the supervision of the Airports Authority staff. The current senior management of the Airports Authority includes:
JOHN E. POTTER. Mr. Potter is President and Chief Executive Officer of the Metropolitan Washington Airports Authority. Prior to assuming this position on June 22, 2011, Mr. Potter served as the Postmaster General of the United States for ten years where he worked to modernize management of the over 500,000 employee organization. Prior to serving as Postmaster General, Mr. Potter served in a number of positions at the United States Postal Service, including Manager of Washington–Baltimore–Northern Virginia Field Operations, Senior Vice President of Labor Relations, Senior Vice President of Operations Support, and Executive Vice President and Chief Operating Officer. Mr. Potter is a graduate of Fordham University (B.A., Economics, 1977) and Massachusetts Institute of Technology (M.S.M., Sloan Fellow, 1995).
MARGARET E. MCKEOUGH. Ms. McKeough is Executive Vice President and Chief Operating Officer of the Airports Authority. Prior to assuming this position on April 1, 2004, Ms. McKeough served as the Airports Authority’s Vice President for Business Administration beginning in August 1998. Before joining the Airports Authority, Ms. McKeough was the Deputy Aviation Director for Business and Properties at Phoenix Sky Harbor International Airport and managed various business programs in the Phoenix Economic Development Department. Ms. McKeough is a graduate of Providence College (B.A., Political Science, 1983) and the University of Connecticut (M.P.A., 1985).
QUINCE T. BRINKLEY, JR. Mr. Brinkley is Vice President and Secretary of the Airports Authority. Prior to joining the Airports Authority in June 2008, Mr. Brinkley served as Vice President and Portfolio Manager with Wachovia Bank. Prior to that time, Mr. Brinkley was Northeast Regional Community Development Lending Manager with Freddie Mac for six years. He served as a Senior Airport Consultant with Unison Consulting Group, Inc. for five years and also has held a number of positions in the housing and development area. Mr. Brinkley is a
II-2
graduate of Morehouse College (B.A., Finance, 1985) and University of North Carolina (M.P.A., 1994).
PHILIP G. SUNDERLAND. Mr. Sunderland is Vice President and General Counsel to the Airports Authority. Prior to assuming this position in April 2008, Mr. Sunderland served as the Secretary and Counsel to the Airports Authority beginning in June 2007. Before joining the Airports Authority, Mr. Sunderland was the chief of staff for Congressman James Moran (VA, 8th). Prior to his work on Capitol Hill, he had been the City Manager for five years and the City Attorney for 14 years for the City of Alexandria, Virginia. Mr. Sunderland has served on the boards of numerous non-profit organizations in Northern Virginia, was a member of a Virginia General Assembly task force that prepared a re-codification of the Local Government chapter of the Virginia Code, and has served as a teaching fellow at the Stanford Law School and the Chinese University of Hong Kong. He is a graduate of Dartmouth College (B.A., Economics, 1967) and the Stanford University Law School (J.D., 1972).
ANDREW T. ROUNTREE. Mr. Rountree became Vice President for Finance and Chief Financial Officer on December 2, 2010. Prior to then, Mr. Rountree was the Acting Vice President for Finance and Chief Financial Officer and the Deputy Chief Financial Officer. He joined the Airports Authority’s Office of Finance in 2005. Prior to joining the Airports Authority, Mr. Rountree was the Director of Finance for the City of Richmond, Virginia in September 2000. While with the City of Richmond, he served as Deputy Director for Finance from 1998 to 2000, and originally joined the City of Richmond in 1996 as the Chief of the License, Assessment, and Tax Audit. Mr. Rountree began his career with the Commonwealth of Virginia’s Auditor of Public Accounts, the legislatively appointed auditor for Commonwealth of Virginia, and worked there until 1990 as Audit Director. He subsequently served as Assistant Controller for the Commonwealth of Virginia’s Department of Information Technology until 1996. Mr. Rountree is a graduate of Virginia Commonwealth University (B.S., Economics, 1982) and is a Certified Public Accountant.
VALERIE HOLT. Ms. Holt is Vice President for Audit. Ms. Holt joined the Airports Authority in June 2001. She previously served as the Chief Financial Officer and the Controller for the District of Columbia and as a Director for the District of Columbia Financial Responsibility and Management Assistance Authority. She is a Certified Public Accountant with eight years of public accounting experience including employment with two “Big Four” firms. She holds undergraduate degrees from George Washington University (B.A., Accounting, 1984), Eastern Michigan University (B.S., Sociology, 1970) and a graduate degree from the University of Michigan (M.S.W., Social Work, 1972).
FRANK D. HOLLY, JR. Mr. Holly is Vice President for Engineering and is responsible for the Airports Authority’s Capital Construction Program and Capital Improvements Program for the Airports, and is also responsible for development of the Dulles Metrorail Extension Project. He joined the Airports Authority in 1992. Mr. Holly served as an active duty officer in the Army Corps of Engineers before retiring in 1989 in the grade of Colonel. During his Army career, he was involved in managing large scale development programs in the U.S. and overseas. After military service, he joined the Chicago Department of Aviation as a Deputy Commissioner. He was directly responsible for managing the engineering and maintenance functions at Chicago O’Hare International Airport. He is a graduate of Hampton University (B.S., Architecture, 1960) and the University of Missouri-Rolla (M.S., Engineering Management, 1970).
II-3
MARK TREADAWAY. Mr. Treadaway is Vice President for Air Service Planning and Development and Acting Vice President for Communications. He joined the Airports Authority in 1992, holding several positions in marketing and air service development. Prior to joining the Airports Authority, he gained experience in strategic business planning and account management while employed at advertising agencies, Apple Computer, Inc. and as a founding partner of a marketing consultancy group. He is a graduate of the University of Texas (B.B.A., 1978) and American Graduate School of International Management (Thunderbird Campus) in Phoenix, Arizona, (M.B.A., 1980).
GEORGE R. ELLIS. Mr. Ellis is Vice President for Information Systems and Telecommunications. He joined the Airports Authority in 1998, after 28 years with AT&T’s Transmission Engineering, Planning and Marketing departments. Mr. Ellis also directed the IBM and UPS Global Network Management Centers at AT&T’s White Plains, New York location. He is a graduate of City College of New York (B.S.E.E., 1977) and Golden Gate University (M.S., Telecommunications Management, 2000).
STEVEN C. BAKER. Mr. Baker is Vice President for Business Administration. Prior to joining the Airports Authority in October 2005, Mr. Baker served as Deputy Aviation Director of the Miami International Airport and Vice President of Portfolio Management for the Harold A. Dawson Company. Mr. Baker also served as Vice President of Aviation Resource Partners, Inc., Counsel for American Airlines, Inc., and Regional Administrator for United Airlines, Inc. He is a graduate of Cornell University (B.A., Economics, 1982), the University of Pennsylvania (M.B.A., 1986 and J.D. 1986).
ARL WILLIAMS. Mr. Williams is Vice President for Human Resources. Mr. Williams joined the Airports Authority in 1998, after serving as Director of Human Resources for the District of Columbia Courts. He served as Director of Human Resources for the National Center for State Courts, Deputy Director of Administration and subsequently Associate Director of Civil Rights for the U.S. Environmental Protection Agency, and Labor Relations Representative for Xerox Corporation. He is a graduate of the Benedictine College (B.A., Economics, 1966), Notre Dame Law School (J.D., 1969) and Duke University (M.B.A., 1979).
J. PAUL MALANDRINO, JR. Mr. Malandrino is Vice President and Airport Manager at Reagan National Airport. Mr. Malandrino was the Federal Security Director at Thurgood Marshall Baltimore/Washington International Airport for almost four years before assuming his current position in July 2006. Prior to that time, he served as Manager of the Operations Department at Dulles International Airport for more than six years. Mr. Malandrino retired from the U.S. Air Force in 1996, after spending 30 years on active duty. Mr. Malandrino is a graduate of The Citadel (B.A. History, 1965) and Golden Gate University (M.P.A., 1976).
CHRISTOPHER U. BROWNE. Mr. Browne is Vice President and Airport Manager at Dulles International Airport. He joined the Airports Authority staff in 1988 as an Operations Duty Officer and was promoted to the Manager of the Operations Division in 1995. He was subsequently promoted to the Vice President and Airport Manager at Reagan National Airport in 1998, where he served until he assumed his current position in April 2005. Mr. Browne retired from the Navy in March 2000, after seven years of active duty and 13 years in the United States Naval Reserves, during which time he attained the rank of Commander. Mr. Browne is a graduate of Dartmouth College (B.A., History, 1980).
II-4
ELMER H. TIPPETT, JR. Mr. Tippett is Vice President for Public Safety. Mr. Tippett joined the Airports Authority in 1993, after serving as Superintendent of the Maryland State Police and Deputy Chief of Police for Prince George’s County, Maryland. He is a graduate of the American University (B.S., Criminal Justice, 1977), the F.B.I. National Academy and the National Executive Institute.
Employees and Labor Relations
As of May 2011, the Airports Authority employed approximately 1,421 full and part-time employees, of whom approximately 802 are represented by labor unions in five bargaining units. The Airports Authority is not subject to the National Labor Relations Act and also is outside the jurisdiction of the Federal Labor Relations Authority. As required by the Federal Lease, the Board adopted a Labor Code in November 1988 which became effective February 1, 1989. This Labor Code established an Employee Relations Council (the “ERC”) consisting of nine members who are named to two-year terms by mutual agreement between the President and Chief Executive Officer of the Airports Authority and the labor organizations representing Airports Authority employees. The ERC is composed of three panels: the Impasse Panel, the Representation Matters Panel and the Unfair Labor Practices Panel. Through these panels, the ERC acts on petitions for exclusive representation, resolves negotiation disputes and investigates unfair labor practice allegations. Pursuant to the terms of the Virginia Act, Airports Authority employees are prohibited from striking.
Lease of the Airports to the Airports Authority
The Airports were transferred by the federal government to the Airports Authority on June 7, 1987, for an initial term of 50 years ending June 6, 2037. The term of the Federal Lease may be extended by mutual agreement and execution of a written extension by the Secretary of Transportation and the Airports Authority. The Federal Lease was amended April 30, 2003, to extend the term to June 6, 2067. The Federal Lease transferred a leasehold interest in all of the Airports’ then existing real property, including access highways and related facilities, and transferred title to all equipment, materials, furnishings and other personal property appurtenant to or located on the Airports’ property (other than particular property required for federal air traffic control responsibilities). Since the transfer, the Airports Authority has acquired title to approximately 1,540 acres of land, as well as aviation easements over approximately 158 acres of land adjacent to Dulles International Airport for airport expansion. Included in the property acquired are 830 acres of land to accommodate the new runways at Dulles International Airport and other future development. All land acquired after the transfer is not subject to the Federal Lease except that, pursuant to the most recent amendments to the Federal Lease, any after-acquired land in the Airports Authority’s possession at the expiration of the Federal Lease will revert to the federal government. The Federal Lease was amended in 1991 and 1998 to reflect changes in federal law eliminating the Airports Authority’s Board of Review and increasing the number of federal appointees to the Board.
Under the Federal Lease, the Airports Authority was granted full power and dominion over, and complete discretion in the operation and development of, the Airports and, subject to limited exceptions, has assumed all rights, liabilities and obligations of the FAA’s Metropolitan Washington Airports organization. Pursuant to the Federal Lease, the Airports Authority adopted all existing labor agreements in effect on the Lease Effective Date, and provided for the transfer to the Airports Authority of employees who were employees of the FAA and the continuation of various employment benefits, including coverage of certain United States Civil Service retirement benefits. The Airports Authority has satisfied its legal requirement to fund the pension and other benefit obligations.
II-5
The Federal Lease provides for an annual base rental payable to the United States Treasury, which was initially $3.0 million for the one-year period that commenced June 7, 1987. This amount is subject to annual adjustment for inflation and interest. The adjusted lease payment for the year ended June 6, 2011, was approximately $5.1 million.
The Airports Authority is required to deposit funds into a reserve for rental payments on a monthly basis and to make rental payments in semiannual installments. Any interest earned on the deposited funds also is required to be paid to the United States. Payments under the Federal Lease are to be made by the Airports Authority from funds legally available for such purpose, after the Airports Authority has satisfied its contractual obligations in respect of debt service on its bonds and other indebtedness, and paid or set aside the amounts required for payment of the operating and maintenance expenses of the Airports. The Airports Authority has made all rental deposits and payments on a timely basis.
Under the Federal Lease, the Airports Authority may not use certain Revenues from one Airport for payment of operation and maintenance expenses at the other Airport. This restriction does not extend to debt service, amortization or depreciation expenses. The Federal Lease requires the Airports Authority to use the same basis in calculating general aviation landing fees at the Airports as is used in setting air carrier fees.
The Federal Lease imposes certain restrictions on the Airports Authority in the operation of the Airports. For example, the Airports Authority may not (a) increase or decrease the number of Instrument Flight Rule takeoffs and landings permitted at Reagan National Airport by the FAA’s High Density Rule as in effect on October 18, 1986, which rule limits, with certain exceptions, the number of air carrier flights that can be scheduled to 37 per hour, and 11 regional air carrier flights and 12 general aviation flights scheduled per hour, (b) impose any limitation on the number of passengers taking off or landing at Reagan National Airport, or (c) change the hours of operation or the types of aircraft serving either of the Airports, except by regulation adopted after a public hearing. See “Regulations and Restrictions Affecting the Airports” below.
The Federal Lease requires the Airports Authority to maintain a risk financing plan for its casualty and property losses, covering such items as are customarily insured by enterprises of a similar nature. The Airports Authority’s risk financing plan includes risk retention, risk transfer to commercial insurers or participation in group risk financing plans. The Airports Authority is required to consult with qualified actuaries and risk management consultants in developing its risk management plan. The Airports Authority has adopted a risk financing plan in accordance with the requirements of the Federal Lease. See “Insurance” below.
The following constitute “events of default” under the Federal Lease: (a) the failure of the Airports Authority to make rental payments for 30 days after their due date; (b) the continuation of the use of any of the leased property or any portion thereof for purposes other than airport purposes (for 30 days after notice of such use from the Secretary, unless good faith efforts to remedy the default have been commenced and are being diligently pursued); and (c) the continuation of a breach of any other provision of the Federal Lease (for 30 days after notice of the breach from the Secretary, unless good faith efforts to remedy such default have been commenced and are being diligently pursued). In the case of an event of default described in (a) or (c) above, the Secretary may request the United States Attorney General to bring an appropriate action to compel compliance with the Federal Lease by the Airports Authority. In the case of an event of default relating to a rental payment under the Federal Lease, the Secretary may assess penalties and interest at specified rates. In the case of an event of default described in (b) above, the Secretary is required to direct the Airports Authority to bring the use of Airport property into conformity with the
II-6
Federal Lease and to retake that property if the Airports Authority does not comply within a reasonable period. The Federal Lease provides for its termination only following an event of default that is based on the Airports Authority using all of the leased property for purpose other than airport purposes.
Although the Airports Authority is not required to follow federal contracting statutes and regulations, under the terms of the Federal Lease, the Airports Authority is obligated to implement contracting procedures to achieve, to the maximum extent practicable, full and open competition. The Airports Authority has published a contracting manual that sets forth its procedures for full and open competition.
Regulations and Restrictions Affecting the Airports
The operations of the Airports Authority and its ability to generate revenues are affected by a variety of legislative, legal, contractual and practical restrictions. These include, without limitation, restrictions in the Federal Act, limitations imposed by the Federal Lease and provisions of the Airline Agreement. Both Airports are subject to the extensive federal regulations applicable to all airports and, following the September 11, 2001 attacks, the FAA instituted additional special operating restrictions for Reagan National Airport. The following summarizes some of the applicable regulations and restrictions.
Historical Operating Restrictions
Reagan National Airport is subject to federal statutory and regulatory restrictions that do not apply to most other airports in the United States. The FAA regulation known as the High Density Rule limits the number of air carrier, regional air carrier and general aviation flights that can be scheduled at Reagan National Airport. The High Density Rule has been in effect since 1969, and is intended to promote air traffic efficiency and relieve congestion. The maximum number of air carrier flights authorized is 37 per hour, with some exceptions. In addition to the air carrier flights, the regulation allows 11 regional air carrier flights and 12 general aviation operations per hour. Since September 11, 2001, general aviation activity has been severely curtailed at Reagan National Airport. Initially banned following September 11, general aviation was authorized to resume at Reagan National Airport on October 18, 2005, but subject to compliance with strict security requirements. See “Additional Security Restrictions at Reagan National Airport” below.
Under the Federal Act, nonstop flights to and from Reagan National Airport generally are limited to destinations no more than 1,250 miles away (the “Perimeter Rule”). Since 2000, Congress has authorized increases in flight activity at Reagan National Airport beyond flights authorized by the High Density Rule, by authorizing 12 daily round trips to points beyond the perimeter. While the Perimeter Rule limits long distance flights at Reagan National Airport, it also, in effect, promotes such flights at Dulles International Airport and Baltimore/Washington International Thurgood Marshall Airport (“BWI”). The Airports Authority cannot predict whether any legislation that would increase the number of flights per hour from Reagan National Airport will be enacted by Congress and, if enacted, what the impact of such increased flights might be.
Additional Security Restrictions at Reagan National Airport
The terrorists attacks of September 11, 2001, led to a number of security restrictions on airports throughout the United States and especially at Reagan National Airport. Reagan National Airport was closed immediately after the attacks on September 11, 2001, and did not reopen until October 4, 2001, at which time a phased resumption of flight activity was permitted. Reagan National Airport was authorized
II-7
to resume all operations on April 27, 2002, except for general aviation, which was prohibited until October 18, 2005. Although general aviation is now authorized at Reagan National Airport, it is subject to compliance with strict security requirements, including arrival from one of 22 “gateway” airports,11advanced screening and background checks of crews and passengers, TSA inspection of crews, passengers and property and the presence of armed officers on each flight. Resumption of general aviation at Reagan National Airport has had no material effect on traffic and revenues at Reagan National Airport.
In addition to the enhanced security restrictions applicable to all airports, the federal government imposed special restrictions on Reagan National Airport to address security issues resulting from the proximity of Reagan National Airport’s flight paths to national landmarks and federal buildings in the Washington, D.C. area, such as requiring pilots to follow special identification procedures in order to land at Reagan National Airport, suspending the minimum use requirements under the High Density Rule for Reagan National Airport through October 26, 2002, and again from March 19, 2003 until October 25, 2003, as a result of the conflict in Iraq and the heightened security alerts. Other than the restrictions related to general aviation, the special security restrictions are no longer in effect at Reagan National Airport.
Possible Future Restrictions on Reagan National Airport
For security reasons, the federal government could again restrict flights or close Reagan National Airport for extended periods or permanently. If closure or similar restrictions were to occur, it would have a negative impact on enplanements at the Airports and, as a result, on Revenues. If this were to occur, the Airports Authority would expect to seek compensation from the federal government for the losses and damages incurred, as it did successfully when Reagan National Airport was closed as a result of the events of September 11, 2001. No assurances can be given, however, that any compensation would be forthcoming from the federal government.
Federal Funding Regulations
The FAA has the power to terminate the authority to impose PFCs if the Airports Authority’s PFC revenues are not used for approved projects, if project implementation does not commence within the time periods specified in the FAA’s regulations or if the Airports Authority otherwise violates FAA regulations. The Airports Authority’s plan of funding for the 2001-2016 CCP is premised on certain assumptions with respect to the timing and amounts of the Airports Authority’s PFC applications, and the availability of PFCs to fund PFC-eligible portions of certain projects in the 2001-2016 CCP. In the event that PFCs are lower than those expected, the Airports Authority may elect to delay certain projects or seek alternative sources of funding, including the possible issuance of additional Bonds. See “PLAN OF FUNDING FOR THE 2001- 2016 CCP – Funding Source: PFCs.”
The Federal Act currently provides that, after September 16, 2011, the Secretary of Transportation may not approve an application of the Airports Authority (i) for an airport development grant under the AIP program, or (ii) to impose a PFC. The Airports Authority is seeking legislation to remove this provision, or to extend the date on which it is applied. There can be no assurance that the Airports Authority will be able to obtain such legislation prior to September 16, 2011.
1 The FAA uses the term “gateway” airport to refer to 22 airports at which all inbound flights must complete TSA screening prior to landing at Reagan National Airport. The 22 gateway airports are: Seattle-Tacoma, WA; Boston Logan, MA; Houston Hobby, TX; White Plains, NY; La Guardia, NY; Chicago Midway, IL; Minneapolis/St. Paul, MN; West Palm Beach, FL; San Francisco, CA; Teterboro, NJ; Philadelphia, PA; Dallas/Love Field, TX; Memphis International, TN; General Mitchell International, WI; Lexington, KY; Lambert St. Louis, MO; St. Paul, MN; Long Island, NY; Newark, NJ; Port Columbus, OH; Bradley International, CT; and Hanscom Bedford, MA.
II-8
Noise Abatement Programs
Since 1993, the Airports Authority has had an aircraft noise compatibility program at Reagan National Airport that was approved by the FAA under 14 C.F.R. Part 150, the FAA program for addressing noise issues involving airports and neighboring communities (“Part 150”). The Airports Authority’s program includes noise abatement flight corridors, nighttime noise limits, aircraft thrust management procedures and nighttime engine run-up limitations. In accordance with FAA requirements, in December 2004, the Airports Authority completed and delivered to the FAA a Part 150 review of its noise compatibility program for Reagan National Airport which, in light of changes in the type and number of aircraft operating at Reagan National Airport, proposed certain modifications to the program. The Airports Authority received FAA approval of the Part 150 review in January 2008.
The Airports Authority also has an aircraft noise compatibility program for Dulles International Airport. All runways at Dulles International Airport have buffers between the runway ends and the airport boundary. The Airports Authority worked in conjunction with the planning departments in Fairfax County and Loudoun County to provide for compatible land use in the vicinity of Dulles International Airport, specifically in those areas projected to be adversely affected by significant aircraft noise in the future. The original Part 150 program for Dulles International Airport was completed by the FAA in 1985. In 1993, the noise exposure analysis was updated to reflect the phase-out of older, noisier aircraft as mandated by Congress. Both counties have adopted land-use plans that provide for development compatible with the predicted noise exposure from the planned five runways at Dulles International Airport.
Risk Based Auditing
The functions of the Airports Authority’s Office of Audit include coordination of the annual financial statement audit performed by independent external auditors, as well as internal audits of internal controls. The Office of Audit conducts internal audits to provide the Airports Authority’s management and the Board with reasonable assurance that: (1) risks are being managed; (2) management and delivery capacity are being maintained; (3) adequate control is being exercised; and (4) appropriate results are being achieved. The Office of Audit assesses organization-wide risk to evaluate the allocation of internal audit resources and to develop each annual audit plan in a manner that gives appropriate consideration to risks affecting the Airports Authority.
Insurance
The Airports Authority was required under the Federal Lease to have certain insurance in force on the Lease Effective Date and has obtained property and casualty policies, including airport liability insurance to protect its operations. Additionally, the Airports Authority created an Owner Controlled Wrap-Up Insurance Program (“OCWIP”) for CCP-related work performed at the Airports to provide builders’ risk, workers’ compensation, environmental, and general liability insurance to protect all enrolled contractors and their subcontractors of all tiers. The OCWIP is designed to reduce conflict among contractors and insurance providers, increase the liability protection for all participants, and reduce the total cost of the insurance for the improvements. The Airports Authority has acquired commercial insurance coverage for war risks, including terrorism, on selected liability insurance and property insurance policies. Each policy has specified limits and exclusions.
II-9
THE BONDS
Security and Source of Payment for the Bonds
General
Each Series of Bonds will be secured on a parity with other Series of Bonds issued by the Airports Authority under the Indenture by a pledge of Net Revenues under the terms set forth in the Indenture. In addition, the Bonds will be secured respectively by the Bond proceeds deposited in certain funds held by the Trustee, all as described in the Indenture. No property of the Airports Authority is subject to any mortgage for the benefit of the owners of the Bonds. Under the Indenture, Net Revenues means Revenues, plus transfers, if any, from the General Purpose Fund to the Revenue Fund, after provision is made for the payment of Operation and Maintenance Expenses. See APPENDIX B – “Definitions and Summary of Certain Provisions of the Indenture.”
Revenues are generally defined in the Indenture as all revenues of the Airports Authority received or accrued except (a) interest income on, and any profit realized from, the investment of moneys in any fund or account to the extent that such income or profit is not transferred to, or retained in, the Revenue Fund or the Bond Fund; (b) interest income on, and any profit realized from, the investment of moneys in any fund or account funded from the proceeds of Special Facility Bonds; (c) amounts received by the Airports Authority from, or in connection with, Special Facilities unless such funds are treated as Revenues by the Airports Authority; (d) the proceeds of any passenger facility charge or similar charge levied by, or on behalf of, the Airports Authority, including PFCs, unless such funds are treated as Revenues by the Airports Authority; (e) grants-in-aid, donations, and/or bequests; (f) insurance proceeds which are not deemed to be revenues in accordance with generally accepted accounting principles; (g) the proceeds of any condemnation awards; (h) the proceeds of any sale of land, buildings or equipment; and (i) any other amounts which are not deemed to be revenues in accordance with generally accepted accounting principles or which are restricted as to their use. Unless otherwise provided in a supplemental indenture, there also shall be excluded from the term “Revenues” (a) any Hedge Termination Payments received by the Airports Authority and (b) any Released Revenues in respect of which the Airports Authority has filed with the Trustee the request of an Airports Authority Representative, an Airport Consultant’s or an Airports Authority Representative’s certificate, an Opinion of Bond Counsel and the other documents contemplated in the definition of the term “Released Revenues” set forth in the Indenture. The Airports Authority has completed the procedures necessary to treat the Airports Authority’s Dulles Toll Road Revenues (as described herein) as “Released Revenues” under the Indenture, thereby excluding Dulles Toll Road Revenues from Revenues and from the pledge and lien on the Net Revenues securing the Bonds. See Part I, “INTRODUCTION – Operation of the Dulles Toll Road and Construction of the Dulles Metrorail Extension.”
Under the Indenture, Operation and Maintenance Expenses generally means all expenses of the Airports Authority paid or accrued for the operation, maintenance, administration and ordinary current repairs of the Airports. Operation and Maintenance Expenses do not include (a) the principal of, premium, if any, or interest payable on any Bonds, Subordinated Bonds and Junior Lien Obligations; (b) any allowance for amortization or depreciation of the Airports; (c) any other expense for which (or to the extent to which) the Airports Authority is or will be paid or reimbursed from or through any source that is not included or includable as Revenues; (d) any extraordinary items arising from the early extinguishment of debt; (e) rentals payable under the Federal Lease; and (f) any expense paid with amounts from the Emergency Repair and Rehabilitation Fund.
II-10
The Airports Authority is obligated to deposit all moneys from the Revenue Fund into the various funds and accounts created under the Indenture on a monthly basis. See “Flow of Funds” below. Amounts held by the Airports Authority in the Revenue Fund are not pledged to secure the Bonds.
Each of the Bonds is secured by a pledge of and lien on certain proceeds of the sale of such Series, and the earnings thereon, held in certain funds and accounts created under the Indenture. These funds and accounts include the Bond Fund and, with respect to each Series, the applicable account in the Debt Service Reserve Fund, held by the Trustee, and the applicable account in the Construction Fund, if any, held by a custodian on behalf of the Trustee.
The Bonds shall not constitute a debt of the District of Columbia or of the Commonwealth of Virginia or any political subdivision thereof nor a pledge of the faith and credit of the District of Columbia or of the Commonwealth of Virginia or any political subdivision thereof. Except to the extent payable from proceeds of the applicable Series of Bonds and investment earnings thereon, the Bonds shall be payable from Net Revenues of the Airports Authority pledged for such payment and certain funds established under the Indenture. The issuance of Bonds under the provisions of the Acts shall not directly, indirectly or contingently obligate the District of Columbia or the Commonwealth of Virginia or any political subdivision thereof to any form of taxation whatsoever. The Airports Authority has no taxing power.
Rate Covenant
Pursuant to the Indenture, the Airports Authority has covenanted that it will take all lawful measures to fix and adjust from time to time the fees and other charges for the use of the Airports, including services rendered by the Airports Authority, pursuant to the Airline Agreement or otherwise, calculated to be at least sufficient to produce Net Revenues to provide for the larger of either:
(a) The amounts needed for making the required deposits in each fiscal year to the Principal Accounts, the Interest Accounts, and the Redemption Accounts, the Debt Service Reserve Fund, the Subordinated Bond Funds, the Subordinated Reserve Funds, the Junior Lien Obligations Fund, the Federal Lease Fund and the Emergency Repair and Rehabilitation Fund; or
(b) An amount not less than 125% of the Annual Debt Service with respect to Bonds for such fiscal year.
The Airports Authority has covenanted that if, upon the receipt of the audit report for a fiscal year, the Net Revenues in such fiscal year are less than the amount specified above, the Airports Authority will require the Airport Consultant to make recommendations as to the revision of the Airports Authority’s schedule of rentals, rates, fees and charges, and upon receiving such recommendations or giving reasonable opportunity for such recommendations to be made, the Airports Authority, on the basis of such recommendations and other available information, will take all lawful measures to revise the schedule of rentals, rates, fees and charges for the use of the Airports as may be necessary to produce the specified amount of Net Revenues in the fiscal year following the fiscal year covered by such audit report.
In the event that Net Revenues for any fiscal year are less than the amount specified, but the Airports Authority has promptly complied with these remedial requirements, there will be no Event of Default under the Indenture; provided, however, that if, after the Airports Authority has complied with these remedial requirements, Net Revenues are not sufficient to provide for the specified amount in the fiscal year in which such adjustments are required to be made (as evidenced by the audit report for such
II-11
fiscal year), such failure will be an Event of Default under the Indenture. See APPENDIX B – “Definitions and Summary of Certain Provisions of the Indenture – Rate Covenant and Defaults and Remedies.”
The Airline Agreement provides a mechanism for setting rates and charges for use of the Airports and provides for the leasing of certain Airport facilities. The Airline Agreement will not be assigned or pledged to the Trustee as security for the Bonds. If for any reason the Airline Agreement is amended, expires or is terminated, the Airports Authority will set airline rates and charges in accordance with a successor agreement or regulations and resolutions of the Board that are consistent with FAA requirements that such rates and charges be reasonable, and in an amount sufficient to meet the rate covenant under the Indenture. See APPENDIX C – “Summary of Certain Provisions of the Airport Use Agreement and Premises Lease” and “CERTAIN AGREEMENTS FOR USE OF THE AIRPORTS.”
Irrevocable Commitment of Certain Passenger Facility Charges
The definition of Revenues does not include, among other things, Passenger Facility Charges (“PFCs”), except to the extent PFCs are treated as Revenues by the Airports Authority, which has not occurred to date. However, the definition of Annual Debt Service provides that in any computation relating to the issuance of additional Bonds under Section 213 of the Master Indenture or in any computation required by the rate maintenance covenant under Section 604 of the Master Indenture, there shall be excluded from the computation of Annual Debt Service principal of and interest on Bonds for which funds have been irrevocably committed to make such payments. Pursuant to the Thirty-fifth Supplemental Indenture of Trust, dated as of July 1, 2009 (the “Thirty-fifth Supplemental Indenture”), the Airports Authority has irrevocably committed in each Fiscal Year through 2016 the greater of (i) $35,000,000 of Designated Passenger Facility Charges; or (ii) 50% of the total amount of Designated Passenger Facility Charges, to be deposited into the PFC Debt Service Account of the PFC Fund to pay principal and/or interest on certain Bonds (“PFC Eligible Bonds”) issued to finance or refinance the Cost of certain Authority Facilities authorized to be financed with PFCs. Under the Thirty-fifth Supplemental Indenture, any Designated Passenger Facility Charges received by the Airports Authority in excess of such amount in any Fiscal Year are to be deposited in the PFC Project Account of the PFC Fund.
The term “Designated Passenger Facility Charges” is defined in the Thirty-fifth Supplemental Indenture to mean revenues received by the Airports Authority from the $4.50 passenger facility charge imposed by the Airports Authority at Dulles International Airport pursuant to 49 U.S.C. § 40117, in accordance with Title 14, Code of Federal Regulations, Part 158 (the “FAA Regulations”), and as approved by the Federal Aviation Administration by letters dated August 17, 2005, May 8, 2008, September 4, 2008 and March 6, 2009, net of amounts that collecting air carriers are entitled to retain for collecting, handling and remitting such passenger facility charge revenues at Dulles International Airport, as provided in the FAA Regulations. Such term does not include any other passenger facility charges collected by the Airports Authority at either Reagan National Airport or Dulles International Airport.
The Thirty-fifth Supplemental Indenture may be amended, without the consent of the Holders of the Outstanding Bonds, for purposes of making changes relating to the definition of Designated Passenger Facility Charges or the amounts or Fiscal Years in which Designated Passenger Facility Charges are committed to pay debt service on PFC Eligible Bonds, including a reduction of the amount of Designated Passenger Facility Charges; provided that such amendment will not reasonably be expected to prevent the Airports Authority from complying with the rate maintenance covenant in Section 604 of the Master Indenture.
II-12
If the Airports Authority does not use the full amount of the irrevocably committed Designated Passenger Facility Charges to pay debt service on PFC Eligible Bonds in a Fiscal Year (i.e., there are more Designated Passenger Facility Charges than there is debt service due on PFC Eligible Bonds in such Fiscal Year), any unused portion of the irrevocable commitment may be transferred to the PFC Project Account of the PFC Fund. Amounts on deposit in the PFC Project Account may be applied by the Airports Authority to any lawful purpose relating to the Airports including (i) providing for the payment of the Cost of Authority Facilities authorized to be financed with PFCs, and/or (ii) transferring funds to the PFC Debt Service Account to pay principal and/or interest on PFC Eligible Bonds not otherwise paid. The Airports Authority currently expects to utilize the total amount of Designated Passenger Facility Charges to pay the debt service on the PFC Eligible Bonds. In addition, the Airports Authority currently expects to use an additional $25 million in 2011 and an additional $5 million of Designated Passenger Facility Charges from 2012 through 2016 to pay Annual Debt Service on the Airports Authority’s PFC Eligible Bonds, thereby further reducing Annual Debt Service in each such years. See “APPENDIX B” for detailed information regarding certain covenants and agreements the Airports Authority has made with respect to the use of PFCs.
Flow of Funds
The Airports Authority is required to deposit all Revenues upon receipt, and may deposit amounts from any available source, in the Revenue Fund. On the first Business Day of each month, (1) amounts in the Revenue Fund, excluding any transfers from the General Purpose Fund during the current fiscal year, and (2) 1/12 of the amount of any transfers from the General Purpose Fund during the current fiscal year, are to be withdrawn from the Revenue Fund and deposited or transferred in the following amounts and order of priority:
[Remainder of page intentionally left blank]
II-13 FLOW OF FUNDS UNDER THE INDENTURE
Revenue Fund Designated Passenger Facility Charges To the Operation and Maintenance Fund, an amount necessary to increase the balance in the Operation and Maintenance Fund to Operation and Maintenance Fund (a) 25% of Operation and Maintenance PFC Fund Expenses set forth in the Airports Authority's budget for the current Fiscal Year.
Bond Fund* To the applicable Principal Account, Interest Account and Redemption Account Principal Account* PFC Debt Service Account in the Bond Fund, amounts, if any, set forth Pay Debt Service on PFC Interest Account* (b) in the applicable Supplemental Indenture Eligible Bonds 1 with respect to each Series of Bonds, Redemption Account* subject to a credit for certain amounts on deposit therein.
To the applicable account in the Debt Service Reserve Fund with respect to each PFC Project Account Debt Service Reserve Funds* (c) Series of Bonds, amounts, if any, set forth in the applicable Supplemental Indenture to Pay PFC-approved project replenish any deficiency therein. costs and use amounts in the account for any lawful purpose relating to the To the Subordinated Indenture Trustee, an amount equal to the deposit to the Airports including transfer Subordinated Bond Funds* (d) to the PFC Debt Service Subordinated Bond Funds required by the Account. Subordinated Indenture.
To the Subordinated Indenture Trustee, an amount required by the Subordinated Subordinated Reserve Funds* (e) Indenture to replenish any Subordinated Reserve Funds.
To the Junior Lien Obligations Fund, an Junior Lien Obligations Fund (f) amount equal to any required deposits pursuant to Junior Lien Indentures.
To the Federal Lease Fund, 1/12 of the amount required to be paid annually to the Federal Lease Fund (g) federal government under the Federal Lease plus the amount, if any, necessary to make up any prior deficiencies.
To the Emergency Repair and Rehabilitation Fund, 1/12 of the aggregate Emergency Repair & Rehabilitation Fund (h) amount, if any, withdrawn from such Fund in the preceding Fiscal Year.
To the General Purpose Fund, all remaining moneys required to be withdrawn from the General Purpose Fund (i) Revenue Fund on the first Business Day of each month.
1 PFC Eligible Bonds shall mean any Bonds designated in writing to the Trustee by an Authority Representative from time to time secured by the Master Indenture and issued for the purpose of financing or refinancing the Cost of Authority Facilities which are eligible for funding from passenger facility charges under the FAA Regulations. * Funds or Account held by the Trustee.
II-14
Amounts in the Revenue Fund are not pledged to secure the Bonds. Amounts in the Operation and Maintenance Fund are required to be used by the Airports Authority to pay Operation and Maintenance Expenses and are not pledged to secure the Bonds. Amounts transferred to the Subordinated Indenture Trustee, if any, will be pledged to secure the Subordinated Bonds, if any, and will not be subject to the pledge securing the Bonds. Amounts in the Junior Lien Obligations Fund secure the Junior Lien Obligations and are not pledged to secure the Bonds. Amounts deposited in the Federal Lease Fund are not and will not be pledged to secure the Bonds. Amounts in the Emergency Repair and Rehabilitation Fund may be used by the Airports Authority to pay the costs of emergency repairs and replacements to the Airports and are not pledged to secure the Bonds. Amounts in the General Purpose Fund will be available for use by the Airports Authority for any lawful purpose and are not pledged to secure the Bonds.
Additional Bonds
The Airports Authority has issued, and expects to issue in the future, additional Bonds. Under the Indenture, the Airports Authority is permitted to issue one or more Series of additional Bonds on a parity with the outstanding Bonds, if:
The Airports Authority has provided to the Trustee the following evidence indicating that, as of the date of issuance of such additional Bonds, the Airports Authority is in compliance with the rate covenant as evidenced by: (a) the Airports Authority’s most recent audited financial statements, and the Airports Authority’s unaudited statements for the period, if any, from the date of such audited statements through the most recently completed fiscal quarter, and (b) if applicable, evidence of compliance with the Indenture’s requirement of remedial action (discussed under “Rate Covenant” above); and (c) either
(i) an Airport Consultant has provided to the Trustee a certificate stating that, based upon reasonable assumptions, projected Net Revenues will be sufficient to satisfy the rate covenant (disregarding any Bonds that have been or will be paid or discharged immediately after the issuance of the additional Bonds proposed to be issued) for each of the next three full fiscal years following issuance of the additional Bonds, or each full fiscal year from issuance of the additional Bonds through two full fiscal years following completion of the Projects financed by the additional Bonds proposed to be issued, whichever is later; provided that, if Maximum Annual Debt Service with respect to all Bonds to be outstanding following the issuance of the proposed Bonds in any fiscal year is greater than 110% of Annual Debt Service for such Bonds in any of the test years, then the last fiscal year of the test must use such Maximum Annual Debt Service; provided further, that if capitalized interest on any Bonds and proposed additional Bonds is to be applied in the last fiscal year of the period described in this sentence, the Airport Consultant must extend the test through the first full fiscal year for which there is no longer capitalized interest, or
(ii) an Airports Authority Representative has provided to the Trustee a certificate stating that Net Revenues in the most recently completed fiscal year were not less than the larger of (1) the amounts needed for making the required deposits to the Principal Accounts, the Interest Accounts, and the Redemption Accounts in the Bond Fund, the Debt Service Reserve Fund, the Subordinated Bond Fund, the Subordinated Reserve Fund, the Junior Lien Obligations Fund, the Federal Lease Fund, and the Emergency Repair and Rehabilitation Fund or (2) 125% of (a) Annual Debt Service on Bonds Outstanding in such fiscal year (disregarding any Bonds that have been paid or discharged, or will be paid or discharged immediately after the issuance of such additional Bonds proposed to be issued), plus (b) Maximum Annual Debt Service with respect to such additional Bonds proposed to be issued.
II-15
With respect to additional Bonds proposed to be issued to refund outstanding Bonds, the Airports Authority may issue such refunding Bonds if either the test described in (c) above is met, or if the Airports Authority has provided to the Trustee evidence that (a) the aggregate Annual Debt Service in each fiscal year with respect to all Bonds to be outstanding after issuance of such refunding Bonds will be less than the aggregate Annual Debt Service in each such fiscal year through the last fiscal year in which Bonds are outstanding prior to the issuance of such refunding Bonds, and (b) the Maximum Annual Debt Service with respect to all Bonds to be outstanding after issuance of such refunding Bonds will not exceed the Maximum Annual Debt Service with respect to all Bonds outstanding immediately prior to such issuance.
Book-Entry Only System
The Bonds will be issued as fully registered bonds without coupons and are initially to be registered in the name of Cede & Co., as nominee for DTC as securities depository for the Bonds. Purchases by beneficial owners are to be made in book-entry form. If at any time the book-entry only system is discontinued for the Bonds, the Bonds will be exchangeable for other fully registered certificated Bonds of the same series in any authorized denominations, maturity and interest rate. See APPENDIX D – “Book- Entry Only System.” Interest will be payable by check or draft mailed to the Holder as of the Record Date. The Trustee may impose a charge sufficient to reimburse the Airports Authority or the Trustee for any tax, fee or other governmental charge required to be paid with respect to such exchange or any transfer of a Bond. The cost, if any, of preparing each new Bond issued upon such exchange or transfer, and any other expenses of the Airports Authority or the Trustee incurred in connection therewith, will be paid by the person requesting such exchange or transfer. At the request of any Holder of at least $1,000,000 principal amount of the Bonds, payment of interest will be made by wire transfer as directed by such Holder. Payment of principal of the Bonds will be made upon presentation and surrender of such Bonds at the principal corporate trust office of the Trustee.
NEITHER THE AIRPORTS AUTHORITY, THE UNDERWRITERS, NOR THE TRUSTEE WILL HAVE ANY RESPONSIBILITY OR OBLIGATION TO DTC PARTICIPANTS, INDIRECT PARTICIPANTS, OR ANY BENEFICIAL OWNER WITH RESPECT TO: (i) THE ACCURACY OF ANY RECORDS MAINTAINED BY DTC, CEDE & CO., ANY DTC PARTICIPANT, OR ANY INDIRECT PARTICIPANT; (ii) ANY NOTICE THAT IS PERMITTED OR REQUIRED TO BE GIVEN TO THE OWNERS OF THE BONDS; (iii) THE SELECTION BY DTC OR ANY DTC PARTICIPANT OR INDIRECT PARTICIPANT OF ANY PERSON TO RECEIVE PAYMENT IN THE EVENT OF A PARTIAL REDEMPTION OF ANY BONDS; (iv) THE PAYMENT BY DTC OR ANY DTC PARTICIPANT OR INDIRECT PARTICIPANT OF ANY AMOUNT WITH RESPECT TO THE PRINCIPAL OR REDEMPTION PREMIUM, IF ANY, OR INTEREST DUE WITH RESPECT TO ANY BONDS; (v) ANY CONSENT GIVEN OR OTHER ACTION TAKEN BY DTC AS THE OWNER OF THE BONDS; OR (vi) ANY OTHER MATTER RELATING TO DTC OR THE BOOK-ENTRY ONLY SYSTEM.
Method of Selecting the Bonds for Redemption
In the event that less than all of the outstanding Bonds of a Series are to be redeemed, the maturities to be redeemed and the method of their selection will be determined by the Airports Authority. In the event that less than all of any Bonds of a maturity are to be redeemed, the Bonds of such maturity to be redeemed will be selected by lot in such manner as the Trustee determines.
II-16
Upon the selection and call for redemption of, and the surrender of, any Bonds for redemption in part only, the Airports Authority will cause to be executed, authenticated and delivered to or upon the written order of the Holder thereof, at the expense of the Airports Authority, a new bond or bonds in fully registered form, of authorized denominations and like tenor, in an aggregate face amount equal to the unredeemed portion of the Bonds.
Notice of Redemption
Any notice of redemption of any Bonds must specify (a) the date fixed for redemption, (b) the principal amount of the Bonds or portions thereof to be redeemed, (c) the applicable redemption price, (d) the place or places of payment, (e) that payment of the principal amount and premium, if any, will be made upon presentation and surrender to the Trustee or Paying Agent, as applicable, of the Bonds to be redeemed, (f) that interest accrued to the date fixed for redemption will be paid as specified in such notice, (g) that on and after the redemption date, interest on the Bonds which have been redeemed will cease to accrue, and (h) the designation, including Series, and the CUSIP and serial numbers of any Bonds to be redeemed and, if less than the face amount of any Bond is to be redeemed, the principal amount to be redeemed.
Any notice of redemption will be sent by the Trustee not less than 30 nor more than 60 days prior to the date set for redemption by first class mail (a) at the address shown on the Register, to the Holder of each Bond to be redeemed in whole or in part, (b) to all organizations registered with the SEC as securities depositories, (c) to the Municipal Securities Rulemaking Board, and (d) to at least two information services of national recognition which disseminate redemption information with respect to tax-exempt securities. Failure to give any notice specified in (a), or any defect therein, will not affect the validity of any proceedings for the redemption of any Bonds with respect to which no such failure has occurred, and failure to give any notice specified in (b), (c) or (d) or any defect therein, will not affect the validity of any proceedings for the redemption of any Bonds with respect to which the notice specified in (a) is correctly given. Notwithstanding the foregoing, during any period that the Securities Depository or its nominee is the registered owner of the Bonds, notices will be sent to such Securities Depository or its nominee. During such period, the Trustee shall not be responsible for mailing notices of redemption to anyone other than such Securities Depository or its nominee.
If at the time of notice of any optional redemption of the Bonds there has not been deposited with the Trustee moneys available for payment pursuant to the Indenture and sufficient to redeem all of the Bonds called for redemption, the notice may state that it is conditional in that it is subject to the deposit of sufficient moneys by not later than the redemption date, and if the deposit is not timely made the notice shall be of no effect.
THE AIRPORTS AUTHORITY’S FACILITIES AND MASTER PLANS
Facilities at Reagan National Airport and Dulles International Airport
Reagan National Airport
Reagan National Airport opened for service in 1941. It is located on approximately 860 acres of land along the Potomac River in Arlington County, Virginia, approximately three miles from Washington, D.C. Reagan National Airport’s ability to grow is constrained to a significant extent by the High Density Rule and its physical location. Its proximity to Washington, D.C. also makes operations at Reagan National
II-17
Airport subject to particularly restrictive federal legislation and regulation. See “THE AIRPORTS AUTHORITY – Regulations and Restrictions Affecting the Airports” and “CERTAIN INVESTMENT CONSIDERATIONS.”
Reagan National Airport has three terminals. Terminal A is listed on the National Register of Historic Places and provides nine aircraft gates. The interconnected Terminals B and C have 35 aircraft gates and approximately one million square feet of floor space spread over three levels. Terminals B and C have direct connections to the Metrorail public transit system and public parking garages through two enclosed pedestrian bridges. There are three runways at Reagan National Airport: 1/19 - 6,869 feet; 15/33 - 5,204 feet; and 4/22 - 4,911 feet. The runways and associated taxiways are capable of handling up to Group IV aircraft, which is equivalent to a Boeing 767-300 aircraft.
There are 9,103 public parking spaces at Reagan National Airport, with 6,620 garage and 2,483 surface spaces, as well as 3,200 additional employee parking spaces. A project to add a floor to parking garages A and B/C with 1,424 new parking spaces was completed in March 2010.
Dulles International Airport
Dulles International Airport opened for service in 1962. It is located on approximately 11,830 acres of land (exclusive of the Dulles Access Highway) in Fairfax and Loudoun Counties, Virginia, approximately 26 miles west of Washington, D.C. Dulles International Airport has a main terminal (the “Main Terminal”) and four midfield concourses (Concourses A, B, C and D) that may be reached via an AeroTrain system and/or mobile lounges that transport passengers from the Main Terminal. The Main Terminal at Dulles International Airport is eligible for listing on the National Register of Historic Places but is not on the register. The Dulles Access Highway, a limited-access highway that is subject to the Airports Authority’s jurisdiction under the Federal Lease, is the primary route to Dulles International Airport. Ground transportation to Dulles International Airport is provided via limousine and taxi services, which are provided by concessionaires, and bus transportation is provided by the Airports Authority and the Washington Metropolitan Area Transit Authority. There are four runways: 1C/19C - 11,500 feet; 1R/19L - 11,500 feet; 12/30 - 10,500 feet; and 1L/19R - 9,400 feet. The runways and associated taxiways are capable of handling up to Group VI aircraft, which is equivalent to an Airbus A-380.
The Main Terminal has a total of 1.1 million square feet of floor space, four aircraft gates and an international arrivals building that provides customs, agriculture and immigration service facilities and can serve up to 2,400 passengers an hour. Concourse A has 412,000 square feet of floor space with 8 to 13 aircraft gates, depending on the aircraft fleet mix, and 35 regional aircraft gates. Concourse B has 546,000 square feet and 23 to 28 aircraft gates, depending on the aircraft fleet mix, for international and domestic airlines. Concourses A and B are joined by a pedestrian bridge.
Concourses C and D opened individually but as passenger demand increased, more gates were constructed at both Concourses and the two Concourses eventually were joined. They now have a combined total of 608,627 square feet of floor space and 47 aircraft gates for both international and domestic airlines.
On June 6, 2011, regularly scheduled service for the Airbus A-380, the new 550 seat aircraft, began between Dulles International Airport and Paris-Charles de Gaulle Airport. To accommodate this aircraft, two gates were modified to support the boarding and unloading of passengers from the upper and lower
II-18
decks. The current runway/taxiway system meets FAA design standards and no other construction work is expected to support the Airbus A-380.
There are 27,209 public parking spaces at Dulles International Airport, with 18,884 surface and 8,325 garage spaces, as well as 6,475 additional employee parking spaces. There also are six cargo buildings at Dulles International Airport, with a total of 483,957 square feet of cargo space.
In 2003, the Smithsonian opened the National Air and Space Museum Dulles Center at the Airport (the “Center”). The Airports Authority has title to, and is required to maintain, two roadways that were built by the Smithsonian and must allow Center patrons and invitees ingress to and egress from the Center.
The Airports Authority’s Master Plans
The Master Plan for each Airport establishes the framework for the CCP and may be amended from time to time by the Airports Authority. All major improvements to the Airports must be in accordance with the approved Master Plan for each Airport. The Master Plans adopted by the Airports Authority’s Board include the Airports’ Land Use Plans and the Airport Layout Plans (the “ALPs”). The ALPs have been approved by the FAA, and any future amendments also must be approved by the FAA. The ALPs are required by the FAA to show all existing and proposed improvements.
Reagan National Airport
The Master Plan for Reagan National Airport became effective on April 15, 1988, and has been amended periodically. All major elements of the Master Plan at Reagan National Airport have been completed with the exception of renovation of Terminal A.
Dulles International Airport
The Master Plan for Dulles International Airport was adopted and approved by the FAA prior to the Lease Effective Date and has been amended periodically. The Master Plan for Dulles International Airport includes the future construction of one additional runway, permanent midfield concourses and an expansion of the AeroTrain system, future mass transit along a right-of-way in the Dulles Access Highway corridor, expansion of automobile parking facilities, construction of additional roads on airport land and expansion of the capacity of the existing roads.
THE 2001-2016 CCP
Overview
The Capital Construction Program initiated by the Airports Authority in 1988 provides for planning, designing and constructing certain facilities at Reagan National Airport and Dulles International Airport as contemplated by the Master Plans. Between 1988 and 2000, major capital projects completed under the CCP at Reagan National Airport include, among others, two new main terminals, three parking garages and an airport traffic control tower. Major capital projects completed under the CCP at Dulles International Airport include expansion and rehabilitation of the Main Terminal and construction of Concourses A and B, an international arrivals building and runway, introduction of the AeroTrain system, and road improvements, among others.
II-19
In the aftermath of the events of September 11, 2001, and due to the deteriorating financial condition of many airlines, the Airports Authority began, and continues, to re-examine the CCP. As a result, since the spring of 2002, the Airports Authority has made additional adjustments to the CCP as part of its periodic CCP review process. To accommodate then-existing and expected growth in operations and passenger enplanements as well as to maintain and improve certain of its existing facilities, in the fall of 2006, the Airports Authority revised the scheduled completion date for the CCP from 2011 to 2016 and added $2.1 billion ($2.4 billion in inflated dollars) of projects to the CCP. The active portion of the CCP that is scheduled for completion by the end of 2016 is referred to as the “2001-2016 CCP.” In 2006, the estimated total cost of the 2001-2016 CCP was $7.06 billion.
Due to a number of factors, including economic conditions, increases in the cost of aviation fuel and their impact on the financial condition of airlines, in September 2008, the Airports Authority revised the scope, timing and size of certain 2001-2016 CCP projects, including deferring the construction of the Tier 2 Concourse and related facilities, the construction of the consolidated rental car facility and the expansion of the south utility service complex, resulting in a $2.22 billion reduction in the cost of the 2001-2016 CCP. See “THE 2001-2016 CCP – Deferred Projects.”
The Airports Authority currently estimates the cost of the 2001-2016 CCP to be approximately $5.1 billion (in inflated dollars). See “THE 2001-2016 CCP – Deferred Projects.” The Airports Authority expended approximately $4.1 billion of the $5.1 billion total estimated cost of the 2001-2016 CCP between 2001 and June 2011. The Airports Authority is nearing the completion of the 2001-2016 CCP.
Major projects completed at Reagan National Airport include the pedestrian tunnel from the parking garage to Terminal A, security enhancements and various improvements including historical Terminal A facade renovations, construction of additional decks to parking garages, electrical and life safety improvements and commercial curb upgrades. Major projects completed at Dulles International Airport include the new Runway 1L-19R, Daily Parking Garages 1 and 2, the Main Terminal rehabilitation, the Concourse B expansion, the south and east baggage basements, the airside and landside pedestrian tunnels, the air traffic control tower, construction of the Z-gates, the construction of the remote employee parking lot, the cargo building expansions, and the completion of the AeroTrain system. The Airports Authority expects most of the projects in the 2001-2016 CCP to be completed by the end of 2014.
The Airports Authority currently estimates the cost of the deferred CCP projects to be approximately $2.2 billion (in 2008 dollars). The Airports Authority expects to reassess its capital needs on a regular basis and modify its construction schedule as necessary to accommodate passenger and aircraft activity, security needs and other factors, which could result in changes to the CCP. The 2001-2016 CCP includes the following project categories:
II-20
Summary of the 2001-2016 CCP1
Reagan National Airport Dulles International Airport Total Project Costs Project Costs Project Costs Description (2001-2016) (2001-2016) (2001-2016)2
Airfield $111,906,298 $748,018,367 $859,924,665 Airport Buildings 239,306,466 1,386,122,125 1,625,428,590 Systems & Services 16,634,351 251,066,113 267,700,464 Ground Transportation 73,805,236 474,163,428 547,968,664 Aviation 288,110 155,345,344 155,633,454 Nonaviation – 12,010,825 12,010,825 Passenger Conveyance – 1,122,031,389 1,122,031,389 Maintenance 1,121,626 112,509,961 113,631,586 Public Safety 65,681,058 72,091,258 137,772,317 Administration 56,882,796 175,219,716 232,102,512 Tenant Equipment 1,455,053 9,135 1,464,188 TOTAL2 $567,080,994 $4,508,587,661 $5,075,668,655
______1 The costs presented in this table represent expenditures to date and inflation of future expenditures at 3.0% per annum. 2 Totals may not add due to rounding.
Source: Airports Authority records; compiled by the Airport Consultant.
Reagan National Airport
The 2001-2016 CCP includes approximately $567.1 million of projects at Reagan National Airport ranging from security enhancements in Terminals B and C, runway safety improvements and expansion of the Airports Authority office building, to the construction of a consolidated communications center, an airport rescue and fire fighting facility and an additional parking deck on top of the existing Garages A and B/C. The following is a brief summary of projects that are not yet completed at Reagan National Airport which are estimated to cost $50 million or more:
• Terminal Modifications for In-Line Baggage Screening. In order to satisfy security requirements and to better accommodate in-line baggage screening equipment, certain modifications to the terminal buildings are required at Reagan National Airport. The design portion of this project for Terminal B/C was completed in March 2008. The Airports Authority has received notification from TSA that the in-line baggage system at Reagan National Airport is eligible for funding. The Airports Authority is in the process of negotiating an Other Transaction Agreement (“OTA”) with TSA. Contingent on the execution of an OTA, the Airports Authority is prepared to begin construction in 2012.
Dulles International Airport
The 2001-2016 CCP includes approximately $4.5 billion of projects at Dulles International Airport ranging from the rehabilitation and renovation of Concourses C and D, the mobile lounges, the AeroTrain system, the access highway, the existing runways and the Dulles International Airport police station, to the construction of gate additions to Concourse B, including two gates that can accommodate A-380 aircraft, the expansion of the Main Terminal, the construction of the Cargo Building 6 and the installation of security enhancements at the airport. The following is a brief summary of projects that are not yet completed at Dulles International Airport which are estimated to cost $50 million or more:
II-21
• North Area Road Improvements. Growing passenger demand at Dulles International Airport has increased traffic on the landside access roads. This project provides a multi-year program of widening, grade separation, interchange improvements and extensions on various sections of the Dulles International Airport roadway system.
• Airfield Taxilanes and Aprons. Construction of several airfield taxilanes, aprons, and aircraft hydrant fueling will provide better access to the runways and improve ground flow to the gates and aircraft hardstands.
• Terminal Modifications for In-Line Baggage Screening. In order to satisfy security requirements and to better accommodate in-line baggage screening equipment, certain modifications to the terminal buildings are under construction at Dulles International Airport. The Airports Authority has entered into an OTA with TSA to fund the design and construction of the remaining portion of the in-line baggage screening systems.
• Metrorail Station. The Dulles Metrorail Station is planned as the ninth of eleven stops on the expected Metrorail extension that will originate at the existing East Falls Church Metrorail Station in Falls Church, Virginia, and end at the proposed Route 772 Metrorail Station in Loudoun County, Virginia. The expected Metrorail extension will connect to the entire Metrorail system from the East Falls Church Station. The project is expected to be completed in 2017.
• International Arrivals Building Expansion. This project provides for rehabilitation and expansion of the existing Main Terminal IAB to accommodate current passenger security requirements and to meet forecasted levels of passenger growth by expanding baggage claim spaces. While the final phase of this project was completed in August 2011, additional components of the project are expected to begin in late 2011 and early 2012 to improve the secondary inspection hall, and baggage re-check and meet and greet areas.
Deferred Projects
As a result of the Airports Authority’s periodic reviews of the CCP, the Airports Authority has deferred certain projects authorized as part of the CCP, but expects to reassess the CCP on a regular basis and make further adjustments based on passenger and airline activity, security considerations and other factors. Design work may continue on some of the deferred projects to ensure compatibility with on-going CCP projects and to permit construction of the deferred projects to proceed as soon as the Airports Authority determines that activity levels warrant their activation.
In September 2008, the Airports Authority deferred the construction of the Tier 2 Concourse and related facilities, the construction of the consolidated rental facility and the expansion of the south utility service complex. The cost of all deferred CCP projects, including those deferred by the Airports Authority in September 2008, is currently estimated at $2.2 billion. The cost of the deferred projects is not included in the cost of the 2001-2016 CCP. The following is a brief description of deferred projects which are estimated to cost $50 million or more:
Reagan National Airport
• Regional Commuter Terminal. This project will include the construction of a new 10-gate terminal and a one-story building of approximately 30,000 square feet.
II-22
Dulles International Airport
• Tier 2 Concourse and Related Facilities. The Tier 2 Concourse is a 43-gate, two-level midfield concourse that is expected to replace the existing Concourses C and D and include a concourse federal inspection station, West AeroTrain system station, apron, sterile corridors, hydrant fueling and taxilane reconstruction. The project also includes the demolition of Concourses C and D. In May 2001, United and the Airports Authority agreed to commence the design and construction of the Tier 2 Concourse and related facilities. United was to be the principal tenant and pay rates and charges sufficient to finance the construction of the Tier 2 Concourse and related facilities. As part of the resolution of its bankruptcy proceedings in 2006, United and the Airports Authority agreed to cancel the agreement to construct the new concourse, and United agreed to reimburse the Airports Authority $20.3 million for the expenses the Airports Authority incurred in designing the Tier 2 Concourse and related facilities. After emerging from bankruptcy, United resumed discussions with the Airports Authority regarding the development of the Tier 2 Concourse but no agreement was reached. In June 2008, the Airports Authority ceased all design work on the Tier 2 Concourse and related facilities. The Airports Authority may proceed with the redesign and construction of the Tier 2 Concourse if and when it deems the project necessary based on projected airline operations and passenger demand at Dulles International Airport.
• International AeroTrain System. In addition to the loop domestic AeroTrain system, plans call for the eventual development of an international AeroTrain system to transport arriving international passengers to the Main Terminal IAB.
• Pedestrian Tunnel Extension. This project will extend the existing pedestrian tunnel with moving walkways from Concourse B to the Tier 2 Concourse.
• South Utility System Expansion. This project will develop a southern utility service complex which includes gas, electricity, water, heating/cooling and telecommunications to serve the Tier 2 Concourse through a utility tunnel. Planned work includes the construction of a new south utility building, utility tunnel, trunk lines and a south area electrical substation and distribution center.
• Consolidated Rental Car Facility. This project involves the design and construction of a consolidated rental car facility which includes parking decks, customer service areas and ready lot facilities.
• Tier 3 Concourse. The Tier 3 Concourse, when constructed, will have three piers with capacity to support 37 narrow body aircraft while maintaining flexibility to support A-380 aircraft as well as necessary ancillary facilities. Construction of the Tier 3 Concourse will not commence until the Airports Authority deems the construction necessary based on projected passenger demand levels at Dulles International Airport and it has received either MII approval from the Signatory Airlines or commitments to lease 80% or more of the leasable premises in the Tier 3 Concourse, as provided in the Airline Agreement.
• Taxiway G. This project provides for the design and construction of a new taxiway south of Tier 3 connecting the east and west runways.
II-23
Capital Construction Projects at Reagan National Airport 2001-2016 CCP
II-24
Capital Construction Projects at Dulles International Airport 2001-2016 CCP
II-25
Environmental Approvals
Portions of the 2001-2016 CCP require approval by the FAA to use federal grant funds and are subject to environmental review and approval as required by the National Environmental Policy Act (“NEPA”). The nature of the review depends on the potential for a project or a group of interrelated projects to produce a significant impact on the natural or human environment. The three levels of NEPA review are categorical exclusions, environmental assessments and environmental impact statements (“EIS”).
A categorical exclusion is a determination by the FAA that the action or project falls into a category of actions that the FAA has identified, based on its experience, as having minimal likelihood of causing a significant environmental impact. Examples include replacement of airfield paving and extension of a taxiway. No additional environmental consideration is required for a project that falls within this category unless there are extraordinary circumstances that would cause the project to be reviewed further. An example of an extraordinary circumstance might be when an action is highly controversial on environmental grounds, and there is no agreement on the effect of the proposed action on the environment.
An environmental assessment is a formal, detailed evaluation of environmental conditions to determine whether a proposed action is likely to have a significant environmental impact. It involves a consideration of alternative actions and the process includes an opportunity for public review and comment. The two outcomes of an environmental assessment are a “finding of no significant impact” or a decision that an EIS is required.
An EIS is prepared by the FAA when there is a federal action with a potentially significant impact on the environment. Public involvement is required to determine the scope of the environmental review and the issues and alternatives to be addressed. A draft EIS is published for public review and comment, including a public hearing. The FAA then prepares a final EIS and eventually makes a decision on the project.
Portions of the 2001-2016 CCP are categorically excluded from further environmental review. An environmental assessment and a finding of no significant impact has been completed and issued by the FAA for the Tier 2 Concourse and related projects, including the AeroTrain system, as well as the new air traffic control tower at Dulles International Airport.
The fourth and fifth runways at Dulles International Airport required a full EIS by the FAA. The EIS process commenced in 2002, and was completed in October 2005, when the FAA issued a Record of Decision that allows the Airports Authority to receive federal grant funds for the project. The construction of the runways and many related south area projects are expected to have an adverse impact on existing wetlands and streams at Dulles International Airport and, as a result, the Airports Authority has provided appropriate mitigation by purchasing wetland credits and stream impact mitigation credits for near-term construction and developing a long-range wetland mitigation program for future work. The Airports Authority placed the fourth runway in service in November 2008. The Airports Authority has obtained all environmental approvals required to construct the fifth runway. The EIS for the fifth runway expires in 2015.
II-26
PLAN OF FUNDING FOR THE 2001-2016 CCP
The cost of constructing the projects in the 2001-2016 CCP is expected to be approximately $5.1 billion when adjusted for inflation. The 2001-2016 CCP does not include approximately $2.22 billion of deferred CCP projects. See “2011-2016 CCP – Deferred Projects.” The Airports Authority plans to finance the 2001-2016 CCP projects with the proceeds of Bonds, CP Notes, federal and state grants, PFCs and other available Airports Authority funds. The following table sets forth estimated funding sources for the 2001-2016 CCP. This table was prepared in connection with the Report of the Airport Consultant, and is not expected to be updated to reflect the final terms of the Series 2011C-D Bonds.
2001-2016 CCP Estimated Sources of Funding Proceeds from Prior Bonds1, 2 $2,994,643,082 Series 2011A Bonds and Series 2011B Bonds2 172,540,915 Future Bonds2, 3 125,975,579 Subtotal from Bonds $3,293,159,576
PFCs $1,173,901,910 Federal and State Grants 608,606,881 Total $5,075,668,367
______1 Includes only that portion of previously issued Bonds and CP Notes that funded construction costs in 2001 and thereafter. 2 Includes assumed interest earnings on construction fund deposits. 3 Includes only that portion of future Bonds that will fund construction costs. Sources: Airports Authority records and the Airport Consultant.
Funding Source: Bond Proceeds
To fund a portion of the costs of the 2001-2016 CCP, the Airports Authority previously issued Bonds totaling approximately $3.6 billion of which $2.9 billion was used to fund the 2001-2016 CCP, with the balance used to fund capitalized interest, reserve requirements and financing costs. The Series 2011A Bonds of approximately $234 million and the Series 2011B Bonds of approximately $208 million are expected to be issued to fund approximately $173 million of 2001-2016 CCP project costs (adjusted for inflation), excluding reserve requirements, capitalized interest and financing costs and the refunding of certain outstanding Bonds. After the issuance of the Series 2011A Bonds and the Series 2011B Bonds, additional Bonds of approximately $173 million are expected to be issued to fund approximately $126 million of project costs to complete the 2001-2016 CCP (adjusted for inflation), excluding reserve requirements, capitalized interest and financing costs.
Funding Source: Federal and State Grants
The FAA’s AIP consists of entitlement funds and discretionary funds. Entitlement funds are distributed through grants by a formula currently based on the number of enplanements and the amount of landed weight of arriving cargo at individual airports. Discretionary funds are distributed through FAA LOIs which are based on the FAA’s assessment of national priorities. An LOI represents the FAA’s intention to obligate funds from future federal appropriations for the program. The AIP has been authorized through September 16, 2011. Between January 2001 and May 2011, the Airports Authority received
II-27
approximately $105.4 million in entitlement and discretionary grant funds. The Airports Authority to date has received LOI commitments totaling approximately $211.8 million for 2001-2016 CCP projects at Dulles International Airport, including approximately $200.2 million to finance a portion of the design and construction of the fourth runway and associated taxiways and the cost of the environmental study of Dulles International Airport. As of May 2011, approximately $157.9 million of these LOI commitments had been received by the Airports Authority.
In February 2004, the Airports Authority submitted to TSA an LOI request for $231.1 million to finance building modifications to better accommodate the in-line baggage screening system at each Airport. In 2010, the Airports Authority revised the LOI request to $309.8 million to reflect increased project cost estimates. As of June 2010, approximately $196 million in LOI funds have been approved by TSA for the in-line baggage screening system at Dulles International Airport. As of May 2011, $36.6 million has been expended. The Airports Authority expects to receive the remaining funds to finance the in-line baggage screening system at Reagan National Airport pursuant to an executed LOI and OTA between the Airports Authority and TSA.
The Commonwealth through the aviation portion of its Transportation Trust Fund provides grants to Virginia airport operators. Since 1995, the Airports Authority has received approximately $18.6 million in state grants. The Airports Authority expects to receive an additional $10.5 million between 2011 and 2016.
Revenues received by the Airports Authority pursuant to these federal and state grants are expressly excluded from the definition of “Revenues” under the Indenture and are not pledged to secure the Bonds.
Funding Source: PFCs
The Airports Authority began collecting a $3.00 PFC in 1994 and increased the PFC to $4.50 in May 2001. An airport must apply to the FAA for the authority to impose a PFC and to use the PFC moneys collected for specific FAA-approved projects. Since Reagan National Airport and Dulles International Airport collect a $4.50 PFC, federal entitlement grant moneys that otherwise would have been received under the AIP have been reduced by 75%.
The Airports Authority has submitted and gained approval of five series of PFC applications, with associated amendments, covering both Airports in the amount of $3.0 billion. As of December 31, 2010, the Airports Authority had collected $461.6 million (including interest earned) under the four of these applications at Reagan National Airport and $537.1 million (including interest earned) under an application at Dulles International Airport. The collection dates for approved PFC applications at Reagan National Airport will expire on March 1, 2015, and at Dulles International Airport on December 31, 2038. If the amounts authorized to be collected have not been collected by the expiration dates, it is expected that the authorization to collect the PFCs will be extended.
II-28
The following table sets forth a summary of the Airports Authority’s approved PFC applications.
Total Amount Initial Approved Amended Collected as of PFC Application Approval Date Amount Approved Amount December 31, 20102 #1a - Reagan National Airport August 1993 $166,739,071 $166,410,356 $166,410,3561 #1b - Dulles International Airport October 1993 199,852,390 221,916,682 221,916,6821
#2a - Reagan National Airport May 2000 120,027,100 131,397,000 131,397,0001 #2b - Dulles International Airport May 2000 81,748,000 72,508,092 72,508,0921
#3a - Reagan National Airport July 2002 33,895,949 30,727,768 30,727,768 #3b - Dulles International Airport September 2002 59,102,550 58,903,463 58,903,463
#4a - Dulles International Airport August 2005 672,867,049 2,089,325,913 183,749,238 #4b - Reagan National Airport March 2006 146,603,508 146,603,508 133,046,865
#5a - Reagan National Airport April 2008 124,914,400 124,914,400 – 3 Total $1,605,750,017 $3,042,707,182 $998,659,464 ______
1 PFC application Numbers 1 and 2 were originally for the collection of $3.00 per enplaning passenger. In May 2001, the FAA approved amendments to PFC application Numbers 1 and 2, authorizing the Airports Authority to collect an additional $1.50 PFC per enplaning passenger. 2 Includes interest income earned on PFCs held by the Airports Authority and restricted for use on PFC projects. 3 The Airports Authority has irrevocably committed $35 million of Designated Passenger Facility Charges per year to pay debt service on certain outstanding Bonds from 2010 through 2016, and it expects to use an additional $25 million in 2011 and $5 million per year from 2012 through 2016 of Designated Passenger Facility Charges, principally due to FAA’s approval of the Airports Authority’s request to amend PFC application No. 4a to allow the Airports Authority, among other things, to use PFC revenues to pay the principal and interest on PFC Eligible Bonds used to fund certain PFC eligible CCP projects at Dulles International Airport.
The Airports Authority has made an irrevocable commitment to use $35 million of Designated Passenger Facility Charges per year to pay debt service on the PFC Eligible Bonds from 2011 through 2016, and expects to use an additional $25 million of Designated Passenger Facility Charges in fiscal year 2011 and $5 million of Designated Passenger Facility Charges from fiscal years 2012 through 2016 during the same period. See “THE BONDS – Security and Sources of Payment for the Bonds – Irrevocable Commitment of Certain Passenger Facility Charges.”
The FAA is authorized to terminate the authority to impose PFCs if the Airports Authority’s PFC revenues are not being used for FAA-approved projects, if project implementation does not commence within the time periods specified in the FAA’s regulations or if the Airports Authority otherwise violates FAA regulations. The authority to impose a PFC also may be terminated if the Airports Authority violates certain informal and formal procedural safeguards which must be followed. The Secretary of Transportation may authorize an airport operator, including the Airports Authority, to use PFC revenues to finance non-approved projects if such use is necessary due to the financial need of an airport. See also “FINANCIAL CONDITION OF CERTAIN AIRLINES SERVING THE AIRPORTS – Effect of Airline Bankruptcies – PFCs.”
The calculation of Net Revenues pledged under the Indenture expressly excludes the proceeds of any PFC or similar charge levied by or on behalf of the Airports Authority unless the Airports Authority takes action to treat these funds as Revenues under the Indenture. The Airports Authority has not taken any such actions and, therefore, any PFC or similar charge collected by the Airports Authority currently is not pledged to secure the Bonds.
II-29
The following table sets forth the annual collections of PFCs, plus interest income, from 1996 through 2010. PFC Collections Calendar Year1 Reagan National Airport Dulles International Airport Total2 1996 $ 20,415,577 $ 17,255,415 $ 37,670,992 1997 19,922,714 16,080,610 36,003,324 1998 20,653,430 18,889,787 39,543,217 1999 19,024,173 24,096,445 43,120,618 2000 19,873,021 24,126,617 43,999,638 20013 23,169,094 28,150,741 51,319,835 2002 25,050,752 31,582,074 56,632,826 2003 27,498,164 31,014,365 58,512,529 2004 29,824,841 42,162,043 71,986,884 2005 35,112,158 55,759,361 90,871,519 2006 38,918,474 43,240,383 82,158,857 2007 37,462,684 47,382,752 84,845,436 2008 35,528,816 45,717,340 81,246,056 2009 34,583,526 43,117,746 77,701,272 2010 37,755,355 43,751,837 79,507,192 TOTAL4 $424,792,779 $512,327,516 $935,120,195 ______
1 The Airports Authority changed its fiscal year from an annual period ending September 30 to an annual period ending December 31, effective January 1, 1997. 2 Represents actual annual PFC collections but does not include accruals. 3 The Airports Authority began collection of a $4.50 PFC in May 2001. 4 Totals may not add due to rounding.
Significant changes to the FAA’s PFC program are being considered by Congress. The Airports Authority cannot predict when or whether Congress will adopt these or other changes to the program.
CERTAIN AGREEMENTS FOR USE OF THE AIRPORTS
Airport Use Agreement and Premises Lease
The Airports Authority has entered into the Airline Agreement, on substantially identical terms, with nearly all of the airlines providing service at Reagan National Airport and Dulles International Airport. The Airline Agreement provides for the use and occupancy of facilities at the Airports and establishes the rates and charges, including landing fees and terminal rents, to be paid by the Signatory Airlines. Airline rates and charges are calculated using a methodology where the Airports Authority costs, including debt service and debt service coverage, are allocated to separate cost centers at each Airport and each Signatory Airline’s rates and charges are based on pro rata use of the facilities within these cost centers. Each Signatory Airline’s payment includes its pro rata share of the Airports Authority’s total requirements in the airline cost centers (including a component representing debt service plus debt service coverage), less transfers from the prior year. Airline fees pay for the cost centers of facilities utilized by air carriers. The Airports Authority’s other revenues, principally concession revenue, pay for other cost centers such as roadways, parking areas and non-airline revenue generating portions of the terminal. See APPENDIX C – “Summary of Certain Provisions of the Airport Use Agreement and Premises Lease.”
The Airline Agreement has rate making features that are designed to ensure that the Airports Authority’s debt service and related coverage obligations under the Indenture are met. The Airline Agreement authorizes the Airports Authority to make immediate rate adjustments in the event that
II-30 projected revenues are not adequate to meet the rate covenant under the Indenture, which adjustments are referred to as “Extraordinary Coverage Protection Payments” under the Airline Agreement. The Indenture requires that there be 125% coverage on the debt service on the Bonds. Under the Airline Agreement, the Airports Authority sets its rates and charges at each Airport to recover its costs in the airline-supported cost centers. The Airports Authority recovers its capital costs at each Airport by charging 100% of debt service plus debt service coverage of 25% to satisfy the 125% debt service coverage covenant included in the Indenture. Under the Airline Agreement, in the event that the 125% debt service coverage is not met at an Airport, the rate adjustment will occur at that Airport where the coverage was not met. In the event that the Airports Authority is unable to adjust rates sufficiently at the Airport that failed to generate the required 125% debt service coverage, under the Airline Agreement, the Airports Authority shall adjust the rates at the other Airport as necessary to fulfill the Airports Authority’s obligation to meet the debt service coverage covenant required by the Indenture. See APPENDIX C – “Summary of Certain Provisions of the Airport Use Agreement and Premises Lease.”
An airline that files for bankruptcy has the right to reject its Airline Agreement with the Airports Authority. In the event the Airports Authority does not recover all of its costs pursuant to the Airline Agreement with a bankrupt carrier, the Airports Authority may adjust the rates and charges for all Signatory Airlines in a subsequent rate period to recover the rates and charges due from the bankrupt carrier. As a result, if a Signatory Airline were to reject its lease of space at either Airport, the unrecovered rental costs could be allocated among the remaining airline tenants.
If an airline is not a Signatory Airline, it is required to pay rates and charges set by the Airports Authority in accordance with its regulations, resolutions of the Board and FAA requirements that such rates and charges be reasonable and non-discriminatory. While the Airports Authority believes that its rate- making methodologies, including its allocation of costs for purposes of establishing rates and charges, are reasonable, no assurance can be given that challenges by an airline will not be made to the rates and charges established by the Airports Authority or its methods of allocating particular costs. See “FINANCIAL CONDITION OF CERTAIN AIRLINES SERVING THE AIRPORTS – Effect of Airline Bankruptcies.”
The Airline Agreement expires on September 30, 2014, unless the Airports Authority exercises its rights to terminate sooner. The Airports Authority decided not to exercise its early termination rights in 2010 and 2011, but may exercise those rights in future years. Except in limited circumstances, the Signatory Airlines cannot terminate the Airline Agreement while Bonds are outstanding. A Signatory Airline does have a right to terminate the Airline Agreement if the Airports Authority determines to issue Bonds for a project in the airline-supported areas costing $25 million or more that requires an MII approval of the Signatory Airlines and such approval is not obtained. If MII approval is not obtained, the Airports Authority must defer the issuance of Bonds for that project for one year. Thereafter, the Airports Authority may issue Bonds for the project. However, if an MII approval of the Signatory Airlines still is not obtained after one year has elapsed, each Signatory Airline has 60 days to give the Airports Authority notice of intent to terminate its Airline Agreement in 180 days. Even if a Signatory Airline gives timely notice to the Airports Authority, the Airports Authority may elect not to issue Bonds, in which case the Signatory Airline’s notice of intent to terminate will not be effective. Under the Airline Agreement, the Airports Authority is permitted to negotiate a new Airline Agreement prior to its expiration.
The Airline Agreement is not assigned or pledged to the Trustee as security for the Bonds. The Airline Agreement may be amended at any time without the consent of the Holders of the Bonds. If for any reason the Airline Agreement is amended, expires or is terminated, the Airports Authority will set airline rates and charges in accordance with a successor agreement or its regulations and resolutions of the Board, consistent with FAA requirements that such rates and charges be reasonable and in an amount sufficient to satisfy the rate covenant in the Indenture. Such amendments, successor agreement or regulations could affect the forecast Net Revenues presented in the Report of the Airport Consultant, which are based on the
II-31 assumed continuation of the provisions of the Airline Agreement. See APPENDIX A – “Report of the Airport Consultant” and APPENDIX C – “Summary of Certain Provisions of the Airport Use Agreement and Premises Lease.” The Airline Agreement has been amended to exclude the DTR Revenues (as defined herein) from the definition of “Revenues” and to ensure that no Revenues from the operation of the Airports will be used to support the operation of the Dulles Toll Road or finance the Dulles Toll Road improvements or the Metrorail Extension Project. See Part I, “INTRODUCTION - Operation of the Dulles Toll Road and Construction of the Dulles Metrorail Extension.”
The Airline Agreement also provides that, in accordance with a formula, the Airports Authority will share its revenue, after certain expenses, referred to as Net Remaining Revenues (“NRR”), with the Signatory Airlines. To calculate the Airports Authority’s and the Signatory Airlines’ respective shares of NRR, the total amount of NRR is first segregated by Airport. NRR at each Airport is then reduced by depreciation, debt service coverage on Subordinated Bonds and coverage in the tenant equipment cost centers allocable to each Airport, with the Signatory Airlines receiving 100% of an amount equal to the debt service coverage on any Subordinated Bonds and coverage in the tenant equipment cost centers and the Airports Authority receiving 100% of an amount equal to depreciation. The remaining amount of NRR at each Airport is divided equally between the Airports Authority and the Signatory Airlines up to a plateau of $8 million at Reagan National Airport and $12 million at Dulles International Airport escalated by the U.S. Implicit Price Deflator Index from the base year of 1989 to the current year. The remainder is split with 25% allocated to the Airports Authority and 75% allocated to the Signatory Airlines. The Signatory Airlines’ share of NRR is used to lower airline rates and charges in the year following the year that the NRR is earned. The Airports Authority uses its share of NRR to finance its Capital, Operating and Maintenance Investment Program.
Terminal Concession Agreements
The Airports Authority has agreements to lease space to certain concessionaires who provide food, beverages, specialty retail, newspapers and other sundry items to users of the Airports. The Airports Authority has a management contract with Westfield Concession Management, Inc. (“Westfield”) for the food and beverage and retail operations at Reagan National Airport that expires December 31, 2011, under which Westfield sub-leases all food and beverage and retail facilities at Reagan National Airport. Westfield receives a fee from the Airports Authority for leasing and managing these facilities.
The Airports Authority has a management contract with Westfield for the food and beverage operations at Dulles International Airport that expires on December 31, 2011. The Airports Authority also has a separate contract with Westfield for retail facilities at Dulles International Airport that expires on December 31, 2011. Under both of these contracts, Westfield sub-leases the food and beverage and retail facilities at Dulles International Airport and receives a fee from the Airports Authority for leasing and managing these facilities.
Concession contracts generally obligate the concessionaire to pay the higher of a percentage of gross revenues or a MAG to the Airports Authority. Typically these contracts extend for a period of three to five years, although some contracts extend for longer periods. The concession contracts are awarded on the basis of competitive procedures. Terminal concession revenue represented 33.1% of total concession revenue and 12.6% of total operating revenue in 2010. See table entitled “TOTAL CONCESSION REVENUES BY MAJOR CATEGORY” in Part I, and “AIRPORTS AUTHORITY FINANCIAL INFORMATION” in Part I.
Rental Car Facility Agreements
There currently are five on-airport rental car operators at Reagan National Airport: Avis, Budget, Enterprise, Hertz/Advantage, and Vanguard (Alamo/National). The Airports Authority receives the greater
II-32 of a MAG payment or 10% of the gross receipts of each on-airport rental car operator as a concession fee. Each on-airport rental car operator at Reagan National Airport also currently assesses its customers and remits to the Airports Authority a daily customer contract fee of $2.50 established by the Airports Authority to recover the debt service and other costs associated with the rental car facilities. The only off-airport rental car company is DTG Inc. (Dollar/Thrifty). DTG Inc. operates buses to transport its customers directly to the terminals and pays the Airports Authority 8% of the gross receipts generated from airport business. Alternatively, DTG Inc. (and any other off-airport rental car company) could operate its buses to a point away from the terminals where passengers would transfer to an airport shuttle bus to the terminals and pay 4% of the gross receipts generated from airport business in excess of $300,000. Contracts with rental car operators at Reagan National Airport were awarded on June 1, 2011, and expire on May 31, 2016.
There currently are six on-airport rental car operators at Dulles International Airport: Avis, Budget, DTG Inc. (Dollar/Thrifty), Enterprise, Hertz/Advantage, and Vanguard (Alamo/National). These companies operate under contracts that became effective on July 1, 2008, and expire on June 30, 2013. The Airports Authority receives the greater of a MAG payment or 10% of the gross receipts from each on- airport rental car operator as a concession fee. Under the contracts, the cumulative minimum guarantee for the five years of the contracts are approximately $80 million. Each off-airport operator also pays a $100 annual fee, plus 4% of gross receipts in excess of $300,000. Currently, no off-airport rental car companies operate at Dulles International Airport.
Hertz Global Holdings Inc. (“Hertz”) and Avis Budget Group, Inc. (“Avis”) have made competing bids to acquire Dollar/Thrifty Automotive Group. Inc. (“Dollar/Thrifty”). In August 2011, Dollar/Thrifty announced that it intends to solicit best and final definitive proposals from Hertz and Avis for submission in October 2011. The Airports Authority cannot predict if Hertz or Avis will eventually acquire Dollar/Thrifty or what impact such an acquisition, if completed, would have on Hertz, Avis and/or Dollar/Thrifty’s operations at the Airports.
Rental car revenue represented 19.2% of concession revenue in 2010, and 7.3% of total operating revenue in 2010. See table entitled “TOTAL CONCESSION REVENUES BY MAJOR CATEGORY” in Part I, and “AIRPORTS AUTHORITY FINANCIAL INFORMATION” in Part I.
THE AIRPORTS SERVICE REGION AND AIRPORTS ACTIVITY
The Airports Service Region
The Airport Consultant defines the Airports service region for the Airports as the District of Columbia; the Maryland counties of Calvert, Charles, Frederick, Montgomery and Prince George’s; the Virginia counties of Arlington, Clarke, Fairfax, Fauquier, Loudoun, Prince William, Spotsylvania, Stafford and Warren; the independent Virginia cities of Alexandria, Fairfax, Falls Church, Fredericksburg, Manassas and Manassas Park; and the West Virginia county of Jefferson.
The population of the Airports service region increased at an average annual rate of 1.5% from 2000 to 2010, which was higher than the 0.9% population growth rate experienced by the United States during the same period. Per capita personal income of the Airports service region in 2009 was 44% higher than the United States average.
In the first six months of 2011, unemployment in the Airports service region averaged 5.8% compared with 9.2% for the nation. The Airports service region has the second lowest unemployment rate among the 49 metropolitan areas in the nation with populations of greater than one million. From 2000 to 2010, increases in employment in the Airports service region were concentrated in the professional and business services and government sectors, and these two sectors grew substantially faster in the Airports
II-33 service region than nationally such that, by 2010, the sectors accounted for 46% of employment in the Airports service region, compared with 30% nationwide.
AIRPORTS SERVICE REGION
Source: Report of the Airport Consultant.
II-34
Airlines Serving the Airports
Listed below are scheduled airlines which served the Airports as of July 2011:
REAGAN NATIONAL AIRPORT1
MAJORS/NATIONALS FOREIGN FLAG CARRIERS REGIONALS/COMMUTERS AirTran Airways8 Air Canada Air Wisconsin5 Alaska Airlines Air Canada Jazz (Regional) American Eagle3 American Airlines Atlantic Southwest2 Continental Airlines10 Chautauqua2,4,5 Delta Air Lines Colgan Air4,5 Frontier Airlines Comair2 JetBlue Airways Compass2 MN Airlines Continental Express4,10 Spirit Airlines Mesaba Aviation2 United Airlines10 Piedmont Airlines5 US Airways7 Pinnacle2 PSA5 Republic Airline5 Shuttle America2,6 SkyWest Airlines4
ALL CARGO CARRIERS FedEx
DULLES INTERNATIONAL AIRPORT1
MAJORS/NATIONALS FOREIGN FLAG CARRIERS REGIONALS/COMMUTERS AirTran Airways8 Aer Lingus Air Wisconsin5 American Airlines Aeroflot Atlantic Southeast2,6 Continental Airlines10 AeroSur Chautauqua2 Delta Air Lines7 Air France Colgan Air4,6,10 JetBlue Airways7 All Nippon Airways Comair2 Southwest8 Austrian Airlines Compass2 United Airlines7,10 Avianca Express Jet4,6,10 Virgin America British Airways Go-Jet6,7 COPA Airlines Mesa5,6 Ethiopian Airlines Mesaba Aviation2,5 Grupo TACA PSA5 Icelandair Pinnacle2 KLM-Royal Dutch Airlines Shuttle America6,7 Korean Air SkyWest Airlines4,6,10 Lufthansa German Airlines Trans States6,7 Open Skies Qatar Amiri Air ALL-CARGO CARRIERS Saudi Arabian Airlines FedEx Scandinavian Airlines System Mountain Air Cargo South African Airways United Parcel Service Turkish Airlines Virgin Atlantic Airways
______1 Reflects code sharing between major/national and regional carriers only and not agreements between and among major/national carriers. Chartered carriers enplaning fewer than 1,000 passengers or less than 300 metric tons of cargo are not shown on this table. 2 Operates under a code sharing agreement with Delta. 3 Operates under a code sharing agreement with American. 4 Operates under a code sharing agreement with Continental. 5 Operates under a code sharing agreement with US Airways. 6 Operates under a code sharing agreement with United. 7 Provides domestic, and international/transborder service. 8 As of May 2, 2011, Southwest completed its purchase of AirTran Airways. Southwest expects to operate the airlines as separate companies, and expects to operate under the Southwest brand in 2012. 9 Operates under a code sharing agreement with Midwest Airlines. 10 As of October 1, 2010, United and Continental completed the merger of the two airlines. United Holdings, Inc. expects to operate the airlines separately until mid- 2012. Source: Airports Authority records.
II-35
Airports Activity
Largely as a result of the Perimeter Rule, Reagan National Airport offers primarily short and medium haul passenger flights to destinations within 1,250 miles of Washington, D.C. See “THE AIRPORTS AUTHORITY – Regulations and Restrictions Affecting the Airports.” As of July 2011, nonstop service was provided from Reagan National Airport to 76 destinations, including 70 cities nationwide as well as international destinations such as Bermuda, Halifax, Montreal, Ottawa and Toronto in Canada and Nassau, Bahamas.
Dulles International Airport serves primarily medium to long-haul markets, which is partly a function of the Perimeter Rule at Reagan National Airport. Since 1986, Dulles International Airport has served as a hub for United. As of July 2011, nonstop service was provided from Dulles International Airport to 82 cities nationwide and to 45 international nonstop destinations.
Historical Enplanement Activity
The following table summarizes total commercial enplanements at Reagan National Airport and Dulles International Airport from 2000 through 2010. Enplanements for 2001 must be considered in the context of the events of September 11, 2001. See “CERTAIN INVESTMENT CONSIDERATIONS.”
[Remainder of page intentionally left blank]
II-36
Historical Commercial Enplanements1,2
Reagan National Airport Dulles International Airport
Total Annual Domestic International Annual Annual Annual Enplanements Growth Enplanements Annual Growth Enplanements Growth Enplanements Growth
2000 7,855,373 4.7% 7,888,431 -1.0% 2,083,201 13.1% 9,971,632 1.7% 2001 6,563,504 -16.4% 6,958,802 -11.8% 1,961,394 -5.8% 8,920,196 -10.5% 2002 6,460,451 -1.6% 6,497,774 -6.6% 2,017,724 2.9% 8,515,498 -4.5%
20033 7,102,415 9.9% 6,371,646 -1.9% 1,994,840 -1.1% 8,366,486 -1.7% 2004 7,952,071 12.0% 9,014,584 41.5% 2,309,572 15.8% 11,324,156 35.4% 2005 8,909,274 12.0% 10,947,383 21.4% 2,448,994 6.0% 13,396,377 18.3% 2006 9,239,818 3.7% 8,797,384 -19.6% 2,594,862 6.0% 11,392,245 -15.0% 2007 9,294,077 0.6% 9,313,161 5.9% 2,960,345 14.1% 12,273,506 7.7% 2008 8,977,831 -3.4% 8,742,530 -6.1% 3,115,417 5.2% 11,857,947 -3.4% 2009 8,767,243 -2.3% 8,429,620 -3.6% 3,117,151 0.1% 11,546,771 -2.6% 2010 9,035,544 3.1% 8,564,825 1.6% 3,177,235 1.9% 11,742,060 1.7%
Annual Compounded Growth
2000-2010 1.4% 0.8% 4.3% 1.6%
1 Excludes passengers enplaned on general aviation and military flights. 2 Enplanement figures have been reconciled to the Airports Authority's records and may not match figures released in previous issues. 3 Enplanements at Reagan National Airport include enplaned passengers for Midway, which were inadvertently deleted from the 2007 Comprehensive Annual Financial Report.
Source: Airports Authority records.
Reagan National Airport
Reagan National Airport experienced little overall passenger traffic growth in the 1990s, in part due to the slot restrictions imposed by the High Density Rule. Between 1997 and 2000, enplanements at Reagan National Airport decreased at an annual compounded rate of 0.1%, fluctuating from an increase of 4.7% in 2000 to a decline of 5.0% in 1999. From January through August 2001, enplanements at Reagan National Airport increased by 7.9% compared to the same period in 2000, primarily as a result of the continuing shift of US Airways passengers to Reagan National Airport from Dulles International Airport and a significant increase in America West’s enplanements after it received an exemption to the non-stop Perimeter Rule. Annual enplanements for 2001 decreased by 16.4% from 2000, as a result of the closure of Reagan National Airport from September 11, 2001, until October 4, 2001, and the Federal government’s imposition of flight restrictions thereafter.
Enplanements began recovering at Reagan National Airport once flight restrictions were fully lifted in April 2002, and after 2002, Reagan National Airport experienced five successive years of traffic growth surpassing the 2000 enplanement level in 2004. Between 2005 and 2010, enplanements at Reagan National Airport fluctuated between approximately 8.9 million and 9.3 million.
The top two airlines at Reagan National Airport (US Airways and Delta, along with their code- sharing affiliate carriers) enplaned 60.4% of all passengers in 2010. American, United, and Continental accounted for 27.1% of the total, and all other airlines together accounted for the remaining 11.3%.
There has been a significant shift in passenger traffic over the past nine years from flights operated by major airlines to flights operated by regional affiliates, as well as a gain in enplaned passengers by low
II-37 cost carriers (“LCCs”). Between 2000 and 2010, the share of enplaned passengers carried by major carriers declined from 87.7% to 58.2%; the share carried by regional affiliates increased from 7.1% to 30.7% and the share carried by LCCs increased from 2.4% to 8.3%. Other domestic and foreign-flag airlines accounted for the remaining enplaned passengers in each period.
Dulles International Airport
Dulles International Airport experienced rapid growth in passenger enplanements during the 1990s. Between 1997 and 2000, domestic enplanements increased at an average annual rate of 14.0%, compared with an average annual rate of 3.2% for domestic enplanements nationwide. The adverse effects of the events of September 11, 2001 on travel demand contributed to an 11.8% decrease in domestic enplanements at Dulles International Airport in 2001. Further decreases occurred in 2002 (6.67%) and in 2003 (1.9%).
Domestic enplanements at Dulles International Airport increased 41.5% in 2004 and a further 21.4% in 2005, largely as a result of the start of service by Independence Air. Both connecting and originating passenger numbers increased as other airlines added service and reduced fares to compete with Independence Air. With the bankruptcy and subsequent cessation of service by Independence Air, passenger enplanements decreased 19.6% in 2006, before increasing 5.9% in 2007. Largely as a result of the reduction in demand during the national economic recession, domestic passenger enplanement numbers decreased 7.3% between 2007 and 2010.
LCCs increased their share of domestic enplaned passengers at Dulles International Airport from 2.9% in 2000 to 16.4% in 2009. The increase is largely attributable to initiation of service at Dulles International Airport by JetBlue in 2001, Southwest in 2006, and Virgin American in 2007.
Between 1997 and 2000, international enplanements increased at an average annual rate of 12.0% at Dulles International Airport, compared with an average annual rate of 5.4% for international enplanements nationwide. In the aftermath of the events of September 11, 2001, international enplanements declined by 5.8% in 2001.
International enplanements at Dulles International Airport recovered after September 11, 2001, exceeding the 2000 number by 2004. Between 2004 and 2010, international enplanements at Dulles International Airport increased 37.6%, largely as a result of increased service by United.
United and United Express accounted for 54.2% of international passengers at Dulles International Airport in 2010, up from 40.8% in 2000. No other U.S. airline has a material international service presence at Dulles International Airport. Foreign-flag scheduled airlines accounted for 48% of the international enplaned passengers at Dulles International Airport in 2010.
[Remainder of page intentionally left blank]
II-38
The following tables show passenger enplanements at Reagan National Airport and Dulles International Airport by airline between 2006 and 2010.
ENPLANEMENT MARKET SHARE BY AIRLINE AT REAGAN NATIONAL AIRPORT
Airline 2006 Share 2007 Share 2008 Share 2009 Share 2010 Share
US Airways Carriers 3,807,286 41.2% 3,843,164 41.4% 3,708,948 41.3% 3,531,268 40.3% 3,683,312 40.8% US Airways1 2,402,455 26.0% 2,296,405 24.7% 2,170,157 24.2% 1,965,778 22.4% 1,963,376 21.7% Republic (US Airways Express) 465,755 5.0% 594,411 6.4% 630,563 7.0% 733,136 8.4% 907,075 10.0% Air Wisconsin (US Airways Express) 483,923 5.2% 568,630 6.1% 670,067 7.5% 567,358 6.5% 446,339 4.9% PSA (US Airways Express) 153,266 1.7% 139,087 1.5% 147,013 1.6% 168,781 1.9% 215,400 2.4% Chautauqua (US Airways Express) 95,080 1.0% 70,677 0.8% 64,453 0.7% 77,766 0.9% 123,584 1.4% Colgan Air (US Airways Express) 13,041 0.1% 13,867 0.1% 13,740 0.2% 13,983 0.2% 15,315 0.2% Piedmont (US Airways Express) 11,584 0.1% 28,463 0.3% 12,856 0.1% 4,466 0.1% 12,223 0.1% America West 175,333 1.9% 125,095 1.3% − 0.0% − 0.0% − 0.0% Trans States (US Airways Express) − 0.0% 6,529 0.1% 99 0.0% − 0.0% − 0.0% Mesa (US Airways Express) 6,849 0.1% − 0.0% − 0.0% − 0.0% − 0.0% Delta Carriers 2,015,884 21.8% 1,948,275 21.0% 1,926,078 21.5% 1,834,606 20.9% 1,775,037 19.6% Delta 761,946 8.2% 704,772 7.6% 726,473 8.1% 728,156 8.3% 1,253,421 13.9% Delta Shuttle 311,460 3.4% 252,743 2.7% 206,552 2.3% 13,149 0.1% − 0.0% Northwest 666,028 7.2% 675,764 7.3% 669,821 7.5% 581,173 6.6% 28,371 0.3% Comair (Delta Connection) 176,297 1.9% 179,534 1.9% 190,134 2.1% 250,061 2.9% 206,210 2.3% Shuttle America (Delta Connection) 269 0.0% 27,201 0.3% 23,646 0.3% 168,203 1.9% 164,543 1.8% Pinnacle (Northwest Airlink) 55,563 0.6% 59,895 0.6% 58,100 0.6% 47,431 0.5% 454 0.0% Mesaba Aviation (Delta Connection) − 0.0% − 0.0% − 0.0% − 0.0% 41,114 0.5% Mesaba (Northwest Airlink) 14,734 0.2% 9,895 0.1% 4,658 0.1% 29,506 0.3% 4,944 0.1% Compass (Delta Connection) − 0.0% − 0.0% − 0.0% − 0.0% 20,568 0.2% Pinnacle (Delta Connection) − 0.0% − 0.0% 7,051 0.1% 7,844 0.1% 21,038 0.2% Chautauqua (Delta Connection) 1,700 0.0% 11,009 0.1% 9,881 0.1% 6,065 0.1% 2,908 0.0% Atlantic Southeast (Delta Connection) 27,887 0.3% 26,268 0.3% 4,965 0.1% 2,974 0.0% 31,273 0.3% Freedom (Delta Connection) − 0.0% 1,194 0.0% 24,797 0.3% 44 0.0% 193 0.0% American Carriers 1,428,218 15.5% 1,472,755 15.8% 1,427,507 15.9% 1,475,242 16.8% 1,481,668 16.4% American 1,132,839 12.3% 1,214,058 13.1% 1,158,855 12.9% 1,143,658 13.0% 1,188,767 13.2% American Eagle 280,129 3.0% 258,697 2.8% 268,652 3.0% 331,584 3.8% 292,901 3.2% Trans States (American Connection) 15,250 0.2% − 0.0% − 0.0% − 0.0% − 0.0% United Carriers2 511,091 5.5% 519,311 5.6% 518,293 5.8% 522,673 6.0% 542,789 6.0% United 511,091 5.5% 519,311 5.6% 518,293 5.8% 522,673 6.0% 532,294 5.9% Shuttle America (United Express) − 0.0% − 0.0% − 0.0% − 0.0% 10,495 0.1% Continental Carriers2 475,509 5.1% 468,363 5.0% 439,010 4.9% 441,945 5.0% 420,067 4.6% Continental 378,298 4.1% 373,191 4.0% 325,851 3.6% 303,467 3.5% 291,599 3.2% Continental Express 97,211 1.1% 80,791 0.9% 58,935 0.7% 61,874 0.7% 55,260 0.6% Colgan Air (Continental Connection) − 0.0% − 0.0% 19,678 0.2% 44,203 0.5% 44,085 0.5% Chautauqua (Continental Express) − 0.0% 14,381 0.2% 34,546 0.4% 32,401 0.4% 29,123 0.3% AirTran3 172,293 1.9% 213,397 2.3% 249,030 2.8% 263,100 3.0% 381,746 4.2% Frontier Carriers 123,223 1.3% 128,498 1.4% 176,960 2.0% 306,652 3.5% 331,680 3.7% Frontier 123,223 1.3% 128,498 1.4% 156,669 1.7% 158,734 1.8% 204,339 2.3% Republic (Midwest Connect) − 0.0% − 0.0% 20,291 0.2% 147,868 1.7% 10,503 0.1% Chautauqua (Midwest Connect) − 0.0% − 0.0% − 0.0% 50 0.0% − 0.0% Republic (Midwest) − 0.0% − 0.0% − 0.0% − 0.0% 116,838 1.3% Midwest 207,345 2.2% 204,583 2.2% 174,737 1.9% 32,247 0.4% − 0.0% Jet Blue − 0.0% − 0.0% − 0.0% − 0.0% 37,103 0.4% Alaska 130,596 1.4% 142,567 1.5% 146,589 1.6% 144,317 1.6% 149,368 1.7% Spirit 104,988 1.1% 86,636 0.9% 106,483 1.2% 117,546 1.3% 123,878 1.4% Air Canada Carriers 112,108 1.2% 107,151 1.2% 103,344 1.2% 97,421 1.1% 108,677 1.2% Air Canada 76,107 0.8% 61,837 0.7% 65,031 0.7% 54,701 0.6% 63,165 0.7% Air Canada Jazz 36,001 0.4% 45,314 0.5% 38,313 0.4% 42,720 0.5% 45,512 0.5% American TransAir 151,274 1.6% 159,377 1.7% − 0.0% − 0.0% − 0.0% Charters 3 0.0% − 0.0% 852 0.0% 226 0.0% 219 0.0% TOTAL 4,5,6 9,239,818 100.0% 9,294,077 100.0% 8,977,831 100.0% 8,767,243 100.0% 9,035,544 100.0%
1 Includes activity for US Airways Shuttle; Mid Atlantic had activity in 2006. 2 As of October 1, 2010, United and Continental completed the merger of the two airlines. United Holdings, Inc. expects to operate the airlines separately until mid-2012. 3 As of May 2, 2011, Southwest completed its purchase of AirTran Airways. Southwest expects to operate the airlines as separate companies, and expects to operate under the Southwest brand in 2012. 4 Excludes military and general aviation passenger enplanements. 5 Enplanement data has been reconciled to the Airports Authority’s records and may not match figures released in previous issues. 6 The totals may not add due to rounding. Source: Airports Authority records.
II-39
ENPLANEMENT MARKET SHARE BY AIRLINE AT DULLES INTERNATIONAL AIRPORT Domestic Enplanements
Airline 2006 Share 2007 Share 2008 Share 2009 Share 2010 Share
United Carriers1 6,163,359 70.1% 6,350,199 68.2% 5,826,462 66.6% 5,813,443 69.0% 5,995,358 70.0% United2 3,430,537 39.0% 3,551,268 38.1% 3,312,845 37.9% 3,286,673 39.0% 3,430,680 40.1% Mesa (United Express) 1,602,553 18.2% 1,279,241 13.7% 906,747 10.4% 719,003 8.5% 549,219 6.4% Tran States (United Express) 498,796 5.7% 528,990 5.7% 545,487 6.2% 566,386 6.7% 445,031 5.2% ASA (United Express) − 0.0% − 0.0% − 0.0% − 0.0% 413,277 4.8% Shuttle America (United Express) 266,414 3.0% 375,942 4.0% 369,050 4.2% 372,543 4.4% 308,225 3.6% Go-Jet (United Express) 77,833 0.9% 227,050 2.4% 249,456 2.9% 352,162 4.2% 318,557 3.7% Chautauqua (United Express) 127,799 1.5% 230,741 2.5% 239,421 2.7% 233,296 2.8% 748 0.0% Colgan Air (United Express) 142,528 1.6% 156,967 1.7% 203,456 2.3% 221,228 2.6% 219,380 2.6% ExpressJet (United Express) − 0.0% − 0.0% − 0.0% 62,152 0.7% 277,075 3.2% SkyWest (United Express) − 0.0% − 0.0% − 0.0% − 0.0% 33,166 0.4% Air Wisconsin (United Express) 16,899 0.2% − 0.0% − 0.0% − 0.0% − 0.0% JetBlue 666,704 7.6% 776,980 8.3% 730,989 8.4% 625,519 7.4% 576,039 6.7% Delta Carriers 670,447 7.6% 686,751 7.4% 639,899 7.3% 572,387 6.8% 526,553 6.1% Delta 384,682 4.4% 368,507 4.0% 333,445 3.8% 296,772 3.5% 317,266 3.7% Compass (Delta Connection) − 0.0% − 0.0% − 0.0% − 0.0% 69,150 0.8% Compass (Northwest Airlink) − 0.0% 9,955 0.1% 51,996 0.6% 85,060 1.0% 5,657 0.1% Freedom (Delta Connection) 4,537 0.1% 15,983 0.2% 52,565 0.6% 42,947 0.5% 20,814 0.2% Pinnacle (Northwest Airlink) 22,222 0.3% 14,556 0.2% 19,955 0.2% 41,135 0.5% 3,789 0.0% Northwest 196,249 2.2% 199,194 2.1% 114,489 1.3% 34,442 0.4% 448 0.0% Pinnacle (Delta Connection) − 0.0% − 0.0% 11,589 0.1% 30,379 0.4% 30,405 0.4% Comair (Delta Connection) 58,385 0.7% 67,413 0.7% 37,923 0.4% 21,805 0.3% 51,385 0.6% Chautauqua (Delta Connection) − 0.0% − 0.0% − 0.0% − 0.0% 14,377 0.2% ASA (Delta Connection) 4,306 0.0% 10,490 0.1% 16,296 0.2% 18,032 0.2% 9,832 0.1% Mesaba Aviation (Delta Connection) − 0.0% − 0.0% − 0.0% 0.0% 2,216 0.0% SkyWest (Delta Connection) − 0.0% 635 0.0% − 0.0% 1,232 0.0% 1,132 0.0% Mesaba Aviation (Northwest Airlink) − 0.0% − 0.0% − 0.0% 409 0.0% − 0.0% Shuttle America (Delta Connection) 66 0.0% 18 0.0% 1,641 0.0% 174 0.0% 82 0.0% American Carriers 547,558 6.2% 507,372 5.4% 461,854 5.3% 428,341 5.1% 468,030 5.5% American 450,718 5.1% 444,445 4.8% 435,623 5.0% 409,716 4.9% 464,266 5.4% Chautauqua (American Connection) 39,351 0.4% 9,709 0.1% 4,635 0.1% 16,240 0.2% 3,764 0.0% Trans States (American Connection) − 0.0% 32,784 0.4% 21,596 0.2% 2,385 0.0% − 0.0% American Eagle 57,489 0.7% 20,434 0.2% − 0.0% − 0.0% − 0.0% Southwest Airlines3 80,567 0.9% 368,977 4.0% 396,298 4.5% 371,029 4.4% 374,282 4.4% Virgin America − 0.0% 27,247 0.3% 194,248 2.2% 237,796 2.8% 231,889 2.7% US Airways Carriers 264,801 3.0% 219,952 2.4% 181,884 2.1% 171,327 2.0% 151,496 1.8% Mesa (US Airways Express)4 9,128 0.1% 22,464 0.2% 50,061 0.6% 86,754 1.0% 86,547 1.0% PSA (US Airways Express) 37,924 0.4% 23,553 0.3% 32,574 0.4% 42,999 0.5% 31,284 0.4% US Airways 101,772 1.2% 109,878 1.2% 96,997 1.1% 34,728 0.4% 22,629 0.3% Colgan Air (US Airways Express) 29,145 0.3% 24,730 0.3% 1,302 0.0% − 0.0% − 0.0% Republic (US Airways Express) − 0.0% 105 0.0% 950 0.0% 6,243 0.1% 621 0.0% Air Wisconsin (US Airways Express) 218 0.0% − 0.0% − 0.0% 475 0.0% 6,924 0.1% Piedmont (US Airways Express) − 0.0% − 0.0% − 0.0% 128 0.0% 3,491 0.0% America West 86,614 1.0% 39,222 0.4% − 0.0% − 0.0% − 0.0% AirTran3 199,898 2.3% 204,194 2.2% 179,892 2.1% 127,164 1.5% 119,681 1.4% Continental Carriers1 149,694 1.7% 130,992 1.4% 100,445 1.1% 56,982 0.7% 96,125 1.1% Commutair − 0.0% 6,623 0.1% 15,014 0.2% 30,694 0.4% 46,013 0.5% Continental Express 134,477 1.5% 103,954 1.1% 79,287 0.9% 25,471 0.3% 47,307 0.6% Colgan Air (Continental Connection) − 0.0% − 0.0% 2,336 0.0% − 0.0% 2,104 0.0% Continental 15,217 0.2% 20,415 0.2% 3,808 0.0% 817 0.0% 701 0.0% MN Airlines 16,231 0.2% 31,423 0.3% 20,661 0.2% 15,194 0.2% 14,327 0.2% Alaska 11,421 0.1% − 0.0% − 0.0% − 0.0% − 0.0% Korean Air − 0.0% − 0.0% − 0.0% − 0.0% 181 0.0% Lufthansa − 0.0% − 0.0% − 0.0% − 0.0% 178 0.0% Aeroflot − 0.0% − 0.0% − 0.0% − 0.0% 5 0.0% Independence Air5 22,050 0.3% − 0.0% − 0.0% − 0.0% − 0.0% Charters 4,654 0.1% 9,074 0.1% 9,898 0.1% 10,438 0.1% 10,681 0.1% TOTAL 6,7,8 8,797,384 100.0% 9,313,161 100.0% 8,742,530 100.0% 8,429,620 100.0% 8,564,825 100.0%
1 As of October 2010, United and Continental completed the merger of the two airlines. United Holdings, Inc. expects to operate the airlines separately until mid-2012. 2 Includes activity for Ted in 2006 through 2008. 3 As of May 2, 2011, Southwest completed its purchase of AirTran Airways. Southwest expects to operate the airlines as separate companies, and expects to operate under the Southwest brand in 2012. 4 Includes activity for Air Midwest in 2006. 5 Independence Air liquidated and ceased operations on January 5, 2006. 6 Excludes military and general aviation passenger enplanements. 7 Enplanement data has been reconciled to the Airports Authority’s records and may not match figures released previously. 8 The totals may not add due to rounding. Source: Airports Authority II-40
ENPLANEMENT MARKET SHARE BY AIRLINE AT DULLES INTERNATIONAL AIRPORT International Enplanements
Airline 2006 Share 2007 Share 2008 Share 2009 Share 2010 Share
United Carriers1 1,222,203 47.1% 1,494,713 50.5% 1,605,504 51.5% 1,651,662 53.0% 1,635,332 51.5% United 1,105,952 42.6% 1,350,797 45.6% 1,401,537 45.0% 1,443,621 46.3% 1,451,292 45.7% Chautauqua (United Express) 53,193 2.1% 69,523 2.3% 114,742 3.7% 114,906 3.7% 368 0.0% Shuttle America (United Express) 56,105 2.2% 74,393 2.5% 89,225 2.9% 93,135 3.0% 68,332 2.2% Air Wisconsin (United Express) 6,953 0.3% − 0.0% − 0.0% − 0.0% − 0.0% Trans States (United Express) − 0.0% − 0.0% − 0.0% − 0.0% 81,893 2.6% Go-Jet (United Express) − 0.0% − 0.0% − 0.0% − 0.0% 33,447 1.1% British Airways 182,241 7.0% 173,361 5.9% 189,442 6.1% 182,703 5.9% 173,211 5.5% Air France 201,577 7.8% 192,578 6.5% 176,064 5.7% 181,787 5.8% 161,910 5.1% Lufthansa 215,272 8.3% 203,686 6.9% 173,440 5.6% 158,147 5.1% 176,179 5.5% TACA International 98,628 3.8% 118,331 4.0% 101,867 3.3% 95,132 3.1% 98,844 3.1% Qatar Amiri Air − 0.0% 25,841 0.9% 85,231 2.7% 88,061 2.8% 103,078 3.2% Virgin Atlantic 83,992 3.2% 104,319 3.5% 95,567 3.1% 84,778 2.7% 76,417 2.4% KLM Royal Dutch 76,926 3.0% 83,033 2.8% 78,574 2.5% 79,265 2.5% 74,878 2.4% South African 58,492 2.3% 87,604 3.0% 82,084 2.6% 73,221 2.3% 80,797 2.5% Korean Air 56,776 2.2% 63,789 2.2% 57,850 1.9% 72,814 2.3% 78,117 2.5% SAS 66,272 2.6% 66,251 2.2% 71,112 2.3% 66,085 2.1% 71,042 2.2% Austrian 78,879 3.0% 80,054 2.7% 80,821 2.6% 63,885 2.0% 60,401 1.9% All Nippon 70,047 2.7% 65,852 2.2% 62,932 2.0% 60,949 2.0% 66,573 2.1% Air Canada Carriers 68,221 2.6% 66,902 2.3% 49,104 1.6% 43,459 1.4% 41,010 1.3% Air Canada 4,388 0.2% 558 0.0% − 0.0% − 0.0% − 0.0% Air Canada Jazz 63,833 2.5% 66,344 2.2% 49,104 1.6% 43,459 1.4% 41,010 1.3% Ethiopian Airlines 34,300 1.3% 41,977 1.4% 44,955 1.4% 42,141 1.4% 56,373 1.8% Iberia − 0.0% 27,758 0.9% 39,646 1.3% 36,193 1.2% 22,200 0.7% COPA − 0.0% 12,704 0.4% 30,063 1.0% 31,723 1.0% 31,200 1.0% Aer Lingus − 0.0% 15,571 0.5% 33,295 1.1% 27,229 0.9% 54,628 1.7% Avianca − 0.0% − 0.0% 12,828 0.4% 23,502 0.8% 24,536 0.8% Saudi Arabian 10,740 0.4% 16,476 0.6% 20,785 0.7% 23,044 0.7% 28,874 0.9% Alitalia 31,882 1.2% − 0.0% − 0.0% − 0.0% − 0.0% MaxJet 6,605 0.3% 5,004 0.2% − 0.0% − 0.0% − 0.0% Mexicana − 0.0% − 0.0% − 0.0% 1,853 0.1% 20,299 0.6% Lloyd Aereo Boliviano - LAB 5,067 0.2% 1,045 0.0% − 0.0% − 0.0% − 0.0% BWIA West Indies 13,721 0.5% − 0.0% − 0.0% − 0.0% − 0.0% Aeroflot 8,238 0.3% 7,356 0.2% 8,029 0.3% 7,301 0.2% 8,838 0.3% Turkish Airlines − 0.0% − 0.0% − 0.0% − 0.0% 5,370 0.2% OpenSkies − 0.0% − 0.0% − 0.0% − 0.0% 4,888 0.2% JetBlue − 0.0% − 0.0% 263 0.0% 3,125 0.1% 4,097 0.1% Delta Carriers 2,811 0.1% 5,223 0.2% 10,719 0.3% 5,539 0.2% 3,923 0.1% Delta 2,811 0.1% 5,223 0.2% 5,223 0.2% 4,513 0.1% 3,923 0.1% Northwest − 0.0% − 0.0% 5,496 0.2% 1,026 0.0% − 0.0% Air India − 0.0% − 0.0% − 0.0% 1,055 0.0% 3,002 0.1% Cayman − 0.0% − 0.0% 499 0.0% 1,496 0.0% 637 0.0% AeroSur − 0.0% − 0.0% − 0.0% − 0.0% 233 0.0% Charters 1,792 0.1% 917 0.0% 4,743 0.2% 11,002 0.4% 10,348 0.3% TOTAL 2,3,4 2,594,682 100.0% 2,960,345 100.0% 3,115,417 100.0% 3,117,151 100.0% 3,177,235 100.0%
1 As of October 2010, United and Continental completed the merger of the two airlines. United Holdings, Inc. expects to operate the airlines separately until mid-2012. 2 Excludes military and general aviation passenger enplanements. 3 Enplanement data has been reconciled to the Airports Authority’s records and may not match figures released previously. 4 The totals may not add due to rounding. Source: Airports Authority records.
II-41
COMBINED REAGAN NATIONAL AIRPORT AND DULLES INTERNATIONAL AIRPORT ENPLANEMENT MARKET SHARE BY AIRLINE
Airline 2006 Share 2007 Share 2008 Share 2009 Share 2010 Share
United Carriers1 7,896,653 38.3% 8,364,223 38.8% 7,950,259 38.2% 7,987,778 39.3% 8,173,479 39.3% United2 5,047,580 24.5% 5,421,376 25.1% 5,232,675 25.1% 5,252,967 25.9% 5,414,266 2.6% Mesa (United Express) 1,602,553 7.8% 1,279,241 5.9% 906,747 4.4% 719,003 3.5% 549,219 2.6% Tran States (United Express) 498,796 2.4% 528,990 2.5% 545,487 2.6% 566,386 2.8% 526,924 2.5% Shuttle America (United Express) 322,519 1.6% 450,335 2.1% 458,275 2.2% 465,678 2.3% 387,052 1.9% Go-Jet (United Express) 77,833 0.4% 227,050 1.1% 249,456 1.2% 352,162 1.7% 352,004 1.7% Chautauqua (United Express) 180,992 0.9% 300,264 1.4% 354,163 1.7% 348,202 1.7% 1,116 0.0% Colgan Air (United Express) 142,528 0.7% 156,967 0.7% 203,456 1.0% 221,228 1.1% 219,380 1.1% ExpressJet (United Express) − 0.0% − 0.0% − 0.0% 62,152 0.3% 277,075 1.3% Air Wisconsin (United Express) 23,852 0.1% − 0.0% − 0.0% − 0.0% − 0.0% ASA (United Express) − 0.0% − 0.0% − 0.0% − 0.0% 413,277 2.0% SkyWest (United Express) − 0.0% − 0.0% − 0.0% − 0.0% 33,166 0.2% US Airways Carriers 4,072,087 19.7% 4,063,116 18.8% 3,890,832 18.7% 3,702,595 18.2% 3,834,808 18.5% US Airways3 2,504,227 12.1% 2,406,283 11.2% 2,267,154 10.9% 2,000,506 9.8% 1,986,005 9.6% Republic (US Airways Express) 465,755 2.3% 594,516 2.8% 631,513 3.0% 739,379 3.6% 907,696 4.4% Air Wisconsin (US Airways Express) 484,141 2.3% 568,630 2.6% 670,067 3.2% 567,833 2.8% 453,263 2.2% PSA (US Airways Express) 191,190 0.9% 162,640 0.8% 179,587 0.9% 211,780 1.0% 246,684 1.2% Mesa (US Airways Express)4 15,977 0.1% 22,464 0.1% 50,061 0.2% 86,754 0.4% 86,547 0.4% Chautauqua (US Airways Express) 95,080 0.5% 70,677 0.3% 64,453 0.3% 77,766 0.4% 123,584 0.6% Colgan Air (US Airways Express) 42,186 0.2% 38,597 0.2% 15,042 0.1% 13,983 0.1% 15,315 0.1% Piedmont (US Airways Express) 11,584 0.1% 28,463 0.1% 12,856 0.1% 4,594 0.0% 15,714 0.1% America West 261,947 1.3% 164,317 0.8% − 0.0% − 0.0% − 0.0% Trans States (US Airways Express) − 0.0% 6,529 0.0% 99 0.0% − 0.0% − 0.0% Delta Carriers 2,689,142 13.0% 2,639,992 12.2% 2,576,696 12.4% 2,412,532 11.9% 2,305,513 11.1% Delta 1,149,439 5.6% 1,078,502 5.0% 1,065,141 5.1% 1,029,441 5.1% 1,574,610 7.6% Delta Shuttle 311,460 1.5% 252,743 1.2% 206,552 1.0% 13,149 0.1% − 0.0% Northwest 862,277 4.2% 874,958 4.1% 789,806 3.8% 616,641 3.0% 28,819 0.1% Comair (Delta Connection) 234,682 1.1% 246,947 1.1% 228,057 1.1% 271,866 1.3% 257,595 1.2% Shuttle America (Delta Connection) 335 0.0% 27,219 0.1% 25,287 0.1% 168,377 0.8% 164,625 0.8% Pinnacle (Northwest Airlink) 77,785 0.4% 74,451 0.3% 78,055 0.4% 88,566 0.4% 4,243 0.0% Compass (Northwest Airlink) − 0.0% 9,955 0.0% 51,996 0.2% 85,060 0.4% 5,657 0.0% Freedom (Delta Connection) 4,537 0.0% 17,177 0.1% 77,362 0.4% 42,991 0.2% 21,007 0.1% Pinnacle (Delta Connection) − 0.0% − 0.0% 18,640 0.1% 38,223 1.3% 51,443 1.2% Mesaba (Northwest Airlink) 14,734 0.1% 9,895 0.0% 4,658 0.0% 29,915 0.1% 4,944 0.0% Atlantic Southeast (Delta Connection) 32,193 0.2% 36,758 0.2% 21,261 0.1% 21,006 0.1% 41,105 0.2% Compass (Delta Connection) − 0.0% − 0.0% − 0.0% − 0.0% 89,718 0.4% Mesaba (Delta Connection) − 0.0% − 0.0% − 0.0% − 0.0% 43,330 0.2% Chautauqua (Delta Connection) 1,700 0.0% 11,009 0.1% 9,881 0.0% 6,065 0.0% 17,285 0.1% SkyWest (Delta Connection) − 0.0% 378 0.0% − 0.0% 1,232 0.0% 1,132 0.0% American Carriers 1,975,776 9.6% 1,980,127 9.2% 1,889,361 9.1% 1,903,583 9.4% 1,949,698 9.4% American 1,583,557 7.7% 1,658,503 7.7% 1,594,478 7.7% 1,553,374 7.6% 1,653,033 8.0% American Eagle 337,618 1.6% 279,131 1.3% 268,652 1.3% 331,584 1.6% 292,901 1.4% Trans States (American Connection) 15,250 0.1% 32,784 0.2% 21,596 0.1% 2,385 0.0% − 0.0% Chautauqua (American Connection) 39,351 0.2% 9,709 0.0% 4,635 0.0% 16,240 0.1% 3,764 0.0% JetBlue 666,704 3.2% 776,980 3.6% 731,252 3.5% 628,671 3.1% 617,239 3.0% Continental Carriers1 625,203 3.0% 599,355 2.8% 539,455 2.6% 498,927 2.5% 516,192 2.5% Continental 393,515 1.9% 393,606 1.8% 329,659 1.6% 304,284 1.5% 292,300 1.4% Continental Express 231,688 1.1% 184,745 0.9% 138,222 0.7% 87,345 0.4% 102,567 0.5% Colgan Air (Continental Connection) − 0.0% − 0.0% 22,014 0.1% 44,203 0.2% 46,189 0.2% Chautauqua (Continental Express) − 0.0% 14,381 0.1% 34,546 0.2% 32,401 0.2% 29,123 0.1% Commutair − 0.0% 6,623 0.0% 15,014 0.1% 30,694 0.2% 46,013 0.2% AirTran Airways5 372,191 1.8% 417,591 1.9% 428,922 2.1% 390,264 1.9% 501,427 2.4% Southwest Airlines5 80,567 0.4% 368,977 1.7% 396,298 1.9% 371,029 1.8% 374,282 1.8% Virgin America − 0.0% 27,247 0.1% 194,248 0.9% 237,796 1.2% 231,889 1.1% British Airways 182,241 0.9% 173,361 0.8% 189,442 0.9% 182,703 0.9% 173,211 0.8% Air France 201,577 1.0% 192,578 0.9% 176,064 0.8% 181,787 0.9% 161,910 0.8%
II-42
COMBINED REAGAN NATIONAL AIRPORT AND DULLES INTERNATIONAL AIRPORT ENPLANEMENT MARKET SHARE BY AIRLINE
Airline 2006 Share 2007 Share 2008 Share 2009 Share 2010 Share Frontier Carriers 123,223 0.6% 128,498 0.6% 176,960 0.8% 306,764 1.5% 331,680 1.6% Frontier 123,223 0.6% 128,498 0.6% 156,669 0.1% 158,846 0.8% 204,339 1.0% Republic (Midwest Connect) − 0.0% − 0.0% 20,291 0.1% 147,868 0.7% 10,503 0.1% Chautauqua (Midwest Connect) − 0.0% − 0.0% − 0.0% 50 0.0% − 0.0% Republic (Midwest) − 0.0% − 0.0% − 0.0% − 0.0% 116,838 0.6% Midwest 207,345 1.0% 204,583 0.9% 174,737 0.8% 32,247 0.2% − 0.0% Lufthansa 215,272 1.0% 203,686 0.9% 173,440 0.8% 158,147 0.8% 176,357 0.8% Alaska 142,017 0.7% 142,567 0.7% 146,589 0.7% 144,317 0.7% 149,368 0.7% Spirit 104,988 0.5% 86,636 0.4% 106,483 0.5% 117,546 0.6% 123,878 0.6% TACA International 98,628 0.5% 118,331 0.5% 101,867 0.5% 95,132 0.5% 98,844 0.5% Qatar Amiri Air − 0.0% 25,841 0.1% 85,231 0.4% 88,061 0.4% 103,078 0.5% Air Canada Carriers 180,329 0.9% 174,053 0.8% 152,448 0.7% 140,880 0.7% 149,687 0.7% Air Canada 80,495 0.4% 62,395 0.3% 65,031 0.3% 54,701 0.3% 63,165 0.3% Air Canada Jazz 99,834 0.5% 111,658 0.5% 87,417 0.4% 86,179 0.4% 86,522 0.4% Virgin Atlantic 83,992 0.4% 104,319 0.5% 95,567 0.5% 84,778 0.4% 76,417 0.4% KLM Royal Dutch 76,926 0.4% 83,033 0.4% 78,574 0.4% 79,265 0.4% 74,878 0.4% South African 58,492 0.3% 87,604 0.4% 82,084 0.4% 73,221 0.4% 80,797 0.4% Korean Air 56,776 0.3% 63,789 0.3% 57,850 0.3% 72,814 0.4% 78,298 0.4% SAS 66,272 0.3% 66,251 0.3% 71,112 0.3% 66,085 0.3% 71,042 0.3% Austrian 78,879 0.4% 80,054 0.4% 80,821 0.4% 63,885 0.3% 60,401 0.3% All Nippon 70,047 0.3% 65,852 0.3% 62,932 0.3% 60,949 0.3% 66,573 0.3% Ethiopian Airlines 34,300 0.2% 41,977 0.2% 44,955 0.2% 42,141 0.2% 56,373 0.3% Iberia − 0.0% 27,758 0.1% 39,646 0.2% 36,193 0.2% 22,200 0.1% COPA − 0.0% 12,704 0.1% 30,063 0.1% 31,723 0.2% 31,200 0.2% Aer Lingus − 0.0% 15,571 0.1% 33,295 0.2% 27,229 0.1% 54,628 0.3% Avianca − 0.0% − 0.0% 12,828 0.1% 23,502 0.1% 24,536 0.1% Saudi Arabian 10,740 0.1% 16,476 0.1% 20,785 0.1% 23,044 0.1% 28,874 0.1% Alitalia 31,882 0.2% − 0.0% − 0.0% − 0.0% − 0.0% BWIA West Indies 13,721 0.1% − 0.0% − 0.0% − 0.0% − 0.0% Mexicana − 0.0% − 0.0% − 0.0% 1,853 0.0% 20,299 0.1% MN Airlines 16,231 0.1% 31,423 0.1% 20,661 0.1% 15,194 0.1% 14,327 0.1% Aeroflot 8,238 0.0% 7,356 0.0% 8,029 0.0% 7,301 0.0% 8,843 0.0% MaxJet 6,605 0.0% 5,004 0.0% − 0.0% − 0.0% − 0.0% Lloyd Aereo Boliviano - LAB 5,067 0.0% 1,045 0.0% − 0.0% − 0.0% − 0.0% Turkish Airlines − 0.0% − 0.0% − 0.0% − 0.0% 5,370 0.0% OpenSkies − 0.0% − 0.0% − 0.0% − 0.0% 4,888 0.0% Air India − 0.0% − 0.0% − 0.0% 1,055 0.0% 3,002 0.0% Cayman − 0.0% − 0.0% 499 0.0% 1,496 0.0% 637 0.0% AeroSur − 0.0% − 0.0% − 0.0% − 0.0% 233 0.0% American TransAir 151,274 0.7% 159,377 0.7% − 0.0% − 0.0% − 0.0% Independence Air6 22,050 0.1% − 0.0% − 0.0% − 0.0% − 0.0% Charters 6,449 0.0% 10,248 0.0% 15,493 0.1% 21,527 0.1% 21,248 0.1% TOTAL 7,8,9 20,631,884 100.0% 21,567,583 100.0% 20,835,778 100.0% 20,314,014 100.0% 20,777,604 100.0%
1 As of October 2010, United and Continental completed the merger of the two airlines. United Holdings, Inc. expects to operate the airlines separately until mid-2012. 2 Includes activity for Ted at Dulles International Airport in 2006 through 2008. 3 Includes activity for US Airways Shuttle; MidAtlantic had activity in 2006. 4 Includes activity for Air Midwest at Dulles International Airport in 2006. 5 As of May 2, 2011, Southwest completed its purchase of AirTran Airways. Southwest expects to operate the airlines as separate companies, and expects to operate under the Southwest brand in 2012. 6 Independence Air liquidated and ceased operations on January 5, 2006. 7 Excludes military and general aviation passenger enplanements. 8 Enplanement data has been reconciled to the Airports Authority’s records and may not match figures released previously. 9 The totals may not add due to rounding. Source: Airports Authority records.
II-43
Baltimore/Washington International Thurgood Marshall Airport
Portions of the Airports service region also are served by BWI, which is located northeast of Washington, D.C., approximately 30 miles from Reagan National Airport and 46 miles from Dulles International Airport. BWI is operated by the State of Maryland Department of Transportation. The Federal Lease and the Federal Act provide for the voluntary inclusion of BWI among the airports operated by the Airports Authority. At the time the Airports Authority was created, the State of Maryland declined to have BWI included in the Airports Authority.
According to information on BWI’s website (which has not been independently verified by the Airports Authority), enplaned passengers at BWI in 2010 numbered approximately 11 million. This represented a 4.7% increase in passenger traffic compared to 2009. International enplaned passengers at BWI in 2010 totaled approximately 247,000, 2.2% of all enplaned passengers at the airport. The five airlines with the largest number of enplaned passengers at BWI in 2010 were Southwest (53.5%), AirTran (16.2%), Delta (9.4%), US Airways (6.0%), and United (5.1%).
In a 2005 study, the Department of Transportation (“DOT”) noted that in multi-airport regions, such as the Airports service region, O&D traffic may be diverted to airports that have a strong low-cost presence, such as Southwest at BWI. In 2009, 34.1% of passengers in the region were enplaned at BWI and 65.9% were enplaned at the Airports. Also affecting growth of the Airports is the inability of Reagan National Airport to accommodate any significant increase in passengers during peak periods because of physical constraints and slot restrictions. Between 2002 and 2009, Reagan National Airport’s share of enplaned passengers in the region increased modestly from 26.4% to 28.5%. In the first six months of 2011, the shares of enplaned passenger traffic at Reagan National Airport, Dulles International Airport and BWI were 29.3%, 35.7% and 35.0% respectively.
BWI competes with Reagan National Airport and Dulles International Airport primarily for domestic O&D passenger traffic. BWI’s share of the regional domestic O&D traffic increased from 37.3% in 1997 to 41.6% in 2010. During that same period, Reagan National Airport’s share decreased from 40.5% to 34.7%, and Dulles International Airport’s share increased from 22.2% to 23.7%. In the first three months of 2011, domestic O&D traffic increased 2.1% at BWI, 9.6% at Reagan National Airport and 2.6% at Dulles International Airport, as compared to the same period in 2010.
The following table details the shares of enplaned passengers (O&D and connecting) at Reagan National Airport, Dulles International Airport and BWI in 2003 through 2010:
SHARES OF ENPLANED PASSENGERS AT REGIONAL AIRPORTS Airport 2003 2004 2005 2006 2007 2008 2009 2010
Reagan National Airport 28.0% 27.0% 27.7% 29.8% 29.0% 28.9% 28.5% 28.4% Dulles International Airport 33.0% 38.5% 41.6% 36.8% 38.2% 38.1% 37.5% 37.0% BWI 38.9% 34.5% 30.7% 33.4% 32.8% 33.0% 34.1% 34.6% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100% 100% ______Totals may not add due to rounding. Source: Airports Authority records and Maryland Aviation Administration.
II-44
FINANCIAL CONDITION OF CERTAIN AIRLINES SERVING THE AIRPORTS
General
The Airports Authority derives a substantial portion of its operating revenues from airline landing and facility rental fees. The financial strength and stability of the airlines using the Airports, together with numerous other factors, influence the level of aviation activity at the Airports and revenues of the Airports Authority. Individual airline decisions regarding level of service, particularly hubbing activity at the Airports also affect enplanements. Since 2001, most domestic airlines have been downgraded by the rating agencies, have declared bankruptcy under Chapter 11 of the U.S. Bankruptcy Code (“Chapter 11”), including United, US Airways, Delta, Northwest, ATA, Air Canada and Independence Air, and have implemented service reductions and layoffs of employees in response to reduced passenger demand and increased fuel and other operating costs.
US Airways
For the year ended December 31, 2010, US Airways and its regional affiliates represented approximately 38.6% of the revenues earned from airlines at Reagan National Airport. No other airline represented over 20.7% of such revenues at Reagan National Airport. Enplanements of US Airways and its regional affiliates at the Airports in 2010 represented 18.9% of the combined enplanements at both Airports.
US Airways filed for bankruptcy protection under Chapter 11 on August 11, 2002, and emerged from bankruptcy on March 31, 2003. On September 12, 2004, US Airways again filed for bankruptcy protection under Chapter 11. On September 27, 2005, US Airways and America West merged and reconstituted US Airways emerged from bankruptcy. The merged airline is operating under the US Airways brand. According to information obtained from its filings with the SEC, US Airways reported net income of $502 million in 2010, compared to a net loss of $205 million in 2009.
United/Continental
For the year ended December 31, 2010, United, Continental and their regional affiliates represented approximately 14.2% of the revenues earned from airlines at Reagan National Airport, and approximately 57.7% of the revenues earned from airlines at Dulles International Airport. Enplanements by United, Continental and their regional affiliates at the Airports in 2010 represented 41.8% of the combined enplanements at both Airports.
On October 1, 2010, United and Continental completed the merger of the two airlines. While United and Continental intend to merge the two airlines into a single entity that will operate under the United brand, they expect to operate the airlines separately until mid-2012. According to information obtained from its filings with the SEC, United Continental Holdings, Inc. reported net income of $253 million in 2010, compared to a net loss of $651 million in 2009.
Delta
For the year ended December 31, 2010, Delta and its regional affiliates represented approximately 20.7% of the revenues earned from airlines at Reagan National Airport and enplanements of Delta and its regional affiliates represented approximately 12.4% of the combined enplanements at both Airports. Delta filed for bankruptcy protection on September 14, 2005. The airline continued to operate at the Airports during its reorganization. Delta emerged from bankruptcy protection on April 30, 2007. On October 29,
II-45
2008, Delta acquired Northwest, and the Northwest brand has been phased out and the merged airline operates under the Delta name and brand. According to information obtained from its filings with the SEC, Delta reported net income of $593 million in 2010, compared to a net loss of $1.2 million in 2009.
Other Airlines Serving the Airports
Several other airlines operating at the Airports have experienced financial difficulties during the past few years. TransWorld Airlines (“TWA”) filed for bankruptcy and in April 2001, TWA was acquired by American. Midway Airlines (“Midway”) filed for bankruptcy protection under Chapter 11 in August 2001. Although Midway initially continued to operate in reorganization, it filed for Chapter 7 liquidation in October 2003, and ceased operations. Air Canada filed for bankruptcy under United States and Canadian law on April 1, 2003, and emerged from bankruptcy in September 2004. Sabena, which commenced service at Dulles International Airport on October 31, 2000, has since liquidated. Independence Air commenced service at Dulles International Airport in June 2004 and represented 15.4% of total airline revenues at Dulles International Airport in 2005. Independence Air filed for bankruptcy protection in November 2005 and ceased operations in January 2006.
ATA filed for bankruptcy on October 26, 2004, and emerged from bankruptcy in February 2006. ATA ceased operations and filed for bankruptcy protection for the second time in April 2008. ATA owes the Airports Authority approximately $107,321 in pre-petition debt. This balance was written off in 2010. MaxJet ceased operations at Dulles International Airport in October 2007, and filed for bankruptcy protection in December 2007. MaxJet has paid its post-petition debt, however, the Airports Authority’s claim against MaxJet for approximately $39,041 in lease rejection damages is pending in bankruptcy court. This balance was written off in 2010. MN Airlines, doing business as Sun Country Airlines, filed for bankruptcy on October 6, 2008 but continues service at Dulles International Airport. MN Airlines owes the Airports Authority approximately $7,165 in pre-petition debt. This balance was written off in 2010. Gemini Air Cargo filed for bankruptcy on June 18, 2008 and ceased operations in August 2008. Gemini Air Cargo owes the Airports Authority approximately $5,898 in pre-petition debt. This balance was written off in 2010. Frontier filed for bankruptcy protection in April 2008. Frontier has agreed to assume its lease and to pay the Airports Authority approximately $80,000 for its pre- and post-petition debt.
During 2010, Mesa Air Group filed for bankruptcy protection owing the Airports Authority $116,454.06, Sky King Airlines filed for bankruptcy protection owing the Airports Authority $4,781.44, and Mexicana Airlines filed in Mexico for Chapter 15 bankruptcy protection owing the Airports Authority $357,531.86. The Airports Authority’s accounts receivable included $479,000 in pre-petition debt for these airlines.
The Airports Authority cannot predict the duration or extent of reductions and disruptions in air travel or the extent of any adverse impact on Revenues, PFC collections, passenger enplanements, operations or the financial condition of the Airports Authority that such disruptions and reductions may cause, or whether these and other factors will result in more airline bankruptcies. All airlines that have filed for reorganization under the U.S. bankruptcy laws in the past have remitted all material payments due to the Airports Authority under the Airline Agreements. The Airports Authority is not able to predict how long any airline in bankruptcy protection would continue operating at the Airports or whether any airline will liquidate or substantially restructure its operations. Bankruptcies, liquidations or major restructurings of airlines could occur in the future. Further, the Airports Authority cannot predict or give any assurance that the airlines serving the Airports will continue to pay or to make timely payment of their obligations under the Airline Agreement.
II-46
PFCs
Pursuant to the Aviation Safety and Capacity Expansion Act of 1990 (P.L. 101-508), the Wendel H. Ford Aviation Investment and Reform Act for the 21st Century (P.L. 106-181), the VISION 100-Century of Aviation Reauthorization Act, P.L. 108-176, and the Federal Aviation Administration Extension Act of 2008, P.L. 110-330 (collectively, the “PFC Acts”), the FAA has approved the Airports Authority’s applications to require airlines to collect and remit to the Airports Authority a $4.50 PFC for each enplaning revenue passenger at the Airports. See “PLAN OF FUNDING FOR THE 2001-2016 CCP – Funding Source: PFCs.”
The PFC Acts provide that PFCs collected by the airlines constitute a trust fund held for the beneficial interest of the eligible agency (i.e., the Airports Authority) imposing the PFCs, except for any handling fee or retention of interest collected on unremitted proceeds. In addition, federal regulations require airlines to account for PFC collections separately and to disclose the existence and amount of funds regarded as trust funds for financial statements. Airlines are permitted to commingle PFC collections with other revenues. Airlines that have filed for Chapter 7 or 11 bankruptcy protection, however, are required to segregate PFC revenue in a separate account for the benefit of the airport and cannot grant a third party any security or other interest in PFC revenue. The airlines are entitled to retain interest earned on PFC collections until such PFC collections are remitted. This procedure has been followed by ATA, United, Delta, Northwest and Independence Air during their respective bankruptcies. PFCs collected by those airlines are required by the bankruptcy court to be placed in accounts separate from other airline revenue accounts and be paid to airports monthly in accordance with the PFC regulations. However, the Airports Authority cannot predict whether an airline that files for bankruptcy protection will properly account for the PFCs or whether the bankruptcy estate will have sufficient moneys to pay the Airports Authority in full for the PFCs owed by such airline. The Airports Authority has recovered all of its PFCs from each of the airlines that filed for Chapter 11 bankruptcy protection. PFCs are not pledged to the repayment of the Bonds. On August 1, 2009, however, the Airports Authority irrevocably committed $35 million of Designated Passenger Facility Charges per year to pay Annual Debt Service on the Bonds until 2016. See “PLAN OF FUNDING FOR THE 2001-2016 CCP – Funding Source: PFCs.”
Information Concerning the Airlines
Certain of the airlines (or their respective parent corporations) are subject to the information reporting requirements of the Securities Exchange Act of 1934, as amended, and in accordance therewith file reports and other information with the SEC. Certain information, including financial information, concerning such airlines (or their respective parent corporations) is disclosed in reports and statements filed with the SEC. Such reports and statements can be inspected and copies obtained at prescribed rates at the SEC’s principal offices at 100 F Street, N.E., Washington, D.C. 20549, and should be available for inspection and copying at the SEC’s regional offices located at 233 Broadway, New York, New York 10279, and 500 W. Madison Street, Suite 1400, Chicago, Illinois 60661. The public may obtain information on the hours of operation of the Public Reference Room by calling the SEC at 1-800-SEC- 0380. The SEC maintains an Internet site that contains reports, proxy and information statements, and other information regarding issuers that file electronically with the SEC. Some of the airlines are required to file periodic reports of financial and operating statistics with the DOT. Such reports can be inspected at the Office of Aviation Information Management, Data Requirements and Public Reports Division, Research and Special Programs Administration, DOT, 400 Seventh Street, S.W., Washington, D.C. 20590, and copies of such reports can be obtained from the DOT at prescribed rates.
Airlines owned by foreign governments or foreign corporations operating airlines (unless such foreign airlines have American Depository Receipts registered on a national exchange) are not required to
II-47
file information with the SEC. Airlines owned by foreign governments or foreign corporations file limited information only with the DOT.
The Airports Authority has no responsibility for the completeness or accuracy of information available from the DOT or SEC, including, but not limited to, updates of information on the SEC’s Internet site or links to other Internet sites accessed through the SEC’s site.
CERTAIN INVESTMENT CONSIDERATIONS
The Bonds may not be suitable for all investors. Prospective purchasers of the Bonds should give careful consideration to the information set forth in this Official Statement, including, in particular, the matters referred to in the following summary.
General
The Revenues of the Airports Authority are affected substantially by the economic health of the air transportation industry and the airlines serving the Airports. Certain factors that may materially affect the Airport Service Region, the Airports and the airlines include, but are not limited to (i) the availability and cost of aviation fuel and other necessary supplies, (ii) national and international economic conditions and currency fluctuations, (iii) the financial health and viability of the airline industry, (iv) air carrier service and route networks, (v) the population growth and the economic health of the region and the nation, (vi) changes in demand for air travel, (vii) service and cost competition, (viii) levels of air fares, (ix) fixed costs and capital requirements, (x) the cost and availability of financing, (xi) the capacity of the national air traffic control system, (xii) the capacity of the Airports and the capacity of competing airports, (xiii) national and international disasters and hostilities, (xiv) the cost and availability of employees, (xv) labor relations within the airline industry, (xvi) regulation by the federal government including the affect of the High Density and Perimeter rules on Reagan National Airport, (xvii) environmental risks and regulations, noise abatement concerns and regulations, (xvii) bankruptcy and insolvency laws, and (xviii) safety concerns arising from international conflicts and the possibility of additional terrorist attacks and other risks. Several of these factors, including increased fuel, labor, equipment and other costs, slow or negative traffic growth in certain areas, increased competition among air carriers, bankruptcies, consolidation and mergers among air carriers, costs of compliance with new security regulations and requirements, threat of possible future terrorist attacks and increases in the requirements for and the cost of debt capital, reduced profits and caused significant losses for all but a few air carriers in the early 2000s. By early 2007, all major airlines serving the Airports that had been in bankruptcy emerged from bankruptcy protection and started reporting profits. In 2008, however, a number of airlines (including some that served the Airports) ceased operations and/or filed for bankruptcy protection unable to sustain increased costs due to record aviation fuel prices and other financial pressures. See “THE AIRPORTS SERVICE REGION AND AIRPORTS ACTIVITY” and “FINANCIAL CONDITION OF CERTAIN AIRLINES SERVING THE AIRPORTS.”
Airline Consolidations
In response to competitive pressures, the U.S. airline industry has consolidated. In April 2001, American completed an acquisition of Trans World Airlines. In September 2005, US Airways and America West merged. In October 2008, Delta and Northwest merged. In June 2009, Republic Airways Holdings acquired Frontier and Midwest airlines. In October 2010, United and Continental completed the merger of the two airlines. In May 2011, Southwest Airlines completed its acquisition of AirTran Airways.
II-48
Further airline consolidation is possible and could change airline service patterns, particularly at the connecting hub airports of the merged airlines. The Airports Authority cannot predict what impact, if any, such consolidations will have on airline traffic at the Airports.
Airlines Serving the Airports
The Airports Authority derives a substantial portion of its operating revenues from landing, facility rental and concession fees. The financial strength and stability of the airlines using the Airports, together with numerous other factors, influence the level of aviation activity and revenues at the Airports. In addition, individual airline decisions regarding level of service, particularly hubbing activity at the Airports and aircraft size such as use of regional jets, can affect total enplanements.
In 2002 through 2008, several airlines (including some that served the Airports) ceased operations and/or filed for bankruptcy protection. See “FINANCIAL CONDITION OF CERTAIN AIRLINES SERVING THE AIRPORTS.” No assurances can be given that the airlines now serving the Airports will continue operations or maintain their current levels of activity at the Airports. If one or more airlines were to discontinue operations at the Airports, the activity accounted for by such airlines would not necessarily be replaced by other carriers. See “FINANCIAL CONDITION OF CERTAIN AIRLINES SERVING THE AIRPORTS.”
Cost of Aviation Fuel
Airline earnings are significantly affected by the price of aviation fuel. According to the Air Transport Association, fuel is the largest single cost component for most airline operations, and therefore an important and uncertain determinant of an air carrier's operating economics. There has been no shortage of aviation fuel since the "fuel crisis" of 1974, but there have been significant increases and fluctuations in the price of fuel.
Any increase in fuel prices causes an increase in airline operating costs. According to the Air Transport Association, a one-dollar per barrel increase in the price of crude oil equates to approximately $445 million in annual additional expense for U.S. airlines. Fuel prices continue to be susceptible to, among other factors, political unrest in various parts of the world, Organization of Petroleum Exporting Countries policy, increased demand for fuel caused by rapid growth of economies such as China and India, the levels of fuel inventory maintained by certain industries, the amounts of reserves maintained by governments, currency fluctuations, disruptions to production and refining facilities and weather. In recent years, the cost of aviation fuel has risen sharply in response both to political instability abroad as well as increased demand for petroleum products around the world. Oil prices reached an all-time record high of $145.29 per barrel in July 2008, but have since declined. Significant fluctuations and prolonged increases in the cost of aviation fuel have had an adverse impact on air transportation industry profitability, causing airlines to reduce capacity, fleet and personnel as well as to increase airfares and institute fuel, checked baggage and other extra surcharges, all of which may decrease demand for air travel.
Economic Conditions
Historically, the financial performance of the air transportation industry has correlated with the state of the national and global economy. During September 2008, significant and dramatic changes occurred in the financial markets. Several U.S. commercial and investment banks declared bankruptcy, were acquired by other financial institutions, combined with other financial institutions or sought huge infusions of capital. The volatility in the capital markets led the U.S. government to intervene by making funds available to certain institutions, taking over the ownership of others and assuming large amounts of troubled
II-49
financial instruments in exchange for imposing greater regulation over certain institutions in order to restore consumer confidence in, and stabilize, the nation's financial markets. Since 2008, the U.S. economy has experienced a recession followed by weak growth. As a result of concerns about the U.S. government's ability to resolve long-term deficits, S&P in August 2011 downgraded the credit rating of the U.S. sovereign debt from AAA to AA+. It is not known at this time whether the high national unemployment rate, or the slow rate of national and global economic growth will persist beyond 2012. There can be no assurances that the prolonged weak economic conditions, the U.S. federal government’s credit rating downgrade, or other national and international fiscal concerns will not have an adverse effect on the air transportation industry.
Geopolitical Risks
As a result of the conflicts in the Middle East and related terrorist threats immediately following the events of September 11, 2001, airlines significantly reduced the number of transatlantic flights and consequently, airline revenues and cash flow were adversely affected. Although passenger traffic in the last four years has exceeded the pre-September 11, 2001, levels, uncertainty associated with war and the threats of future terrorist attacks may have an adverse impact on air travel in the future.
Aviation Safety and Security Concerns
Concerns about the safety of airline travel and the effectiveness of security precautions, particularly in the context of international hostilities (such as those that have occurred in the Middle East) and terrorist attacks, may influence passenger travel behavior and air travel demand. These concerns intensified in the aftermath of the events of September 11, 2001. Travel behavior may be affected by anxieties about the safety of flying and by the inconveniences and delays associated with more stringent security screening procedures, both of which may give rise to the avoidance of air travel generally and the switching from air to surface travel modes.
Safety concerns in the aftermath of the terrorist attacks in September 2001 were largely responsible for the steep decline in airline travel nationwide in 2002. Since 2001, government agencies, airlines, and airport operators have upgraded security measures to guard against future terrorist incidents and maintain confidence in the safety of airline travel. These measures include strengthened aircraft cockpit doors, changed flight crew procedures, increased presence of armed sky marshals, federalization of airport security functions under the TSA, more effective dissemination of information about threats, more intensive screening of passengers, baggage, and cargo, and deployment of new screening technologies.
Public health concerns have also affected air travel demand from time to time. In 2003 concerns about the spread of severe acute respiratory syndrome (“SARS”) led public health agencies to issue advisories against nonessential travel to certain regions of the world. In 2009, concerns about the spread of influenza caused by the H1N1 virus reduced certain international travel, particularly to and from Mexico and Asia.
Aviation Security Requirements and Related Costs
The airlines and the federal government were primarily responsible for, and bore most of the capital costs associated with, implementing the new security measures. The Airports are currently in compliance with all federally mandated security requirements. If additional financial assistance becomes available from TSA, the Airports Authority may perform certain additional building modifications to better accommodate in-line baggage screening equipment. See “THE 2001-2016 CCP.”
II-50
The Airports Authority cannot predict the effect of any future government-required security measures on passenger activity at the Airports. Nor can the Airports Authority predict how the government will staff security screening functions or the effect on passenger activity of government decisions regarding its staffing levels.
Certain Factors Affecting the Airports
Enplanements at the Airports, collections of PFCs and the receipt of Revenues were negatively affected by security restrictions on the Airports and the financial condition of the air transportation industry following the terrorist attacks of September 11, 2001, and the Airports Authority, like many airport operators, experienced increased operating costs due to compliance with federally mandated and other security and operating changes. Given the proximity of the Airports to Washington, D.C., the FAA or the Department of Homeland Security may require further enhanced security measures and impose additional restrictions on the Airports, which may negatively affect future Airports Authority performance. The Airports Authority cannot predict the likelihood of future incidents similar to the terrorist attacks of September 11, 2001, the possibility of increased security restrictions, the likelihood of future air transportation disruptions or the impact on the Airports or the airlines from such incidents or disruptions. See “THE AIRPORTS AUTHORITY – Regulations and Restrictions Affecting the Airports – Possible Future Restrictions on Reagan National Airport,” “THE AIR TRADE AND AIRPORTS ACTIVITY – Airlines Serving the Airports,” and “FINANCIAL CONDITION OF CERTAIN AIRLINES SERVING THE AIRPORTS.”
Regulations and Restrictions Affecting the Airports
The operations of the Airports Authority and its ability to generate revenues are affected by a variety of legislative, legal, contractual, statutory, regulatory and practical restrictions, including restrictions in the Federal Act, limitations imposed by the Federal Lease, provisions of the Airline Agreement, the federal acts authorizing the imposition, collection and use of PFCs, regulations such as the High Density and Perimeter Rules that affect Reagan National Airport and extensive federal legislation and regulations applicable to all airports. It is not possible to predict whether future restrictions or limitations on the Airports’ operation will be imposed, whether future legislation or regulation will affect anticipated federal funding or PFC collection, whether additional requirements will be funded by the federal government or require funding by the Airports Authority, or whether such restrictions, legislations or regulations would adversely affect Net Revenues. For a description of these restrictions and regulations, see “THE AIRPORTS AUTHORITY – Regulations and Restrictions Affecting the Airports.”
Effect of Bankruptcy on the Airline Agreement
In the event of bankruptcy proceedings involving one or more of the Signatory Airlines, the debtor airline or its bankruptcy trustee must determine within a time period determined by the court whether to assume or reject the applicable Airline Agreement. In the event of assumption, the debtor airline is required to cure any prior defaults and to provide adequate assurance of future performance under the relevant document. Rejection of the Airline Agreement by any Signatory Airline gives rise to an unsecured claim of the Airports Authority for damages, the amount of which may be limited by the U.S. Bankruptcy Code. The amounts unpaid as a result of a rejection of the Airline Agreement by a Signatory Airline in bankruptcy can be passed on to the remaining Signatory Airlines. If the bankruptcy of one or more Signatory Airlines were to occur, however, there can be no assurance that the remaining Signatory Airlines would be able, individually or collectively, to meet their obligations under the Airline Agreement. See “CERTAIN AGREEMENTS FOR USE OF THE AIRPORTS – Airport Use Agreement and Premises Lease,” “FINANCIAL CONDITION OF CERTAIN AIRLINES SERVING THE AIRPORTS – Effect of Airline
II-51
Bankruptcies” and APPENDIX C – “Summary of Certain Provisions of the Airport Use Agreement and Premises Lease.”
Enforceability of Rights and Remedies and Bankruptcy
The rights and remedies available to the owners of the Series 2011C-D Bonds upon an Event of Default under the Indenture are in many respects dependent upon judicial enforcement actions which are often subject to discretion and delay. Currently, the Airports Authority is not authorized by either of the Acts to file for bankruptcy.
Availability of Designated Passenger Facility Charges
In addition to the use of Net Revenues, the Airports Authority has irrevocably committed to use the greater of (i) $35,000,000 or (ii) 50% of the total amount of Designated Passenger Facility Charges between Fiscal Years 2011 and 2016, respectively, to pay a portion of the Annual Debt Service on PFC Eligible Bonds. See “THE BONDS – Security and Source of Payment for the Bonds – Irrevocable Commitment of Certain Passenger Facility Charges” above.
The amount of Designated Passenger Facility Charges received by the Airports Authority in future years will vary based upon the actual number of PFC-eligible passenger enplanements at Dulles International Airport. No assurance can be given that any level of enplanements will be realized. Additionally, the FAA may terminate the Airports Authority’s authority to impose PFCs, subject to informal and formal procedural safeguards, if (a) PFC revenues are not being used for approved projects in accordance with the FAA’s approval, the PFC Act or the PFC Regulations, or (b) the Airports Authority otherwise violates the PFC Act or the PFC Regulations. The Airports Authority’s authority to impose a PFC may also be terminated if the Airports Authority violates certain provisions of the Airport Noise and Capacity Act of 1990 (the “ANCA”) and its regulations relating to the implementation of noise and access restrictions for certain types of aircraft. The regulations under ANCA also contain procedural safeguards to ensure that the Airports Authority’s authority to impose a PFC would not be summarily terminated. No assurance can be given that the Airports Authority’s authority to impose a PFC will not be terminated by Congress or the FAA, that the PFC program will not be modified or restricted by Congress or the FAA so as to reduce PFC revenues available to the Airports Authority or that the Airports Authority will not seek to decrease the amount of PFCs to be collected, provided such decrease does not violate the Airports Authority’s covenant in the Indenture. A shortfall in PFC revenues may cause the Airports Authority to increase rates and charges at the Airports to meet the debt service requirements on the Bonds that the Airports Authority plans to pay from Designated Passenger Facility Charges, and/or require the Airports Authority to identify other sources of funding for its capital program, including issuing additional Bonds.
Airports Authority Insolvency
The Series 2011C-D Bonds are not secured by or payable from the revenues derived from the Dulles Toll Road or other assets of the Airports Authority accounted for under the Dulles Corridor Enterprise Fund. Nevertheless, the Airports Authority could become insolvent in connection with activities related to the Dulles Toll Road and the Dulles Metrorail Extension Project, even though the Airports are operating at a profit. If this were to occur, an Event of Default under the Indenture could occur even though the Revenues of the Airports may be adequate to meet the rate covenant under the Indenture. A creditor who has a judgment against the Airports Authority as a result of activities related to the Dulles Toll Road or the Dulles Metrorail Extension Project may not be restricted to claims against the revenues of, or other assets accounted for by, the Dulles Corridor Enterprise Fund. Any attempt to levy against Airports Authority facilities used in operation of the Airports or Revenues derived from such operations may cause
II-52
an Event of Default under the Indenture. As described under the “LITIGATION” section in Part I of this Official Statement, certain lawsuits have been instituted against the Airports Authority and others from time to time contesting its power to operate the Dulles Toll Road and to charge and collect tolls for its use.
Similarly, the Airports Authority could become insolvent in connection with its operations and maintenance of the Airports. Attempts to levy against Airports Authority facilities used in operation of the Airports or Revenues derived from such operations may also cause an Event of Default to occur.
Expiration and Possible Termination of Airline Agreement
Pursuant to the Airline Agreement, each Signatory Airline has agreed to pay the rates and charges for its use of the Airports. The Airline Agreement will expire on September 30, 2014, which is prior to the completion of the 2001-2016 CCP. Under the Airline Agreement, the Airports Authority has an annual right to terminate the Airline Agreement on 180 days notice effective each September 30. Under certain limited conditions, a Signatory Airline may terminate the Airline Agreement. See “CERTAIN AGREEMENTS FOR USE OF THE AIRPORTS – Airport Use Agreement and Premises Lease.” The Airports Authority is permitted to renegotiate the Airline Agreement prior to its expiration.
Limitations on Bondholders’ Remedies
The occurrence of an Event of Default under the Indenture does not grant a right to either the Trustee or the Bondholders to accelerate payment of the Bonds. As a result, the Airports Authority may be able to continue indefinitely collecting Revenues and applying them to the operation of the Airports even if an Event of Default has occurred and no payments are being made on the Bonds. See Part I “THE SERIES 2011C-D BONDS – Events of Default and Remedies; No Acceleration or Cross Default.”
Cost and Schedule of Capital Construction Program
The costs and the schedule of the projects included in the CCP depend on various sources of funding, including additional Bonds, CP Notes, PFCs, and federal grants, and are subject to a number of uncertainties. The ability of the Airports Authority to complete the 2001-2016 CCP may be adversely affected by various factors including: (i) estimating errors, (ii) design and engineering errors, (iii) changes to the scope of the projects, (iv) delays in contract awards, (v) material, and/or labor shortages, (vi) unforeseen site conditions, (vii) adverse weather conditions, (viii) contractor defaults, (ix) labor disputes, (x) unanticipated levels of inflation, (xi) environmental issues, and (xii) additional security improvements and associated costs mandated by the federal government. A delay in the completion of certain projects under the 2001-2016 CCP could delay the collection of revenues in respect of such projects, increase costs for such projects, and cause the rescheduling of other projects. In addition, any of the deferred projects could be implemented at any time adding to the cost of the 2001-2016 CCP. The Airports Authority’s ability to increase capacity at Dulles International Airport, which may be necessary to efficiently accommodate forecast increases in aircraft operations and enplaned passengers, is dependent upon completion of certain projects in the 2001-2016 CCP. There can be no assurance that the cost of construction of the 2001-2016 CCP projects will not exceed the currently estimated dollar amount or that the completion of the projects will not be delayed beyond the currently projected completion dates. Any schedule delays or cost increases could result in the need to issue additional Bonds and could result in increased costs per enplaned passenger to the airlines, which could place the Airports at a competitive disadvantage relative to lower-cost airports. See “THE 2001-2016 CCP.”
II-53
Competition
The Airports compete with other U.S. airports for both domestic and international passengers. Portions of the Airports service region are served by BWI. BWI experienced rapid growth in enplanements from 1991 through 2003, primarily due to the increasing presence of low-cost carriers at BWI, in particular Southwest. Among the three airports serving the Airport Service Region, BWI moved from enplaning the fewest passengers in the Airports service region in 1991 to enplaning the most passengers in 2003. In 2004, although each of the Region’s airports experienced higher passenger activity, Dulles International Airport’s enplanements surpassed BWI as a result of considerable passenger traffic stimulation caused by the startup of Independence Air at Dulles International Airport and the resulting competitive response by United and other airlines serving Dulles International Airport. The significant increase of low-cost seat capacity at Dulles International Airport in 2004 slowed traffic growth at BWI and resulted in the return to Dulles International Airport of some portion of the Region’s domestic passenger traffic that had migrated to BWI. The Airports Authority cannot predict, however, whether this trend will continue long-term. With the expected continued growth of low-cost carriers and proposed improvements in transportation to and from the region, BWI will likely continue to be a competitor for the region’s domestic traffic.
International passengers account for a growing portion of the enplanements at Dulles International Airport. International passengers made up 26.9% of all enplanements at Dulles International Airport in 2010. Dulles International Airport ranked ninth among U.S. airports in terms of international passengers and was the country’s fourth largest transatlantic international gateway. Among east coast airports, only the New York area airports offer more service across the Atlantic, and Continental has historically used Newark International Airport as its principal Atlantic gateway. International traffic may be more susceptible to fluctuation and disruption based on political instability, terrorist activities, currency fluctuations, and other factors that can not be predicted or controlled by the airlines or the Airports Authority. The Airports Authority cannot predict whether the level of international traffic will continue at its current level or continue to grow at Dulles International Airport, nor can it predict what events occurring domestically or international might adversely affect such traffic in the future. See APPENDIX A – “Report of the Airport Consultant.”
The Airports Authority also may continue to experience increases in its operating costs due to compliance with federally mandated and other security and operating changes that are unique to the Airports. Such increased costs may increase the cost per enplaned passenger to the airlines, which could result in the Airports being put at a competitive disadvantage relative to other airports and transportation modes. See “THE AIRPORTS SERVICE REGION AND AIRPORTS ACTIVITY.”
Travel Substitutes
Teleconference, video-conference and web-based meetings continue to improve in quality and price and are considered a satisfactory alternative to some face-to-face business meetings.
Other Key Factors
Capacity limitations of the national air traffic control system, the Airports and at competing airports could be factors that might affect future activity at the Airports. In the past, demands on the air traffic control system have caused operational restrictions that have affected airline schedules and passenger traffic and caused significant delays. The FAA has made certain improvements to the computer, radar and commutations equipment of the air traffic control system in recent years, but no assurances can be given that future increases in airline and passenger activity would not again adversely affect airline operations.
II-54
Future growth of air traffic at Reagan National Airport will be constrained by the limits of the facilities as well as the Perimeter and High Density Rules. Existing terminal and airfield capacity at Dulles International Airport are believed to be sufficient to accommodate near term future growth in airline traffic.
BWI is the primary airport in the Airport Service Region that competes with the Airports. BWI has no airfield, landside or access constraints that would inhibit growth in either domestic or international markets. In recent years, certain low cost carriers, and particularly Southwest, have developed hubs and expanded rapidly at BWI. No assurances can be given that other airlines will not commence or expand activities at BWI to the detriment of airline activity at either or both of the Airports.
For more details on these and other “key factors” that could impact results of Airports Authority operations, see APPENDIX A – “Report of the Airport Consultant.”
Forecasting Risk
The Report of the Airport Consultant incorporates numerous assumptions underlying the forecasts of airline traffic and financial results and states that any forecast is subject to uncertainties. Inevitably, some assumptions used to develop the forecasts will not be realized and unanticipated events and circumstances may occur. Therefore, the actual results achieved during the forecast period will vary from the forecasts, and the variations may be material. See “REPORT OF THE AIRPORT CONSULTANT” and APPENDIX A – “Report of the Airport Consultant.”
Forward Looking Statements
This Official Statement, and particularly the information contained in Part I under the captions “INTRODUCTION,” and “THE SERIES 2011C-D BONDS,” and in Part II under the captions “THE BONDS,” “THE AIRPORTS AUTHORITY’S FACILITIES AND MASTER PLANS,” “PLAN OF FUNDING FOR THE 2001-2016 CCP,” “REPORT OF THE AIRPORT CONSULTANT” and the Report of the Airport Consultant included as APPENDIX A to this Official Statement contains statements relating to future results that are “forward looking statements” as defined in the Private Securities Litigation Reform Act of 1995. When used in this Official Statement, the words “estimate,” “forecast,” “intend,” “expect,” and similar expressions identify forward looking statements. Such statements are subject to risks and uncertainties that could cause actual results to differ materially from those contemplated in such forward looking statements. Among the factors that may cause forecast revenues and expenditures to be materially different from those anticipated are an inability to incur debt at assumed rates, construction delays, increases in construction costs, general economic downturns, factors affecting the airline industry in general, federal legislation and/or regulations, and regulatory and other restrictions, including but not limited to those that may affect the ability to undertake the timing or the costs of certain projects. Any forecast is subject to such uncertainties. Therefore, there will be differences between forecast and actual results, and those differences may be material.
REPORT OF THE AIRPORT CONSULTANT
The Report of the Airport Consultant is attached as APPENDIX A. The Report of the Airport Consultant was prepared by LeighFisher, in conjunction with its subconsultants, MAC Consulting, LLC, and Airport Strategies, LLC. The Report of the Airport Consultant evaluates the ability of the Airports Authority to produce Net Revenues sufficient to meet the requirements of the rate covenant during the forecast period taking into account estimated Annual Debt Service requirements using assumptions as documented in the Report of the Airport Consultant. The Report of the Airport Consultant has been included herein in reliance upon the knowledge and experience of LeighFisher as the Airport Consultant
II-55
and its subconsultants. As stated in the Report of the Airport Consultant, any forecast is subject to uncertainties. Therefore, there will be differences between forecast and actual results, and those differences may be material. The forecasts presented in the Report of the Airport Consultant are based on various assumptions that reflect the best information available to the Airports Authority and the knowledge and experience of the Airport Consultant. The Airports Authority’s future operating and financial performance, however, will vary from the forecasts and such variances may be material. The Report of the Airport Consultant should be read in its entirety for an understanding of the forecasts and the underlying assumptions.
Regulatory and other restrictions may adversely affect the ability of the Airports Authority to achieve the forecasts in the Report of the Airport Consultant. See “THE AIRPORTS AUTHORITY – Regulations and Restrictions Affecting the Airports.” Other factors affecting the achievement of the forecasts include, without limitation, the Airports Authority’s ability to incur debt at assumed interest rates, unexpected construction delays or cost increases (which may reflect special costs of the Airports Authority’s projects as well as general increase in construction costs). Such forecasts also may be affected by the factors affecting the airline industry in general, and the numbers and types of passengers using the Airports.
The Report of the Airport Consultant includes forecasts of Signatory Airline payments per enplaned passenger at Reagan National Airport and Dulles International Airport, of which are estimated to increase to $13.91, and $26.73, respectively, in 2016. The Report of the Airport Consultant also includes a stress test for which the numbers of enplaned passengers were assumed in 2016 to be lower than the base forecasts by approximately 20% for Reagan National Airport and 30% for Dulles International Airport. Under the stress test assumptions, the Signatory Airline payments per enplaned passenger are projected in 2016 to be $18.66 at Reagan National Airport and $40.35 at Dulles International Airport. In the stress test projection, debt service coverage remains at or higher than 125% during the projection period. See APPENDIX A, which should be read in its entirety for an understanding of the forecasts, the stress test and the underlying assumptions.
CONTINUING DISCLOSURE
The Airports Authority has entered into the Disclosure Agreement with DAC meeting the requirements of Rule 15c2-12 promulgated by the SEC pursuant to the Securities Exchange Act of 1934, as amended. The Disclosure Agreement requires the Airports Authority to file with DAC (i) certain annual financial information and operating data and (ii) certain event notices. Under the Disclosure Agreement, DAC serves as the Airports Authority’s Disclosure Dissemination Agent for purposes of filing annual disclosure and event notices required by the Rule 15c2-12. DAC also will provide certain financial information of the Airports Authority through DAC’s web site at http://www.dacbond.com. The form of the Disclosure Agreement is attached as APPENDIX F. In accordance with the changes to Rule 15c2-12 promulgated by the SEC, as of July 1, 2009, the Airports Authority’s annual financial information and the annual budget information, along with notices of the occurrence of certain material events, will be filed solely with the Municipal Securities Rulemaking Board under its EMMA system.
The Disclosure Agreement requires the Airports Authority to provide limited information at specified times. While the Airports Authority expects to provide substantial additional information, as it has in the past, it is not legally obligated to do so. A default by the Airports Authority under the Disclosure Agreement is not an Event of Default with respect to the Series 2011C-D Bonds. The Disclosure Agreement permits any bondholder to seek specific performance of the Airports Authority’s obligations thereunder after 30 days prior written qualifying notice to the Airports Authority and 30 days to cure, but no assurance can be given as to the outcome of any such proceeding. In connection with the issuance of its
II-56
outstanding Bonds, the Airports Authority has never failed to comply in all material respects with any previous undertakings with regard to the Rule 15c2-12 to provide certain annual financial information and material event notices.
FINANCIAL ADVISOR
Jefferies & Company, Inc. (the “Financial Advisor”) served as the financial advisor to the Airports Authority in connection with the issuance of the Bonds. The Financial Advisor has prepared the debt issuance plan for funding a portion of the 2001-2016 CCP based on information provided by the Airports Authority. In addition, it has assisted in the preparation of this Official Statement. The Financial Advisor has not undertaken to make an independent verification of, or to assume responsibility for, the accuracy, completeness or fairness of the information contained in this Official Statement.
INDEPENDENT ACCOUNTANTS
A copy of the Airports Authority’s most recent audited financial statement is contained in its 2010 CAFR which was filed with EMMA and can also be found at www.mwaa.com/311.htm and www.dacbond.com. The financial statements incorporated in this Official Statement by reference to the Airports Authority’s 2010 CAFR as of and for the year ended December 31, 2010 have been audited by PricewaterhouseCoopers LLP, independent accountants, as stated in their report included therein.
PROSPECTIVE FINANCIAL INFORMATION
The Report of the Airport Consultant was prepared by the Airport Consultant and contains prospective financial information. This prospective financial information was not prepared with a view toward compliance with the published guidelines of the Securities and Exchange Commission or the guidelines established by the American Institute of Certified Public Accountants for preparation and presentation of prospective financial information. Other prospective financial information included in this Official Statement, and budget information (See Part I, “AIRPORTS AUTHORITY FINANCIAL INFORMATION – Aviation Enterprise Fiscal Year 2011 Budget”) including summaries of prospective financial information from the Report of the Airport Consultant, has been prepared by, and is the responsibility of, the Airports Authority's management. PricewaterhouseCoopers LLP, independent accountants, has neither examined, compiled nor performed any procedures with respect to this prospective financial information and, accordingly, PricewaterhouseCoopers LLP does not express an opinion or offer any other form of assurance with respect thereto. The PricewaterhouseCoopers LLP report included in the Airports Authority’s 2010 CAFR relates to the Airports Authority’s historical financial information. It does not extend to the prospective financial information and should not be read to do so.
II-57 [THIS PAGE INTENTIONALLY LEFT BLANK]
Attachment A
REPORT OF THE AIRPORT CONSULTANT
on the proposed issuance of
METROPOLITAN WASHINGTON AIRPORTS AUTHORITY
AIRPORT SYSTEM REVENUE AND REFUNDING VARIABLE RATE BONDS Series 2011A and Series 2011B AIRPORT SYSTEM REVENUE REFUNDING BONDS Series 2011C and Series 2011D TAXABLE AIRPORT SYSTEM REVENUE REFUNDING BONDS Series 2011E
Prepared for
Metropolitan Washington Airports Authority
Prepared by
LeighFisher Burlingame, California
September 9, 2011
[THIS PAGE INTENTIONALLY LEFT BLANK]
September 9, 2011
The Honorable Charles D. Snelling Chairman of the Board
Mr. John E. Potter President and Chief Executive Officer
Metropolitan Washington Airports Authority 1 Aviation Circle Washington, D.C. 20001-6000
Re: Report of the Airport Consultant Metropolitan Washington Airports Authority Airport System Revenue and Refunding Bonds, Series 2011A-E
Dear Mr. Snelling and Mr. Potter:
LeighFisher, in conjunction with MAC Consulting, LLC, and Airport Strategies, LLC, is pleased to submit this Report of the Airport Consultant in connection with the proposed issuance by the Metropolitan Washington Airports Authority (the Airports Authority) of Airport System Revenue and Refunding Bonds. This letter and the accompanying attachment and financial exhibits constitute our report.
The Airports Authority operates Ronald Reagan National Airport (Reagan National Airport) and Washington Dulles International Airport (Dulles International Airport) (collectively, the Airports) under the terms of an agreement and deed of lease with the federal government (the Federal Lease) that, as amended, extends to 2067.
The Authority proposes to issue Bonds to fund certain of the costs of capital improvements at the Airports (including the redemption of Commercial Paper Notes issued to provide interim financing for such improvements) and to refund certain outstanding Airport System Revenue Bonds, as follows:
Approximately $234 million principal amount of Series 2011A Bonds to be issued as variable-rate Bonds to fund the costs of capital improvements and to refund certain of the outstanding Series 2002C Bonds and Series 2009A Bonds.
Approximately $208 million principal amount of Series 2011B Bonds to be issued as variable-rate Bonds to fund the costs of capital improvements and to refund the remaining Series 2002C Bonds.
Mr. Charles D. Snelling and Mr. John E. Potter September 9, 2011
Approximately $165 million principal amount of Series 2011C Bonds to be issued as fixed-rate AMT Bonds to refund certain of the outstanding Series 2001A Bonds.
Approximately $11 million principal amount of Series 2011D Bonds to be issued as fixed-rate Non-AMT Bonds to refund certain of the outstanding Series 2001B Bonds.
The Airports Authority may also issue Series 2011C Bonds to refund certain of the outstanding Series 1998B Bonds to achieve additional savings. No such refunding of Series 1998B Bonds was assumed for this report. The Airports Authority may also issue Series 2011E Bonds as fixed-rate taxable Bonds to refund certain of the Series 1998B Bonds and Series 2001A Bonds to achieve additional savings. The principal amount of any such Series 2011E Bonds would reduce by a similar amount the principal of Series 2011C Bonds. No such issuance of Series 2011E Bonds was assumed for this report.
The proposed Series 2011A, 2011B, 2011C, 2011D and any 2011E Bonds are collectively referred to in this report as the 2011A-E Bonds. The Series 2011A and Series 2011B Bonds whose proceeds are to be used to fund capital improvements are collectively referred to as the 2011AB New Money Bonds. The report also takes into account Bonds that the Airports Authority plans to issue in 2012 and 2013 to fund certain of the costs of additional capital improvement, referred to as the 2012 Bonds and 2013 Bonds.
Indenture The proposed 2011A-E Bonds and planned 2012 Bonds and 2013 Bonds are to be issued under the 2001 Amended and Restated Master Indenture of Trust securing Airport System Revenue Bonds, as supplemented and amended (the Indenture), and are to be secured by a pledge of the Net Revenues of the Airports Authority. Except as otherwise defined, capitalized terms in this report are used as defined in the Indenture.
Aviation Enterprise Fund The Airports Authority operates and develops the Airports through the Aviation Enterprise Fund. The Airports Authority also oversees the operation and development of the Dulles Toll Road and the Dulles Corridor Metrorail Project through the Dulles Corridor Enterprise Fund. The Aviation Enterprise Fund and the Dulles Corridor Enterprise Fund are segregated. The Airports Authority may not use Net Revenues pledged for the payment of Airport System Revenue Bonds to pay the operating or debt service costs of the Dulles Toll Road or the Dulles Corridor Metrorail Project. Revenues from the operation of the Dulles Toll Road are Released Revenues under the Indenture and are excluded from the pledge of Net Revenues securing the Bonds. Only the financial operations of the Aviation Enterprise Fund are considered in this report.
A-2
Mr. Charles D. Snelling and Mr. John E. Potter September 9, 2011
Capital Construction Program In 1998, the Airports Authority initiated a program of capital improvements (the Capital Construction Program or CCP) to expand, redevelop, and modernize the Airports consistent with their master plans. The Airports Authority evaluates the CCP from time to time in light of changes in aviation demand, financial conditions, and other circumstances and over the years has revised the scope, costs, and implementation schedule for CCP projects. Estimated project costs for the active portion of the CCP that is scheduled for completion through 2016 (the 2001-2016 CCP), including allowances for inflation, total $5,076 million, $567 million for projects at Reagan National Airport and $4,509 million for projects at Dulles International Airport.
Projects in the 2001-2016 CCP still to be completed at Reagan National Airport include runway safety area improvements, rehabilitation of Terminal A, and modifications to the Terminal B/C buildings and baggage systems to accommodate in-line baggage screening equipment.
Projects in the 2001-2016 CCP still to be completed at Dulles International Airport include rehabilitation of Concourses C and D, completion of an expansion of the international arrivals building, and modifications to the main terminal building and baggage systems to accommodate in-line baggage screening equipment, and modifications to Concourse B for AeroTrain.
The Airports Authority estimates that all projects to be funded in part from the proceeds of the proposed 2011AB New Money Bonds and planned 2012 Bonds and 2013 Bonds will be substantially completed and placed in service by the end of 2014. Also included in the 2001-2016 CCP for the purposes of this report is the Airport Authority’s contribution to the construction of a Metrorail station adjacent to the main terminal at Dulles, expected to be completed in 2017.
The Airports Authority is funding the 2001-2016 CCP with a combination of grants from the Federal Aviation Administration (FAA), the Commonwealth of Virginia, and the Transportation Security Administration (TSA); revenues derived from a $4.50 passenger facility charge imposed at the Airports (PFC Revenues); and Bond proceeds. The Airports Authority expects that the proceeds of the proposed 2011A-E Bonds and planned 2012 Bonds and 2013 Bonds, together with other available sources of capital funds, will provide all the funds needed to complete the 2011-2016 CCP.
Certain other projects in the Capital Construction Program as originally defined have been deferred. The Airports Authority has not committed to proceeding with any such deferred projects and it was assumed for the purposes of this report that no additional Bonds beyond those discussed in this report will be issued during the forecast period covered.
A-3
Mr. Charles D. Snelling and Mr. John E. Potter September 9, 2011
Security for the Bonds Under the Indenture, Bonds are secured by a pledge of Net Revenues defined as all Revenues of the Airports Authority plus transfers, if any, from the General Purpose Fund to the Revenue Fund, after provision is made for the payment of Operation and Maintenance (O&M) Expenses. PFC Revenues are excluded from Revenues under the Indenture, unless specifically so designated, and are not pledged to secure Bonds. The Airports Authority has not designated any PFC Revenues as Revenues, although, as discussed in the following section, it has committed certain Designated Passenger Facility Charges to the payment of Bond debt service.
Rate Covenant In Section 604(a) (the Rate Covenant) of the Indenture, the Airports Authority covenants that it will fix and adjust from time to time the fees and other charges for the use of the Airports, including services rendered by the Airports Authority, so as to produce Net Revenues at least sufficient to provide for the larger of either:
(i) The amounts needed for making the required deposits in the Fiscal Year to the Principal Accounts, the Interest Accounts, the Redemption Accounts, the Debt Service Reserve Fund, the Subordinated Bond Funds, the Subordinated Reserve Funds, the Junior Lien Obligations Fund, the Federal Lease Fund, and the Emergency Repair and Rehabilitation Fund; or
(ii) 125% of Annual Debt Service with respect to Bonds for such Fiscal Year.
The Airports Authority’s Fiscal Year is the calendar year ending December 31.
For purposes of demonstrating compliance with the Rate Covenant, Annual Debt Service is defined in the Indenture to exclude the payment of principal of and interest on indebtedness for which funds are, or are reasonably expected to be, available for and which are irrevocably committed to make such payments, including any such funds in an escrow account or any such funds constituting capitalized interest.
Pursuant to the Thirty-fifth Supplemental Indenture, certain Designated Passenger Facility Charges received from the imposition of the $4.50 PFC at Dulles International Airport are irrevocably committed to the payment of debt service on PFC Eligible Bonds through 2016. The Airports Authority intends to commit certain additional PFC Revenues to the payment of such debt service. For purposes of demonstrating compliance with the Rate Covenant, Annual Debt Service is reduced by all such Designated Passenger Facility Charges.
A-4
Mr. Charles D. Snelling and Mr. John E. Potter September 9, 2011
Airline Agreement The Airports Authority and airlines accounting for most of the passengers and landed weight at the Airports (the Signatory Airlines) have entered into agreements (collectively the Airline Agreement) that provide for the use and occupancy of the Airports and establish the methodologies for calculating the terminal rentals, landing fees, and other fees and charges payable by the Signatory Airlines. Certain capitalized terms in this report are used as defined in the Airline Agreement.
Under an “extraordinary coverage protection” provision of the Airline Agreement, the Airports Authority may adjust rentals, fees, and charges payable by the Signatory Airlines to ensure that projected Net Revenues at the Airports are not less than required to meet the 125% debt service coverage requirement of the Rate Covenant.
The Airline Agreement is scheduled to expire in September 2014, unless the Airports Authority exercises its annual rights to terminate sooner. The Airports Authority has not exercised its early termination rights in 2004 through 2011, but may exercise those rights in 2012 or 2013. For purposes of this report, it was assumed that the provisions of the Airline Agreement relating to the calculation of airline rentals, fees, and charges will apply through the forecast period and that the Signatory Airlines will pay all amounts required under the Airline Agreement. No payments under the extraordinary coverage protection provision of the Airline Agreement are forecast to be required.
The Signatory Airlines have consented to the funding plan for 2001-2016 CCP through the majority-in-interest (MII) review and approval process established in the Airline Agreement, thereby allowing debt service requirements and O&M Expenses allocable to airline cost centers to be recovered through Signatory Airline rentals, fees, and charges as provided for in the Airline Agreement.
Scope of Report The purpose of this report is to evaluate the ability of the Airports Authority to produce Net Revenues sufficient to meet the requirements of the Rate Covenant taking into account the estimated debt service requirements of outstanding Bonds, the proposed 2011A-E Bonds, the planned 2012 Bonds and 2013 Bonds, and Commercial Paper Notes expected to be outstanding. The report covers a forecast period through 2016, two years after the expected substantial completion of the 2001-2016 Capital Construction Program.
In preparing the report, we analyzed:
Future airline traffic demand at the Airports, giving consideration to the demographic and economic characteristics of the Airports service region, historical trends in airline service and traffic, the roles of the Airports in airline
A-5
Mr. Charles D. Snelling and Mr. John E. Potter September 9, 2011
route systems, constraints on aircraft operations at Reagan National Airport, and other key factors that may affect future traffic.
Estimated sources and uses of funds for the 2001-2016 CCP and associated Bond debt service requirements.
Historical and forecast PFC Revenues and the use of such PFC Revenues to pay project costs and Bond debt service.
Historical relationships among revenues, expenses, and airline traffic at the Airports.
Budgeted and year-to-date revenues and expenses for 2011, expected staffing requirements, the facilities being constructed under the 2001-2016 CCP, and other factors that may affect future revenues and expenses.
The Airports Authority’s policies and agreements relating to airline use and occupancy of the Airports, including the calculation of airline rentals, fees, and charges under the Airline Agreement.
The Airports Authority’s policies and contractual agreements relating to the operation of other services and concessions, including public parking, rental car concessions, terminal concessions, and the leasing of buildings and grounds.
We also identified key factors upon which the future financial results of the Airports Authority depend, formulated assumptions about those factors, and on the basis of those assumptions, assembled the financial forecasts presented in the exhibits at the end of the report. Estimates of project costs, project financing, and annual debt service requirements, were provided by the sources noted in the report. The projects in the 2001-2016 CCP, their estimated costs, and the funding plan are summarized in Exhibits A and B at the end of the report. Estimates of debt service requirements are summarized in Exhibit C-1.
Forecast Airline Payments per Passenger Exhibit E-4 presents the forecast calculation of terminal rentals, landing fees, and other fees and charges payable by the Signatory Airlines under the Airline Agreement. The exhibit also presents forecast Signatory Airline payments expressed per enplaned passenger. Such airline payments per passenger are generally consistent with those forecast for other major U.S. airports with large capital programs.
A-6
Mr. Charles D. Snelling and Mr. John E. Potter September 9, 2011
Forecast Debt Service Coverage As shown in the following tabulation and Exhibit G-1, the Net Revenues of the Airports Authority are forecast to be sufficient to meet the requirements of the Rate Covenant and to exceed the required 125% debt service coverage in each year of the forecast period.
FORECAST DEBT SERVICE COVERAGE
in thousands Net Annual Debt Revenues Debt Service (a) service coverage Year [A] [B] [A/B] 2011 (E) $387,445 $287,516 1.35 2012 442,687 339,522 1.30 2013 457,204 350,552 1.30 2014 468,482 355,275 1.32 2015 490,255 371,216 1.32 2016 492,310 371,539 1.33
(a) Net of Designated Passenger Facility Charges that the Airports Authority has irrevocably committed or intends to commit to the payment of debt service on PFC-Eligible Bonds
Assumptions Underlying the Financial Forecasts The financial forecasts presented in this report are based on information and assumptions that were provided by or reviewed with and agreed to by Airports Authority management as being appropriate for the report’s purpose. The forecasts reflect management’s expected course of action during the forecast period and in management’s judgment, present fairly the expected financial results of the Airports Authority. Those key factors and assumptions that are significant to the forecasts are set forth in the report, which should be read in its entirety for an understanding of the forecasts and the underlying assumptions.
In our opinion, the underlying assumptions provide a reasonable basis for the forecasts. However, any financial forecast is subject to uncertainties. Inevitably, some assumptions will not be realized, and unanticipated events and circumstances may occur. Therefore, there will be differences between the forecast and actual results, and those differences may be material. Accordingly, LeighFisher makes no warranty with respect to the forecasts and nothing in the report shall be deemed to create or imply the creation of any third-party beneficiary status for any person with regard to the
A-7
Mr. Charles D. Snelling and Mr. John E. Potter September 9, 2011 forecasts. We have no responsibility to update the report for events and circumstances occurring after the date of the report.
* * * * * We appreciate the opportunity to serve as Airport Consultant for the Airports Authority’s proposed financing.
Respectfully submitted,
LEIGHFISHER
A-8
Attachment
BACKGROUND, ASSUMPTIONS, AND RATIONALE FOR THE FINANCIAL FORECASTS
REPORT OF THE AIRPORT CONSULTANT
on the proposed issuance of
METROPOLITAN WASHINGTON AIRPORTS AUTHORITY
AIRPORT SYSTEM REVENUE AND REFUNDING VARIABLE RATE BONDS Series 2011A and Series 2011B AIRPORT SYSTEM REVENUE REFUNDING BONDS Series 2011C and Series 2011D TAXABLE AIRPORT SYSTEM REVENUE REFUNDING BONDS Series 2011E
A-9
[THIS PAGE INTENTIONALLY LEFT BLANK]
A-10
CONTENTS
Page
AIRPORT FACILITIES ...... A-19
Reagan National Airport ...... A-19 Passenger Terminals ...... A-19 Dulles International Airport ...... A-20 Passenger Terminals ...... A-21
BASIS FOR AIRLINE PASSENGER DEMAND ...... A-24
Airports Service Region ...... A-24 Demographic and Economic Profile ...... A-24 Population Trends ...... A-26 Income Trends ...... A-30 Gross Domestic Product ...... A-30 Employment Trends ...... A-32 Employment by Industry Sector ...... A-35 Unemployment Rate ...... A-36 Tourism ...... A-37 Economic Outlook...... A-38
AIRLINE TRAFFIC ANALYSIS ...... A-41
Historical Passenger Traffic at the Airports ...... A-41 Airline Shares of Passengers at the Airports ...... A-42 Changes in Passengers Compared with Other U.S. Airports ...... A-42 Competing Airports Serving the Region ...... A-44 Competition from Baltimore/Washington Airport ...... A-44 Competition from Other International Gateway Airports ...... A-47 Historical Airline Service and Traffic at Reagan ...... A-48 Perimeter and High Density Rules ...... A-48 Airline Service Trends ...... A-50 Enplaned Passenger Trends ...... A-55 Airline Shares of Enplaned Passengers ...... A-58 Domestic Market and Fare Trends ...... A-58 Cargo Trends ...... A-61 Historical Aircraft Operations ...... A-61 Historical Airline Service and Traffic Trends at Dulles ...... A-61 Airline Service Trends ...... A-61 Enplaned Passenger Trends ...... A-71 Airline Shares of Domestic Enplaned Passengers ...... A-75 Airline Shares of International Enplaned Passengers ...... A-77
A-11
CONTENTS (continued)
Page Historical Airline Service and Traffic Trends at Dulles (continued) Domestic Market and Fare Trends ...... A-80 International Passenger Market Trends ...... A-80 Cargo Trends ...... A-83 Historical Aircraft Operations ...... A-86 Key Factors Affecting Future Airline Traffic ...... A-86 Economic and Political Conditions ...... A-86 Financial Health of the Airline Industry ...... A-87 Airline Service and Routes ...... A-88 Airfares and Airline Competition ...... A-88 Airline Consolidation and Alliances ...... A-89 Availability and Price of Aviation Fuel ...... A-89 Aviation Safety and Security Concerns ...... A-90 Capacity of the National Air Traffic Control System ...... A-91 Capacity of the Airports ...... A-91 Airline Traffic Forecasts ...... A-91 Forecast Passengers for Reagan National Airport ...... A-92 Forecast Aircraft Operations and Landed Weight for Reagan National Airport ...... A-95 Forecast Passengers for Dulles International Airport ...... A-95 Forecast Aircraft Operations and Landed Weight for Dulles International Airport ...... A-99 Forecast Passengers for Both Airports ...... A-101 Stress Test Forecasts ...... A-102
FINANCIAL ANALYSIS ...... A-106
Framework for Airports Authority’s Financial Operations ...... A-106 Indenture ...... A-106 Airline Agreement ...... A-106 Capital, Operating and Maintenance Investment Program ...... A-107 Capital Construction Program ...... A-108 Commercial Paper Notes ...... A-108 Federal and State Grants ...... A-108 PFC Revenues ...... A-109 Airport System Revenue Bonds ...... A-110 Annual Debt Service ...... A-111 Operation and Maintenance Expenses ...... A-112 Revenues ...... A-113 Airline Revenues ...... A-114 Signatory Airline Rentals, Fees, and Charges ...... A-114
A-12
CONTENTS (continued)
Page
Concession Revenues ...... A-115 Public Parking ...... A-115 Rental Cars ...... A-117 Food and Beverage ...... A-118 Newsstand and Retail ...... A-119 Duty Free ...... A-119 Fixed Based Operations ...... A-120 In-Flight Kitchen ...... A-120 Other Operating Revenues ...... A-120 Investment Earnings ...... A-120 Application of Revenues ...... A-120 Sharing of Net Remaining Revenues ...... A-121 Application of Designated Passenger Facility Charges ...... A-122 Debt Service Coverage ...... A-122 Stress Test Financial Projections ...... A-123
A-13
TABLES
Page 1 Gate Distribution and Use by Airline, Reagan National Airport ...... A-20 2 Gate Distribution and Use by Airline, Dulles International Airport ...... A-23 3 Airports Service Region Population by County ...... A-27 4 Real Gross Domestic Product ...... A-31 5 Nonagricultural Employment by Industry Sector ...... A-36 6 Socioeconomic Forecasts ...... A-39 7 Historical Enplaned Passengers ...... A-41 8 Comparison of Daily Domestic Scheduled Passenger Airline Service at Regional Airports ...... A-46 9 Comparison of Scheduled Transatlantic Airline Service at Top U.S. International Gateway Airports ...... A-48 10 Comparison of Airline Service at US Airways Airports ...... A-50 11 Domestic Scheduled Passenger Airline Service by Aircraft Type ...... A-51 12 Scheduled Airline Service in Top Domestic O&D Passenger Markets ...... A-52 13 Historical Enplaned Passengers by O&D and Connecting Components.. A-56 14 Composition of Enplaned Passengers, by Airline Group ...... A-57 15 Airline Shares of Enplaned Passengers ...... A-59 16 Passengers and Airfares to Top 15 Domestic O&D City Markets ...... A-60 17 Comparison of Scheduled Airline Service at United/Continental Airports ...... A-62 18 Domestic Scheduled Passenger Airline Service by Aircraft Type ...... A-63 19 Scheduled Airline Service in Top Domestic O&D Passenger Markets ...... A-65 20 Historical International Airline Service ...... A-68 21 Historical Enplaned Passengers by O&D and Connecting Components.. A-72 22 Composition of Enplaned Passengers, by Airline Group ...... A-75 23 Airline Shares of Domestic Enplaned Passengers ...... A-76 24 Airline Shares of International Enplaned Passengers ...... A-78 25 Passengers and Airfares to Top Domestic O&D City Markets ...... A-81 26 Historical International Passengers by World Region ...... A-82
A-14
TABLES (continued)
Page 27 Historical Air Cargo Weight by Passenger and All-Cargo Airlines ...... A-84 28 Airline Shares of Air Cargo Weight ...... A-85 29 Historical and Forecast Enplaned Passengers ...... A-94 30 Historical and Forecast Aircraft Departures and Landed Weight ...... A-96 31 Historical and Forecast Enplaned Passengers ...... A-98 32 Historical and Forecast Aircraft Operations and Landed Weight ...... A-100 33 Base Case and Stress Test Passenger Forecasts ...... A-103 34 PFC Collection and Use Authority ...... A-110 35 2010 Revenue Summary ...... A-114 36 Airport Public Parking Facilities ...... A-116
FIGURES
1 Airports Service Region ...... A-25 2 Comparative Population ...... A-26 3 20 Most Populous U.S. Metropolitan Statistical Areas ...... A-28 4 Change in Population in the Most Populous U.S. Metropolitan Statistical Areas ...... A-29 5 Comparative Per Capita Personal Income ...... A-30 6 Comparative Nonagricultural Employment ...... A-32 7 Nonagricultural Employment in the Most Populous U.S. Metropolitan Statistical Areas ...... A-33 8 Change in Nonagricultural Employment in the Most Populous U.S. Metropolitan Statistical Areas ...... A-34 9 Civilian Unemployment Rates ...... A-37 10 Historical and Forecast Gross Domestic Product for the U.S...... A-40 11 Historical Enplaned Passengers ...... A-42 12 Airline Shares of Enplaned Passengers ...... A-43 13 Change in Domestic Enplaned Passengers ...... A-43 14 Change in International Enplaned Passengers ...... A-44
A-15
FIGURES (continued)
Page 15 Comparative Trends in Enplaned Passengers at Regional Airports ...... A-47 16 U.S. Cities with Daily Scheduled Nonstop Airline Service ...... A-54 17 History of Enplaned Passengers in Relation to External Events ...... A-55 18 U.S. Cities with Daily Scheduled Airline Service ...... A-66 19 Scheduled Domestic Airline Service on United and United Express ...... A-67 20 Scheduled International Airline Service on United and United Express .. A-69 21 international Cities with Scheduled Airline Service ...... A-70 22 Historical Enplaned Passengers in Relation to External Events ...... A-71 23 Historical Enplaned Passengers by O&D and Connecting Components.. A-74 24 International Enplaned Passengers by Airline Group ...... A-79 25 Historical Air Cargo Weight by Passenger and All-Cargo Airlines ...... A-83 26 Historical and Forecast Enplaned Passengers, Reagan National Airport . A-93 27 Historical and Forecast Enplaned Passengers, Dulles International Airport ...... A-97 28 Historical and Forecast Enplaned Passengers for Both Airports ...... A-101 29 Base Case and Stress Test Passenger Forecasts, Reagan National Airport ...... A-104 30 Base Case and Stress Test Passenger Forecasts, Dulles International Airport ...... A-105
A-16
EXHIBITS
Page A 2001-2016 Capital Construction Program ...... A-125 B Sources and Uses of Bond Funds ...... A-126 C-1 Annual Debt Service ...... A-127 C-2 Annual Debt Service by Cost Center, Reagan National Airport ...... A-128 C-3 Annual Debt Service by Cost Center, Dulles International Airport ...... A-129 D-1 Operation and Maintenance Expenses ...... A-130 D-2 Operation and Maintenance Expenses, Reagan National Airport ...... A-131 D-3 Operation and Maintenance Expenses, Dulles International Airport ...... A-132 E-1 Revenues ...... A-134 E-2 Revenues, Reagan National Airport ...... A-136 E-3 Revenues, Dulles International Airport ...... A-138 E-4 Calculation of Signatory Airline Rentals, Fees, and Charges, Reagan National Airport ...... A-140 E-5 Calculation of Signatory Airline Rentals, Fees, and Charges, Dulles International Airport ...... A-141 F-1 Application of Revenues and Allocation of Net Remaining Revenues ..... A-143 F-2 Sources and Uses of PFC Revenues ...... A-144 G-1 Debt Service Coverage and Rate Covenant Requirement ...... A-146 G-2 Debt Service Coverage, Reagan National Airport ...... A-148 G-3 Debt Service Coverage, Dulles International Airport ...... A-149 H-1 Summary of Financial Forecasts ...... A-150 H-2 Summary of Financial Forecasts, Reagan National Airport ...... A-151 H-3 Summary of Financial Forecasts, Dulles International Airport ...... A-152
A-17
[THIS PAGE INTENTIONALLY LEFT BLANK]
A-18
AIRPORT FACILITIES
REAGAN NATIONAL AIRPORT Reagan National Airport, opened in 1941, is located on approximately 860 acres along the Potomac River in Arlington County, Virginia, approximately 3 miles south of central Washington, D.C. Roadway access is provided via the George Washington Memorial Parkway and Route 1 through the Crystal City area of Arlington, Virginia. Access is also provided by the Metrorail rapid transit system via a station adjacent to the airport's passenger terminals.
Reagan National Airport has three runways. Runway 1-19 (6,869 feet long) is the primary air carrier runway, capable of accommodating up to Airplane Design Group (ADG) IV (B-767 and similar) aircraft. Runway 15-33 (5,204 feet long) and Runway 4-22 (4,911 feet long) are used primarily by smaller aircraft, depending on wind conditions and other operational considerations.
Passenger Terminals The passenger terminals at Reagan National Airport provide 44 loading bridge- equipped aircraft gates and associated passenger check-in, security, baggage handling, and other functions in approximately 1.0 million square feet of space. Terminal A, which dates from the opening of the airport, is listed on the National Register of Historic Places and provides nine aircraft gates, all capable of handling ADG III (B-737 and similar) aircraft. Terminal B/C provides 35 aircraft gates on three piers, with security screening areas at the entrance to each pier. Of the 35 gates, 17 are designated for ADG III aircraft and 18 for ADG IV aircraft. In addition, nine hardstand positions are provided for ADG II (small regional airline) aircraft. Table 1 shows the distribution and use of gates at the airport by airline.
The Airports Authority provides 9,103 public automobile parking spaces at Reagan National Airport, 6,620 in parking garages and 2,483 in surface lots. An additional 3,200 spaces are provided in lots for employee parking. Direct connections from Terminal B/C to the airport's Metrorail station and the public parking garages are provided through two enclosed pedestrian bridges. Connections from Terminal A to the Metrorail station and the public parking garages are provided via shuttle bus service and an underground walkway.
A-19
Table 1 GATE DISTRIBUTION AND USE BY AIRLINE Reagan National Airport June 2011
Average daily Terminal departures Average daily seats Per A B/C Total Departures Per gate Seats departure Preferential-use gates Air Canada 1 1 8.6 8.6 519 60 AirTran (a) 3 3 12.9 4.3 1,581 123 American 5 5 49.2 9.8 5,460 111 Continental 3 3 18.6 6.2 1,638 88 Delta (b) 9 9 93.9 10.4 9,175 98 Frontier 2 2 10.2 5.1 1,228 120 JetBlue 2 2 8.6 4.3 860 100 Spirit 1 1 3.8 3.8 546 144 US Airways (c) 15 15 180.1 12.0 14,939 83 United 3 3 13.8 4.6 1,792 130 Total gates 9 35 44 399.7 9.1 37,740 94
Note: Departures and seats include those by code-sharing regional affiliates. (a) Sun Country subleases a gate from AirTran; Sun Country departures and seats are included with those of AirTran. (b) Alaska subleases a gate from Delta; Alaska departures and seats are included with those of Delta. (c) Total includes nine ground loading positions. Source: Airports Authority records and Official Airline Guide, Inc., accessed May 11, 2011.
DULLES INTERNATIONAL AIRPORT Dulles International Airport, opened in 1962, is located on approximately 11,830 acres of land in Fairfax and Loudoun counties, Virginia, approximately 26 miles west of central Washington, D.C.
The Dulles Access Highway, a limited-access highway under the jurisdiction of the Airports Authority, is the primary access route to the airport. The Airports Authority provides bus service between Dulles and the West Falls Church Metrorail station. The Washington Metropolitan Area Transit Authority provides bus service between Dulles and the Rosslyn (Arlington, Virginia) and L’Enfant Plaza (Washington, D.C.) Metrorail stations. The Dulles Corridor Metrorail Project will provide direct Metrorail service to a station at the airport.
Dulles International Airport has four runways: Runway 1L-19R (9,400 feet long), Runway 1C-19C (11,500 feet long), Runway 1R-19L (11,500 feet long), and Runway 12-30 (10,500 feet long). All runways are capable of accommodating operations by ADG VI (A380) aircraft. Most aircraft operations at the airport are conducted in parallel flow on the three north-south Runways 1-19. Crosswind
A-20
Runway 12-30 is used primarily for departures to the west and arrivals from the east during periods of high winds.
Passenger Terminals The passenger terminal complex at Dulles International Airport consists of the Eero Saarinen-designed main terminal and four midfield concourses. All passenger check-in and baggage claim functions are accommodated in the main terminal. In September 2009, passenger security screening was relocated from the upper level of the main terminal to the lower-level security mezzanine. The main terminal also provides four loading bridge-equipped aircraft gates (referred to as the Z Gates). The midfield concourses Concourses A, B, C, and D collectively encompass approximately 3.6 million square feet of space. (Concourse B is also sometimes referred to as the Tier 1 Concourse.) For a typical aircraft fleet mix, the four concourses provide 115 aircraft gates. Of these, 80 are equipped with loading bridges and 35 provide ground loading for regional airline aircraft.
The security mezzanine adjoins the main terminal station for the underground AeroTrain automated people-mover system. The AeroTrain system, which began service in January 2010, has four stations, one located at the main terminal (integrated with the security mezzanine), two serving Concourses A and B, and one serving Concourse C. The Concourse C station is located at the site of a future midfield concourse, referred to as the Tier 2 Concourse, which will eventually replace Concourses C and D. Passengers access Concourse C from the AeroTrain station via an underground walkway. During peak periods, the AeroTrain system operates with headways of approximately 2.5 minutes and achieves travel times of approximately 2.0 minutes between stations.
Before the opening of the AeroTrain system, passengers were transported between the main terminal and all concourses by mobile lounges. Until the future extension of the AeroTrain system, Concourse D and the international arrivals building (IAB) at the main terminal will continue to be served by mobile lounges. An underground moving walkway also provides access between the main terminal and Concourses A and B.
The IAB accommodates the federal inspection services (customs, immigration and agriculture) conducted by U.S. Customs and Border Protection (CBP) for most international arriving passengers. The IAB, which is connected to the main terminal, is being expanded in phases, adding approximately 206,000 square feet of space and increasing processing capacity to approximately 2,500 passengers per hour. The first phase, which was completed in September 2009, provided a new primary inspection hall and additional passenger processing areas. Subsequent phases provided expanded baggage claim facilities. Future IAB projects will improve the secondary inspection hall, baggage re-check, and passenger meeting areas.
A-21
Concourse A provides approximately 114,000 square feet of space and 35 regional aircraft parking positions, which are leased to United Airlines. Concourse B, which is connected to Concourse A, provides approximately 1,060,000 square feet of space, and 32 loading bridge-equipped gates, 23 of which are served by a sterile corridor to accommodate arriving international passengers. The Concourse B and main terminal Z Gates accommodate all airlines other than United-Continental and its regional airline affiliates.
Concourses C and D, which are connected, provide approximately 631,000 square feet of space and 44 loading bridge-equipped gates, all of which are leased to United. Of the 44 gates, 12 are served by a sterile corridor to a CBP facility, known as the midfield CBP, that provides customs, immigration, and agriculture inspection services for United and other Star Alliance arriving international passengers that are connecting to domestic flights. The midfield CBP facility was renovated and expanded in 2008 and has a processing capacity of approximately 1,200 passengers per hour.
Table 2 shows the distribution and use of the gates at Dulles International Airport by airline.
United leases all 35 regional airline gates at Concourse A and 40 of the 44 gates at Concourses C and D on a preferential-use basis. The Airports Authority has the right under the Airline Agreement to reallocate preferential-use gates and associated holdrooms every 3 years if needed to provide adequate facilities for all airlines operating or desiring to operate at the Airports. The Airports Authority may also require a Signatory Airline to accommodate another airline at its preferential-use gates.
The Airports Authority manages and assigns the 4 gates on Concourse D (now assigned to United-Continental), and all 32 gates on Concourse B, and the 4 Z Gates under an application and permit process whereby the gates are operated on a common-use basis in accordance with established policies and procedures. The Airports Authority may cancel a permit on 30-days advance written notice. A Signatory Airline may cancel a permit on 60-days advance written notice.
The Airports Authority provides 27,209 public automobile parking spaces at Dulles, 18,884 in surface lots and 8,325 in two parking garages. An additional 6,475 spaces are provided in lots for employee parking. An underground walkway with moving sidewalks connects one garage to the main terminal and a covered walkway connects the other garage to the main terminal. The garages and remote surface parking lots are served by courtesy shuttle buses.
A-22
Per Per departure 827 140.2 644 63.1 437 118.1 Seats Average daily seats Per gate Per departures Average daily
Departures 1.0 5.9 5.9 3.01.5 14.6 8.0 4.9 5.3 1,872 1,091 128.2 136.4 4.0 22.7 5.7 2,095 92.3 1.02.0 3.7 10.0 3.7 5.0 1,515 151.5 11.5 23.6 2.1 6,123 259.4 44.0 104.8 2.4 17,145 163.6 79.0 300.8 3.8 27,605 91.8 35.0 196.0 5.6 10,460 53.4 Total 1.0 1.0 10.2 10.2 3.0 11.0 Z (c) Table 2 Table 2 D June 2011 Concourse C 22.0 22.0 22.0 22.0 Dulles International Airport 1.0 8.0 3.0 1.5 4.0 2.0 1.0 (b) 11.5 B GATE DISTRIBUTION AND USE BY AIRLINE GATE DISTRIBUTION are except for four preferential permit gates on Concourse D. (a) 35.0 32.0 22.0 22.0 4.0 115.0 399.5 3.5 42,209 105.7 35.0 24.0 22.0 22.0 1.0 104.0 399.5 3.8 35.0 35.0 A by code-sharing regional affiliates. (d) (c) (d) Subtotal 0.0Subtotal 24.0 use in gates Subtotal 0.0 0.0 1.0 25.0 98.7 3.9 14,604 148.0 Subtotal Virgin America Virgin airlines Foreign-flag Southwest Southwest Airways US JetBlue Delta American AirTran Mainline gates Mainline Regional gates Regional Gates shared between two airlines are shown as 0.5 each. as 0.5 shown twoare between airlines shared Gates United and Continental are combined. All gates combined.All are Continental and United Gates not in use Total gates Other airlines (permit gates) (permit airlines Other United Airlines Eleven gates at the east end of Concourse B designatedare as A gates on signage.airport bridges. loading equipped with not aircraft, airline for regional positions Parking (d) May accessed 11, 2011. Inc., Guide, Official records Airline and Source: Authority Airports ______Note: Departures and seats include those (a) (b) (c)
A-23
BASIS FOR AIRLINE PASSENGER DEMAND
AIRPORTS SERVICE REGION Ronald Reagan Washington National Airport (Reagan National Airport or Reagan) and Washington Dulles International Airport (Dulles International Airport or Dulles) serve a region consisting of the greater Washington, D.C. area, home of the nation’s capital. The Airports service region for purposes of this report consists of the Washington-Arlington-Alexandria, DC-VA-MD-WV Metropolitan Statistical Area (MSA), as defined by the U.S. Office of Management and Budget. The Airports service region encompasses the following jurisdictions: the District of Columbia; the Maryland counties of Calvert, Charles, Frederick, Montgomery, and Prince George’s; the Virginia counties of Arlington, Clarke, Fairfax, Fauquier, Loudoun, Prince William, Spotsylvania, Stafford, and Warren; the independent Virginia cities of Alexandria, Fairfax, Falls Church, Fredericksburg, Manassas, and Manassas Park; and the West Virginia county of Jefferson. Figure 1 shows a map of the Airports service region.
Portions of the Airports service region are also served by Baltimore/Washington International Thurgood Marshall Airport (Baltimore/Washington Airport or BWI), located approximately 30 miles northeast of Washington, D.C. and operated by the Maryland Aviation Administration. The interrelationships among Reagan National Airport, Dulles International Airport, and Baltimore/Washington International Airport are discussed later in the Airline Traffic Analysis section.
DEMOGRAPHIC AND ECONOMIC PROFILE The demographic and economic factors that most strongly influence airline passenger demand are the population, employment, and per capita income of the Airports service region. The Airports service region is one of the nation’s largest metropolitan areas and economies. Its residents are on average wealthier and better educated than the national average, resulting in high rates of air travel. In addition, tourism and business-related travel have a strong role in generating visitors to the region.
A-24
Figure 1 AIRPORTS SERVICE REGION
Source: Environmental Systems Research Institute, Inc, 2005 population estimates.
A-25
Population Trends Figure 2 shows that, from 2000 through 2010, the population of the Airports service region increased an annual average of 1.5% compared with a 0.9% average annual increase for the nation as a whole. In 2010, the population of the Airports service region was 5.6 million.
Figure 2 COMPARATIVE POPULATION (2000 = 100)
118
116
114
112
110
Index 108
106
104
102
100 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 Airports service region United States
Average annual percent increase (decrease) 2000-2010 Airports service region 1.5% United States 0.9
Source: U.S. Department of Commerce, Bureau of the Census website, www.census.gov, accessed June 2011.
Table 3 shows that the Virginia portion of the Airports service region accounted for 47% of the population of the region in 2010 and for 64% of the population growth in the region between 2000 and 2010.
A-26
Table 3 AIRPORTS SERVICE REGION POPULATION BY COUNTY
Average annual Percentage of percent Airports service region 2000 2010 increase in 2010 District of Columbia 571,744 610,589 0.7% 11.0%
State of Maryland Montgomery County 877,363 988,521 1.2% 17.7% Prince George's County 803,189 839,212 0.4 15.1 Other Maryland counties 392,888 464,221 1.7 8.3 Subtotal/average 2,073,440 2,291,954 1.0% 41.1%
Commonwealth of Virginia Arlington County 189,527 224,551 1.7% 4.0% City of Alexandria 129,424 153,695 1.7 2.8 Fairfax County, Fairfax City, and Falls Church City 1,006,803 1,093,427 0.8 19.6 Loudoun County 173,897 311,687 6.0 5.6 Prince William County, Manassas City, and Manassas Park City 329,524 443,073 3.0 7.9 Other Virginia jurisdictions 304,233 393,238 2.6 7.1 Subtotal/average 2,133,408 2,619,671 2.1% 47.0%
State of West Virginia 42,439 53,566 2.4% 1.0%
Total Airports service region 4,821,031 5,575,780 1.5% 100.0%
Note: Columns may not add to totals shown because of rounding. Source: U.S. Department of Commerce, Bureau of the Census website, www.census.gov, accessed June 2011.
A-27
Figure 3 shows that the Airports service region was the seventh largest MSA in the nation by population in 2010. Figure 4 shows that, between 2000 and 2010, the population of the Airports service region increased 15.7%, making it the seventh fastest growing MSA of the 20 most populous MSAs.
Figure 3 20 MOST POPULOUS U.S. METROPOLITAN STATISTICAL AREAS 2010
New York Los Angeles Chicago Dallas-Fort Worth Philadelphia Houston Airports service region Miami Atlanta Boston San Francisco Detroit Riverside Phoenix Seattle Minneapolis-St. Paul San Diego St. Louis Tampa Baltimore
0 5 10 15 20 Population (millions)
Source: U.S. Department of Commerce, Bureau of the Census website, www.census.gov, accessed June 2011.
A-28
Figure 4 CHANGE IN POPULATION IN THE MOST POPULOUS U.S. METROPOLITAN STATISTICAL AREAS 2000-2010
Riverside Phoenix Houston Atlanta Dallas-Fort Worth Tampa Airports service region Seattle Miami Minneapolis-St. Paul San Diego Baltimore San Francisco Philadelphia St. Louis Chicago Los Angeles Boston New York Detroit
(5%) 0% 5% 10% 15% 20% 25% 30% Percent increase (decrease): 2000-2010
Source: U.S. Department of Commerce, Bureau of the Census website, www.census.gov, accessed June 2011.
A-29
Income Trends Figure 5 shows that the Airports service region’s per capita personal income in 2009 ($57,000) was 44% higher than the national average ($39,600). In 2000, per capita personal income was 36% higher than the national average.
Figure 5 COMPARATIVE PER CAPITA PERSONAL INCOME (nominal dollars)
$60,000
$55,000
$50,000
$45,000
$40,000
$35,000
$30,000
$25,000 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010
Airports service region United States
Average annual percent increase 2000-2003 2003-2010 (a) Airports service region 2.5% 4.2% United States 2.1 3.3
(a) The percentage shown for the Airports service region is for 2003-2009, the most recent data available at the time this report was prepared. Source: U.S. Department of Commerce, Bureau of Economic Analysis website, www.bea.gov, accessed June 2011.
Gross Domestic Product The Airports service region produced goods and services with a market value of $369 billion in 2009 (the most recent data available from the U.S. Bureau of Economic Analysis, expressed in 2005 dollars). Based on this measure, the Airports service region ranked as the fourth largest U.S. metropolitan area economy after New York, Los Angeles, and Chicago, despite its being the seventh largest metropolitan area in terms of population. Table 4 shows that both real Gross Domestic Product (GDP) and GDP per capita for the Airports service region increased consistently between 2001 and 2008. In 2009, the rate of real GDP growth in the Airports service region
A-30
slowed and GDP per capita declined. However, the positive growth in the region’s economy in 2009 was in contrast to the nationwide decline in GDP.
Collectively, MSAs like the Airports service region account for approximately 90% of the nation’s GDP. Between 2001 and 2009, real GDP in the Airports service region increased an average of 2.8% per year compared with an average of 1.5% per year for all U.S. MSAs. Real GDP per capita in the Airports service region in 2009 ($67,344) was 51% higher than the average for all U.S. MSAs ($44,703).
Table 4 REAL GROSS DOMESTIC PRODUCT
Real GDP (billions of 2005 dollars) Airports Airports service service All U.S. region as percent Year region MSAs of all U.S. MSAs 2001 $ 295 $ 10,191 2.9% 2002 304 10,367 2.9 2003 316 10,582 3.0 2004 333 10,956 3.0 2005 349 11,279 3.1 2006 355 11,601 3.1 2007 361 11,836 3.0 2008 367 11,790 3.1 2009 369 11,505 3.2
Real GDP per capita (2005 dollars) Percent Airports Airports service region exceeds service All U.S. real GDP per capita Year region MSAs in all U.S. MSAs 2001 $ 59,801 $ 43,059 38.9% 2002 60,687 43,325 40.1 2003 62,135 43,783 41.9 2004 64,590 44,854 44.0 2005 66,692 45,697 45.9 2006 67,367 46,516 44.8 2007 67,859 46,937 44.6 2008 68,319 46,268 47.7 2009 67,344 44,703 50.6
Note: Data are not available for the Airports service region or for all U.S. MSAs in 2000 or 2010. Source: U.S. Department of Commerce, Bureau of Economic Analysis website, www.bea.gov, accessed June 2011.
A-31
Employment Trends Figure 6 shows how nonagricultural employment in the Airports service region has increased faster than that in the nation. Between 2008 and 2010, during and since the economic recession, nonagricultural employment decreased less in the Airports service region than in the nation as a whole.
Figure 6 COMPARATIVE NONAGRICULTURAL EMPLOYMENT (2000 = 100)
115
110
105 Index
100
95 2000 *2001 2002 2003 2004 2005 2006 *2007 *2008 *2009 2010
Airports service region United States
Average annual percent increase (decrease) 2000-2003 2003-2008 2008-2010 Airports service region 1.3% 1.5% (0.7%) United States (0.5) 1.0 (2.6)
*Indicates national recession during all or part of the year, according to the National Bureau of Economic Research. Source: U.S. Department of Labor, Bureau of Labor Statistics website, www.bls.gov, accessed June 2011.
A-32
Although the Airports service region was the seventh largest MSA in the United States by population in 2010, Figure 7 shows that it was the fourth largest by nonagricultural employment.
Figure 7 NONAGRICULTURAL EMPLOYMENT IN THE MOST POPULOUS U.S. METROPOLITAN STATISTICAL AREAS 2010
New York Los Angeles Chicago Airports service region Dallas-Fort Worth Philadelphia Houston Boston Atlanta Miami San Francisco Detroit Minneapolis-St. Paul Phoenix Seattle St. Louis Baltimore San Diego Tampa Riverside
0123456789 Population (millions) Source: U.S. Department of Labor, Bureau of Labor Statistics website, www.bls.gov, accessed June 2011.
Figure 8 shows that nonagricultural employment in the Airports service region increased 0.7% between June 2009 and June 2011, the sixth largest increase among the nation’s 20 most populous MSAs.
A-33
Figure 8 CHANGE IN NONAGRICULTURAL EMPLOYMENT IN THE MOST POPULOUS U.S. METROPOLITAN STATISTICAL AREAS June 2009 to June 2011
Boston Dallas-Fort Worth Houston Detroit San Diego Airports service region Minneapolis-St. Paul St. Louis New York Miami Seattle Chicago Baltimore Phoenix Philadelphia Tampa San Francisco Los Angeles Atlanta Riverside
(4%) (2%) 0% 2% 4% Percent increase (decrease) Source: U.S. Department of Labor, Bureau of Labor Statistics website, www.bls.gov, accessed August 2011.
The Airports service region is home to much of the federal government and many of its employees and contractors. According to the Center for Regional Analysis at George Mason University, the region’s economy is somewhat insulated from downturns by the economic activity generated by the federal government.
The workforce in the Airports service region is well-educated, with approximately 31% holding an associate’s or bachelor’s degree and an additional 22% holding a graduate or professional degree—much greater than national averages of 25% and 10%, respectively.* This highly educated resident population is a key strength of the region’s economy. The Airports service region is considered to have a high quality of life and good accessibility to other cities and countries via the three airports in the region, both important factors in attracting and retaining an educated workforce.
*U.S. Department of Commerce, Bureau of the Census, 2005-2009 American Community Survey, December 2010.
A-34
The Greater Washington Initiative, an organization that assists firms in expanding their businesses in the Airports service region, reports that the region has the highest per capita ratio of “knowledge workers” in the nation. Knowledge workers are those engaged in professional services, information technology, education, and research. Many of the region’s knowledge workers provide professional services to the federal government, either directly or through contracted services. Federal procurement spending in the Airports service region increased from approximately $28 billion in 1999 to approximately $80 billion in 2009.**
In recent years, companies such as Volkswagen Group of America, Northrop Grumman, Airbus, Hilton Worldwide, and BAE Systems have located their U.S. headquarters in the region. More than 1,000 institutions in the region engage in international business, including approximately 180 embassies, the World Bank, the International Monetary Fund, the Inter-American Development Bank, the Export- Import Bank, approximately 400 international associations, and approximately 350 law firms with international practices.**†
Employment by Industry Sector Table 5 shows the major industry sector shares of nonagricultural employment in the Airports service region and the United States in 2010 and the average annual percent change in employment by industry sector from 2000 to 2010. Relative to the national average, employment in the Airports service region is disproportionately concentrated in the professional and business services and government sectors. Between 2000 and 2010, employment in these two sectors increased at higher rates in the Airports service region than in the nation such that, by 2010, they together accounted for 46% of employment in the region, compared with 30% in the nation.
*George Mason University, Center for Regional Analysis, The U.S. and Washington Area Economic Performance and Outlook, January 14, 2011. **Greater Washington Initiative, Greater Washington 2010 Regional Report, June 2010.
A-35
Table 5 NONAGRICULTURAL EMPLOYMENT BY INDUSTRY SECTOR Average annual percent increase (decrease) 2010 Percent of total 2000-2010 Airports Airports service United service United Industry sector region States region States Government 23.2% 17.3% 1.8% 0.8% Professional/Business Services 23.0 12.9 2.0 0.0 Trade, Transportation, Utilities 12.8 19.0 (0.4) (0.6) Education and Health Services 12.1 15.1 2.6 2.6 Leisure and Hospitality 8.8 10.0 1.9 0.9 Other Services 6.1 4.1 1.9 0.4 Financial Activities 4.9 5.9 0.1 (0.1) Natural Resources, Mining, Construction 4.7 4.8 (0.9) (1.7) Information 2.7 2.1 (4.7) (2.9) Manufacturing 1.8 8.9 (4.2) (4.0) Total 100.0% 100.0% 1.0% (0.2)%
Note: Columns may not add to totals shown because of rounding. Source: U.S. Department of Labor, Bureau of Labor Statistics website, www.bls.gov, accessed June 2011.
Unemployment Rate Figure 9 shows that the rate of unemployment has historically been lower in the Airports service region than in the nation. In the first 6 months of 2011, unemployment in the region was 5.8% compared with 9.2% in the nation. According to the U.S. Department of Labor, Bureau of Labor Statistics, in June 2011, the Airports service region recorded the second lowest unemployment rate among the 49 MSAs with populations greater than 1.0 million.
A-36
Figure 9 CIVILIAN UNEMPLOYMENT RATES 2000-2011
10%
8%
6%
4%
2%
0% 2000 *2001 2002 2003 2004 2005 2006 *2007 *2008 *2009 2010 2011 Airports service region United States Note: Data for 2011 represent the average for January-June. *Indicates national recession during all or part of the year, according to the National Bureau of Economic Research. Source: U.S. Department of Labor, Bureau of Labor Statistics website, www.bls.gov, accessed August 2011.
Tourism Washington, D.C., attracted 14.8 million domestic visitors and 1.6 million international visitors in 2009, according to Destination DC, a nonprofit organization that promotes tourism for the District. In 2009, visitors to Washington, D.C., spent $5.2 billion, of which $1.2 billion was accounted for by international visitors. According to the U.S. Department of Commerce, Office of Travel and Tourism Industries, the Airports service region ranked as the seventh most-visited U.S. metropolitan destination by international visitors in 2010.
Among domestic visitors to the Airports service region, approximately 54% are leisure travelers and 46% are business travelers.* The Washington Convention Center, located in downtown Washington, D.C., hosts approximately 500,000 convention and meeting attendees annually. The Airports service region is also home to the Gaylord National Hotel & Convention Center, which opened in 2008. Located on the Potomac River in Prince George’s County, Maryland, the Gaylord is the largest nongaming hotel and convention center on the East Coast, featuring over 2,000 guest rooms and 470,000 square feet of meeting and convention space.**
*Destination D.C., Washington D.C.’s 2009 Visitor Statistics, 2010. **Gaylord Hotels, www.gaylordhotels.com/gaylord-national , accessed July 2011.
A-37
ECONOMIC OUTLOOK Between the fourth quarter of 2007 and the second quarter of 2009, the U.S. economy, as measured by real GDP, contracted 4.1%. National GDP growth resumed in the second half of 2009, but economic growth since then has not been strong enough to replace the jobs lost during the 2008-2009 recession, and recovery from the recession is still tenuous.
Continued economic recovery will depend on, among other factors, recovery in the real estate sector, the effectiveness of fiscal and monetary stimuli, the health of the financial and credit markets, the strength of the U.S. dollar versus other currencies, energy prices, the ability of the federal government to reduce historically high deficits, and inflation remaining within the range targeted by the Federal Reserve. Figure 10 shows economic forecasts from the Congressional Budget Office released in January 2011. National real GDP was forecast to grow 2.7% in 2011, 3.1% in 2012, and 3.4% per year, on average, between 2012 and 2016.
In August 2011, Standard & Poor’s (S&P) lowered the U.S. long-term sovereign credit rating from 'AAA' to 'AA+', citing Congressional and administration difficulties in effectively addressing national fiscal imbalances. The credit downgrade contributed to subsequent volatility in stock markets worldwide. As a result of the S&P credit downgrade, as well as other global economic concerns, some economic commentators have suggested an increased risk of the occurrence of a “double-dip” recession in the U.S. economy.
The economic outlook for the Airports service region generally depends on the same factors as those for the nation. The long-term outlook for the regional economy is favorable given its advantages of a highly educated and affluent population, a stable economy anchored by the federal government, a strong professional and business services sector, and the region's popularity as a destination for business and leisure travelers.
Table 6 shows socioeconomic forecasts for the Airports service region developed by the Metropolitan Washington Council of Governments, an independent, nonprofit regional planning organization. Growth in both population and employment in the region is forecast to exceed national rates.
A-38
Table 6 SOCIOECONOMIC FORECASTS 2010-2020
Average annual percent increase (decrease) Historical Forecast 2000-2010 2010-2020 (a) Population Airports service region (b) 1.5% 1.1% United States 0.9 1.0
Nonagricultural employment Airports service region (b) 1.0% 1.5% United States (0.2) 1.0
(a) Percentages shown for the United States are for 2008-2018, the most recently published forecast period at the time this report was prepared. (b) Percentages shown are for Metropolitan Washington Council of Governments member jurisdictions, which are nearly, but not exactly, coterminous with the Airports service region as defined in this report. Sources: Population: Historical--U.S. Department of Commerce, Bureau of the Census website, www.census.gov, accessed June 2011. Forecast--Metropolitan Washington Council of Governments, Growth Trends to 2040: Cooperative Forecasting in the Washington Region, www.mwcog.org, accessed June 2011. U.S. Department of Commerce, Bureau of the Census website, www.census.gov, accessed June 2011. Nonagricultural employment: Historical--U.S. Department of Labor, Bureau of Labor Statistics website, www.bls.gov, accessed June 2011. Forecast--Metropolitan Washington Council of Governments, Growth Trends to 2040: Cooperative Forecasting in the Washington Region, www.mwcog.org, accessed June 2011. U.S. Department of Labor, Bureau of Labor Statistics website, www.bls.gov, accessed June 2011.
A-39
Figure 10 HISTORICAL AND FORECAST GROSS DOMESTIC PRODUCT FOR THE U.S. (billions of 2005 dollars)
$20,000 Historical Forecast $18,000 $16,000 $14,000 $12,000 $10,000 $8,000 $6,000 $4,000 $2,000 $0
*Indicates national recession during all or part of the year, according to the National Bureau of Economic Research. Sources: Historical—U.S. Department of Commerce, Bureau of Economic Analysis website, www.bea.gov, accessed June 2011. Forecast—Congressional Budget Office, The Budget and Economic Outlook, Fiscal Years 2011 to 2021, January 2011.
A-40
AIRLINE TRAFFIC ANALYSIS
HISTORICAL PASSENGER TRAFFIC AT THE AIRPORTS Reagan National Airport and Dulles International Airport together accommodated nearly 20.8 million enplaned passengers in 2010. Table 7 shows that, of the combined 2010 Airports passenger total, Reagan served 9.0 million (43%) and Dulles served 11.7 million (57%).
Table 7 HISTORICAL ENPLANED PASSENGERS Reagan National and Dulles International Airports (passengers in thousands)
Reagan Dulles Airports total Year Dom. Intl. Total Dom. Intl. Total Dom. Intl. Total 2000 7,726 129 7,855 7,888 2,083 9,972 15,615 2,212 17,827 2001 6,480 83 6,564 6,959 1,961 8,920 13,439 2,045 15,484 2002 6,356 104 6,460 6,498 2,018 8,515 12,854 2,122 14,976 2003 6,971 131 7,102 6,372 1,995 8,366 13,343 2,126 15,469 2004 7,797 155 7,952 9,015 2,310 11,324 16,812 2,464 19,276 2005 8,737 173 8,909 10,947 2,449 13,396 19,684 2,622 22,306 2006 9,054 185 9,240 8,797 2,595 11,392 17,852 2,780 20,632 2007 9,146 149 9,294 9,313 2,960 12,274 18,459 3,109 21,568 2008 8,836 141 8,978 8,743 3,115 11,858 17,579 3,257 20,836 2009 8,634 133 8,767 8,430 3,117 11,547 17,064 3,251 20,314 2010 8,891 144 9,036 8,565 3,177 11,742 17,456 3,322 20,778 Average annual percent increase (decrease) 2000-2010 1.4% 1.1% 1.4% 0.8% 4.3% 1.6% 1.1% 4.1% 1.5% Annual percent increase (decrease) 2000-2001 (16.1%) (35.5%) (16.4%) (11.8%) (5.8%) (10.5%) (13.9%) (7.6%) (13.1%) 2001-2002 (1.9) 25.0 (1.6) (6.6) 2.9 (4.5) (4.4) 3.8 (3.3) 2002-2003 9.7 26.1 9.9 (1.9) (1.1) (1.7) 3.8 0.2 3.3 2003-2004 11.9 17.7 12.0 41.5 15.8 35.4 26.0 15.9 24.6 2004-2005 12.0 11.5 12.0 21.4 6.0 18.3 17.1 6.4 15.7 2005-2006 3.6 7.4 3.7 (19.6) 6.0 (15.0) (9.3) 6.1 (7.5) 2006-2007 1.0 (19.9) 0.6 5.9 14.1 7.7 3.4 11.8 4.5 2007-2008 (3.4) (4.8) (3.4) (6.1) 5.2 (3.4) (4.8) 4.8 (3.4) 2008-2009 (2.3) (5.8) (2.3) (3.6) 0.1 (2.6) (2.9) (0.2) (2.5) 2009-2010 3.0 8.3 3.1 1.6 1.9 1.7 2.3 2.2 2.3 Share of airport total 2000 44.1% 55.9% 100.0% 2007 43.1 56.9 100.0 2010 43.5 56.5 100.0
Notes: Includes nonrevenue passengers. Rows may not add to totals shown because of rounding. Percentages were calculated using unrounded numbers. Source: Metropolitan Washington Airports Authority records.
A-41
Figure 11 illustrates that Dulles has accommodated most of the increase in passengers at the Airports since airline deregulation in 1978.
Figure 11 HISTORICAL ENPLANED PASSENGERS Reagan National and Dulles International Airports
24 22 20 18 16 14 12
(millions) 10 8
Enplaned passengers 6 4 2 0
Reagan Dulles Notes: Includes both revenue and nonrevenue passengers on domestic and international flights. Excludes passengers on general aviation and military flights. Source: Metropolitan Washington Airports Authority records.
Airline Shares of Passengers at the Airports Figure 12 shows airline shares of enplaned passengers at the Airports. The top two airlines, United Airlines and US Airways, together enplaned 60.3% of passengers at the Airports in 2010. (Refer to the later Tables 15, 23, and 24 for all airlines serving the Airports.)
Changes in Passengers Compared with Other U.S. Airports Figure 13 shows changes in domestic revenue enplaned passengers at the top 30 U.S. airports. Between 2000 and 2010, Reagan National Airport and Dulles International Airport both experienced increases of approximately 1.2 million domestic revenue enplaned passengers, more than for half of the top 30 U.S. airports. Figure 14 shows that, over the same 10 year period, Dulles experienced the fifth-highest increase in international revenue enplaned passengers among the top 20 U.S. airports.
A-42
Figure 12 AIRLINE SHARES OF ENPLANED PASSENGERS Reagan National and Dulles International Airports 2010
REAGAN DULLES REAGAN + DULLES American American Delta JetBlue United 4.5% 4.0% 9.4% All other 3.0% 10.7% JetBlue All other American U.S. airlines Delta AirTran 4.9% U.S. 16.4% 7.8% 11.1% 4.2% airlines 8.4% Frontier Foreign flag 2.3% airlines Foreign flag All other 13.0% US airlines airlines Airways 7.9% Delta 6.0% 18.5% 19.6% United US 41.8% Airways United 40.8% 65.8%
Notes: Airlines include regional code-sharing affiliated carriers, if any. Continental is included with United. Percentages may not add to 100% because of rounding. Source: Metropolitan Washington Airports Authority records.
Figure 13 CHANGE IN DOMESTIC ENPLANED PASSENGERS Top 30 U.S. Airports by Domestic Revenue Passengers 2000 vs. 2010
8
6
4
2 (millions)
0 Increase (decrease)
(2)
(4) IAH FLL MIA JFK ATL BWI CLT LAX LAS TPA SLC PHL LGA HNL SEA PDX SFO SAN PHX BOS DEN MSP ORD DTW DFW EWR MCO MDW Dulles Reagan
Note: Revenue passengers only; nonrevenue passengers are excluded. Sources: U.S. DOT, Schedules T100 and 298C T1.
A-43
Figure 14 CHANGE IN INTERNATIONAL ENPLANED PASSENGERS Top 20 U.S. Airports by International Revenue Passengers 2000 vs. 2010
3.0
2.5
2.0
1.5
1.0
(millions) 0.5
Increase (decrease) 0.0
(0.5)
(1.0) IAH FLL JFK MIA ATL CLT LAX PHL SEA SFO HNL BOS MSP ORD DFW DTW EWR GUM MCO Dulles Note: Revenue passengers only; nonrevenue passengers are excluded. Sources: U.S. DOT, Schedules T100 and 298C T1.
COMPETING AIRPORTS SERVING THE REGION Reagan National Airport and Dulles International Airport face regional competition for domestic traffic from Baltimore/Washington Airport and competition for international traffic from other major eastern U.S. gateway airports, such as Boston- Logan, Philadelphia, John F. Kennedy, Newark Liberty, and Hartsfield-Jackson Atlanta international airports.
Competition from Baltimore/Washington Airport BWI is located about 30 miles northeast of downtown Washington, D.C., by interstate highway and is also accessible from Washington, D.C., by rail and bus service. Reagan National Airport and Dulles International Airport are located approximately 5 miles south and 25 miles west, respectively, of downtown Washington, D.C. Of the domestic origin-destination (O&D) passengers served by the three airports, BWI accounts for about 42%, Reagan for 34%, and Dulles for 24%. BWI provides CBP facilities for the processing of arriving international passengers, baggage, and cargo; however, BWI accommodates minimal international passenger airline service.
A-44
In June 2011, airlines offered nonstop service from BWI to 63 U.S. airports, compared with 78 from Dulles and 67 from Reagan. Low-cost carriers (LCCs)* offered service from BWI to 57 of these 63 airports, and 59 of the 63 routes were flown by large jets.** Table 8 shows that, while airlines offered service from Reagan and Dulles to more nonstop destinations than from BWI, fewer destinations were served by LCCs or by large jet aircraft. Reagan, however, has experienced strong growth in LCC service over the past four years. Between 2007 and 2011, the numbers of flights and seats offered by LCCs at Reagan more than doubled (albeit from a small base), resulting in a similar level of LCC service (in terms of flights, seats, and destinations served) as that offered at Dulles.
Airfares at BWI are generally lower than airfares at either Reagan or Dulles. Based on fare data for 2010, domestic O&D passengers at BWI paid $135, on average, for a one-way trip averaging 1,020 miles, compared with about $181 at Reagan for a trip averaging 1,017 miles, and about $193 at Dulles for a trip averaging 1,441 miles.***†
Southwest Airlines introduced service at BWI in September 1993 and is now the busiest airline serving BWI in terms of enplaned passengers. As of June 2011, BWI was the second busiest airport in the combined Southwest/AirTran system in terms of departing seats, and advance published flight schedules (which are subject to change) indicate that the merged airline’s departing seats at BWI will be 3.9% higher in 2011 than in 2010. This increase exceeds the airline’s planned 2.4% systemwide capacity increase over the same period. Southwest initiated limited service at Dulles International Airport in 2006.
*For purposes of this report, the following airlines are considered to be low-cost carriers: AirTran Airways, Allegiant Air, Frontier Airlines, JetBlue Airways, Southwest Airlines, Spirit Airlines, Sun Country Airlines, and Virgin America, as well as the no-longer-operating ATA, Independence Air, Midway Airlines, and National Airlines. **For purposes of this report, jet aircraft are categorized as either large jets (100 or more seats) or regional jets (less than 100 seats). ***The average fares cited above exclude all taxes and passenger facility charges, and some ancillary charges (for checked bags, meals, etc.) imposed by the airlines.
A-45
Table 8 COMPARISON OF DAILY DOMESTIC SCHEDULED PASSENGER AIRLINE SERVICE AT REGIONAL AIRPORTS Reagan National, Dulles International, and Baltimore/Washington Airports (for June of the years noted)
Number of airports Average daily Average daily served nonstop (a) aircraft departures departing seats Airport 2007 2011 2007 2011 2007 2011 By airline type Total---all airlines Reagan 65 67 374 390 37,037 37,083 Dulles 73 78 381 336 33,138 29,599 BWI 57 63 333 353 41,369 43,510
Low-cost carriers Reagan51114351,9584,218 Dulles 12 9 43 32 5,511 4,207 BWI 49 57 217 247 29,010 32,824
Legacy and other airlines Reagan 65 63 360 354 35,079 32,865 Dulles 73 77 338 304 27,626 25,391 BWI 25 20 116 106 12,359 10,686
By aircraft type Large jet Reagan 38 31 205 159 28,077 22,388 Dulles 27 28 135 118 20,012 17,522 BWI 55 59 281 299 38,818 40,663
Regional jet Reagan 47 54 163 224 8,743 14,373 Dulles 49 50 213 168 12,149 9,716 BWI 10 7 41 30 2,143 1,949
Turboprop Reagan 3 4 6 7 217 322 Dulles112033519772,360 BWI 4 5 11 24 407 898
(a) Some city markets are served by more than one airport. Some airports are served by more than one carrier type or aircraft type. Source: Official Airline Guides, Inc, accessed May 31, 2011.
A-46
Figure 15 shows that both Reagan and Dulles outperformed BWI and the nation in terms of growth in numbers of enplaned passengers between 2000 and 2007. Between 2007 and 2010, the numbers of enplaned passengers at Reagan and Dulles decreased (3% and 4%, respectively), while the number at BWI increased (3%). The increase in the number of enplaned passengers at Dulles in 2004-2005 resulted from Independence Air’s short-lived hubbing operation at that airport. (Independence Air declared bankruptcy in November 2005 and ceased all operations in January 2006.)
Figure 15 COMPARATIVE TRENDS IN ENPLANED PASSENGERS AT REGIONAL AIRPORTS Reagan National, Dulles International, Baltimore/Washington Airports,
150
140
130
120
110
Index: 2000 = 100 100
90
80 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 Reagan Dulles BWI All U.S. airports and Average of All U.S. Airports
Sources: U.S. DOT, Schedules T100 and 298C T1.
Competition from Other International Gateway Airports The superior level of international service, together with the connectivity of the United hub, make Dulles the preferred airport for international travel to and from the region served by the three airports. Table 9 shows that, between June 2007 and 2011, among the 15 busiest U.S. transatlantic gateway airports, Dulles International Airport experienced the largest increase in the number of transatlantic aircraft departures and the second-largest increase in the number of transatlantic departing seats.
A-47
Table 9 COMPARISON OF SCHEDULED TRANSATLANTIC AIRLINE SERVICE AT TOP U.S. INTERNATIONAL GATEWAY AIRPORTS (for June of years noted; ranked by 2011 seats)
Average daily scheduled Average daily scheduled aircraft departures departing seats Increase Increase (decrease) (decrease) Rank Airport 2007 2011 2007-2011 2007 2011 2007-2011 1 New York-Kennedy 101 104 4 26,561 28,346 1,785 2 Newark 64 61 (3) 13,599 12,924 (675) 3 Chicago-O'Hare 43 39 (5) 10,992 9,952 (1,041) 4 Dulles 30 37 7 7,575 9,283 1,708 5 Atlanta 33 31 (2) 7,620 7,716 96 6 Los Angeles 21 22 1 6,380 6,901 520 7 Boston 23 26 4 5,657 6,736 1,080 8 Philadelphia 23 22 (2) 5,355 5,152 (203) 9 Miami 13 17 4 3,816 5,069 1,253 10 San Francisco 11 14 3 3,809 4,726 917 11 Houston-Bush 11 15 3 2,732 3,800 1,068 12 Detroit 13 9 (4) 3,423 2,551 (872) 13 Orlando 6 7 1 2,070 2,305 235 14 Dallas/Fort Worth 7 8 1 1,658 2,096 438 15 Charlotte 3 7 4 827 1,835 1,008
Notes: Includes average daily flights and seats to destinations in Europe, the Middle East, and Africa. Excludes charter flights. Changes shown were calculated using unrounded numbers. Source: Official Airline Guides, Inc., accessed May 31, 2011.
HISTORICAL AIRLINE SERVICE AND TRAFFIC AT REAGAN Trends in domestic airline service, passenger traffic, and airfares at Reagan National Airport are discussed below. CBP does not provide facilities at the airport for the inspection of arriving international flights, so international service is offered only to and from those locations (Canada, the Bahamas, Bermuda) that allow for the preclearance of inbound passengers at their point of departure.
Perimeter and High Density Rules By federal statute, nonstop flights from Reagan National Airport are generally limited to destinations not more than 1,250 statute miles away. This “Perimeter Rule” was amended in 2000 to allow six daily round-trip nonstop flights between Reagan National Airport and points beyond the 1,250-mile perimeter. Following the enactment of federal legislation in 2003 (the Century of Aviation Reauthorization
A-48
Act, commonly referred to as Vision 100), six additional “beyond-perimeter” daily nonstop roundtrip flights were authorized.
The “High Density Rule,” which has been in effect since 1969, limits the number of airline, regional airline, and general aviation flights that may be scheduled each hour at Reagan National Airport. Federal legislation enacted in 2000 (the Wendell H. Ford Aviation Investment and Reform Act for the 21st Century, commonly referred to as AIR-21) phased out the High Density Rule at New York’s Kennedy International and LaGuardia airports and at Chicago‘s O’Hare International Airport, but not at Reagan National Airport.
Since 2000, 44 additional slot exemptions have been granted by the FAA at Reagan National Airport, bringing the total number of daily slots at the airport to 912. A slot is an authorization from the FAA for a takeoff or a landing; a pair of slots is required for an airline to operate the arrival and subsequent departure of a flight. The AIR-21 legislation created 24 new slots—12 beyond the perimeter and 12 within the perimeter. In 2003, under Vision 100, the U.S. DOT granted an additional 20 slot exemptions—12 beyond the perimeter and 8 within the perimeter.*
As of August 2011, different versions of an FAA reauthorization bill had been passed by the House of Representatives and the U.S. Senate. Both versions of the bill contain provisions for additional beyond-perimeter slots at Reagan National Airport—10 in the House bill and 24 in the Senate bill—and it is possible that some additional beyond-perimeter slots will be granted. Even if the number of slots is not increased, however, additional unused capacity exists at the airport (albeit in the less attractive early-morning and late-evening hours).
Slots are awarded to airlines—whether incumbent or new entrant—that the U.S. DOT believes are likely to produce the most competitive benefits, including, among other criteria, lower airfares. In awarding slots, the U.S. DOT has tended to favor LCCs. Of the 20 slot exemptions created in 2003, for example, 10 were allocated to LCCs. Despite this, and primarily because of the regulatory constraints on capacity imposed by the High Density Rule, limited opportunities have been available for LCCs to increase service at Reagan.
*The 2003 legislation also increased the number of slot exemptions allowed per hour (from two to three) and made available four slot exemptions for service to any airport within the 1,250-mile perimeter, regardless of hub size. The legislation also allowed the operation of regional jets with up to 76 seats in slots at Reagan National Airport that had been limited to aircraft with 55 or fewer seats. This change was made to allow airlines greater flexibility in scheduling flights at Reagan National Airport.
A-49
Airline Service Trends Table 10 shows that Reagan National Airport was the fourth busiest airport in the route network of US Airways as of June 2011. Between 2007 and 2011, US Airways reduced its number of departing seats at Reagan by 9%, the same magnitude as its systemwide capacity reduction.
Table 10 COMPARISON OF AIRLINE SERVICE AT US AIRWAYS AIRPORTS Top U.S. Airports in the US Airways System (for June of years noted)
Percent Average daily increase (decrease) departing seats 2007- 2010- Rank Airport 2007 2010 2011 2010 2011 1 Charlotte 52,747 60,594 61,417 14.9% 1.4% 2 Philadelphia 39,480 40,211 39,581 1.9 (1.6) 3 Phoenix 34,769 31,749 33,607 (8.7) 5.9 4 Reagan 16,398 15,682 14,934 (4.4) (4.8) 5 New York-LaGuardia 11,306 9,750 10,439 (13.8) 7.1 6 Boston 9,537 7,666 7,872 (19.6) 2.7 7Las Vegas 16,274 4,533 4,880 (72.1) 7.7 8 Pittsburgh 9,358 3,756 4,016 (59.9) 6.9 9 Orlando 4,469 3,996 3,679 (10.6) (7.9) 10 Los Angeles 4,301 3,104 3,502 (27.8) 12.8 All Other 121,216 105,287 105,741 (13.1) 0.4 Total---U.S. system 319,855 286,327 289,669 (10.5%) 1.2%
Notes: Represents domestic and international seats and includes regional code-sharing affiliates. Columns may not add to totals shown because of rounding. Percentages were calculated using unrounded numbers. Source: Official Airline Guides, Inc, accessed May 31, 2011.
Table 11 shows that airlines operated more aircraft departures at Reagan National Airport in June 2011 than in June 2000, but because of the greater use of smaller aircraft (mostly regional jets), offered fewer departing seats. (With higher load factors, however, the airlines enplaned more passengers in 2010 than in 2000.)
Table 12 presents changes in nonstop jet airline service in Reagan’s top 15 domestic O&D city-pair markets since 2000. As a result of the increased use of regional jets between 2000 and 2011, the number of jet aircraft departures from the airport increased 14% in the top 15 markets, while the number of seats decreased 2%.
A-50
Table 11 DOMESTIC SCHEDULED PASSENGER AIRLINE SERVICE BY AIRCRAFT TYPE Reagan National Airport (for June of years noted)
Increase (decrease) 2000- 2007- 2010- 2000 2007 2010 2011 2007 2010 2011 Airports served nonstop (a) Large jet 46 38 30 31 (8) (8) 1 Regional jet 10 46 49 54 36 3 5 Jet subtotal 49 64 65 66 15 1 1 Turboprop 14 3 3 4 (11) - 1 Total airports served nonstop (a) 59 65 66 67 6 1 1 Average daily aircraft departures Large jet 268 205 165 159 (63) (40) (6) Regional jet 23 163 198 224 140 34 27 Jet subtotal 291 368 363 383 77 (6) 21 Turboprop 57 6 9 7 (51) 3 (2) Total average daily aircraft departures 348 374 371 390 27 (3) 19 Percent of total: Large jet 77.0% 54.8% 44.4% 40.7% Regional jet 6.7 43.6 53.2 57.6 Jet subtotal 83.7% 98.4% 97.7% 98.3% Turboprop 16.3 1.6 2.3 1.7 Average daily departing seats Large jet 34,939 28,105 23,250 22,388 (6,835) (4,855) (862) Regional jet 1,129 8,743 11,756 14,373 7,615 3,012 2,617 Jet subtotal 36,068 36,848 35,005 36,761 780 (1,842) 1,756 Turboprop 1,922 217 455 322 (1,706) 239 (133) Total average daily departing seats 37,990 37,064 35,461 37,083 (925) (1,604) 1,623 Percent of total: Large jet 92.0% 75.8% 65.6% 60.4% Regional jet 3.0 23.6 33.2 38.8 Jet subtotal 94.9% 99.4% 98.7% 99.1% Turboprop 5.1 0.6 1.3 0.9 Average seats per departure Large jet 130 137 141 141 7 4 0 Regional jet 49 54 59 64 5 6 1 Jet subtotal 124 100 97 96 (24) (3) (1) Turboprop 34 36 53 49 2 17 (3) Total average seats per departure 109 99 96 95 (10) (3) (0)
Notes: Domestic flights account for 98% of all scheduled passenger flights at Reagan National Airport. Columns and rows may not add to totals shown because of rounding. Changes shown were calculated using unrounded numbers. (a) Some city markets are served by more than one airport and some airports are served by more than one aircraft type. Source: Official Airline Guides, Inc, accessed June 6, 2011.
A-51
Table 12 SCHEDULED AIRLINE SERVICE IN TOP DOMESTIC O&D PASSENGER MARKETS Reagan National Airport (for June of years noted)
Airlines providing nonstop Average daily scheduled Average daily scheduled City market jet service (b) jet aircraft departures departing jet seats Rank (a) Airport 2011 2000 2007 2010 2011 2000 2007 2010 2011 1Chicago AA,UA 29 24 23 22 3,865 3,253 2,870 2,746 O'Hare AA,UA 26 20 23 22 3,310 2,658 2,870 2,746 Midway - 3 4 - - 555 596 - - 2 Atlanta DL,FL 19 22 21 22 2,445 2,801 3,157 3,160 3 New York AA,CO,DL,US 43 50 41 42 6,262 5,102 3,538 3,716 LaGuardia DL,US 31 33 27 27 4,785 3,950 2,841 2,824 Newark CO 9 8 3 5 1,136 743 133 265 Kennedy AA,DL 3 9 11 10 341 409 563 627 4 Boston B6,DL,US 22 26 25 26 2,835 2,336 2,299 2,807 5 Orlando B6,DL,FL,US 2 6 7 11 231 743 916 1,250 6 Dallas/Fort Worth (c) AA,US 14 13 15 14 2,098 1,761 1,935 1,891 7 Fort Lauderdale B6,NK,US 2 6 6 7 231 874 849 933 8 Los Angeles (d) AS - 1 1 1 - 157 157 157 9 Miami AA,DL 10 8 9 11 1,447 1,280 1,440 1,592 10 Houston (e) CO 8 8 8 8 923 978 1,028 1,026 11 Denver F9,UA - 4 4 4 - 874 667 634 12 Minneapolis/St. Paul DL 7 7 7 6 1,077 967 966 891 13 Tampa DL,US 2 5 5 6 284 632 641 640 14 Seattle AS - 2 2 2 - 314 314 314 15 St. Louis AA,DL 7 4 4 5 1,055 495 523 583 Total---top 15 markets 164 185 177 186 22,753 22,567 21,298 22,342 Other markets 127 183 185 197 13,315 14,281 13,707 14,420 Total---all markets 291 368 363 383 36,068 36,848 35,005 36,761
Note: Columns may not add to totals shown because of rounding. (a) Top 15 city markets ranked by domestic O&D passengers in 2010. (b) Certificated U.S. airlines operating scheduled passenger jet services. Turboprop operations are not included. Each major airline and its code-sharing affiliates were counted as one airline. Legend: AA=American, AS=Alaska, B6=JetBlue, CO=Continental, DL=Delta, F9=Frontier, FL=AirTran, NK=Spirit, UA=United, US=US Airways. (c) Market includes Dallas/Fort Worth Airport and Love Field. (d) Market includes Los Angeles, Long Beach, Burbank, Orange County, and Ontario airports. (e) Market includes Hobby and Bush airports. Source: Official Airline Guides, Inc, accessed June 7, 2011.
A-52
Airlines serving Reagan provided nonstop scheduled jet service to all of the airport's top 15 domestic O&D markets in June 2011; 11 of these were served nonstop by more than one airline. Four of the top seven markets (New York, Boston, Orlando, and Fort Lauderdale) were served nonstop by three or more airlines in June 2011.
Figure 16 shows the domestic destinations with daily scheduled nonstop jet service from Reagan National Airport in June 2011. The 1,250-mile perimeter is shown for reference.
The regulatory constraints on capacity imposed by the High Density Rule have dissuaded incumbent airlines from reducing their flight frequencies at Reagan National Airport because any such reductions would place those airlines at risk of losing some of their slots.
In May 2011, US Airways and Delta Air Lines submitted for FAA approval a proposal whereby Delta would transfer to US Airways 42 of its slot pairs at Reagan National Airport and US Airways would transfer to Delta 132 of its slot pairs at New York's LaGuardia Airport. The proposal is a revision of a 2009 proposal that was abandoned by the two airlines because of unacceptable conditions that the FAA attached to its approval.
In July 2011, the DOT tentatively approved the Delta/US Airways proposal, contingent upon the airlines’ surrender of 16 slot pairs at LaGuardia and 8 slot pairs at Reagan and certain other conditions. While Delta and US Airways are reported to be prepared to accept these conditions, the final outcome of the slot transfer proposal and its implications for airline service at Reagan are uncertain.
Industry observers have pointed to increased LCC service at both LaGuardia and Reagan as an important factor alleviating government objections on anticompetitive grounds. Southwest began serving LaGuardia in June 2009, JetBlue Airways began serving Reagan in November 2010, and Southwest’s merger with AirTran Airways, which received all necessary approvals in May 2011, also gives Southwest access to Reagan.
A-53
Figure 16 Figure 16 June 2011 Reagan National Airport National Airport Reagan ip service by jet aircraft. U.S. CITIES WITH DAILY SCHEDULED NONSTOP AIRLINE SERVICE AIRLINE SERVICE NONSTOP SCHEDULED U.S. CITIES DAILY WITH ily scheduled nonstop roundily scheduled nonstop tr Inc, accessed June 6, 2011. 2011. 6, June accessed , Inc, Note: Shown are all cities with da Source: Guide Official Airline
A-54
Enplaned Passenger Trends From the early 1980s until 2000, annual enplaned passenger numbers at Reagan National Airport fluctuated 5% above and below 7.5 million passengers. After the terrorist attacks in September 2001 depressed passenger traffic in the remainder of 2001 and in 2002, the airport experienced 5 consecutive years of traffic growth followed by a decline during the 2008-2009 economic recession. Figure 17 provides a graphic depiction of the history of enplaned passengers at Reagan.
Figure 17 HISTORY OF ENPLANED PASSENGERS IN RELATION TO EXTERNAL EVENTS Reagan National Airport
12 Delta & United & Northwest Continental Airport merge merge Airport resumes full (2008) (2010) transferred Persian Gulf war, Terminals operations 10 to Airports B/C open Airline economic recession (2002) Iraq war, Authority (1997) deregulation (1990-1991) SARS (1987) (1978) outbreak (2003) 8
6 Economic
(millions) recession Economic (2007-2009) recession, terrorist attacks, Airport
Enplaned passengers Enplaned passengers 4 closed for 23 days US Airways & (2001) America West merge (2005) 2
0
Notes: Includes both domestic and international, and revenue and non-revenue passengers. Excludes passengers enplaned on general aviation and military flights. Sources: Metropolitan Washington Airports Authority records; LeighFisher.
Table 13 shows that the number of enplaned passengers at Reagan National Airport decreased 16.4% in 2001 compared with the previous year's number, largely as a result of the temporary closure of the airport following the September 2001 terrorist attacks. The number of annual enplaned passengers recovered by 2004, then fluctuated between 8.9 million and 9.3 million between 2005 and 2010.
Changes in the numbers of enplaned O&D passengers, which accounted for 82% of total passengers at Reagan National Airport in 2010, followed a generally similar pattern as that for all enplaned passengers. Of O&D passengers at the airport, the Airports Authority’s 2010 passenger survey indicated that 57% were traveling for business and 43% were traveling for leisure.
A-55
Table 13 HISTORICAL ENPLANED PASSENGERS BY O&D AND CONNECTING COMPONENTS Reagan National Airport (passengers in thousands)
Enplaned O&D passengers Connecting passengers Domestic Domestic- Total Scheduled charter & to- enplaned Year Dom. Intl. (a) nonrev. (b) Total domestic Gateway (c) Total passengers 2000 6,108 586 285 6,979 843 33 876 7,855 2001 5,204 454 243 5,901 644 18 663 6,564 2002 5,218 473 267 5,958 479 24 503 6,460 2003 5,531 519 240 6,290 767 46 812 7,102 2004 6,134 562 249 6,946 940 66 1,006 7,952 2005 6,892 591 202 7,685 1,150 75 1,225 8,909 2006 6,907 613 171 7,691 1,455 93 1,548 9,240 2007 6,886 627 175 7,688 1,548 58 1,606 9,294 2008 6,377 629 220 7,226 1,687 64 1,751 8,978 2009 6,327 644 202 7,173 1,542 52 1,595 8,767 2010 6,534 662 257 7,454 1,525 56 1,581 9,036
Average annual percent increase (decrease) 2000-2010 0.7% 1.2% (1.0%) 0.7% 6.1% 5.4% 6.1% 1.4%
Annual percent increase (decrease) 2000-2001 (14.8%) (22.4%) (15.0%) (15.5%) (23.5%) (45.1%) (24.4%) (16.4%) 2001-2002 0.3 4.1 10.0 1.0 (25.7) 30.8 (24.2) (1.6) 2002-2003 6.0 9.6 (9.9) 5.6 60.1 92.2 61.6 9.9 2003-2004 10.9 8.5 3.6 10.4 22.7 43.8 23.9 12.0 2004-2005 12.3 5.1 (18.9) 10.6 22.3 13.6 21.7 12.0 2005-2006 0.2 3.8 (15.3) 0.1 26.6 24.6 26.4 3.7 2006-2007 (0.3) 2.2 2.5 (0.0) 6.4 (37.9) 3.7 0.6 2007-2008 (7.4) 0.3 25.5 (6.0) 9.0 10.9 9.1 (3.4) 2008-2009 (0.8) 2.4 (8.3) (0.7) (8.6) (18.6) (9.0) (2.3) 2009-2010 3.3 2.9 27.5 3.9 (1.1) 7.1 (0.8) 3.1
Share of airport total 2000 88.8% 11.2% 100.0% 2007 82.7 17.3 100.0 2010 82.5 17.5 100.0
Notes: Rows may not add to totals shown because of rounding. Percentages were calculated using unrounded numbers. (a) Includes O&D passengers that boarded domestic flights at Reagan National Airport bound for international destinations via other U.S. gateway airports, a small number of international charter enplaned passengers, and international nonrevenue passengers. (b) Includes passengers on domestic nonscheduled (charter) flights and domestic nonrevenue passengers. (c) Gateway connections represent passengers connecting between domestic flights and international flights. Sources: Metropolitan Washington Airports Authority records; U.S. DOT, Air Passenger Origin-Destination Survey, reconciled to Schedules T100 and 298C T1.
A-56
The number of connecting passengers at Reagan decreased more than 40% between 2000 and 2002, but then tripled over the 4 subsequent years. By 2010, connecting passengers represented approximately 18% of all enplaned passengers at Reagan, compared with 8% in 2002.
Table 14 shows that US Airways accounted for 40.8% of total enplaned passengers at Reagan National Airport in 2010, and accounted for 81.4% of connecting passengers.
Table 14 COMPOSITION OF ENPLANED PASSENGERS, BY AIRLINE GROUP Reagan National Airport 2010
Enplaned passengers (thousands) Passenger composition by airline US All other Total--- US All other Total--- Airways airlines all airlines Airways airlines all airlines By sector Domestic 3,648 5,244 8,891 99.0% 98.0% 98.4% International 36 109 144 1.0 2.0 1.6
By type of passenger Resident enplaned O&D (a) 1,267 2,240 3,507 34.4% 41.8% 38.8% Visitor enplaned O&D (b) 1,129 2,819 3,948 30.6 52.7 43.7 Enplaned O&D subtotal 2,396 5,059 7,454 65.0% 94.5% 82.5% Connecting 1,288 293 1,581 35.0 5.5 17.5
Total passengers 3,683 5,352 9,036 100.0% 100.0% 100.0%
Share of Reagan National Airport total Enplaned O&D 32.1% 67.9% 100.0% Connecting 81.4 18.6 100.0 Total passengers 40.8 59.2 100.0
Notes: Rows and columns may not add to totals shown because of rounding. Percentages were calculated using unrounded numbers. Airline groups include code-sharing regional affiliates, if any. (a) Resident enplaned O&D passengers are defined here as those passengers whose flight itineraries began at Reagan National Airport. (b) Visitor enplaned O&D passengers are defined here as passengers whose flight itineraries began at airports other than Reagan National Airport. Sources: Metropolitan Washington Airports Authority records; U.S. DOT, Air Passenger Origin-Destination Survey, reconciled to Schedules T100 and 298C T1.
A-57
Airline Shares of Enplaned Passengers Table 15 shows that the top two airlines at Reagan National Airport (US Airways and Delta, along with their code-sharing affiliate carriers) together enplaned 60.4% of all passengers in 2010. American and United (including Continental) accounted for 27.1% of the total, and all other airlines accounted for the remaining 12.5%.
As shown in Table 15, between 2000 and 2010, airline service changed substantially at Reagan, from flights operated by major airlines using mainline aircraft to flights operated by regional airline affiliates and LCCs. Between 2000 and 2010, the share of passengers enplaned at the airport by major airlines decreased from 87.7% to 58.2%; the regional affiliates’ share increased from 7.1% to 30.7%; and the LCC share increased from 2.4% to 8.3%.
The number of enplaned passengers at Reagan increased 6.2% in the first 7 months of 2011 relative to the same period of 2010. Delta and JetBlue accounted for virtually all of the increase.
Domestic Market and Fare Trends Table 16 shows that, in 2010, the number of enplaned passengers to Reagan National Airport's top 15 domestic O&D markets increased 10% compared with the 2000 number. Passenger traffic to Atlanta, Orlando, and Fort Lauderdale showed particularly large increases, in part because of lower airfares.
In contrast, passenger traffic and airfare trends in the “shuttle” markets to and from New York and Boston reflected the effects of increased competition with surface modes of transportation, primarily the 2000 start by Amtrak of its Acela Express high-speed passenger rail service. Between 2000 and 2010, the number of domestic O&D passengers traveling from Reagan to New York and Boston decreased 66% and 14%, respectively. Average airfares to and from those cities increased substantially, reflecting a shift of lower-fare-paying customers away from airline travel.
Fares paid at Reagan National Airport tend to be higher than fares paid at Dulles International Airport for flights to large O&D markets within the 1,250-mile perimeter because capacity at Reagan is limited, competition is less robust, and passengers are prepared to pay for the convenience of using the airport. On the other hand, fares paid at Reagan tend to be lower than at Dulles to destinations outside the perimeter largely for two reasons: passengers are prepared to pay higher fares for the nonstop long-haul flights available at Dulles, and airlines at Reagan tend to offer lower fares so that their one-stop and connecting services in those markets are more competitive.
A-58
Table 15 AIRLINE SHARES OF ENPLANED PASSENGERS Reagan National Airport (passengers in thousands)
First 7 months Airline 2000 2007 2010 2010 2011 US Airways (a) 3,044 3,843 3,683 2,107 2,105 Delta (b) 2,062 1,948 1,775 979 1,190 American (c) 1,377 1,473 1,482 845 821 United/Continental 958 988 963 563 506 United 412 519 543 319 289 Continental 546 468 420 244 217 AirTran - 213 382 217 229 Frontier/Midwest 122 333 332 189 199 Frontier 11 128 204 91 199 Midwest 111 205 127 98 - Alaska - 143 149 83 90 Spirit 10 87 124 70 87 Air Canada 109 107 109 65 64 JetBlue - - 37 - 135 ATA (d) 100 159 - -- All other 74 - 0 0 12 Total 7,855 9,294 9,036 5,119 5,438 Airline share of total US Airways (a) 38.8% 41.4% 40.8% 41.2% 38.7% Delta (b) 26.2 21.0 19.6 19.1 21.9 American (c) 17.5 15.8 16.4 16.5 15.1 United/Continental 12.2 10.6 10.7 11.0 9.3 United 5.2 5.6 6.0 6.2 5.3 Continental 7.0 5.0 4.6 4.8 4.0 AirTran - 2.3 4.2 4.2 4.2 Frontier/Midwest 1.6 3.6 3.7 3.7 3.7 Frontier 0.1 1.4 2.3 1.8 3.7 Midwest 1.4 2.2 1.4 1.9 - Alaska - 1.5 1.7 1.6 1.7 Spirit 0.1 0.9 1.4 1.4 1.6 Air Canada 1.4 1.2 1.2 1.3 1.2 JetBlue - - 0.4 - 2.5 ATA (d) 1.3 1.7 - -- All other 0.9 - 0.0 0.0 0.2 Total 100.0% 100.0% 100.0% 100.0% 100.0% Share by type of airline Legacy airline 87.7% 66.3% 58.2% 58.7% 54.9% Affiliated regional carrier 7.1 22.5 30.7 31.0 30.1 Low-cost carrier 2.4 6.3 8.3 7.4 12.2 Other airline 2.8 4.9 2.9 2.9 2.8
Notes: "-" represents zero. “0” represents a number less than 500. "0.0" represents a number less than 0.05%. Columns may not add to totals shown because of rounding. Percentages were calculated using unrounded numbers. Passengers reported by regional affiliates are grouped with their respective code-sharing airlines. (a) America West is included with US Airways for all years shown, although its merger with US Airways occurred in September 2005. (b) Northwest is included with Delta for all years shown, although its merger with Delta occurred in October 2008. (c) TWA is included with American in 2000, although American started reporting TWA passengers with its own in 2001. (d) ATA ceased all operations on April 3, 2008.
Source: Metropolitan Washington Airports Authority records.
A-59
Table 16 PASSENGERS AND AIRFARES TO TOP 15 DOMESTIC O&D CITY MARKETS Reagan National Airport
Domestic enplaned O&D passengers (in thousands) As percent Average annual percent 2010 City market of total increase (decrease) Rank Airport 2000 2007 2010 2000 2010 2000-2007 2007-2010 1Chicago 336 494 416 5.5% 6.4% 5.7% (5.6%) O'Hare 277 385 409 4.5 6.3 4.8 2.1 Midway 58 110 7 1.0 0.1 9.4 (59.7) 2 Atlanta 209 393 380 3.4 5.8 9.4 (1.2) 3 New York (a) 993 586 342 16.3 5.2 (7.2) (16.4) 4 Boston 380 360 326 6.2 5.0 (0.8) (3.2) 5 Orlando 81 175 256 1.3 3.9 11.6 13.5 6 Dallas/Fort Worth (b) 204 221 238 3.3 3.6 1.1 2.5 7 Fort Lauderdale 87 197 233 1.4 3.6 12.3 5.7 8 Los Angeles (c) 143 161 179 2.3 2.7 1.7 3.6 9 Miami 122 185 169 2.0 2.6 6.2 (2.9) 10 Houston (d) 123 161 169 2.0 2.6 3.9 1.6 11 Denver 81 157 159 1.3 2.4 9.9 0.4 12 Minneapolis/St. Paul 110 141 158 1.8 2.4 3.6 4.0 13 Tampa 91 131 133 1.5 2.0 5.4 0.6 14 Seattle 63 109 123 1.0 1.9 8.2 4.1 15 St. Louis 67 107 109 1.1 1.7 6.9 0.6 Total---top 15 markets 3,090 3,578 3,391 50.6% 51.9% 2.1% (1.8%) All other markets 3,018 3,309 3,144 49.4 48.1 1.3 (1.7) Total---all markets 6,108 6,887 6,534 100.0% 100.0% 1.7% (1.7%) Average one-way fare paid (e) 2010 City market Percent increase (decrease) Rank Airport 2000 2007 2010 2000-2007 2007-2010 1Chicago $169.74 $120.64 $140.46 (28.9%) 16.4% O'Hare 183.78 135.57 140.94 (26.2) 4.0 Midway 103.06 68.30 113.28 (33.7) 65.9 2 Atlanta 197.66 154.18 142.10 (22.0) (7.8) 3 New York (a) 117.25 141.69 168.87 20.8 19.2 4 Boston 137.94 180.29 173.52 30.7 (3.8) 5 Orlando 125.79 128.09 113.22 1.8 (11.6) 6 Dallas/Fort Worth (b) 243.63 196.78 218.46 (19.2) 11.0 7 Fort Lauderdale 116.13 109.19 102.85 (6.0) (5.8) 8 Los Angeles (c) 219.68 196.97 185.76 (10.3) (5.7) 9 Miami 166.56 129.31 151.23 (22.4) 16.9 10 Houston (d) 257.51 217.09 230.55 (15.7) 6.2 11 Denver 142.21 165.90 180.83 16.7 9.0 12 Minneapolis/St. Paul 238.98 182.94 203.47 (23.4) 11.2 13 Tampa 130.75 138.89 164.97 6.2 18.8 14 Seattle 212.52 227.39 235.10 7.0 3.4 15 St. Louis 221.18 173.44 165.32 (21.6) (4.7) Average---top 15 markets $161.34 $156.36 $164.96 (3.1%) 5.5% All other markets 177.47 182.13 197.41 2.6 8.4 Average---all markets $169.31 $168.74 $180.57 (0.3%) 7.0%
Notes: Columns may not add to totals shown because of rounding. Percentages were calculated using unrounded numbers. (a) Market includes Kennedy, LaGuardia, and Newark airports. (b) Market includes Dallas/Fort Worth Airport and Love Field. (c) Market includes Los Angeles, Burbank, Long Beach, Ontario, and Orange County airports. (d) Market includes Bush and Hobby airports. (e) Average one-way fares shown exclude taxes, fees, passenger facility charges, and ancillary fees charged by the airlines. Source: U.S. DOT, Air Passenger Origin-Destination Survey, reconciled to Schedules T100 and 298C T1.
A-60
Cargo Trends Because Reagan National Airport is land-constrained and lacks the space necessary to accommodate all-cargo aircraft operations and associated facilities, the all-cargo airlines serving the Airports service region operate mostly at Dulles International Airport. With the exception of FedEx shipments, virtually all cargo at Reagan is carried in the belly compartments of passenger aircraft. The shift from large jets to regional jets that has occurred among the passenger airlines serving Reagan has resulted in reduced cargo capacity on passenger aircraft.
In 2010, approximately 7,250 tons of air cargo was handled at Reagan versus 365,000 tons at Dulles. FedEx accounted for 66% of air cargo tonnage handled at Reagan, followed by US Airways with about 10%.
Historical Aircraft Operations The number of commercial passenger and all-cargo aircraft operations at Reagan National Airport increased an average of 0.7% per year between 2000 and 2010, half the rate of the increase in the number of enplaned passengers (1.4%) over the same period. The average passenger load factor at Reagan increased from about 64% in 2003 to about 73% in 2010. Average aircraft size also increased, as US Airways Express affiliates replaced turboprops with 50-seat and, increasingly, 70-seat regional jets.
HISTORICAL AIRLINE SERVICE AND TRAFFIC TRENDS AT DULLES Unlike Reagan National Airport, Dulles International Airport is not subject to the High Density Rule or the Perimeter Rule, and its airside and landside capacity would not constrain the expansion of airline service through 2016.
Airline Service Trends Table 17 shows that Dulles International Airport was the sixth busiest airport in the combined United/Continental system in June 2011. Between 2007 and 2011, United increased its number of scheduled seats at Dulles by approximately 1% while it reduced its systemwide capacity by approximately 13%.
A-61
Table 17 COMPARISON OF SCHEDULED AIRLINE SERVICE AT UNITED/CONTINENTAL AIRPORTS Top U.S. Airports in the United/Continental System (for June of years noted)
Percent Average daily increase (decrease) departing seats 2007- 2010- Rank Airport 2007 2010 2011 2010 2011 1 Houston-Bush 66,178 61,115 60,482 (7.7%) (1.0%) 2 Chicago-O'Hare 66,255 58,339 57,112 (11.9) (2.1) 3 Newark 48,228 45,012 44,401 (6.7) (1.4) 4 Denver 46,174 40,331 39,258 (12.7) (2.7) 5 San Francisco 31,655 29,636 31,156 (6.4) 5.1 6 Dulles 27,307 27,522 27,505 0.8 (0.1) 7 Los Angeles 24,877 22,847 23,340 (8.2) 2.2 8 Cleveland 15,177 12,352 12,500 (18.6) 1.2 9 Las Vegas 8,288 7,299 6,649 (11.9) (8.9) 10 Boston 7,211 6,485 6,641 (10.1) 2.4 All other 202,355 173,668 166,436 (14.2) (4.2) Total---U.S. system 543,706 484,605 475,479 (10.9%) (1.9%)
Notes: Represents domestic and international seats and includes regional code-sharing affiliates. Percentages were calculated using unrounded numbers. Source: Official Airline Guides, Inc, accessed May 31, 2011.
Domestic Airline Service Trends Table 18 shows that, between June 2000 and June 2011, the number of daily regional jet departures at Dulles International Airport doubled, as the major airlines’ code- sharing affiliates increased regional jet service. By June 2011, regional jets accounted for about 50% of all aircraft departures at the airport, and about 33% of total seats. Turboprop operations, which accounted for about 46% of all aircraft departures in 2000, accounted for about 15% of departures in 2011.
A-62
Table 18 DOMESTIC SCHEDULED PASSENGER AIRLINE SERVICE BY AIRCRAFT TYPE Dulles International Airport (for June of years noted)
Increase (decrease) 2000- 2007- 2010- 2000 2007 2010 2011 2007 2010 2011 Airports served nonstop (a) Large jet 35 27 28 28 (8) 1 - Regional jet 20 49 48 50 29 (1) 2 Jet subtotal 52 64 63 66 12 (1) 3 Turboprop 38 11 14 20 (27) 3 6 Total airports served nonstop (a) 77 73 75 78 (4) 2 3 Average daily flight departures Large jet 202 135 126 118 (67) (9) (8) Regional jet 84 213 180 168 129 (33) (13) Jet subtotal 286 348 306 286 62 (42) (20) Turboprop 245 33 40 51 (212) 8 11 Total average daily flight departures 531 381 346 336 (150) (35) (10) Percent of total: Large jet 38.1% 35.5% 36.4% 35.1% Regional jet 15.9 55.9 52.1 49.8 Jet subtotal 53.9% 91.5% 88.4% 84.9% Turboprop 46.1 8.5 11.6 15.1 Average daily departing seats Large jet 25,166 20,076 19,029 17,522 (5,090) (1,047) (1,507) Regional jet 4,213 12,149 10,453 9,716 7,936 (1,696) (737) Jet subtotal 29,380 32,226 29,483 27,239 2,846 (2,743) (2,244) Turboprop 5,808 977 1,382 2,360 (4,832) 406 978 Total average daily departing seats 35,188 33,202 30,865 29,599 (1,986) (2,337) (1,266) Percent of total: Large jet 71.5% 60.5% 61.7% 59.2% Regional jet 12.0 36.6 33.9 32.8 Jet subtotal 83.5% 97.1% 95.5% 92.0% Turboprop 16.5 2.9 4.5 8.0 Average seats per flight Large jet 125 148 151 148 15 3 (3) Regional jet 50 57 58 58 7 8 (0) Jet subtotal 103 93 96 95 (10) 4 (1) Turboprop 24 30 35 47 6 4 - Total average seats per flight 66 87 89 88 21 2 (1)
Notes: Columns and rows may not add to totals shown because of rounding. Changes were calculated using unrounded numbers. (a) Some city markets are served by more than one airport and some airports are served by more than one aircraft type. Source: Official Airline Guides, Inc, accessed June 6, 2011.
A-63
The 16% decrease in the number of daily domestic departing seats at Dulles between June 2000 and June 2011 was far exceeded by the 37% decrease in daily domestic aircraft departures over the same period. Changes in the mix of aircraft types serving Dulles resulted in an increase from 66 to 88 seats, on average, per domestic aircraft departure from the airport.
Table 19 presents a comparison of scheduled daily nonstop jet service at Dulles International Airport, showing changes in airline service in the top 15 domestic O&D city-pair markets since 2000. Although the number of jet aircraft departures decreased 21% in the top 15 markets between 2000 and 2011, the number of seats decreased at a lower 15% because of increases in average aircraft size. In 10 of the top 15 markets in June 2011, Dulles passengers had the choice of nonstop service offered by at least two airlines. Three or more airlines offered nonstop service in 4 of the top 15 markets. United provided nonstop service in 14 of the top 15 markets (all except Fort Lauderdale), while 9 of the 15 markets were served nonstop by LCCs (AirTran, JetBlue, Southwest, and Virgin America).
Domestic capacity offered by LCCs at Dulles has shown considerable volatility. In 2005, departing seats offered by LCCs increased 80%, year-over-year, with the establishment of Independence Air’s hub at the airport, only to decrease 70% in 2006 following the airline’s demise. Between 2006 and 2008, domestic LCC capacity at Dulles again increased sharply (up 54%) as Southwest and Virgin America began service, but between 2008 and 2010, LCC capacity at the airport decreased 19%. Advance published airline flight schedules indicate a further 12% decrease in domestic LCC capacity at the airport in 2011. Four of the five LCCs serving the airport—JetBlue, Southwest, AirTran, and Sun Country Airlines—have collectively reduced their scheduled departing seats by about 33% since 2008.
Figure 18 shows the domestic destinations with daily nonstop or one-stop service from Dulles International Airport in June 2011.
A-64
Table 19 SCHEDULED AIRLINE SERVICE IN TOP DOMESTIC O&D PASSENGER MARKETS Dulles International Airport (for June of years noted)
Airlines providing nonstop Average daily scheduled Average daily scheduled City market jet service (b) jet aircraft departures departing jet seats Rank (a) Airport 2011 2000 2007 2010 2011 2000 2007 2010 2011 1Los Angeles AA,B6,UA,VX 12 15 17 16 1,808 2,526 2,702 2,530 Los Angeles AA,UA,VX 12 11 15 14 1,808 1,926 2,402 2,230 Long Beach B6 4 2 2 600 300 300 2 San Francisco B6,UA,VX 11 12 13 13 1,455 1,965 2,104 2,107 San Francisco UA,VX 9 8 12 12 1,197 1,376 1,954 1,957 Oakland B6 - 3 1 1 - 467 150 150 San Jose - 2 1 - - 258 122 - - 3 Boston B6,UA 26 13 14 12 2,792 1,390 1,777 1,479 4 Orlando B6,UA 15 13 10 7 1,772 1,788 1,450 1,065 5 Chicago (c) UA,WN 14 15 13 14 2,055 2,294 2,003 1,977 6 Denver UA,WN 8 8 10 11 1,513 1,453 1,667 1,722 7 Atlanta DL,FL,UA 21 18 14 15 2,811 2,131 1,640 1,711 8Las Vegas UA 2 5 3 2 248 766 467 320 9 New York (d) B6,CO,DL,UA 25 30 19 17 1,788 1,919 1,139 1,067 10 Dallas/Fort Worth (e) AA,UA 12 8 8 8 1,485 963 941 957 11 San Diego UA 3 4 3 3 355 612 537 466 12 Fort Lauderdale B6 4 3 2 2 446 450 275 225 13 Seattle UA 4 3 4 3 498 478 572 459 14 Tampa UA 5 5 4 3 644 749 590 457 15 Houston (f) CO,UA 3 6 5 5 316 343 389 446 Total---top 15 markets 165 161 138 130 19,985 19,826 18,254 16,986 Other markets 121 188 168 156 9,395 12,400 11,229 10,253 Total---all markets 286 348 306 286 29,380 32,226 29,483 27,239
Note: Columns may not add to total shown because of rounding. (a) Top 15 city markets ranked by domestic O&D passengers in 2010. (b) Certificated U.S. airlines operating scheduled passenger jet services. Turboprop operations are not included. Each major airline and its code-sharing affiliates were counted as one airline. Legend: AA=American, B6=JetBlue, CO=Continental, DL=Delta, FL=AirTran, UA=United, VX=Virgin America, WN=Southwest. (c) Market includes O'Hare and Midway airports. (d) Market includes LaGuardia, Kennedy, and Newark airports. (e) Market includes Dallas/Fort Worth Airport and Love Field. (f) Market includes Bush and Hobby airports. Source: Official Airline Guides, Inc, accessed June 7, 2011.
A-65
Figure 18 Figure 18 June 2011 Dulles International Airport U.S. CITIES WITH DAILY SCHEDULED AIRLINE SERVICE AIRLINE SERVICE SCHEDULED U.S. CITIES DAILY WITH Inc, accessed June 6, 2011. 2011. 6, June accessed Inc, , Note: Source: cities Shown are all with daily scheduled round nonstop trip service by passenger jet aircraft. Guides Airline Official
A-66
Figure 19 shows the fluctuations in United’s domestic hubbing operation at Dulles International Airport. While United’s regional affiliates operating as United Express have accounted for an increasing share of the airline’s capacity at Dulles since the mid-1980s, this component of United's service at the airport has stabilized at approximately 47% of the airline's total since 2005. Advance published flight schedules indicate that United’s domestic seat capacity (including merger partner Continental’s capacity) at the airport in 2011 will be 7% below the airline’s 2007 peak capacity.
Figure 19 SCHEDULED DOMESTIC AIRLINE SERVICE ON UNITED AND UNITED EXPRESS Dulles International Airport
25,000
20,000
15,000
10,000 Average daily departing seats departing daily Average 5,000
0
United (including Ted) United Express Continental, Continental Connection, & Continental Express Notes: Continental, Continental Connection, and Continental Express included only in 2011. Estimated 2011 seats are based on advance schedule filings by United and Continental. Source: Official Airline Guides, Inc, accessed June 6, 2011.
International Airline Service Trends Table 20 shows that the average number of international departing seats at Dulles International Airport increased about 62% over the past 11 years, from 7,737 per day in 2000 to 12,502 per day in 2011. This increase is evidence of both a strong base of demand for international airline travel in the Airports service region and an increase in connecting service. Increases were recorded by both U.S. airlines and foreign-flag airlines operating international flights from Dulles. The strong increase in capacity to Latin America and the Caribbean was largely the result of United moving its Latin American operations from Miami International Airport and New York's Kennedy International Airport to Dulles International Airport in 2003 and 2004. The near-doubling of capacity to Asia between 2005 and 2010 was primarily caused by
A-67
United’s introduction of nonstop service from Dulles to Tokyo (2006) and Beijing (2007).
Table 20 HISTORICAL INTERNATIONAL AIRLINE SERVICE Dulles International Airport (for June of years noted)
Number of airports served Number of airlines Average daily departing seats 2000 2007 2010 2011 2000 2007 2010 2011 2000 2007 2010 2011 By airline flag U.S. (virtually all United) 8 18 27 27 2 3 3 4 3,174 5,332 6,066 6,367 Foreign 19 24 22 21 15 14 20 20 4,563 5,672 5,939 6,134
By destination world area U.K., Europe, Mid-East, & Africa 12 16 22 25 12 13 14 17 6,294 7,575 8,468 9,283 Latin America & Caribbean (a) 4 10 9 10 3 3 7 6 375 1,214 1,424 1,351 Asia 2 3 3 3 2 3 3 3 458 1,249 1,147 1,188 Canada 5 5 5 4 1 2 2 1 610 966 965 680
By aircraft type Large jet 19 29 35 38 17 17 22 24 7,227 10,135 11,040 11,822 Regional jet 4 5 5 4 1 2 2 1 510 870 965 680
Total---all destinations 23 34 39 42 17 18 23 24 7,737 11,004 12,005 12,502
(a) Includes Mexico, Central America, South America, and the Caribbean. Source: Official Airline Guides, Inc, accessed June 7, 2011.
Figure 20 shows that, from a small base in 1990, United’s international capacity at Dulles International Airport grew to 3,000 daily departing seats in 2003. United's capacity is expected to reach a new peak in 2011 (5,750 daily departing seats) following 10 consecutive years of growth, the introduction of United Express service to several Canadian cities, and the airline’s merger with Continental.
While the merged United’s advance published flight schedules indicate that the airline’s seat capacity will be 2.9% lower systemwide in 2011 than in 2010, the schedules indicate that United's international seat capacity at Dulles will be 3.6% higher.
A-68
Figure 20 SCHEDULED INTERNATIONAL AIRLINE SERVICE ON UNITED AND UNITED EXPRESS Dulles International Airport
6,000
5,000
4,000
3,000
2,000 Average daily departing departing seats daily Average 1,000
0
United (including Ted) United Express Continental, Continental Connection, & Continental Express Notes: Continental, Continental Connection, and Continental Express did not have any international service prior to 2011. Estimated 2011 seats are based on advance schedule filings by United and Continental. Source: Official Airline Guides, Inc, accessed June 6, 2011.
Figure 21 shows the international destinations with daily nonstop or one-stop service from Dulles International Airport in June 2011. In June 2011, 24 airlines (20 of them foreign-flag airlines) served 42 destinations on five continents nonstop. In June 2011, Air France began service to Dulles with A380 aircraft configured to carry 538 passengers.
A-69
Figure 21 Figure 21 June 2011 Dulles International Airport INTERNATIONAL CITIES WITH SCHEDULED AIRLINE SERVICE AIRLINE INTERNATIONAL CITIES WITH SCHEDULED Note: Source: cities Shown are all with daily scheduled round nonstop trip service by passenger jet aircraft. Inc. Guides, Airline Official
A-70
Enplaned Passenger Trends Figure 22 illustrates the increase in the number of enplaned passengers at Dulles International Airport from 1.5 million in 1978 to 11.7 million in 2010.
Figure 22 HISTORICAL ENPLANED PASSENGERS IN RELATION TO EXTERNAL EVENTS Dulles International Airport
16 Virgin America Delta & United & begins service Northwest Continental Independence (2007) merge merge Air begins (2008) (2010) 14 service Airport (2004) United transferred to establishes 12 Airports international Iraq Authority hub (1987) Concourses A war, SARS (1990) outbreak 10 and B open (1998-1999) (2003) Persian Gulf war, 8 United buildup economic recession Economic (millions) of domestic hub (1990-1991) recession (1986-1987) (2007-2009) 6 Concourses
Enplaned passengers C and D Airline open 4 Economic deregulation (1985-1986) Independence Air recession, terrorist (1978) ceases operations, attacks, JetBlue begins Southwest begins 2 service, Reagan closed service for 23 days (2006) (2001) 0
Notes: Includes domestic and international and revenue and nonrevenue passengers. Excludes passengers enplaned on general aviation and military flights. Sources: Metropolitan Washington Airports Authority records, LeighFisher.
Table 21 shows historical numbers of enplaned passengers at Dulles International Airport by O&D and connecting components.
Although passenger numbers at Dulles were volatile during the 2000-2010 period, particularly during the short-lived operation of Independence Air hub in 2004-2005, overall growth in numbers of enplaned passengers averaged 1.6% per year. Increases in connecting passengers (up an average of 5.0% per year) accounted for all of the growth in enplaned passengers during the 2000-2010 period. The number of O&D passengers showed no net change. Among O&D passengers, increases in international passengers were offset by decreases in domestic passengers (both scheduled and charter) and nonrevenue passengers.
Of O&D passengers at Dulles, the Airports Authority’s 2010 passenger survey indicated that 45% were traveling for business and 55% were traveling for leisure.
A-71
Table 21 HISTORICAL ENPLANED PASSENGERS BY O&D AND CONNECTING COMPONENTS Dulles International Airport (passengers in thousands)
Enplaned O&D passengers Connecting passengers Domestic Domestic- Total Scheduled charter & to- enplaned Year Dom. Intl. (a) nonrev. (b) Total domestic Gateway (c) Total passengers 2000 4,689 1,686 674 7,048 1,592 1,331 2,923 9,972 2001 3,970 1,681 651 6,302 1,462 1,156 2,618 8,920 2002 3,859 1,683 479 6,022 1,187 1,307 2,494 8,515 2003 4,064 1,671 179 5,915 1,288 1,164 2,452 8,366 2004 5,899 1,922 184 8,005 1,912 1,408 3,320 11,324 2005 6,572 2,023 81 8,677 3,177 1,542 4,720 13,396 2006 5,095 2,052 137 7,284 2,308 1,800 4,108 11,392 2007 5,331 2,253 230 7,813 2,399 2,062 4,460 12,274 2008 4,862 2,318 129 7,309 2,364 2,185 4,549 11,858 2009 4,526 2,274 91 6,891 2,425 2,230 4,656 11,547 2010 4,467 2,339 163 6,969 2,460 2,312 4,773 11,742
Average annual percent increase (decrease) 2000-2010 (0.5%) 3.3% (13.2%) (0.1%) 4.4% 5.7% 5.0% 1.6%
Annual percent increase (decrease) 2000-2001 (15.3%) (0.3%) n.c. (10.6%) (8.2%) (13.2%) (10.4%) (10.5%) 2001-2002 (2.8) 0.2 n.c. (4.5) (18.8) 13.1 (4.7) (4.5) 2002-2003 5.3 (0.7) n.c. (1.8) 8.5 (10.9) (1.7) (1.7) 2003-2004 45.1 15.0 n.c. 35.3 48.5 20.9 35.4 35.4 2004-2005 11.4 5.3 n.c. 8.4 66.2 9.6 42.2 18.3 2005-2006 (22.5) 1.4 n.c. (16.1) (27.4) 16.7 (13.0) (15.0) 2006-2007 4.6 9.8 n.c. 7.3 3.9 14.5 8.6 7.7 2007-2008 (8.8) 2.9 n.c. (6.5) (1.4) 6.0 2.0 (3.4) 2008-2009 (6.9) (1.9) n.c. (5.7) 2.6 2.1 2.3 (2.6) 2009-2010 (1.3) 2.9 n.c. 1.1 1.5 3.7 2.5 1.7
Share of Airport total 2000 70.7% 29.3% 100.0% 2007 63.7 36.3 100.0 2010 59.4 40.6 100.0
n.c.=not calculated. Notes: Rows may not add to totals shown because of rounding. Percentages were calculated using unrounded numbers. (a) Includes O&D passengers that boarded domestic flights at Dulles International Airport bound for international destinations via other U.S. gateway airports, a small number of international charter enplaned passengers, and international nonrevenue passengers. (b) Includes passengers on domestic nonscheduled (charter) flights and domestic nonrevenue passengers. (c) Gateway connections represent passengers connecting between domestic and international flights. Sources: Metropolitan Washington Airports Authority records; U.S. DOT, Air Passenger Origin-Destination Survey, reconciled to Schedules T100 and 298C T1.
A-72
Figure 23 illustrates the trends in O&D and connecting components of enplaned passengers graphically.
Domestic enplaned O&D passengers. The number of domestic enplaned O&D passengers experienced a net decrease between 2000 and 2010. In 2004 and 2005, the numbers of domestic enplaned O&D passengers temporarily spiked during the hubbing operation of Independence Air. Between 2007 and 2010, the number of domestic enplaned O&D passengers decreased 16%, as the economy worsened and LCCs reduced service.
Domestic-to-domestic connecting passengers. The number of passengers connecting between domestic flights increased considerably over the past 10 years. The chart reflects the expansion of United’s hubbing activity at the airport and the Independence Air hubbing operation. The number of domestic-to-domestic connecting passengers in 2010 was about 55% higher than in 2000.
International enplaned O&D passengers. With the exception of 2009, the number of international enplaned O&D passengers increased steadily since 2003. Increases averaged 4.9% per year between 2003 and 2010. International enplaned O&D passenger traffic remained steady following the September 2001 terrorist attacks and during the economic recessions in 2001 and 2008-2009.
International gateway connecting passengers. Passengers connecting between domestic flights and international flights exhibited even stronger growth between 2003 and 2010 (up 10.3% per year on average) than international enplaned O&D passengers. Connections to United’s international flights and, to a lesser extent, to flights operated by the other Star Alliance airlines, accounted for most of the gateway connections.
Table 22 shows that United accounted for 65.8% of enplaned passengers and 88.8% of connecting passengers at Dulles International Airport in 2010.
A-73
Figure 23 HISTORICAL ENPLANED PASSENGERS BY O&D AND CONNECTING COMPONENTS Dulles International Airport (passengers in thousands)
Domestic enplaned O&D Domestic-domestic connecting passengers (millions) passengers (millions) 7 7
6 6
5 5
4 4
3 3
2 2
1 1
0 0
International enplaned O&D International gateway connecting passengers (millions) passengers (millions) 7 7
6 6
5 5
4 4
3 3
2 2
1 1
0 0
Notes: Domestic O&D enplaned passengers may be overstated and domestic-to-domestic connections understated in 2004 and 2005 as the result of Independence Air reporting irregularities. International enplaned O&D includes O&D passengers that boarded domestic flights at Dulles International Airport bound for international destinations via other U.S. gateway airports, a small number of international charter enplaned passengers, and international nonrevenue passengers. International gateway connections represent passengers connecting between domestic and international flights. Sources: Metropolitan Washington Airports Authority records; U.S. DOT, Air Passenger Origin-Destination Survey, reconciled to Schedules T100 and 298C T1.
A-74
Table 22 COMPOSITION OF ENPLANED PASSENGERS, BY AIRLINE GROUP Dulles International Airport 2010
Enplaned passengers (thousands) Passenger composition by airline United All other Total--- United All other Total--- Airlines (a) airlines all airlines Airlines (a) airlines all airlines By sector Domestic 6,091 2,473 8,565 78.8% 61.6% 72.9% International 1,635 1,542 3,177 21.2 38.4 27.1
By type of passenger Resident enplaned O&D (b) 2,061 1,594 3,655 26.7% 39.7% 31.1% Visitor enplaned O&D (c) 1,427 1,887 3,315 18.5 47.0 28.2 Enplaned O&D subtotal 3,488 3,482 6,969 45.1% 86.7% 59.4% Connecting 4,239 534 4,773 54.9 13.3 40.6
Total passengers 7,727 4,015 11,742 100.0% 100.0% 100.0%
Share of Dulles International Airport total Enplaned O&D 50.0% 50.0% 100.0% Connecting 88.8 11.2 100.0 Total passengers 65.8 34.2 100.0
Notes: Rows and columns may not add to totals shown because of rounding. Percentages were calculated based on unrounded numbers. Airline groups include code-sharing regional affiliates, if any. (a) Includes Continental Airlines and its code-sharing regional affiliates. (b) Resident enplaned O&D passengers are defined here as those passengers whose flight itineraries began at Dulles International Airport. (c) Visiting enplaned O&D passengers are defined here as those passengers whose flight itineraries began at airports other than Dulles International Airport. Sources: Metropolitan Washington Airports Authority records; U.S. DOT, Air Passenger Origin-Destination Survey, reconciled to Schedules T100 and 298C T1.
Airline Shares of Domestic Enplaned Passengers The number of domestic enplaned passengers at Dulles International Airport increased 1.6% in 2010 compared with the 2009 number. The number of enplaned passengers on United and its code-sharing affiliates increased 3.8%.
LCCs increased their share of domestic enplaned passengers at Dulles from 2.9% in 2000 to 15.4% in 2010. The increase is entirely attributable to the initiation of service at the airport by JetBlue in 2001, Southwest in 2006, and Virgin America in 2007.
Table 23 shows that the number of domestic enplaned passengers at Dulles International Airport decreased 2.8% in the first 7 months of 2011 relative to the same period of 2010, due largely to decreases for United, JetBlue, and Southwest.
A-75
Table 23 AIRLINE SHARES OF DOMESTIC ENPLANED PASSENGERS Dulles International Airport (passengers in thousands)
First 7 months Airline 2000 2007 2010 2010 2011 United/Continental 5,176 6,481 6,091 3,495 3,454 United 4,984 6,350 5,995 3,438 3,363 Continental 191 131 96 57 91 JetBlue - 777 576 325 290 Delta (a) 934 687 527 296 308 Southwest/AirTran 195 573 494 302 246 Southwest - 369 374 234 188 AirTran 195 204 120 68 58 American (b) 547 507 468 274 253 US Airways (c) 934 220 151 85 96 Virgin America - 27 232 134 131 Sun Country 353114 82 All other 68 9 11 6 5 Total 7,888 9,313 8,565 4,924 4,786
Airline share of total United/Continental 65.6% 69.6% 71.1% 71.0% 72.2% United 63.2 68.2 70.0 69.8 70.3 Continental 2.4 1.4 1.1 1.2 1.9 JetBlue - 8.3 6.7 6.6 6.1 Delta (a) 11.8 7.4 6.1 6.0 6.4 Southwest/AirTran 2.5 6.2 5.8 6.1 5.1 Southwest - 4.0 4.4 4.7 3.9 AirTran 2.5 2.2 1.4 1.4 1.2 American (b) 6.9 5.4 5.5 5.6 5.3 US Airways (c) 11.8 2.4 1.8 1.7 2.0 Virgin America - 0.3 2.7 2.7 2.7 Sun Country 0.4 0.3 0.2 0.2 0.0 All other 0.9 0.1 0.1 0.1 0.1 Total 100.0% 100.0% 100.0% 100.0% 100.0%
Note: “-“ represents zero. “0” represents a number less than 500. “0.0” represents a number less than 0.05%. Columns may not add to totals shown because of rounding. Percentages shown were calculated using unrounded numbers Passengers reported by regional affiliates are grouped with their respective code-sharing airlines. (a) Northwest is included with Delta for all years shown although its merger with Delta occurred in October 2008. (b) TWA is included as an affiliate of American in 2000, although American began reporting TWA passengers with its own in 2001. (c) America West is included with US Airways for all years shown, although its merger with US Airways occurred in September 2005. Source: Metropolitan Washington Airports Authority records.
A-76
Airline Shares of International Enplaned Passengers Between 2000 and 2010, the number of international enplaned passengers at Dulles International Airport increased an average of 4.3% per year, more than four times the rate of increase for domestic enplaned passengers. International passengers accounted for 27.1% of total enplaned passengers at the airport in 2010.
Table 24 shows that United and United Express accounted for 51.5% of international enplaned passengers at Dulles in 2010, up from 40.8% in 2000. Other U.S. airlines accounted for only 0.5% of international enplaned passengers at the airport. Foreign-flag airlines accounted for the remaining 48.0% of international enplaned passengers at the airport. Five foreign-flag airlines that did not serve Dulles in 2000 (Qatar Airways, South African Airways, KLM-Royal Dutch Airlines, Scandinavian Airlines (SAS), and Aer Lingus) together accounted for more than 12% of total international enplaned passengers at the airport in 2010. Among foreign-flag airlines, those based in Europe, Africa, and the Middle East together accounted for the largest share (36.5%) of international passengers at the airport in 2010, followed by airlines from the Caribbean and Latin America (5.5%), Asia (4.6%), and Canada (1.3%).
The number of international enplaned passengers at Dulles increased 4.0% in the first 7 months of 2011 relative to the same period of 2010.
Dulles International Airport is one of two main international gateways on the East Coast for United and some foreign-flag members of the Star Alliance; the other is Newark Liberty International Airport.* Star Alliance member US Airways operates international gateways at Philadelphia International Airport and Charlotte/Douglas International Airport which are substantially smaller than the international gateway operations at Dulles and Newark.
At Dulles International Airport, United and its United Express affiliates provide the domestic feed for flights to the United Kingdom and Europe operated by United, Lufthansa German Airlines, SAS, Austrian Airlines, and Turkish Airlines. Dulles also serves as a connecting gateway for Star Alliance flights to and from Canada (United), Japan (ANA), and Senegal and South Africa (South African Airways).
*The Star Alliance is one of three global airline alliances; the other two are oneworld and SkyTeam. The Star Alliance has 26 member airlines, 8 of which serve Dulles International Airport: United/Continental, US Airways, ANA, Austrian Airlines, Lufthansa, SAS, South African Airways, and Turkish Airlines.
A-77
Table 24 AIRLINE SHARES OF INTERNATIONAL ENPLANED PASSENGERS Dulles International Airport (passengers in thousands)
First 7 months Airline 2000 2007 2010 2010 2011 United (a) 850 1,495 1,635 935 962 Lufthansa (a) 167 204 176 96 100 British Airways 193 173 173 95 105 Air France 124 193 162 92 93 Qatar Airways - 26 103 57 58 TACA International 43 118 99 58 61 South African (a) -88814746 Korean Air 5064784548 Virgin Atlantic 115 104 76 44 42 KLM - 83 75 42 44 SAS (a) -66714138 All Nippon (a) 77 66 67 39 35 Austrian (a) 47 80 60 36 34 Ethiopian 8 42 56 31 50 Aer Lingus - 16 55 27 38 All other 408 143 209 126 130 Total 2,083 2,960 3,177 1,812 1,885
Airline share of total United (a) 40.8% 50.5% 51.5% 51.6% 51.1% Lufthansa (a) 8.06.95.55.35.3 British Airways 9.2 5.9 5.5 5.2 5.6 Air France 6.0 6.5 5.1 5.1 5.0 Qatar Airways - 0.9 3.2 3.2 3.1 TACA International 2.0 4.0 3.1 3.2 3.2 South African (a) - 3.0 2.5 2.6 2.5 Korean Air 2.4 2.2 2.5 2.5 2.5 Virgin Atlantic 5.5 3.5 2.4 2.4 2.2 KLM - 2.8 2.4 2.3 2.3 SAS (a) - 2.2 2.2 2.3 2.0 All Nippon (a) 3.72.22.12.11.9 Austrian (a) 2.32.71.92.01.8 Ethiopian 0.4 1.4 1.8 1.7 2.6 Aer Lingus - 0.5 1.7 1.5 2.0 All other 19.6 4.8 6.6 7.0 6.9 Total 100.0% 100.0% 100.0% 100.0% 100.0%
Notes: Columns may not add to totals shown because of rounding. Percentages shown were calculated using unrounded numbers. Passengers reported by regional affiliates are grouped with their respective code-sharing airlines. In 2010, "All other" included Air Canada, Copa, Saudi Arabia, Avianca, Iberia, Mexicana, Vision, Turkish, OpenSkies, JetBlue, Delta, Air India, and various charter airlines. (a) Members of the Star Alliance. Source: Metropolitan Washington Airports Authority records.
A-78
Figure 24 shows the composition of international traffic at Dulles International Airport in 2000 through 2010 by airlines in the Star Alliance and others. In 2010, United and its Star Alliance partners together accounted for 67% of international enplaned passengers at the airport. Between 2000 and 2010, the number of international passengers enplaned by United at Dulles nearly doubled. The Star Alliance airlines other than United showed no net growth in international enplaned passengers at Dulles over the decade. The number of international passengers enplaned by non-Star Alliance airlines at the airport increased 46% over the same period.
Figure 24 INTERNATIONAL ENPLANED PASSENGERS BY AIRLINE GROUP
3.5
3.0
2.5
2.0
(millions) 1.5
1.0 Enplaned passengers passengers Enplaned
0.5
0 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 United Other Star Alliance airlines All others Dulles International Airport
Notes: Includes revenue and nonrevenue passengers, both O&D and connecting, boarding international flights. Excludes passengers enplaned on general aviation and military flights. United includes passengers enplaned on United Express flights. Continental did not report any international passengers to the Airports Authority during the time period shown. Source: Metropolitan Washington Airports Authority records.
A-79
Domestic Market and Fare Trends Table 25 shows the top 15 domestic O&D markets at Dulles International Airport. West Coast cities rank higher at Dulles than at Reagan, and the major East Coast cities rank lower, reflecting the longer-haul passenger base at Dulles that results from provisions of the Perimeter Rule in effect at Reagan.
Between 2000 and 2010, the average fare paid for domestic flights at Dulles International Airport decreased 3.8%. Some individual markets served from Dulles were particularly responsive to lower airfares. Considerable reductions in average fares paid between Dulles and Los Angeles, San Francisco, and Las Vegas, for example, led to increased passenger numbers in those markets.
The reported average airfare data reflected in Table 25 are exclusive of many ancillary charges (fees for checked baggage and preferred aircraft seating, for example) that have become widespread in the airline industry since 2008. Therefore, average airfares as reported by the airlines to the U.S. DOT understate (by 10% or more) the amount paid by airline passengers.
International Passenger Market Trends Passengers bound for the United Kingdom, Europe, Africa, and the Middle East accounted for 71% of all international passengers at Dulles International Airport in 2010. Passengers bound for other world areas, however, while much smaller in number, have increased at a higher rate since 2000. Table 26 presents trends in passengers departing on international flights at Dulles International Airport (O&D, connecting, and “through” passengers combined) to the four major world areas served by the airlines from Dulles International Airport.*
The number of passengers to Canada was adversely affected by the 2008-2009 economic recession, while passenger traffic to the other parts of the world was less affected.
*Through passengers are those on a given flight who transit a given airport without deplaning. For this reason, numbers of departing passengers are typically greater than numbers of enplaning passengers (which exclude through passengers).
A-80
Table 25 PASSENGERS AND AIRFARES TO TOP DOMESTIC O&D CITY MARKETS Dulles International Airport
Domestic enplaned O&D passengers (in thousands) As percent Average annual percent 2010 City market of total increase (decrease) Rank Airport 2000 2007 2010 2000 2010 2000-2007 2007-2010 1 Los Angeles 332 531 552 7.1% 12.3% 6.9% 1.3% Los Angeles 302 347 438 6.4 9.8 2.0 8.1 Long Beach 1 136 64 0.0 1.4 115.4 (22.2) Orange County 19 19 28 0.4 0.6 (0.1) 13.2 Ontario 9 20 17 0.2 0.4 11.6 (4.8) Burbank 1 9 5 0.0 0.1 30.1 (20.7) 2 San Francisco (a) 293 451 496 6.3 11.1 6.4 3.2 3 Boston 289 259 264 6.2 5.9 (1.5) 0.6 4 Orlando 287 303 228 6.1 5.1 0.8 (9.1) 5 Chicago (b) 177 259 217 3.8 4.9 5.5 (5.7) 6 Denver 195 184 172 4.2 3.8 (0.8) (2.3) 7 Atlanta 431 219 155 9.2 3.5 (9.2) (10.9) 8 Las Vegas 41 202 129 0.9 2.9 25.5 (13.8) 9 New York (c) 236 177 122 5.0 2.7 (4.0) (11.8) 10 Dallas/Fort Worth (d) 175 130 119 3.7 2.7 (4.2) (2.8) 11 San Diego 79 157 117 1.7 2.6 10.3 (9.3) 12 Fort Lauderdale 106 145 109 2.3 2.4 4.6 (8.9) 13Seattle 8394911.82.0 1.8 (1.1) 14 Tampa 107 141 78 2.3 1.7 4.1 (18.0) 15 Houston (e) 50 61 61 1.1 1.4 3.0 0.0 Total---top 15 markets 2,879 3,312 2,908 61.4% 65.1% 2.0% (4.2%) All other markets 1,810 2,018 1,559 38.6 34.9 1.6 (8.2) Total---all markets 4,689 5,331 4,467 100.0% 100.0% 1.8% (5.7%) Average one-way fare paid (f) 2010 City market Percent increase (decrease) Rank Airport 2000 2007 2010 2000-2007 2007-2010 1 Los Angeles $315.56 $226.27 $207.89 (28.3%) (8.1%) Los Angeles 315.18 254.91 218.18 (19.1) (14.4) Long Beach 375.32 170.21 161.53 (54.6) (5.1) Orange County 340.25 188.87 176.00 (44.5) (6.8) Ontario 264.16 169.20 177.15 (35.9) 4.7 Burbank 366.95 171.82 175.74 (53.2) 2.3 2 San Francisco (a) 465.98 276.11 235.53 (40.7) (14.7) 3 Boston 113.30 105.13 97.54 (7.2) (7.2) 4 Orlando 103.55 99.16 107.08 (4.2) 8.0 5 Chicago (b) 165.72 113.58 140.37 (31.5) 23.6 6 Denver 282.69 225.59 241.75 (20.2) 7.2 7 Atlanta 119.41 136.27 141.90 14.1 4.1 8 Las Vegas 274.47 155.19 210.04 (43.5) 35.3 9 New York (c) 109.95 99.82 107.79 (9.2) 8.0 10 Dallas/Fort Worth (d) 246.64 188.66 214.57 (23.5) 13.7 11 San Diego 365.87 232.74 305.64 (36.4) 31.3 12 Fort Lauderdale 104.43 105.55 106.62 1.1 1.0 13 Seattle 383.57 288.73 279.69 (24.7) (3.1) 14 Tampa 114.29 105.37 145.84 (7.8) 38.4 15 Houston (e) 243.80 188.85 203.32 (22.5) 7.7 Average---top 15 markets $213.95 $175.57 $184.95 (17.9%) 5.3% All other markets 179.06 174.32 207.55 (2.7) 19.1 Average---all markets $200.49 $175.10 $192.84 (12.7%) 10.1%
Note: Columns may not add to totals shown because of rounding. Percentages were calculated using unrounded numbers. (a) Market includes San Francisco, Oakland, and San Jose airports. (b) Market includes O'Hare and Midway airports. (c) Market includes Kennedy, LaGuardia, and Newark airports. (d) Market includes Dallas/Fort Worth Airport and Love Field. (e) Market includes Bush and Hobby airports. (f) Average one-way fares shown exclude taxes, fees, passenger facility charges, and ancillary fees charged by the airlines. Source: U.S. DOT, Air Passenger Origin-Destination Survey, reconciled to Schedules T100 and 298C T1.
A-81
Table 26 HISTORICAL INTERNATIONAL PASSENGERS BY WORLD REGION Dulles International Airport (passengers in thousands)
Latin America Trans- Mexico and Total--- Year atlantic (a) Caribbean (b) Asia Canada all destinations 2000 1,723 101 118 17 1,959 2001 1,574 113 90 86 1,863 2002 1,629 142 105 116 1,992 2003 1,477 228 100 148 1,953 2004 1,665 292 119 176 2,253 2005 1,766 326 122 168 2,382 2006 1,846 393 133 202 2,574 2007 2,003 380 264 229 2,876 2008 2,128 393 260 214 2,995 2009 2,155 379 258 196 2,989 2010 2,180 400 278 204 3,061
Average annual percent increase (decrease) 2000-2010 2.4% 14.8% 8.9% 28.0% 4.6%
Annual percent increase (decrease) 2000-2001 (8.6%) 12.3% (23.7%) 394.3% (4.9%) 2001-2002 3.5 25.3 16.5 35.2 6.9 2002-2003 (9.3) 60.7 (4.5) 27.6 (1.9) 2003-2004 12.7 28.1 19.1 19.2 15.3 2004-2005 6.1 11.5 2.0 (4.5) 5.8 2005-2006 4.5 20.5 9.7 19.9 8.0 2006-2007 8.5 (3.2) 98.0 13.4 11.8 2007-2008 6.3 3.4 (1.6) (6.6) 4.1 2008-2009 1.2 (3.5) (0.6) (8.1) (0.2) 2009-2010 1.2 5.4 7.4 4.0 2.4
Notes: Rows may not add to totals shown because of rounding. Percentages were calculated using unrounded numbers. Departing passengers include O&D, connecting, and "through" passengers on scheduled and nonscheduled international flights. Not included are passengers who board domestic flights bound for U.S. gateway airports where they connect to international flights. (a) Includes the United Kingdom, Europe, Africa, and the Middle East. (b) Includes Mexico, Central America, South America, and the Caribbean. Source: U.S. DOT, Schedule T100.
A-82
Cargo Trends Dulles International Airport is an important cargo airport, ranking 12th among U.S. airports in terms of international cargo weight in 2010, according to data filed by the airlines with the U.S. DOT.
Figure 25 shows trends in total (enplaned plus deplaned) cargo weight at Dulles International Airport between 2000 and 2010. Cargo weight at the airport was 13% lower in 2010 than in 2000, mostly the result of a decrease in cargo weight carried by the all-cargo airlines.
Figure 25 HISTORICAL AIR CARGO WEIGHT BY PASSENGER AND ALL-CARGO AIRLINES Dulles International Airport
900
800
700
600
500
400
Air cargo weight cargo Air 300 millions ofpounds) (
200
100
0 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 Passenger airlines All-cargo airlines Notes: Sum of enplaned and deplaned air cargo. Excludes cargo carried on military and general aviation flights. Source: Metropolitan Washington Airports Authority records.
Table 27 shows that, between 2000 and 2010, domestic cargo weight at Dulles International Airport decreased 46%, while international cargo weight (virtually all carried by the passenger airlines) increased 42%. By 2010, 79% of the cargo weight carried by the passenger airlines was international cargo, up from 54% in 2000. Because the all-cargo airlines carry virtually no international cargo at the airport, they have not been able to offset the decline in domestic cargo experienced over the past decade.
A-83
Table 27 HISTORICAL AIR CARGO WEIGHT BY PASSENGER AND ALL-CARGO AIRLINES Dulles International Airport (cargo in thousands of pounds)
Domestic International Total Year Passenger All-cargo Total Passenger All-cargo Total Passenger All-cargo Total 2000 262,530 268,816 531,346 310,616 - 310,616 573,146 268,816 841,962 2001 199,223 251,920 451,143 272,368 112 272,480 471,591 252,032 723,623 2002 166,334 247,322 413,656 299,000 - 299,000 465,334 247,322 712,656 2003 143,071 210,893 353,964 271,323 179 271,502 414,394 211,071 625,466 2004 124,164 238,502 362,666 316,179 159 316,337 440,343 238,661 679,004 2005 103,668 238,168 341,835 319,259 481 319,741 422,927 238,649 661,576 2006 110,257 229,012 339,269 431,623 412 432,035 541,880 229,424 771,304 2007 116,042 237,574 353,616 433,710 557 434,267 549,753 238,131 787,883 2008 103,618 208,262 311,880 420,017 146 420,163 523,635 208,408 732,043 2009 94,234 176,688 270,922 372,527 279 372,806 466,760 176,967 643,728 2010 114,422 174,955 289,376 441,146 73 441,219 555,567 175,028 730,595
Average annual percent change 2000-2007 (11.0%) (1.7%) (5.7%) 4.9% n.a. 4.9% (0.6%) (1.7%) (0.9%) 2007-2010 (0.5) (9.7) (6.5) 0.6 (49.1) 0.5 0.4 (9.8) (2.5) 2000-2010 (8.0) (4.2) (5.9) 3.6 n.a. 3.6 (0.3) (4.2) (1.4)
Annual percent change 2009-2010 21.4% (1.0%) 6.8% 18.4% (73.7%) 18.4% 19.0% (1.1%) 13.5%
Share of Airport total 2000 31.2% 31.9% 63.1% 36.9% - 36.9% 68.1% 31.9% 100.0% 2007 14.7 30.2 44.9 55.0 0.1 55.1 69.8 30.2 100.0 2010 15.7 23.9 39.6 60.4 0.0 60.4 76.0 24.0 100.0
n.a.=not applicable. Notes: Sum of enplaned and deplaned freight and mail. Excludes air cargo carried on military and general aviation flights. Rows may not add to totals shown because of rounding. Percentages were calculated using unrounded numbers. Source: Metropolitan Washington Airports Authority records.
Cargo activity at Dulles is dominated by United and FedEx. Table 28 shows that their combined share of cargo weight at the airport increased from 63.1% in 2000 to 64.8% in 2010. The third-ranking airline, Lufthansa, accounted for 5.2% of the 2010 total.
Cargo weight at Dulles decreased 5.9% in the first 7 months of 2011 relative to the same period of 2010. The decrease was largely attributable to a 15% decrease in cargo weight handled by United.
A-84
Table 28 AIRLINE SHARES OF AIR CARGO WEIGHT Dulles International Airport (cargo in thousands of pounds)
First 7 months Airline 2000 2007 2010 2010 2011 United/Continental 347,720 323,563 321,879 190,632 162,630 United 340,934 319,512 317,759 188,191 160,773 Continental 6,786 4,051 4,120 2,441 1,858 FedEx 183,629 186,740 151,152 85,457 83,582 Lufthansa 29,177 46,974 37,949 22,030 19,751 British Airways 38,266 29,917 33,408 18,058 20,367 Air France 21,641 24,240 29,808 16,315 16,499 All Nippon 19,347 29,692 27,797 14,971 16,627 UPS 18,521 22,068 23,538 13,783 13,687 Qatar Airways - 9,685 21,904 12,752 12,038 SAS - 15,781 16,619 9,156 8,369 Virgin Atlantic 17,852 17,787 15,764 9,261 8,916 Austrian 8,195 15,409 10,573 6,066 6,058 South African - 4,798 10,481 6,253 5,710 KLM - 13,537 8,997 3,503 7,175 ABX(a) 28,945 28,764 - - - All Other 129,088 18,930 20,726 11,246 13,519 Total 842,381 787,883 730,595 419,485 394,927
Airline share of total United/Continental 41.3% 41.1% 44.1% 45.4% 41.2% United 40.5 40.6 43.5 44.9 40.7 Continental 0.8 0.5 0.6 0.6 0.5 FedEx 21.8 23.7 20.7 20.4 21.2 Lufthansa 3.5 6.0 5.2 5.3 5.0 British Airways 4.5 3.8 4.6 4.3 5.2 Air France 2.6 3.1 4.1 3.9 4.2 All Nippon 2.3 3.8 3.8 3.6 4.2 UPS 2.2 2.8 3.2 3.3 3.5 Qatar Airways - 1.2 3.0 3.0 3.0 SAS - 2.0 2.3 2.2 2.1 Virgin Atlantic 2.1 2.3 2.2 2.2 2.3 Austrian 1.0 2.0 1.4 1.4 1.5 South African - 0.6 1.4 1.5 1.4 KLM - 1.7 1.2 0.8 1.8 ABX (a) 3.4 3.7 - - - All Other 15.3 2.4 2.8 2.7 3.4 Total 100.0% 100.0% 100.0% 100.0% 100.0%
Notes: Rows may not add to totals shown because of rounding. Percentages were calculated using unrounded numbers. Sum of enplaned and deplaned freight and mail. Excludes air cargo carried on military and general aviation flights. Cargo weight reported by regional affiliates is grouped with each affiliate’s respective code-sharing airline. (a) ABX ceased service at Dulles International Airport in January 2009.
Source: Metropolitan Washington Airports Authority records.
A-85
Historical Aircraft Operations The number of commercial passenger and all-cargo aircraft operations at Dulles International Airport decreased an average of 3.0% per year between 2000 and 2010, compared with an average increase of 1.7% per year in the number of enplaned passengers over the same period.
Between 2000 and 2003, the number of passenger aircraft operations at Dulles decreased 33% and load factors increased above 70% for the first time. Over the next 2 years, passenger aircraft operations increased and the average number of seats per departure decreased, both of which were associated with Independence Air’s hubbing operation at the airport. In 2010, the average number of seats per departure and the load factor were 103 seats and 80.5%, respectively.
The number of all-cargo aircraft departures in 2010 was less than half the number in 2000. Despite a 1.6% average annual increase in average landed weight per all-cargo aircraft departure over the same period, the net result was that all-cargo aircraft landed weight in 2010 was 43% lower than in 2000.
KEY FACTORS AFFECTING FUTURE AIRLINE TRAFFIC In addition to the economy and demographics of the Airports service region and airline service at the Airports, as discussed earlier, key factors that will affect future airline traffic at the Airports include:
Economic and political conditions Financial health of the airline industry Airline service and routes Airfares and airline competition Airline consolidation and alliances Availability and price of aviation fuel Aviation safety and security concerns Capacity of the national air traffic control system Capacity of the Airports
Economic and Political Conditions Historically, airline passenger traffic nationwide has correlated closely with the state of the U.S. economy and levels of real disposable income. The 2008-2009 recession, and associated high unemployment and reduced discretionary income, contributed to reduced airline travel demand in those years. Airline travel demand strengthened in 2010, leading to a resumption of growth in airline passenger traffic.
With the globalization of business and the increased importance of international trade and tourism, growth in the U.S. economy has become more closely tied to worldwide economic, political, and social conditions. As a result, international economics, trade balances, currency exchange rates, political relationships, and hostilities increasingly affect levels of passenger traffic at U.S. airports. Sustained
A-86
future increases in passenger traffic will depend on generally stable social conditions and economic growth, both nationally and globally.
Political unrest in the Middle East and North Africa in 2011 affected international flows of capital and trade and depressed demand for certain geographic segments of international travel.
Financial Health of the Airline Industry The number of passengers using the Airports will depend partly on the profitability of the U.S. airline industry and the associated ability of individual airlines, particularly US Airways and United, to make the necessary investments to continue providing service.
Between 1995 and 2000, the airline industry was profitable, but as a result of the 2001 economic recession, the disruption of the airline industry that followed the September 2001 attacks, increased fuel and other operating costs, and price competition, the industry experienced huge financial losses. In 2001 through 2005, the major U.S. passenger airlines collectively recorded net losses of approximately $40 billion.
To mitigate those losses, all of the major network airlines restructured their route networks and flight schedules and reached agreement with their employees, lessors, vendors, and creditors to cut costs, either under Chapter 11 bankruptcy protection or the possibility of such. Between 2002 and 2005, US Airways, United Airlines, Delta Air Lines, Northwest Airlines, Hawaiian Airlines, ATA Airlines, Aloha Airlines, and Independence Air filed for bankruptcy protection.
In 2006 and 2007, the U.S. passenger airlines as a whole were profitable, but in 2008, as oil and aviation fuel prices increased to unprecedented levels, the airlines experienced a financial crisis. As a result, they grounded older, less fuel-efficient aircraft, adopted fuel-saving operating practices, hedged fuel requirements, reduced scheduled seat capacity, eliminated unprofitable routes, laid off employees, reduced employee compensation, reduced other nonfuel expenses, increased airfares, and imposed ancillary fees and charges. The U.S. passenger airlines collectively reduced domestic capacity (as measured by available seat-miles) approximately 4% in 2008 and an additional 8% in 2009 before increasing capacity 2% in 2010.
In 2010, the U.S. passenger airlines regained profitability by increasing capacity slightly, increasing airfares, achieving record-high load factors, controlling nonfuel operating expenses, and increasing ancillary revenues. Sustained industry profitability will depend on economic growth to support travel demand, reasonable fuel costs, and continued capacity restraint, among other factors. Any resumption of financial losses could cause U.S. airlines to seek bankruptcy protection or liquidate. The liquidation of one or more of the large network airlines could drastically affect airline service, particularly at certain connecting hub airports, present business
A-87
opportunities for the remaining airlines, and change airline travel patterns nationwide.
Airline Service and Routes The number of O&D passengers depends on the intrinsic attractiveness of the Airports service region as a business and leisure destination and the propensity of its residents to travel. The number of connecting passengers, on the other hand, depends on the airline service provided at the Airports and at other connecting hubs. Most legacy airlines have emphasized the development of hub-and-spoke route networks as a means of increasing their service frequencies, passenger numbers, and profitability.
As discussed in an earlier section, Reagan National Airport serves as a secondary connecting hub for US Airways, and Dulles International Airport serves as a primary connecting hub and international gateway for United Airlines. As a result, much of the connecting passenger traffic at the Airports results from the route networks and flight schedules of US Airways and United rather than the economy of the Airports service region. If US Airways were to reduce connecting service at Reagan National Airport or United were to reduce connecting service at Dulles International Airport, such service would not necessarily be replaced by other airlines, although reductions in service by any airline would create business opportunities for others.
Airfares and Airline Competition Airline fares have an important effect on passenger demand, particularly for relatively short trips for which the automobile and other travel modes are potential alternatives, and for price-sensitive “discretionary” travel. The price elasticity of demand for airline travel increases in weak economic conditions when the disposable income of potential airline travelers is reduced. Airfares are influenced by airline capacity and yield management; passenger demand; airline market presence; labor, fuel, and other airline operating costs; taxes, fees, and other charges assessed by government and airport agencies; and competitive factors. Future passenger numbers, both nationwide and at the Airports, will depend, in part, on the level of airfares.
Overcapacity in the industry, the ability of consumers to compare airfares and book flights easily via the Internet, and other competitive factors combined to reduce airfares nationwide between 2000 and 2005. During that period, the average domestic yield for U.S. airlines decreased from 14.9 cents to 12.7 cents per passenger-mile. In 2006 through 2008, as airlines reduced capacity and were able to sustain fare increases, the average domestic yield increased to 14.7 cents per passenger-mile. In 2009, yields again decreased, but in 2010, as travel demand increased, yields increased to 14.2 cents per passenger-mile. Between 2006 and 2010, new charges for services, such as checked baggage, in-flight meals, and preferred
A-88
seating, increased the effective price of airline travel more than these yield figures suggest.
Airline Consolidation and Alliances In response to competitive pressures, the U.S. airline industry has consolidated. In September 2005, US Airways and America West Airlines merged. In October 2008, Delta and Northwest Airlines merged. In October 2009, Republic Airways Holdings completed purchases of Frontier Airlines and Midwest Airlines and now operates the combined airline under the Frontier name.
In October 2010, United and Continental completed a merger transaction, thereby creating the largest airline in the world as measured by domestic and international seat-miles. The merged airline, which will operate under the United name, expects to integrate most of its operations by mid-2012. In May 2011, Southwest completed an acquisition of AirTran, thereby creating the largest U.S. domestic airline as measured by the number of enplaned passengers. It is expected that the FAA will issue a single operating certificate in early 2012, which will allow the operations of the two airlines to be integrated. Various other airline merger combinations have been rumored, including mergers involving US Airways. Any such further airline consolidation could change airline service patterns, particularly at the connecting hub airports of the merging airlines.
Alliances, joint ventures, and other marketing arrangements provide airlines with many of the advantages of mergers and all of the large U.S. network airlines are members of such alliances with foreign-flag airlines. Alliances typically involve marketing, code-sharing, and scheduling arrangements to facilitate the transfer of passengers between the airlines. Joint ventures involve even closer cooperation and the sharing of costs and revenues on certain routes.
Availability and Price of Aviation Fuel The price of aviation fuel is a critical and uncertain factor affecting airline operating economics. Fuel prices are particularly sensitive to worldwide political instability and economic uncertainty. Beginning in 2003, fuel prices increased as a result of the invasion and occupation of Iraq; political unrest in Nigeria and other oil-producing countries; the rapidly growing economies of China, India, and other developing countries; and other factors influencing the demand for and supply of oil. By mid-2008, average fuel prices were three times higher than they were in mid-2004 and represented the largest airline operating expense, accounting for between 30% and 40% of total expenses for most airlines. Increased fuel prices were an important contributor to airline industry losses in 2008 and 2009. Fuel prices fell sharply in the second half of 2008 as demand declined worldwide, but again increased in 2009 and 2010, partly as a result of a weakened U.S. dollar. In early 2011, political instability in North Africa and the Middle East contributed to further fuel price volatility.
A-89
Airline industry analysts hold differing views on how oil and aviation fuel prices may change in the near term. However, there is widespread agreement that fuel prices are likely to remain high relative to historical levels and to increase over the long term as global energy demand increases in the face of finite and increasingly expensive oil supplies.
Aviation fuel prices will continue to affect airline service, airfares, and passenger numbers. Airline operating economics will also be affected as regulatory costs are imposed on the airline industry as part of efforts to reduce aircraft emissions contributing to global climate change.
Aviation Safety and Security Concerns Concerns about the safety of airline travel and the effectiveness of security precautions influence passenger travel behavior and airline travel demand. Anxieties about the safety of flying and the inconveniences and delays associated with security screening procedures lead to both the avoidance of travel and the switching from air to surface modes of transportation for short trips.
Safety concerns in the aftermath of the terrorist attacks in September 2001 were largely responsible for the steep decline in airline travel nationwide in 2002. Since 2001, government agencies, airlines, and airport operators have upgraded security measures to guard against changing threats and maintain confidence in the safety of airline travel. These measures include strengthened aircraft cockpit doors, changed flight crew procedures, increased presence of armed sky marshals, federalization of airport security functions under the Transportation Security Administration (TSA), more effective dissemination of information about threats, more intensive screening of passengers and baggage, and deployment of new screening technologies.
Public health and safety concerns have also affected air travel demand from time to time. In 2003, concerns about the spread of severe acute respiratory syndrome (SARS) led public health agencies to issue advisories against nonessential travel to certain regions of the world. In 2009, concerns about the spread of influenza caused by the H1N1 virus reduced international travel, particularly to and from Mexico and Asia. In April 2010, airspace and airports in much of Europe were closed for 6 days because of the threat to flight safety from the eruption of Iceland’s Eyjafjallajökull volcano and the subsequent ash cloud. In March 2011, travel demand to and from Japan declined following a destructive earthquake and tsunami.
Historically, airline travel demand has recovered after temporary decreases stemming from terrorist attacks or threats, hijackings, aircraft crashes, public health and safety concerns, and international hostilities. Provided that precautions by government agencies, airlines, and airport operators serve to maintain confidence in the safety of commercial aviation without imposing unacceptable inconveniences for airline travelers, it can be expected that future demand for airline travel at the Airports will depend primarily on economic, not safety or security, factors.
A-90
Capacity of the National Air Traffic Control System Demands on the national air traffic control system have, in the past, caused delays and operational restrictions affecting airline schedules and passenger traffic. The FAA is gradually implementing its Next Generation Air Transport System (NextGen) air traffic management programs to modernize and automate the guidance and communications equipment of the air traffic control system and enhance the use of airspace and runways through improved air navigation aids and procedures. After September 2001, and again in 2008 and 2009, air traffic delays decreased as a result of reduced numbers of aircraft operations, but, as air travel demand strengthens, increased flight delays and restrictions may again be expected.
Capacity of the Airports In addition to any future constraints that may be imposed by the capacity of the national air traffic control system, future growth in airline traffic at Reagan National Airport will be affected by constrained airport facilities and by the restrictions imposed by the High Density Rule and the Perimeter Rule. At Dulles International Airport, existing terminal and airfield capacity are believed to be sufficient to accommodate growth in airline traffic through the forecast period to 2016.
AIRLINE TRAFFIC FORECASTS Forecasts of airline traffic at the Airports through 2016 were developed on the basis of the economic outlook for the Airports service region, trends in historical airline traffic, and key factors likely to affect future traffic, all as discussed earlier in this report. Forecasts for the Airports included in the FAA's Terminal Area Forecast (TAF), issued in December 2010, were also reviewed.
In developing the forecasts in this report, it was assumed that, over the long term, airline traffic at the Airports will increase as a function of growth in the economy of the Airports service region and continued airline competition. It was assumed that airline service at the Airports will not be constrained by the availability of aviation fuel, the capacity of the air traffic control system or the Airports, charges for the use of aviation facilities, or, except for the Perimeter and High Density Rules at Reagan National Airport, government policies or actions that restrict growth.
The traffic forecasts for both Airports were developed on the basis of the assumptions that, beginning in 2012:
1. The U.S. economy will experience sustained growth in gross domestic product averaging between 2.0% and 2.5% per year, somewhat below historical average growth rates.
2. The economy of the Airports service region will grow at a higher rate than the U.S. economy as a whole.
A-91
3. The airlines serving the Airports will be financially viable and provide the seat capacity required to accommodate additional passenger demand.
4. Competition among airlines serving the major markets at each of the Airports will ensure the continued availability of competitive airfares.
5. A generally stable international political environment and enhanced passenger and baggage screening procedures will maintain airline traveler confidence in aviation security without imposing unreasonable inconvenience.
6. There will be no material disruption of airline service or passenger travel behavior as a result of international hostilities or terrorist acts or threats.
7. The respective roles of Reagan National Airport, Dulles International Airport, and Baltimore/Washington Airport in accommodating domestic and international airline service will be unchanged.
Forecast Passengers for Reagan National Airport Year-to-date and advance schedule filings by the airlines indicate a 5.5% increase in the number of departing seats at Reagan National Airport between 2010 and 2011, (compared with a nationwide increase of 1.4%).* On the basis of year-to-date passenger traffic reports and advance airline schedules, the number of enplaned passengers at the airport is forecast to be approximately 9.5 million in 2011, up 4.6% from the number in 2010.
In forecasting enplaned passengers at Reagan National Airport through 2016, it was assumed that:
Any future changes to the High Density and Perimeter rules will result in no material increase in the number of landing and takeoff slots.
Any trading of slots among Delta, US Airways, or other airlines will result in no material change in overall airline service.
US Airways, whether as an independent airline or as part of a larger merged airline, will continue to operate the airport as a secondary hub in its route network.
Passenger load factors and aircraft seating capacities will gradually increase.
*Advance published flight schedules for US Airways do not reflect its possible acquisition from Delta of a substantial number of slots at Reagan National Airport.
A-92
In 2012 through 2016, the number of enplaned passengers at Reagan is forecast to increase an average of 0.9% per year, similar to the average rate of growth forecast for the airport by the FAA in the TAF over the same period (1.0% per year).
The number of enplaned passengers at Reagan is forecast to be approximately 10.0 million in 2016. Connecting passengers are forecast to account for a similar share of enplaned passengers in 2016 (17.2%) as they did in 2010 (17.5%). Figure 26 presents the forecasts of enplaned passengers graphically. Table 29 presents historical and forecast enplaned passengers at the airport by O&D and connecting components, and provides domestic and international subtotals.
Figure 26 HISTORICAL AND FORECAST ENPLANED PASSENGERS Reagan National Airport
This forecast was prepared on the basis of the information and assumptions given in the text. The achievement of any forecast is dependent upon the occurrence of future events which cannot be assured. Therefore, the actual results may vary from the forecast, and the variance could be material.
12 Historical Forecast
10
8
6 (millions)
4 Enplaned passengers
2
0 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 Enplaned O&D Connecting Sources: Historical: Metropolitan Washington Airports Authority records. Forecast: LeighFisher, July 2011.
A-93
ers g O&D Enplaned ers g 98.5 82.8 98.4%98.798.4 88.8% 98.198.1 89.9 98.1 92.2 98.0 88.6 98.4 87.3 98.4 86.3 98.5 83.2 98.4 82.7 80.5 81.8 98.7% 82.5 98.698.6 82.6% 98.698.5 82.7 82.7 82.8 82.8 an National Airport an National Percent oftotal Domestic passen passen nonrevenue passengers, nonrevenue . ependent upon the nue passengers. nue passengers. ers g 2.2 0.9 1.7 4.6% 1.4% 7,855 6,564 6,460 7,102 7,952 8,909 9,240 9,294 8,978 8,767 9,036 9,450 9,655 9,765 9,850 9,940 , reconciled to Schedules T100 and 10,025 Total passen domestic flights at Reag lights, and nonreve ers g 2.3 1.0 1.8 4.7% 0.7% 6,979 5,958 6,290 6,946 7,685 7,691 7,688 7,226 7,173 7,454 7,807 7,987 8,080 8,151 8,228 8,303 5,901 Total passengers on charter flights, passen enplaned O&D enplaned 83 Total hts g g 9 hts 1.7 7.0 1.61.7 2.9 0.6 5.4% 1.1% 171122 129 3135 104 47 131 26 155 29 173 24 185 29 149 141 29 133 30 144 3031 125 31 134 32 138 142 146 150 Air Passenger Origin-Destination Survey Origin-Destination Air Passenger g fli ers enplaned ers ted using unrounded numbers. g Connectin ned O&D passengers that boarded Passen on international fli international on (b)
&D Table 29 Table 29 O Enplaned domestic from rcentages were calcula Reagan National Airport National Airport Reagan Total e annual percent increase (decrease) increase percent e annual g hts g g Avera 859492 7,726791975 6,356 112 6,971 7,797 93 110 124 653 6,480 74 1.5 2.1 8.7 0.81.4 0.9 1.8 3.3 0.4 total 11, 2011. 2011. 11, y ton Airports Authority records; U.S. DOT, from: g 9 l connections, if any. if any. l connections, O&D passengers on scheduled flights, along with small numbers of hts g HISTORICAL AND FORECAST ENPLANED PASSENGERS PASSENGERS ENPLANED AND FORECAST HISTORICAL fli Connectin ers enplaned on domestic fli domestic on enplaned ers g hts g hFisher, accessed Jul accessed hFisher, fli g Passen ) a ( &D &D O Enplaned Domestic International Connectin bound for international destinations via other U.S. gateway airports, passengers on nonsch eduled (charter) f Category includes international and international-to-internationa Category includes domestic enplan ed O&D passengers, international enpla (b) Sources: Historical: Metropolitan Washing 298C T1. Forecast: Lei Forecast: T1. 298C Notes: Excludes passengers enplaned on general aviation and military flights. Rows may not add tot totals shown because of rounding. Pe (a) 2011-2012 2.2 1.5 1.8 2012-20162010-2016 0.9 1.8 0.8 1.4 1.7 1.7 Forecast 2010-2011 5.1% 4.0% 1.7% 4.0% 4.9% (17.2%) 1.8% (13.4%) Year Historical 2000 6,867 843 16 Historical 2000-2010 0.7% 6.1% 5.3% 6.1% 1.4% 0.3% 2001200220032004 5,8272005 5,8652006 6,1802007 6,822 644 2008 7,547 4792009 7,553 7672010 7,565 940 1,150 7,114Forecast 1,455 13 7,0632011 1,548 24 7,3392012 1,687 35 2013 40 1,5422014 47 7,711 1,5252015 32 7,8832016 35 7,973 1,190 1,586 28 8,040 1,502 1,610 27 8,114 1,580 1,626 8,737 8,184 1,723 1,639 9,054 1,571 28 1,651 9,146 1,552 28 1,661 138 8,836 29 139 8,634 29 1,614 123 8,891 30 1,638 112 30 1,655 109 9,325 1,668 116 9,521 1,680 9,627 1,691 9,708 96 104 9,794 107 9,875 111 115 118 This forecast was prepared on the basis of information and assumptions given and in the text. The of information is on the of any achievement d basis forecast was prepared forecast This which of cannot be results occurrence vary Therefore,actual future events assured. and may the the could bevariance material
A-94
Forecast Aircraft Operations and Landed Weight for Reagan National Airport Table 30 shows forecasts of aircraft operations and landed weight at Reagan National Airport, which were derived from the passenger forecasts based on assumed trends in average seat occupancy, aircraft seat capacity, and aircraft size.
Between 2010 and 2016, the airlines serving Reagan National Airport were assumed to increase aircraft seating capacity and passenger load factors slightly, so that, while the number of enplaned passengers is forecast to increase an average of 1.7% per year, the number of aircraft operations is forecast to increase an average of 1.2% per year. Landed weight at Reagan National Airport is forecast to increase an average of 1.6% per year, reflecting assumed increases in average aircraft size.
Forecast Passengers for Dulles International Airport Advance flight schedules indicate a 1.7% reduction in the number of departing seats at Dulles International Airport for the full year 2011. This decrease compares with an estimated 1.4% increase in seats nationwide. Scheduled departing seats on United (including Continental) for 2011 show a 1.1% decrease at the airport (less than the 2.9% systemwide capacity reduction guidance provided by the airline).
On the basis of year-to-date passenger traffic reports and advance airline schedules, the number of enplaned passengers at Dulles in 2011 is forecast to be approximately 11.7 million, down 0.8% from the number enplaned in 2010.
In forecasting enplaned passengers at Dulles through 2016, it was assumed that:
United, following its merger with Continental, will continue to operate a domestic hub and international gateway at the airport.
The role of the airport as the primary provider of domestic long-haul and international airline service for the region served by the Airports and BWI will be unchanged.
No change will occur to the competitive position of the airport relative to competing U.S. airports as a gateway for international passengers.
A-95
1, 2011. 2011. 1, n.a. 0.7 1.0 5.6% 1.6 Total 12,400 10,962 10,113 10,834 11,472 12,832 12,996 12,720 12,686 12,069 12,095 12,767 12,895 13,014 13,115 13,197 13,280 (0.2%) ht g material. material. o ependent g - - All-car er g Total landedwei (millions of pounds) Passen o - 10,962 - - 12,400 - --- 10,113- 10,834- 11,472- 12,832 - 12,996 - 12,720 ------0.7 1.6 0.1 - 1.0 - 5.6% 0.5% Guides, Inc., accessed June 2 g ht g All-car er g . landedwei n.a. n.a. n.a. n.a. g 0.4 0.4 0.4 v A may vary and could be the variance Passen (b) l a t 0.3 1.2 0.6 o unrounded numbers. Aircraft (pounds) departure per operations Schedule T100; Official Schedule T100; Airline Total o g - 0.3 - 0.6 e annual percent increase (decrease) increase percent e annual Table 30 Table 30 g All-car Avera were calculated based on er g Reagan National Airport National Airport Reagan be assured. Therefore,be assured. results the actual 0.7% n.a. 0.7% 0.7% (0.9%) n.a. (0.3%) n.a. 1.1 0.1 1.1 0.3 0.6 5.1% 0.5% 5.1% 5.3% 0.4% Passen eT g
Avera seats perseats departures Aircraft departure ington Airports Authority; U.S. DOT, ington Airports Authority; d military flights. d military g 2011. y 1.6 0.7 1.0 5.5% (0.7%) seats ) a ( hFisher, Jul g actor actor f ers g HISTORICAL AND FORECAST AIRCRAFT DEPARTURES AND LANDED WEIGHT WEIGHT AND LANDED AIRCRAFT DEPARTURES AND FORECAST HISTORICAL 7,8555,551 59.1% 58.4% 13,293 9,511 107 108 123,990 88,102 - - 123,990 88,102 247,980 176,204 100,009 6,5646,4607,1027,952 n.a. 61.8%8,909 64.3%9,240 65.7% 10,4549,294 n.a. 68.1% 11,0418,978 70.4% 12,0968,767 98 72.0% n.a. 13,0789,036 89 69.9% 13,124 91 71.1% 106,169 12,900 103,499 96 72.6% 124,2149,450 12,853 96 132,8939,655 12,330 96 136,322 -9,765 12,438 - 72.0% 95 136,312 -9,850 72.8% 93 134,819 -9,940 106,169 103,499 72.9% 13,128 94 135,483 - 124,214 73.0% 13,265 132,608 - 132,893 73.2% 13,390 132,589 212,337 - 136,322 94 206,997 85 13,485 248,428 198 136,312 95 13,575 265,785 199 134,819 95 139,400 135,568 272,644 95 132,806 105,912 140,200 95,254 272,623 96 132,788 140,900 87,221 200 269,638 141,400 86,324 271,105 200 265,611 141,700 94,134 200 139,600 265,177 95,342 200 140,400 94,347 200 141,100 93,510 279,200 90,714 141,600 280,800 90,928 141,900 198,000 198,000 282,200 198,000 283,200 91,304 12,669 283,800 12,029 91,692 198,000 12,056 92,080 198,000 92,467 17 198,000 39 92,855 12,728 198,000 39 12,855 198,000 12,974 40 13,075 40 13,158 40 40 40 Enplaned Load Departin passen Rows maynottotals add to shown. Percentages Historical: MetropolitanHistorical: Wash Forecast: Lei
: s Load factor calculation based on enplaned calculation factor passengersLoad passengers. excludes and “through” departures. and arrivals of Sum aircraft Based on data for January through August 2001. This forecast was prepared on the basis of information and assumptions given and in of information the istext. The on the of any basis achievement d wasforecast prepared forecast This upon the occurrence of future events which cannot 2010-2016 1.7 2012-2016 0.9 Year Historical 2000 2001 (c) Historical 2000-2010Forecast 1.4% 2010-2011 4.6% 2011-2012 2.2 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 Forecast 2011 2012 2013 2014 2015 2016 10,025 73.4% 13,663 96 142,000 200 142,200 284,400 93,243 198,000 13,241 40 n.a. = available not n.a. Notes: an Excludes general aviation (a) (b) (c) Source
A-96
The number of enplaned passengers is forecast to increase 1.4% in 2012, to approximately 11.8 million. Between 2012 and 2016, the number of enplaned passengers is forecast to increase an average of 2.6% per year. This rate of increase is lower than the average rate for the airport forecast by the FAA in the TAF for the same period (4.9% per year).
The number of enplaned passengers at Dulles International Airport is forecast to be approximately 13.1 million in 2016 (9.1 million domestic, plus 4.0 million international). Connecting passengers are forecast to account for approximately the same share of total enplaned passengers in 2016 (41.0%) as they did in 2010 (40.6%). Figure 27 presents the enplaned passenger forecasts graphically. Table 31 presents historical and forecast enplaned passengers at Dulles by O&D and connecting components and provides domestic and international subtotals.
Figure 27 HISTORICAL AND FORECAST ENPLANED PASSENGERS Dulles International Airport
This forecast was prepared on the basis of the information and assumptions given in the text. The achievement of any forecast is dependent upon the occurrence of future events which cannot be assured. Therefore, the actual results may vary from the forecast, and the variance could be material.
16
Historical Forecast 14
12
10
8 (millions) 6 Enplaned passengers 4
2
0
Enplaned O&D Connecting Sources: Historical: Metropolitan Washington Airports Authority records. Forecast: LeighFisher, July 2011.
A-97
ers g O&D Enplaned ers g 77.2 63.9 76.279.6 70.7 70.7 76.3 70.7 79.1%78.0 70.7% 70.6 75.9 63.7 81.7 64.8 73.7 61.6 73.0 59.7 72.9 59.4 71.7%71.0 59.3% 59.1 70.6 59.1 70.3 59.1 70.0 59.0 69.8 59.0 Percent of total of Percent rial. rial. sult of Independence es International ependent upon Domestic passen passen nonrevenue passengers, nonrevenue nonrevenue passengers. ers g 8,366 8,515 9,972 8,920 1.4 2.6 1.8 11,392 11,324 12,274 13,396 11,858 11,547 11,742 11,650 11,815 12,095 12,415 12,740 13,075 Total , reconciled to Schedules T100 and , passen ers g 1.2 2.5 1.7 (0.9%) (0.8%) (0.1%) 1.6% 5,915 6,022 7,048 7,813 7,284 8,005 8,677 6,302 7,309 6,891 6,969 6,905 6,986 7,151 7,336 7,520 7,709 Total passen enplaned O&D enplaned passengers on charter flights, heduled (charter) flights and 3.6 3.7 3.9 Total hts g ssengers that boarded domestic flights at Dull g 702 2,310 584 1,995 575653 1,961 2,018 675 2,083 901 2,595 774 2,449 5.5% 4.3% 3.5 3.5 3.5 3.5% 3.9% hts g fli ers enplaned ers Air Passenger Origin-Destination Survey Origin-Destination Air Passenger g Connectin Passen e actual results may vary and the variance could results be mate and the variance e may vary actual ) on international fli on international c (
Table 31 Table 31 3.6 3.8 4.2 &D O Enplaned from domestic eway airports, passengers on nonsc Dulles International Airport 2.1 1.1 0.4 e annual percent increase (decrease) increase percent e annual Total g Avera hts g g 2.4 1.5 1.2 total on Airports Authority records; U.S. DOT, from: HISTORICAL AND FORECAST ENPLANED PASSENGERS PASSENGERS ENPLANED AND FORECAST HISTORICAL g l connections, if any. if any. l connections, hts O&D passengers on scheduled flights, along with small numbers of g fli Connectin ers enplaned on domestic fli ) g a - 3.5 ( ts gh i Passen fl (b) , ) a ( &D &D Enplaned Domestic International Connectin O 298C T1. Forecast: LeighFisher, July 2011. 2011. July LeighFisher, Forecast: T1. 298C Rows may not add to totals shown because of rounding. Percentages were calculated based on unrounded numbers. and international–to-internationa Category includes international Air reporting irregularities.Air reporting Category includes domestic enplaned O&D passengers, international enplaned O&D pa Airport bound for international destinations via other U.S. gat Domestic enplaned O&D passengers may be overstated and domestic-to-domestic connections understated in 2004 and 2005 as the re This forecast was prepared on the basis of information and assumptions given and in the istext. The of any achievement d of information forecast on the basis was prepared forecast This the occurrence of future events which cannot be Therefore, th assured. 2007 5,895 2,399 1,019 3,418 9,313 1,918 1,042 2,960 20042005 6,397 7,002 1,912 3,177 706 768 2,617 3,945 9,015 10,947 1,607 1,675 2012-2016 2.0 1.8 3.5 2003 4,504 1,288 580 1,867 6,372 1,410 2011-2012 (0.1) 20012002 4,916 4,657 1,462 1,187 581 654 2,043 1,841 6,959 6,498 1,386 1,365 Forecast 2010-2011 (3.0%) (4.4%) 3.5% (1.9%) (2.5%) 4.1% Historical 2000 5,640 1,592 656 2,249 7,888Historical 1,408 2000-2010 (1.3%) 4.4% 5.8% 4.9% 0.8% 3.7% Year 2008 5,298 2,364 1,081 3,445 8,743 2,011 1,104 3,115 2006 5,590 2,308 899 3,208 8,797 1,694 2010-2016 0.8 0.4 3.5 2009 4,892 2,425 1,113 3,538 8,430 1,999 1,118 3,117 2010 4,947 2,460 1,158 3,618 8,565 2,023 1,155 3,177 Forecast 2011 4,800 2,352 1,198 3,550 8,350 2,105 1,195 3,300 20122013 4,793 4,871 2,352 2,380 1,240 1,284 3,592 3,664 8,385 8,535 2,193 2,280 1,237 1,280 3,430 3,560 2014 4,971 2,426 1,328 3,754 8,725 2,365 1,325 3,690 2015 5,071 2,474 1,375 3,849 8,920 2,449 1,371 3,820 2016 5,179 2,524 1,423 3,947 9,125 2,531 1,419 3,950 (c) (b) Notes: Excludes passengers on general aviation and military flights. (a) Sources: Historical: Metropolitan Washingt
A-98
Forecast Domestic Enplaned Passengers Between 2010 and 2011, the number of passengers enplaned on domestic flights at Dulles International Airport is forecast to decrease 2.5% to 8.35 million. Year-to-date and advance published flight schedules show a 3.5% reduction in domestic departing seats for 2011 relative to 2010, and passenger load factors are forecast to increase slightly.
Airline domestic seat capacity reductions at Dulles are expected to continue in the first half of 2012, before capacity is again added in the second half of the year. For the year as a whole, the number of passengers enplaned on domestic flights at the airport is forecast to remain unchanged.
Between 2012 and 2016, the number of passengers enplaned on domestic flights at Dulles International Airport is forecast to increase an average of 2.1% per year.
Forecast International Enplaned Passengers Between 2010 and 2011, the number of passengers enplaned on international flights at Dulles International Airport is forecast to increase 3.9% to 3.3 million. Year-to- date and advance published flight schedules show a 2.9% increase in international departing seats in 2011 relative to 2010, and passenger load factors are forecast to increase slightly.
In 2012, the number of passengers enplaned on international flights is forecast to increase an additional 3.9% to 3.4 million.
Between 2012 and 2016, the number of passengers enplaned on international flights at Dulles is forecast to increase an average of 3.6% per year.
Forecast Aircraft Operations and Landed Weight for Dulles International Airport Table 32 shows forecasts of aircraft operations and landed weight at Dulles International Airport, which were derived from the passenger forecasts based on assumed trends in average seat occupancy, aircraft seat capacity, and aircraft size.
Between 2010 and 2016, increases in the numbers of aircraft operations and seats are forecast to average 1.4% and 1.6% per year, respectively, compared with a 1.8% per year forecast increase in the number of enplaned passengers. The number of all- cargo aircraft operations is forecast to increase an average of 1.5% per year.
A-99
Total 0.7% 1.2 2.5 1.6 17,382 17,573 16,579 15,141 19,161 20,413 18,669 20,074 19,523 18,812 18,905 18,565 18,795 19,215 19,715 20,220 20,735 (1.8%) ht g o g All-car . er ependent upon the g Total landed wei (millions of pounds) (millions d June 21, 2011. 2011. 21, June d Passen o g - 1.2 - - 2.5 2.8 ht g All-car er g 0.1 0.1 0.0 1.6 1.5 0.1 . landed wei . landed 95,475 257,344 18,550 611 87,817 222,230 16,781 792 91,766 296,944 19,752 662 g v A Passen (b) l 1.1 1.4 2.4 a t o Aircraft (pounds) per departure operations OPERATIONS AND LANDED WEIGHT WEIGHT AND LANDED OPERATIONS Total Table 32 Table 32 o g e annual percent increase (decrease) increase percent e annual g All-car Avera er Dulles International Airport g 1.1 - 1.1 1.4 1.5 1.4 2.4 2.8 2.4 (2.9%) (6.9%) (3.0%) (3.0%) 4.0% 1.6% 1.0% (5.5%) (2.2%) (2.2%) (2.2%) (2.2%) 0.4% 0.1% (1.8%) (2.1%) the number of arrivals is equivalent to the number of departures. Passen and 2005 were due to Independence Air. (passengers and seats in thousands) and seats in thousands) (passengers eT g Avera seats per Aircraft departures departure g 2011. 2011. 1.6 1.2 2.5 (1.0%) (1.8%) y seats ) a (
hFisher, Jul hFisher, g actor f HISTORICAL AND FORECAST AIRCRAFT AND FORECAST HISTORICAL ers g 8,515 64.3% 13,245 93 142,153 2,357 144,510 289,020 111,868 287,290 15,902 677 8,920 n.a. n.a. n.a. 160,613 3,192 163,805 327,609 103,728 226,247 16,660 722 9,972 61.7% 16,168 85 191,093 3,564 194,657 389,314 8,366 70.9% 11,794 92 127,643 2,330 129,973 259,945 113,791 264,492 14,525 616 11,324 70.2% 16,122 83 194,292 2,374 196,666 393,332 13,396 75.8% 17,679 82 215,239 2,228 217,467 434,934 Rows may not add to totals shown because of rounding. Percentages were calculated using unrounded numbers. Forecast: Lei Forecast: Enplaned Load Departin passen Load factor calculation is based on enplaned passengers and excludes “through” passengers. Sum of aircraft arrivals and departures, assuming The elevated levels of passenger activity in 2004 (c) (c) n.a.=not available. n.a.=not available. Notes: Excludes general aviation and military flights. (a) (c) (b) Sources: Historical: Metropolitan Airports Washington Authority; Airline U.S. DOT, Schedule Guide,T100; Official Inc, accesse 2000-2010 1.6% 2012-2016 2.6 2010-2016 1.8 2002 2001 Year Historical 2000 Historical 2003 Forecast 2010-2011 (0.8%) 2011-2012 1.4 2004 2005 2006200720082009 11,3922010 12,274Forecast 11,858 77.1%2011 11,547 78.2%2012 11,742 76.5% 14,7712013 77.9% 15,6882014 80.0% 11,650 15,4972015 96 11,815 14,824 1002016 12,095 14,669 103 80.9% 153,265 12,415 103 81.0% 156,678 12,740 103 81.1% 14,405 150,239 2,054 13,075 2,111 81.2% 14,582 144,136 2,091 81.2% 155,319 14,913 142,289 104 158,789 1,653 81.3% 15,298 104 152,330 1,738 15,689 104 139,200 145,789 310,637 16,092 104 317,578 140,800 144,027 104 1,700 304,660 143,800 104 1,700 291,577 147,400 140,900 1,750 288,053 151,000 118,134 142,500 124,377 1,800 154,700 145,550 274,304 126,138 1,850 277,839 281,800 149,200 127,522 1,900 273,438 285,000 152,850 129,700 18,106 261,368 291,100 156,600 19,487 259,837 298,400 18,951 130,209 563 305,700 18,381 587 130,335 313,200 260,000 18,455 572 130,460 260,000 432 130,586 260,000 452 130,712 18,125 260,000 130,838 18,351 260,000 18,760 442 260,000 19,248 442 19,738 455 20,241 468 481 494 This forecast was prepared on the basis of information and assumptions given and in the istext. The of any achievement d of information forecast on the basis was prepared This forecast occurrence of future events which be of cannot results occurrence vary Therefore,actual future events assured. and may the the could bevariance material
A-100
An estimated 1.8% decrease in total landed weight is forecast at the airport in 2011. Thereafter, the forecast of landed weight generally follows the same pattern as the forecast of enplaned passengers. Between 2011 and 2016, total landed weight is forecast to increase an average of 2.5% per year. In 2016, landed weight is forecast to be 20.7 billion pounds, up from 18.9 billion pounds in 2010.
Forecast Passengers for Both Airports Figure 28 shows that the number of enplaned passengers at Reagan National Airport and Dulles International Airport together is forecast to increase an average of 1.8% per year between 2012 and 2016. Given the regulatory restrictions at Reagan National Airport, Dulles International Airport is forecast to accommodate most of the traffic growth at the two Airports.
Figure 28 HISTORICAL AND FORECAST ENPLANED PASSENGERS FOR BOTH AIRPORTS Reagan National and Dulles International Airports
This forecast was prepared on the basis of the information and assumptions given in the text. The achievement of any forecast is dependent upon the occurrence of future events which cannot be assured. Therefore, the actual results may vary from the forecast, and the variance could be material.
28 Historical Forecast 24 Both Airports: 1.8% per year
20 Dulles: 2.3% per year 16
12 (millions)
8 Enplaned passengers Reagan: 1.2% per year 4
0
Reagan Dulles Note: Percentages shown in figure represent average annual percent increase for 2012 through 2016. Sources: Historical: Metropolitan Washington Airports Authority records. Forecast: LeighFisher, July 2011.
A-101
Stress Test Forecasts Stress test forecasts of enplaned passengers were developed to provide the basis for conducting a test of the Airports Authority’s financial results to hypothetical reductions in passenger numbers, such as could occur under conditions of economic recession, restricted seat capacity, high airfares, and reduced connecting airline service.
In the stress test forecasts, a weaker economic recovery than that envisioned for the baseline forecasts was assumed to occur, resulting in reduced numbers of O&D passengers. Additionally, connecting service at Dulles and (to a lesser extent) Reagan was hypothesized to be reduced as a result of changes in the network strategies of United and US Airways, respectively, resulting in reduced numbers of connecting passengers.
For Reagan National Airport, the number of enplaned passengers in 2016 is forecast to be 8.0 million, compared with 10.0 million in the baseline forecast. In 2016, the number of enplaned passengers forecast for the stress test is 20% lower than in the baseline forecast—16% lower for O&D passengers and 42% lower for connecting passengers. O&D passengers account for approximately 88% of the 2016 total in the stress test forecast, compared with 83% in the baseline forecast.
For Dulles International Airport, the number of enplaned passengers in 2016 is forecast to be 9.2 million, compared with 13.1 million in the baseline forecast. In 2016, the number of enplaned passengers is 30% lower than in the baseline forecast—9% lower for O&D passengers and 59% lower for connecting passengers. O&D passengers account for approximately 76% of the 2016 total in the stress test forecast, compared with 59% in the baseline forecast.
Table 33 presents the stress test forecasts relative to the baseline forecasts. Figure 29 and Figure 30 depict the stress test forecasts graphically for Reagan National Airport and Dulles International Airport, respectively.
A-102
Table 33 BASE CASE AND STRESS TEST PASSENGER FORECASTS Reagan National and Dulles International Airport (passengers in thousands)
This forecast was prepared on the basis of the information and assumptions given in the text. The achievement of any forecast is dependent upon the occurrence of future events which cannot be assured. Therefore, the actual results may vary from the forecast, and the variance could be material.
Actual Forecast 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 Reagan Base case Total enplaned passengers 9,294 8,978 8,767 9,036 9,450 9,655 9,765 9,850 9,940 10,025 O&D enplaned passengers 7,688 7,226 7,173 7,454 7,807 7,987 8,080 8,151 8,228 8,303 Connecting passengers 1,606 1,751 1,595 1,581 1,643 1,668 1,685 1,699 1,712 1,723 Stress test Total enplaned passengers 9,294 8,978 8,767 9,036 9,450 8,700 8,000 8,000 8,000 8,000 O&D enplaned passengers 7,688 7,226 7,173 7,454 7,807 7,400 7,000 7,000 7,000 7,000 Connecting passengers 1,606 1,751 1,595 1,581 1,643 1,300 1,000 1,000 1,000 1,000 Percent reduction from Base Total enplaned passengers - (9.9%) (18.1%) (18.8%) (19.5%) (20.2%) O&D enplaned passengers - (7.3) (13.4) (14.1) (14.9) (15.7) Connecting passengers - (22.1) (40.7) (41.1) (41.6) (41.9)
Dulles Base case Total enplaned passengers 12,274 11,858 11,547 11,813 11,650 11,815 12,095 12,415 12,740 13,075 O&D enplaned passengers 7,813 7,309 6,891 7,040 6,905 6,986 7,151 7,336 7,520 7,709 Connecting passengers 4,460 4,549 4,656 4,773 4,745 4,829 4,944 5,079 5,220 5,366 Stress test Total enplaned passengers 12,274 11,858 11,547 11,813 11,650 10,450 9,200 9,200 9,200 9,200 O&D enplaned passengers 7,813 7,309 6,891 7,040 6,905 6,986 7,000 7,000 7,000 7,000 Connecting passengers 4,460 4,549 4,656 4,773 4,745 3,464 2,200 2,200 2,200 2,200 Percent reduction from Base Total enplaned passengers - (11.6%) (23.9%) (25.9%) (27.8%) (29.6%) O&D enplaned passengers - - (2.1) (4.6) (6.9) (9.2) Connecting passengers - (28.3) (55.5) (56.7) (57.9) (59.0)
Notes: Excludes passengers on general aviation and military flights. Columns may not add to totals shown because of rounding. Percentages were calculated using unrounded numbers. Sources: Historical: Metropolitan Washington Airports Authority records; U.S. DOT, Air Passenger Origin-Destination Survey, reconciled to Schedules T100 and 298C T1. Forecast: LeighFisher, July 2011.
A-103
Figure 29 BASE CASE AND STRESS TEST PASSENGER FORECASTS Reagan National Airport
This forecast was prepared on the basis of the information and assumptions given in the text. The achievement of any forecast is dependent upon the occurrence of future events which cannot be assured. Therefore, the actual results may vary from the forecast, and the variance could be material.
14 Historical Forecast 13
12
11
10
(millions) 9
8 Enplaned passengers 7
6
5
Base enplaned passengers Base enplaned O&D passengers Stress enplaned passengers Stress enplaned O&D passengers
Sources: Historical: Metropolitan Washington Airports Authority records; U.S. DOT, Air Passenger Origin-Destination Survey, reconciled to Schedules T100 and 298C T1. Forecast: LeighFisher, July 2011.
A-104
Figure 30 BASE CASE AND STRESS TEST PASSENGER FORECASTS Dulles International Airport
This forecast was prepared on the basis of the information and assumptions given in the text. The achievement of any forecast is dependent upon the occurrence of future events which cannot be assured. Therefore, the actual results may vary from the forecast, and the variance could be material.
14 Historical Forecast 13
12
11
10
(millions) 9
8 Enplaned passengers 7
6
5
Base enplaned passengers Base enplaned O&D passengers Stress enplaned passengers Stress enplaned O&D passengers
Sources: Historical: Metropolitan Washington Airports Authority records; U.S. DOT, Air Passenger Origin-Destination Survey, reconciled to Schedules T100 and 298C T1. Forecast: LeighFisher, July 2011.
A-105
FINANCIAL ANALYSIS
FRAMEWORK FOR AIRPORTS AUTHORITY’S FINANCIAL OPERATIONS The Airports Authority operates the Airports through the Aviation Enterprise Fund with a staff of approximately 1,400, including police and fire employees. The financial operations of the Aviation Enterprise Fund are accounted for separately for each of the two Airports and for consolidated functions provided for both Airports and the Dulles Corridor Enterprise. Consolidated functions account for approximately 240 staff positions.
Indenture The financial operations of the Aviation Enterprise Fund are governed in large part by the Indenture authorizing the issuance of Airport System Revenue Bonds. As described in the letter at the beginning of this report, the Airports Authority covenants in the Rate Covenant of the Indenture that it will fix and adjust fees and charges for the use of the Airports so as to ensure that all funding requirements of the Indenture are met and that Net Revenues are at least 125% of Annual Debt Service.
The Indenture also prescribes the application of Revenues and Designated Passenger Facility Charges to the funds and accounts established under the Indenture, as described in the later sections “Application of Revenues” and “Application of Designated Passenger Facility Charges.”
Airline Agreement The Airports Authority and airlines accounting for most of the passengers and landed weight at the Airports have entered into agreements that provide, among other things, for the use and occupancy of the Airports; the methodologies for calculating Signatory Airline rentals, fees, and charges according to cost-recovery principles; and the majority-in-interest (MII) rights of the Signatory Airlines to approve certain capital expenditures.
The Airline Agreement provides that the Airports Authority may adjust airline rates to include Extraordinary Coverage Protection Payments to ensure that Net Revenues at each of the Airports are projected to be not less than 125% of the sum of Debt Service on Bonds and Subordinated Bonds, so ensuring that Net Revenues are not less than the 125% debt service coverage requirement of the Rate Covenant. The Airline Agreement has been amended to exclude revenues from the Dulles Toll Road from the definition of Revenues.
The Airports Authority shares Net Remaining Revenues (NRR) each year with the Signatory Airlines according to an allocation methodology set out in the Airline Agreement. In 2007 through 2010, the annual amount of NRR averaged approximately $110 million, shared approximately 40% to the Airports Authority
A-106
and 60% to the Signatory Airlines. The historical and forecast amounts of NRR and its sharing is shown in Exhibit F-1 and discussed in the later section “Sharing of Net Remaining Revenues.”
The Airports Authority’s share of NRR is deposited into the General Purpose Fund and, at the beginning of the next year, transferred into the Capital Fund. Amounts in the Capital Fund may be used at the discretion of the Airports Authority to pay, among other things, the costs of Capital Construction Program, other capital improvements, major maintenance and repair projects, equipment acquisitions, and other improvements and operating initiatives.
The Signatory Airlines’ share of NRR is deposited into the General Purpose Fund and, at the beginning of the next year, deposited into the Airline Transfer Account and used to reduce rentals, fees, and charges in such year.
The Airline Agreement is scheduled to expire in September 2014, unless the Airports Authority exercises its unilateral right to terminate sooner. Such right may be exercised, upon 180 days notice, to terminate the Airline Agreement in September 2012 or September 2013. A Signatory Airline may terminate its Airline Agreement only if the Airports Authority issues Bonds for a project costing more than $25 million after an MII disapproval of such project.*
For purposes of this report, it is assumed that the provisions of the Airline Agreement relating to the calculation of rentals, fees, and charges will continue in effect through the forecast period, and that the Signatory Airlines will pay all such rentals, fees, and charges.
In 2004, the Airports Authority and United agreed to terminate an earlier agreement under which the Tier 2 concourse at Dulles International Airport was to be constructed and leased by United. In consideration of this termination, United reimbursed the Airports Authority for certain planning and design costs.
Capital, Operating and Maintenance Investment Program The Airports Authority’s Capital, Operating and Maintenance Investment Program (COMIP) provides for various maintenance projects, repairs, equipment acquisitions, improvements, and planning studies as well as the cost of the snow removal program and certain operating initiatives. For 2011, the Airports Authority budgeted $32.3 million for new COMIP authorization to be funded from the Capital Fund. In the financial forecasts, it was assumed that the Airports Authority’s share
*MII is defined in the Airline Agreement to mean, for each of the two Airports, for the Airfield Cost Center, 50% in number of Signatory Airlines and Signatory Cargo Carriers accounting for 60% of the landed weight of such airlines, and for other Signatory Airline Supported Areas, 50% of Signatory Airlines accounting for 60% of terminal rentals, fees, and charges.
A-107
of NRR transferred to the Capital Fund will be adequate to fund all required COMIP costs.
CAPITAL CONSTRUCTION PROGRAM The major projects in the 2001-2016 Capital Construction Program that are to be funded in part from the proceeds of the 2011AB New Money Bonds and planned 2012 Bonds and 2013 Bonds are listed in Exhibit A. Exhibit A also presents estimated project costs and sources of funding. Each of the sources of funding are discussed in the following sections.
Commercial Paper Notes Exhibit A shows the estimated permanent sources of funding for the 2001-2016 CCP. Certain of these amounts will require interim funding pending the receipt of the permanent funding. The Airports Authority has authorized a commercial paper program to provide such interim funding in an aggregate principal amount not to exceed $500 million at any time. The payment of principal and interest on Commercial Paper Notes is secured by Net Revenues and any other pledged funds on a parity with outstanding Bonds.
The Airports Authority has in place credit facilities allowing draws of up to $271 million of Commercial Paper Notes (up to $250 million of Series One Notes and up to $21 million of Series Two Notes). As of July 1, 2011, $88.5 million of Commercial Paper Notes were outstanding. The Airports Authority plans to refund all but $38.5 million of the outstanding Commercial Paper Notes with the proceeds of the Series 2011A Bonds.
Federal and State Grants The Airports Authority is eligible to receive grants-in-aid from the FAA under the Airport Improvement Program (AIP) for up to 75% of the costs of eligible projects. Certain of these grants are to be received as “entitlement” grants, the annual amount of which is calculated on the basis of the number of enplaned passengers and the amount of landed weight of all-cargo aircraft at the Airports. Other, “discretionary” grants are awarded on the basis of the FAA’s determination of the priorities for projects at the Airports and at other airports nationwide. Between 2000 and 2010, the Airports Authority received an annual average of approximately $10.0 million of AIP entitlement and discretionary grants.
The FAA issues letters of intent (LOIs) for multi-year grants, expressing the FAA’s intention to obligate funds from future federal budget appropriations. The Airports Authority has received LOI commitments totaling $211.8 million for projects in the 2001-2016 CCP at Dulles, including $200.2 million to fund design and construction of Runway 1L-19R and associated taxiways. As of May 2011, $157.9 million in such LOI funds had been received.
A-108
The AIP grant program is subject to periodic reauthorization by Congress. Under current federal legislation, the FAA’s authority to issue new AIP grants to the Airports Authority is also subject to specific Congressional approval. (AIP grants under approved LOIs are not subject to such approval.) The future AIP grants incorporated in Exhibit A were estimated on the assumption that Congress will take the requisite action to allow such grants to be issued.
The Airports Authority has requested LOIs from the Transportation Security Administration (TSA) under which the TSA is expected to pay $113.8 million of the costs of in-line baggage screening equipment and systems at Reagan National Airport and $195.4 million of the costs of such equipment and systems at Dulles International Airport. As of May 2011, $36.6 million in such LOI funds had been received for the Dulles systems.
The Commonwealth of Virginia provides grants to Virginia airport operators. In 2000 through 2010 the Airports Authority received an annual average of approximately $2 million in such state grants and expects to receive similar amounts though 2016.
PFC Revenues The Airports Authority has received approval from the FAA to impose and use a PFC per eligible enplaned passenger at both Airports. Beginning November 1993 at Reagan National Airport, and January 1994 at Dulles International Airport, the PFC was $3.00. Effective May 2001, the PFC was increased to $4.50 at both Airports. Under approvals received from the FAA, the Airports Authority is authorized to impose a PFC and to use up to $3.043 billion of PFC Revenues on approved projects including Runway 1L-19R, the expansion of the IAB, the extension of Concourse B, the construction of the AeroTrain system, and the Dulles Metrorail station. In March 2009, the FAA approved the use of PFC Revenues to pay certain of the principal and interest on Bonds used to fund the AeroTrain and related projects. The approved PFC collection periods extend to March 2015 for Reagan and December 2038 for Dulles. Table 34 shows the Airport’s approved PFC collection and use authority.
Exhibit F-2 presents historical and forecast sources of PFC Revenues at the Airports. PFC Revenues derived from the imposition of the $4.50 PFC at Dulles International Airport (but not at Reagan National Airport) are defined as Designated Passenger Facility Charges. As discussed in the later section “Application of Designated Passenger Facility Charges,” the Airports Authority has committed or intends to commit certain of such Designated Passenger Facility Charges to pay PFC Eligible Bond debt service.
As shown in Exhibit F-2, PFC collections through 2018 are forecast to be sufficient to pay PFC Eligible Bond debt service and to provide $200.0 million of pay-as-you-go funding for the PFC-eligible portion of the costs of the Dulles Metrorail station. As shown, certain of such pay-as-you-go funding is expected to require interim
A-109
financing through the issuance of Commercial Paper Notes repayable from PFC revenues. All debt service and pay-as-you-go payments for the Airports Authority’s contribution to the costs of the Dulles Metrorail station are to be made from PFC Revenues.
Table 34 PFC COLLECTION AND USE AUTHORITY Metropolitan Washington Airports Authority (as of December 31, 2010)
PFC Reagan Dulles Application National International Total 1a, 1b $166,410,356 $ 221,916,682 $ 388,327,038 2a, 2b 131,397,000 72,508,092 203,905,092 3a, 3b 30,727,768 58,903,463 89,631,231 4b, 4a 146,603,508 2,089,325,913 2,235,929,421 5 124,914,400 -- 124,914,400 Total PFC collection and use authority $3,042,707,182 Less: PFC collections through December 31, 2010 998,659,464 Remaining collection authority as of December 31, 2010 $2,044,047,718
Source: Metropolitan Washington Airports Authority.
Airport System Revenue Bonds Exhibit B presents the estimated sources and uses of the proposed 2011A-E Bonds and the planned 2012 Bonds and 2013 Bonds. Assumptions, as provided by Jefferies & Company, Inc., the Airports Authority’s financial advisor are as follows:
The 2011A Bonds are being issued as variable-rate bonds in the principal amount of approximately $234 million to (1) pay $68 million of the costs of the 2001-2016 CCP, (2) refund $50 million of outstanding Commercial Paper Notes, (3) provide for capitalized interest on the 2011A Bonds and prior Bonds, (4) along with other available funds, refund $114 principal amount of outstanding 2002C Bonds and 2009A Bonds, and (5) pay costs of issuance.
The 2011B Bonds are being issued as variable-rate bonds in the principal amount of approximately $208 million to (1) pay $104 million of the costs of the 2001-2016 CCP, (2) along with other available funds, refund the remaining $127 principal amount of the 2002C Bonds, and (3) pay costs of issuance.
The 2011C Bonds (AMT) are being issued as fixed-rate bonds in the principal amount of approximately $165 million to (1) along with other available funds, refund $168 principal amount of outstanding 2001A Bonds, and (2) pay costs of issuance. The Airports Authority may also issue 2011C Bonds to refund certain of
A-110
the outstanding 1998B Bonds. No such refunding of 1998B Bonds was assumed for this report.
The 2011D Bonds (Non-AMT) are being issued as fixed-rate bonds in the principal amount of approximately $11 million to (1) along with other available funds, refund $11 principal amount of outstanding Series 2001B Bonds, and (2) pay costs of issuance.
The Airports Authority may also issue 2011E Bonds as fixed-rate taxable Bonds to refund certain of the 1998B Bonds and 2001A Bonds. The principal amount of any such 2011E Bonds would reduce by a similar amount the principal of 2011C Bonds. No such issuance of 2011E Bonds was assumed for this report.
The planned 2012 Bonds are assumed to be issued effective September 2012 as fixed-rate bonds in the principal amount of approximately $60 million to (1) pay $43 million of costs of the 2001-2016 CCP, (2) provide for capitalized interest on the planned 2012 Bonds and prior Bonds, (3) fund a deposit to the Debt Service Reserve Fund, and (4) pay costs of issuance.
The planned 2013 Bonds are assumed to be issued effective September 2013 as fixed-rate bonds in the principal amount of approximately $113 million to (1) pay $83 million of completion costs of the 2001-2016 CCP, (2) provide for capitalized interest on the planned 2013 Bonds and prior Bonds, (3) fund a deposit to the Debt Service Reserve Fund, and (4) pay costs of issuance.
The Airports Authority may issue additional Refunding Bonds during the forecast period to achieve debt service savings. However, no such issuance of Refunding Bonds was assumed.
ANNUAL DEBT SERVICE Exhibit C-1 presents historical and forecast Annual Debt Service. Forecast amounts are as estimated using the following assumptions as provided by Jefferies & Company, Inc., the Airports Authority’s financial advisor:
Commercial Paper Notes: Principal amount of $38.50 million, amortization over 30 years with level annual payments of principal and interest, interest rate of 5.62% for the $21.00 million tax-exempt portion, and interest rate of 6.00% for the $17.50 million taxable portion.
Outstanding Variable-Rate Bonds Subject to Floating-to-Fixed Interest Rate Swaps: Principal amounts of $134.72 million of 2009D Bonds and $103.25 million of 2010C Bonds subject to the 2006 Swap Agreements, interest rate of 4.10%; and $170.00 million of 2010D Bonds subject to the 2006 Swap Agreements, interest rate of 4.11%.
A-111
Outstanding Unhedged Variable-Rate Bonds: Principal amount of $66.35 million of 2003D Bonds and $66.75 million of 2010C Bonds, interest rate of 4.00%.
Proposed 2011A Variable-Rate Bonds: Principal amounts of $125.00 million of 2011A Bonds subject to the 2005 Swap Agreements, interest rate of 3.86%; $51.66 million of 2011A Bonds subject to the 2001 Swap Agreements, interest rate of 4.45%; and $56.98 million of 2011A Bonds subject to the 2006 Swap Agreements, interest rate of 4.10%.
Proposed 2011B Variable-Rate Bonds: Principal amount of $207.64 million, interest rate of 4.00%.
Proposed 2011C AMT Fixed-Rate Bonds: Principal amount of $165.43 million, interest rate of 4.94%.
Proposed 2011D Non-AMT Fixed-Rate Bonds: Principal amount of $10.79 million, interest rate of 4.58%.
Planned 2012 Fixed-Rate Bonds: Principal amount of $59.77 million, amortization over 30 years with level annual payments of principal and interest, interest rate of 6.50%.
Planned 2013 Fixed-Rate Bonds: Principal amount of $113.47 million, amortization over 30 years with level annual payments of principal and interest, interest rate of 6.50%.
OPERATION AND MAINTENANCE EXPENSES Exhibit D-1 presents historical and forecast Operation and Maintenance (O&M) Expenses for the Airports Authority’s Aviation Enterprise. O&M Expenses include all expenses of the Airports Authority paid or accrued for the operation, maintenance, administration, and ordinary current repairs of the Airports. Such expenses include those directly attributable to the Airports and an allocable portion of expenses for consolidated functions. O&M Expenses do not include, among other things, rentals payable under the Federal Lease or operating expenses of the Dulles Corridor Enterprise. Exhibits D-2 and D-3 present the O&M Expenses for Reagan and Dulles, respectively.
A-112
O&M Expenses were forecast, using estimates in the Airports Authority’s 2011 budget as a base, taking into account assumed increases in costs as a result of inflation and forecast increases in passenger enplanements, planned facility development, and other assumptions. In particular, the following assumptions were adopted for the forecast period:
1. The unit cost of salaries, wages, and employee fringe benefits for life and health insurance and retirement benefits will increase an average of 3.0% per year and there will be no overall increase in staffing.
2. The cost of utilities and other materials and supplies will also increase an average of 3.0% per year.
3. Expenses to operate and maintain the AeroTrain system, which became fully operational in January 2010 (and offsetting savings in mobile lounge expenses), are fully reflected in the 2011 budget. Accordingly, no incremental AeroTrain expenses were assumed.
4. Other Airport facilities to be developed under the CCP and opened in 2012 through 2014, including completion of the IAB at Dulles and the in-line baggage screening systems at both Airports, will not have a material incremental effect on operating and maintenance expenses.
5. All operating and maintenance expenses will be funded through the O&M Expense budget. (In 2009 and earlier years, up to approximately $5 million of such expenses were funded from the Airports Authority’s share of NRR through the COMIP budget.)
REVENUES Exhibit E-1 presents historical and forecast Revenues of the Aviation Enterprise. Revenues of the Airports Authority are derived primarily from rentals, fees, and charges paid for the use and occupancy of the Airports, including landing fees, terminal rents, and other charges payable by Signatory Airlines under the Airline Agreement, public parking revenues, and fees paid by companies for the right to operate concessions. Table 35 summarizes 2010 Revenues according to major category.
A-113
Table 35 2010 REVENUE SUMMARY Metropolitan Washington Airports Authority (dollars in thousands)
Reagan National Dulles International Airport Airport Total % of % of % of Amount Total Amount Total Amount total Airline revenues Terminal rents and user fees $ 80,656 36.3% $110,889 31.4% $191,545 33.3% Landing and apron fees 40,143 18.1 61,495 17.4 101,638 17.7 International Arrival Building fees -- 0.0 18,013 5.1 18,013 3.1 Passenger conveyance fees -- 0.0 6,653 1.9 6,653 1.2 $120,799 54.3% $197,049 55.8% $317,848 55.3% Concessions Landside concession revenues (a) $ 60,451 27.2% $ 65,265 18.5% $ 125,716 21.9% In-terminal concession revenues 19,276 8.7 31,552 8.9 50,829 8.8 Airside concession revenues 1,481 0.7 15,966 4.5 17,447 3.0 $ 81,209 36.5% $109,417 32.0% $193,992 33.7% Other operating revenues $ 14,673 6.6% $31,710 9.0% $ 46,384 8.1% Investment earnings $ 5,589 2.5% $ 11,403 3.2% $ 16,991 3.0% Total $222,270 100.0% $352,945 100.0% $575,215 100.0%
Notes: Columns and rows may not add to totals shown because of rounding. (a) Includes public automobile parking stated net of expenses and management fees. Source: Metropolitan Washington Airports Authority.
Individual components of Revenues, shown for Reagan in Exhibit E-2 and for Dulles in Exhibit E-3, were forecast taking into account historical results through 2010, budget estimates for 2011, allowances for unit price inflation at 2.0% per year, planned facility development, and the provisions of the Airline Agreement and other leases and agreements with tenants and users of the Airports.
Revenues from sources related to passengers, such as parking and terminal concessions, and from sources related to aircraft activity, such as landing fees, were forecast to change in part as a function of the traffic forecasts shown in Tables 29 through 32 in the earlier section “Airline Traffic Forecasts.”
AIRLINE REVENUES Signatory Airline Rentals, Fees, and Charges Exhibits E-4 and E-5 show, for Reagan and Dulles respectively, the historical and forecast calculation of rentals, fees, and charges payable by the Signatory Airlines under the provisions of the Airline Agreement. The Airports Authority calculates and adjusts such rentals, fees, and charges annually, but may adjust them at mid-year or at any other time in the event the Indenture requires such an
A-114
adjustment. Exhibits E-4 and E-5 also show aggregate Signatory Airline payments per enplaned passenger.
Signatory Airline rentals, fees, and charges are calculated for each of the Airports from the Total Requirement as allocable to the Cost Centers and Sub-Centers within the Airline Supported Areas listed on Exhibits E-4 and E-5.* The Total Requirement of each such Cost Center and Sub-Center is the sum of allocable O&M Expenses, deposits into funds and accounts required under the Indenture, Capital Charges (including Debt Service), Debt Service Coverage, Federal Lease payments, and the requirements of the Indirect Cost Centers (Maintenance, Public Safety, Systems and Services, and Administration). The Airline Agreement defines Debt Service Coverage as an amount equal to 25% of the portion of Debt Service attributable to Senior Bonds and Subordinated Bonds plus such other amounts as may be established by any financing agreement or arrangement with respect to other indebtedness.
In total, the rentals, fees, and charges paid by the Signatory Airlines recover their pro rata share of the Total Requirements of the Airline Supported Areas net of the Signatory Airline share of Net Remaining Revenues (NRR). Revenues of the Airports Authority from other (nonairline) sources cover the Total Requirements of the Non-Aviation Cost Centers including the allocable portion of the requirements of the Indirect Cost Centers and the unrecovered portion of the Total Requirements of the Airline Supported Areas.
Under the Airline Agreement, if Revenues are not projected to be sufficient at either or both of the Airports to produce Net Revenues of at least 125% of the sum of Debt Service on Bonds and Subordinated Bonds, then the Airports Authority may adjust the Total Requirements in Airline Supported Areas, at either or both Airports, by requiring Extraordinary Coverage Protection Payments to ensure that the 125% coverage requirement of the Rate Covenant is met. No such Extraordinary Coverage Protection Payments are forecast to be required.
CONCESSION REVENUES Public Parking Table 36 shows the number of public parking spaces and parking rates at the Airports. Parking rates were last increased effective June 1, 2008.
*Certain capitalized terms in this section of the report are as defined in the Airline Agreement.
A-115
Table 36 AIRPORT PUBLIC PARKING FACILITIES Metropolitan Washington Airports Authority (as of July 2011)
Number of spaces Parking rates Reagan National Garage A 1,371 $2 per half-hour for first 2 hours $4 per hour for next 2 hours $20 per day Garage B/C 5,249 Hourly $2 per half-hour for first 2 hours $4 per hour for next 6 hours $36 per day Daily $5 per hour, $20 per day Economy 2,483 $3 per hour, $12 per day Total 9,103 Dulles International Hourly Lot 1,923 $4 per hour, $36 per day Daily Garage 1 4,680 $4 per half-hour, $17 per day Daily Garage 2 3,645 $4 per half-hour, $17 per day Economy 16,131 $5 per hour, $10 per day Valet 830 $30 for first day $19 each additional day Total 27,209
Source: Metropolitan Washington Airports Authority.
The parking facilities at both Airports are operated for the Airports Authority by Five Star Parking under a management agreement that commenced in June 2010 and extends through June 2013. Under the management agreement, all parking operating costs are reimbursed to the operator, who receives a fixed management fee (adjusted annually for inflation). The parking revenues shown in Exhibits E-1, E-2, and E-3 are the net revenues received by the Airports Authority (gross receipts less operating expenses and management fees).
In 2010, net parking revenues were $27.7 million at Reagan National Airport, equivalent to $3.71 per originating passenger, and $45.7 million at Dulles International Airport, equivalent to $6.49 per originating passenger. There is little competition from off-airport operators at either Airport.
Parking revenues were forecast assuming that:
1. Parking revenues at Dulles will be reduced slightly from $46.5 million ($6.73 per originating passenger) as budgeted for 2011 to $45.4 million
A-116
($6.49 per originating passenger) in 2012 to reflect changing parking patterns at the airport.
2. Parking revenues at Reagan will be increased approximately in proportion to originating passenger numbers from $28.6 million ($3.66 per originating passenger) as budgeted for 2011 to $29.2 million ($3.65 per originating passenger) in 2012.
3. Parking rates will not be increased during the forecast period.
4. In 2013 and thereafter, the existing supply of parking spaces at the Airports will be adequate to allow parking transactions to increase from 2012 numbers in proportion to forecast increases in originating passengers, and parking revenues per originating passenger will remain at estimated 2012 amounts.
5. Parking facilities will continue to be operated under management agreements with financial terms substantially the same as the current agreement.
Rental Cars As of June 2011, on-Airport rental car companies provided service at the Airports as follows:
Reagan National Airport Dulles International Airport Avis Avis Budget Budget Enterprise Dollar/Thrift y Hertz/Advanta ge Enterprise Vanguard (Alamo/National) Hertz/Advanta ge Vanguard (Alamo/National)
Avis Budget Group, Inc. and Hertz Global Holdings have made competing bids to acquire the Dollar Thrifty Automotive Group. In August 2011, Dollar Thrifty advised that it intends to solicit best and final definitive proposals from the two bidders for submission in October 2011. It was assumed that any such acquisition or other consolidation of rental car companies will have no material effect on rental car operations or revenues at the Airports.
The rental car companies operate at the Airports under the terms of competitively bid concession agreements. At Reagan, the rental car concession agreements became effective in June 2011 and expire in May 2016. At Dulles, the agreements became effective in July 2008 and expire in June 2013. Under the concession agreements, the rental car companies pay the greater of a minimum annual guarantee, which is adjusted annually, or 10% of their gross receipts. The agreements provide for a
A-117
waiver of the minimum annual guarantee under specified conditions of drastically reduced passenger traffic or other disruptions to business.
At Reagan, off-airport rental car companies pay a privilege fee of 8% of gross receipts. As of July 2011, Dollar/Thrifty was the only off-airport rental car company providing service. At Dulles, off-airport rental car companies pay 4% of gross receipts in excess of $300,000. As of July 2011, no off-airport rental car companies provided service.
In 2010, revenues received by the Airports Authority from rental car operations at Reagan totaled $28.2 million, $3.78 per originating passenger. Under the provisions of the new rental car agreement that became effective in June 2011, rental car revenues at Reagan are expected to decrease. Airports Authority staff forecast that, for 2012, such revenues will be $20.5 million, $2.57 per originating passenger. At Dulles, rental car revenues in 2010 were $16.1 million, $2.29 per originating passenger, and are expected to remain at approximately the same amount per originating passenger in 2011 and 2012. Rental car revenues were forecast to increase from the 2012 estimates in proportion to the forecast increase in originating passengers and with inflation.
The Airports Authority imposes a customer contract fee of $2.50 per day on on-airport rental car transactions at Reagan. Revenues from the customer contract fee are used to pay debt service on bonds issued to fund the construction of rental car facilities at the airport. The adequacy of such customer contract fee revenues to meet the debt service requirements of the bonds was not evaluated in this report.
Food and Beverage At Reagan National Airport, approximately 40 food and beverage outlets occupy 36,000 square feet of terminal space. In 2010, gross revenues from food and beverage concessions totaled $49.2 million, $5.45 per enplaned passenger. Net revenues received by the Airports Authority were $7.6 million, equivalent to 15.4% of gross revenues.
At Dulles International Airport, approximately 50 food and beverage outlets occupy 52,500 square feet of terminal space. In 2010, gross revenues from food and beverage concessions were $62.6 million, $5.30 per enplaned passenger. Net revenues received by the Airports Authority were $8.9 million, equivalent to 14.2% of gross revenues. Increased revenues at Dulles in 2008 and 2009 reflected the opening of new outlets as part of the expansion of Concourse B.
Westfield Concession Management, Inc. manages the food and beverage programs at both Airports under master developer agreements that expired in December 2010. Pending the completion of the evaluation of proposals for new concession management contracts, the agreements with Westfield have been extended through December 2011. Under the agreements, Westfield develops and manages the food and beverage programs at the Airports, but does not operate any of the concession
A-118
facilities. Westfield negotiates contracts with each concessionaire using a standard lease that has been approved by the Airports Authority. These leases generally obligate the concessionaire to pay the higher of a minimum annual guarantee or a percentage of gross revenues. Westfield collects all rents and fees from the concessionaires and retains a portion of gross rental payments as its management fee.
Food and beverage revenues were forecast to increase as a function of forecast increases in enplaned passengers and price inflation, assuming no significant changes in food and beverage facilities or services.
Newsstand and Retail At Reagan National Airport, approximately 40 newsstand and retail outlets occupy 29,000 square feet of terminal space. In 2010, gross revenues for newsstand and retail concessions were $31.7 million, $3.51 per enplaned passenger. Net revenues received by the Airports Authority were $5.3 million, equivalent to 16.7% of gross revenues.
At Dulles International Airport, approximately 50 newsstand and retail outlets occupy 34,300 square feet of terminal space. In 2010, gross revenues for newsstand and retail concessions were $39.5 million, $3.35 per enplaned passenger. Net revenues received by the Airports Authority were $6.5 million, equivalent to 16.5% of gross revenues. Increased revenues at Dulles in 2008 and 2009 reflected the opening of new outlets as part of the expansion of Concourse B.
Westfield manages the newsstand and retail programs at both Airports under the master developer agreements that have been extended through December 2011.
Newsstand and retail revenues are forecast to increase as a function of forecast increases in enplaned passengers and price inflation.
Duty Free Duty free concessions at Reagan National Airport and Dulles International Airport (which accounts for substantially all duty free revenues) are managed and operated by Dulles Duty Free. At Dulles, duty free outlets are located in Concourses B, C, and D. In 2010, gross duty free revenues were $15.8 million, $4.97 per enplaned international passenger. Net duty free revenues received by the Airports Authority from Dulles were $3.2 million, equivalent to 20.0% of gross revenues.
Decreased duty free revenues in 2009 resulted from the closure of facilities during construction, as well as the drop in discretionary spending attributable to the recession and changes in international air service. Duty free revenues were forecast to increase from budgeted 2011 amounts with international enplaned passengers and price inflation.
A-119
Fixed Based Operations Two fixed based operators, Landmark and Signature Flight Support, serve business and general aviation at Dulles International Airport. The Landmark agreement expires in August 2015, with no option for additional renewals. The Signature FBO agreement expires in October 2012, with an option period of 5 years. Landmark and Signature pay the greater of a minimum annual guarantee ($5.9 million and $3.1 million, respectively) or a percentage of gross revenues for various categories of goods or services. In 2009 and 2010, both companies paid the minimum annual guarantee.
In-Flight Kitchen The in-flight kitchen concession at Reagan National Airport is operated by LSG Sky Chefs under a contract that extends to November 2012. Sky Chefs pays the Airports Authority a minimum annual guarantee of 10% of gross receipts for on-airport sales and 2% of gross receipts for off-airport sales. In-flight kitchen revenues at Reagan have declined as airlines have reduced meal services. Two in-flight kitchen conces- sions at Dulles International Airport are operated by Gate Gourmet International and LSG Sky Chefs under contracts that expire in June 2013. The contracts are substantially the same, with both operators paying the Airports Authority 8% of gross revenues for on-airport sales and 2% for off-airport sales.
OTHER OPERATING REVENUES Other operating revenues are derived from rentals, TSA security fees, utility reimbursements, and miscellaneous other sources. Some building rentals are based on market rates and some, including certain hangars and cargo buildings, are based on cost-recovery rates. Revenues from TSA security fees include the reimbursements of the costs of police coverage of passenger screening activities. Revenues from utilities include reimbursements for metered and billed utility services.
INVESTMENT EARNINGS Investment earnings included in Revenues are derived from amounts in funds and accounts other than the Construction Fund and the PFC Fund. Interest income was forecast assuming increased fund balances associated with the issuance of the proposed 2011A-E and planned 2012 Bonds and 2013 Bonds and an average interest rate of 2% increasing to 4% in 2014 and thereafter.
APPLICATION OF REVENUES Exhibit F-1 shows the forecast application of Revenues. Under the Indenture, all Revenues (together with any other available funds, including transfers from the General Purpose Fund) are applied in the following priority:
Pay Operation and Maintenance Expenses
A-120
Deposit to the Operation and Maintenance Fund any amounts necessary to maintain a reserve balance of 25% of budgeted O&M Expenses.
Deposit to the Bond Fund Principal and Interest Accounts amounts required to pay Bond principal and interest.
Deposit to the Bond Fund Redemption Account amounts required to redeem Bonds. (No such payments are forecast to be required.)
Deposit to the Debt Service Reserve Fund any amounts necessary to maintain required debt service reserves. (No such payments are forecast to be required.)
Pay any required debt service on Subordinated Bonds. (No such payments are forecast to be required.)
Replenish any required Subordinated Bond Reserve Funds. (No such payments are forecast to be required.)
Pay any required debt service on Junior Lien Obligations. (No such payments are forecast to be required.)
Make annual payments required under the Federal Lease.
Replenish any amounts withdrawn from the Emergency Repair and Rehabilitation Fund in the preceding year. (No such payments are forecast to be required.)
Deposit all remaining amounts into the General Purpose Fund.
Amounts in the General Purpose Fund are not pledged to Bondholders and are available for use by the Airports Authority for any legal purpose, provided that any moneys required to be transferred to the Revenue Fund, including those to be transferred under the provisions of the Airline Agreement, are not to be applied for any other purpose.
Any termination payments under Swap Agreements are payable from funds subordinated to Bonds, Commercial Paper Notes, Subordinated Bonds, and Junior Lien Obligations. (No such payments are forecast to be required.)
SHARING OF NET REMAINING REVENUES Exhibit F-1 also shows the forecast calculation of Net Remaining Revenues and its allocation between the Airports Authority (transfer to the Capital Fund) and the Signatory Airlines (transfer to the Airline Transfer Account).
The Signatory Airlines receive 100% of an amount equal to the debt service coverage on any Subordinated Bonds and coverage in the Tenant
A-121
Equipment cost centers (approximately $0.5 million at Reagan and $0.3 million at Dulles in 2010).
The remaining amount of NRR for each Airport is split 50%-50% up to a “plateau” amount, which is increased annually with an inflation index. The plateau amounts for 2010 were $10.7 million at Reagan and $16.0 million at Dulles.
The remaining amount of NRR above the plateau amount is split 25% to the Airports Authority and 75% to the Signatory Airlines.
APPLICATION OF DESIGNATED PASSENGER FACILITY CHARGES Exhibit F-2 shows historical and forecast PFC Revenues (not taking into account potential investment earnings) and the use of such PFC Revenues to pay debt service on PFC Eligible Bonds and project costs pay-as-you-go. Pursuant to the Thirty-fifth Supplemental Indenture, Designated Passenger Facility Charges derived from the $4.50 PFC at Dulles International Airport (and not designated as Revenues) are deposited into the PFC Fund for use in the following priority:
To the PFC Debt Service Account in each year 2009 through 2016, an amount equal to the greater of $35.0 million or 50% of the total amount of Designated Passenger Facility Charges received by the Airports Authority in each year. Such amounts are irrevocably committed to the payment of Debt Service on PFC Eligible Bonds.
To the PFC Project Account, all remaining amounts. Such amounts may be applied to any approved PFC-eligible purpose, including transfer to the PFC Debt Service Account to pay Debt Service on PFC Eligible Bonds or to pay approved PFC-eligible costs pay-as-you-go. The Airports Authority used $47.0 million to pay Bond debt service in 2010 and intends to commit $25.0 million in 2011 and $5.0 million per year in 2012 through 2016.
DEBT SERVICE COVERAGE Exhibit G-1 shows historical and forecast coverage of Bond debt service by Net Revenues for the Aviation Enterprise. Exhibits G-2 and G-3 present historical and forecast debt service coverage for Reagan National Airport and Dulles International Airport, respectively. The amount of transfers from the General Purpose Fund is assumed to be the entire amount of the Signatory Airlines’ share of NRR per the Airline Agreement.
Exhibit G-1 also shows the calculation of the sufficiency of forecast Net Revenue to meet the requirements of the Rate Covenant, which requires that Net Revenues be sufficient to provide for the larger of the Indenture Section 6.04(a)(i) requirement or the Indenture Section 6.04(a)(ii) requirement. Net Revenues are forecast to be
A-122
sufficient to meet the requirements of the Rate Covenant each year of the forecast period.
STRESS TEST FINANCIAL PROJECTIONS Exhibits H-1 through summarize the forecast financial results as shown in earlier exhibits and discussed in the preceding sections. Revenues and expenses were forecast assuming the base forecasts of enplaned passengers shown in Tables 29 through 32 in the earlier section “Airline Traffic Forecasts.” Exhibits H-1 through H-3 also summarize projected financial results assuming the stress test passenger forecasts shown in Table 33.
For Reagan, enplaned passenger numbers in 2016 are approximately 20% lower in the stress test than in the base case. For Dulles, enplaned passenger numbers in 2016 are approximately 30% lower in the stress test than in the base case.
For the stress test financial projections, the 2001-2016 Capital Construction Program was assumed to be implemented to the same schedule assumed for the base case financial forecasts, notwithstanding the reduced passenger traffic, and to be funded with the same amounts of Bond proceeds and other funds.
Other assumptions underlying the stress test projections are the same as those for the base case forecasts, except revenues related to passenger numbers, such as PFC Revenues, concession revenues, parking revenues, and rental car revenues, were projected to be lower. O&M Expenses were assumed to be the same for the stress test as for the base case.
Under the stress test, Bond debt service coverage ratios are projected to exceed the 125% requirement of the Rate Covenant. Extraordinary Coverage Protection Payments from the Signatory Airlines would be required at Reagan but not at Dulles. Annual PFC Revenues and balances in the PFC Fund would be reduced, but PFC Revenues would still be sufficient to pay PFC Eligible Bond debt service from Designated Passenger Facility Charges in an amount exceeding the irrevocably committed $35 million and provide pay-as-you-go funding for the future projects shown in as shown in Exhibit F-2, albeit with a need for increased interim financing. As shown in Exhibits H-2 and H-3, required airline payments per passenger at the Airports would increase relative to those for the base forecasts.
A-123
[THIS PAGE INTENTIONALLY LEFT BLANK]
A-124 Exhibit A
2001-2016 CAPITAL CONSTRUCTION PROGRAM Metropolitan Washington Airports Authority (dollars in thousands)
Sources of funds Pay-as-you- Virginia go PFC Proposed Proposed Planned Planned Project costs FAA Grants TSA Grants State Grants Revenues Prior Bonds 2011A Bonds 2011B Bonds 2012 Bonds 2013 Bonds
Reagan National Airport Completed projects $ 179,413 $ 27,698 $ - $ 4,777 $24,288 $122,651 $ - $ - $ - $ - Projects in progress Terminal modifications for in-line baggage screening 151,726 - 113,794 - - 25,282 1,566 1,274 3,396 6,413 Runway safety area improvements 44,171 32,282 - - - 8,718 1,124 2,042 5 - Terminal A rehabilitation 24,970 - - - 3,559 149 4,556 9,882 6,824 - Other projects in progress 166,801 25,073 - - - 79,166 14,332 23,713 6,515 18,002 Subtotal projects in progress $ 387,668 $ 57,356 $ 113,794 $ - $ 3,559 $ 113,316 $ 21,578 $ 36,910 $ 16,740 $ 24,415 Total 2001-2016 CCP for Reagan National Airport $ 567,081 $ 85,053 $ 113,794 $ 4,777 $ 27,847 $ 235,967 $ 21,578 $ 36,910 $ 16,740 $ 24,415
Dulles International Airport Completed projects $ 3,432,088 $ 166,659 $ - $ 22,540 $ 775,512 $-2,467,377 $ $ - $ - $ - Projects in progress Terminal modifications for in-line baggage screening$ 269,906 $ - $ 195,430 $ 1,775 $ - $ 65,117 $ 1,019 $ 1,407 $ 2,019 $ 3,139 A-125 Contribution to Dulles Metrorail station 209,600 - - - 200,002 - - - - 9,598 International Arrivals Building expansion 148,120 - - - 124,303 21,849 937 1,009 20 - Public Safety projects 52,894 - - - - 14,177 4,366 5,064 12,739 16,550 Enterprise resource program 30,351 - - - - 22,780 4,176 3,260 135 - Airfield pavement replacement 28,074 - - - - 21,455 3,145 3,474 - - Concourses C & D rehabilitation 27,068 - - - - 235 7,690 16,774 2,370 - Concourse B expansion and modifications for AeroTrain 12,519 - - - - 192 5 1,667 - 10,655 Concourse B gate modifications for A380 9,247 - - - - 4,413 1,860 1,464 1,510 - Other Airfield projects 46,478 18,258 - - - 11,676 2,273 3,295 272 10,705 Other projects in progress 242,243 321 - - 46,238 129,406 21,248 29,921 6,795 8,314 Subtotal projects in progress $ 1,076,499 $ 18,579 $ 195,430 $ 1,775 $ 370,543 $ 291,299 $ 46,718 $ 67,335 $ 25,859 $ 58,961 Total 2001-2016 CCP for Dulles International Airport $ 4,508,587 $ 185,237 $ 195,430 $ 24,315 $ 1,146,055 $ 2,758,676 $ 46,718 $ 67,335 $ 25,859 $ 58,961 Total 2001-2016 CCP $ 5,075,668 $ 270,291 $ 309,224 $ 29,092 $ 1,173,902 $ 2,994,643 $ 68,296 $ 104,245 $ 42,599 $ 83,377
Source: Metropolitan Washington Airports Authority. Columns may not add to totals shown because of rounding.
September 9, 2011 Exhibit B
SOURCES AND USES OF BOND FUNDS Metropolitan Washington Airports Authority (dollars in thousands)
Proposed Proposed Proposed Proposed Planned Planned 2011A Bonds 2011B Bonds 2011C Bonds 2011D Bonds 2012 Bonds 2013 Bonds Airports Authority
Sources of funds Par amount of Bonds $ 233,635 $ 207,640 $ 165,425 $ 10,790 59,770$ 113,465$ Original issue premium - - 4,846 501 - - Authority funds (principal redemption) 5,210 9,080 - - - - Existing DSRF (2002C) 6,550 14,916 - - - - Existing DSRF (2009A) 10,300 - - - - - Existing DSRF (2001B) - - - 887 - - Total sources $ 255,695 $ 231,636 $ 170,271 $ 12,178 59,770$ 113,465$
Uses of funds Construction Fund $ 68,296 $ 104,245 $ - $ - 42,599$ 83,377$ Capitalized interest 22,916 - - - 10,631 19,467 Refund CP One 50,000 - - - - - Refund Series 2002C 55,550 126,720 - - - - A-126 Refund Series 2009A 58,295 - - - - - Refund Series 1998B ------Refund Series 2001A - - 168,074 - - - Refund Series 2001B - - - 11,196 - - Debt Service Reserve Fund - - 540 870 4,543 8,624 Costs of issuance 639 671 1,657 112 1,998 1,998 Total uses $ 255,695 $ 231,636 $ 170,271 $ 12,178 59,770$ 113,465$
Source: Jefferies & Company, Inc. as of September 2, 2011 (based on information provided by the Metropolitan Washington Airports Authority). Columns may not add to totals shown because of rounding.
Sptember 9, 2011 Exhibit C-1
ANNUAL DEBT SERVICE Metropolitan Washington Airports Authority For Fiscal Years ending December 31 (dollars in thousands)
Historical Estimated Forecast ______2007______2008______2009______2010______2011______2012______2013______2014______2015______2016 _ Airports Authority
Series of Bonds Commercial Paper $ 441 $ 1,803 1,457$ $ 1,149 283$ $ 1,446 $ 1,450 $ 1,455 $ 1,464 $ 1,464 1998B 18,411 19,143 18,087 12,254 1,510 1,510 1,510 1,510 1,510 1,510 1999A 5,891 5,934 5,533 3,498 ------2001A-B 14,943 15,925 16,675 19,779 19,554 3,358 3,391 3,391 3,391 3,391 2002A-B & D 12,725 11,790 13,224 14,710 22,110 22,278 21,802 21,814 21,899 21,897 2002C 21,435 21,461 21,210 21,238 21,367 - - - - - 2003A-D 19,512 21,392 19,866 19,077 24,282 24,590 24,801 24,800 24,857 24,876 2004A-D 38,241 36,334 40,532 47,776 44,748 45,052 45,105 45,105 44,376 45,431 2005A-D 18,971 22,435 22,819 24,324 25,595 26,407 26,550 26,602 23,643 27,100 2006A-C 15,398 12,837 21,468 32,581 30,548 32,304 33,251 33,272 33,616 33,617 2007A-B 8,752 28,476 34,475 51,820 44,909 48,002 48,317 48,422 49,192 49,216 2008A - 6, 964 2, 496 14, 330 11, 851 21, 526 21, 674 21, 832 17, 623 22, 422 2009A-D - - 14,889 40,919 43,562 43,156 43,282 44,189 45,544 45,008
A-127 2010A-D & F1 - - - 13,608 56,925 63,492 64,570 64,644 77,120 68,171 Total Outstanding $ 184,247 204,496$ 232,732$ 317,065$ 347,243$ 333,120$ 335,703$ 337,037$ 344,237$ $ 344,105
Proposed 2011A1 new money $ - -$ -$ 2,016$ 51$ $ 4,221 $ 7,065 $ 7,777 $ 8,695 $ 8,655 Proposed 2011A2 refunding -- - - - 6,441 6,703 6,705 6,759 6,757 Proposed 2011A3 refunding -- - - - 3,818 4,059 4,063 4,147 4,145 Proposed 2011B new money -- - - 2 1,602 4,652 5,147 5,558 5,558 Proposed 2011B refunding -- - - - 14,166 14,747 14,804 14,889 14,898 Proposed 2011C refunding -- - - 207 15,289 15,437 15,441 15,436 15,438 Proposed 2011D refunding - - - - 13 866 863 861 868 864 Total Proposed 2011A Bonds $ - -$ -$ 2,016$ 274$ $ 46,402 $ 53,526 54,796$ 56,352$ $ 56,315
Planned 2012 $ - -$ -$ -$ -$ -$ $ 1,323 $ 1,840 $ 3,131 $ 3,131 Planned 2013 ------1,602 7,496 7,988 Total future bonds $ - $ - $ - $ - $ - $ -$ 1,323 $ 3,442 $ 10,626 $ 11,119 Subtotal $ 184,247 $ 204,496 $ 232,732 $ 319,081 $ 347,516 $ 379,522 $ 390,552 $ 395,275 $ 411,216 $ 411,539
Less: Irrevocable PFC commitment $ - $ - $ (3,672) $ (35,000) $ (35,000) $ (35,000) $ (35,000) $ (35,000) $ (35,000) $ (35,000) Less: Intended PFC commitment - - - (47,013) (25,000) (5,000) (5,000) (5,000) (5,000) (5,000) Total Annual Debt Service $ 184,247 $ 204,496 $ 229,060 $ 237,068 $ 287,516 $ 339,522 $ 350,552 $ 355,275 $ 371,216 $ 371,539
Source: Jefferies & Company, Inc. as of September 2, 2011 (based on information provided by the Metropolitan Washington Airports Authority). Columns may not add to totals shown because of rounding.
Sptember 9, 2011 Exhibit C-2
ANNUAL DEBT SERVICE BY COST CENTER Metropolitan Washington Airports Authority For Fiscal Years ending December 31 (dollars in thousands)
Historical Estimated Forecast ______2007______2008______2009______2010______2011______2012______2013______2014______2015______2016 _ Reagan National Airport Airfield 8,403$ 8,633$ 8,446$ 8,580$ 7,460$ 7,986$ 8,192$ 8,306$ 9,130$ 8,698$ Terminal A 766 1,131 2,644 2,784 2,498 2,872 3,342 3,778 3,750 3,787 Terminals B & C 32,561 32,161 33,375 34,590 29,081 28,677 28,720 29,549 31,422 31,935 Tenant Equipment 2,081 2,197 2,139 2,035 2,044 2,350 2,472 2,574 2,551 2,581 Subtotal Airline Supported Areas 43,810$ 44,122$ 46,604$ 47,990$ 41,082$ 41,885$ 42,726$ 44,207$ 46,854$ 47,001$
Ground Transportation 15,361$ 15,807$ 10,953$ 16,058$ 18,792$ 19,326$ 19,475$ 19,545$ 20,023$ 19,780$ Aviation 5,563 5,594 5,032 5,057 3,935 3,701 3,703 3,703 3,673 3,706 Nonaviation ------Subtotal Non-airline Supported Areas 20,924$ 21,402$ 15,985$ 21,114$ 22,726$ 23,027$ 23,177$ 23,247$ 23,695$ 23,486$
Maintenance 88$ 92$ 945$ 1,015$ 808$ 835$ 842$ 930$ 929$ 931$ Public Safety 26 718 2,450 3,705 3,056 3,271 3,364 3,374 5,161 5,047 Administration 4,038 3,484 2,497 2,387 2,389 4,613 5,444 5,431 5,755 5,417 Systems & Services 6,877 7,045 8,515 10,025 6,262 6,374 6,792 6,795 6,711 6,801 A-128 Subtotal Indirect Cost Centers 11,029$ 11,338$ 14,407$ 17,132$ 12,514$ 15,094$ $ 16,441 16,531$ 18,556$ 18,196$ Total Reagan National Airport 75,763$ 76,862$ 76,995$ 86,236$ 76,322$ 80,006$ $ 82,344 83,985$ 89,105$ 88,683$
Allocation of Indirect Cost Centers Airline Supported Areas 6,645$ 6,315$ 7,950$ 11,481$ 8,424$ 10,223$ 11,149$ 11,215$ 12,552$ 12,291$ Non-airline Supported Areas 4,383 5,023 6,457 5,651 4,090 4,871 5,292 5,316 6,004 5,905 11,029$ 11,029$ 11,338$ 14,407$ 17,132$ 12,514$ 15,094$ $ 16,441 16,531$ 18,556$ 18,196$
Source: Jefferies & Company, Inc. as of September 2, 2011 (based on information provided by the Metropolitan Washington Airports Authority). Columns may not add to totals shown because of rounding.
Sptember 9, 2011 Exhibit C-3
ANNUAL DEBT SERVICE BY COST CENTER Metropolitan Washington Airports Authority For Fiscal Years ending December 31 (dollars in thousands)
Historical Estimated Forecast ______2007______2008______2009______2010______2011______2012______2013______2014______2015______2016 _ Dulles International Airport Airfield 19,267$ 25,035$ 42,200$ 28,061$ 38,823$ 44,087$ 45,254$ 45,480$ 45,119$ 45,787$ Concourses C & D 2,767 3,623 4,036 2,774 4,786 5,452 7,148 7,344 7,381 7,372 Concourse B 1,683 3,271 2,268 1,153 4,808 8,322 8,589 8,690 9,393 9,497 Main Terminal 31,993 31,443 37,572 39,572 56,151 59,686 60,755 61,151 70,038 69,364 Airside Operations Building 71 119 58 61 0 0 0 0 0 0 International Arrivals Building 4,507 4,679 3,828 6,245 5,559 11,372 11,514 11,588 12,004 11,625 Concourse C IAB 525 551 510 323 737 764 764 764 763 763 Concourse A 422 712 486 429 353 355 355 355 355 355 Z Gates 1,535 686 705 893 1,256 2,037 2,039 2,041 1,920 2,052 Passenger Conveyance 3,571 3,373 3,404 7,708 27,478 44,044 44,468 44,734 45,939 45,178 Tenant Equipment 947 880 1,043 1,110 891 907 907 907 895 908 Subtotal Airline Supported Areas 67,287$ 74,372$ 96,110$ 88,329$ 140,843$ 177,025$ 181,792$ 183,053$ 193,808$ 192,901$
Ground Transportation 16,523$ 19,163$ 18,665$ 20,009$ 20,912$ 21,265$ 21,192$ 21,201$ 21,195$ 21,712$ Aviation 3,081 8,688 12,047 11,913 12,417 13,437 14,091 14,116 13,720 14,220
A-129 Nonaviation 1,211 1,302 1,303 1,482 1,150 1,151 1,151 1,150 1,150 1,151 Cargo 1,392 1,663 1,206 1,162 1,407 1,526 1,802 1,802 1,739 1,805 Subtotal Non-airline Supported Areas 22,207$ 30,817$ 33,221$ 34,566$ 35,886$ 37,379$ 38,235$ 38,269$ 37,805$ 38,888$
Maintenance 86$ 587$ 771$ 974$ 3,571$ 7,924$ 8,117$ 8,125$ 7,822$ 8,253$ Public Safety 1,208 2,554 2,791 2,543 2,364 2,496 2,982 4,353 4,364 4,363 Administration 6,987 5,669 4,786 8,980 9,815 13,436 15,213 15,230 16,317 16,133 Systems & Services 10,709 13,636 14,385 15,441 18,715 21,256 21,868 22,259 21,996 22,318 Subtotal Indirect Cost Centers 18,989$ 22,446$ 22,733$ 27,937$ 34,465$ 45,112$ $ 48,180 49,968$ 50,498$ 51,067$ Total Dulles International Airport 108,483$ 127,634$ 152,065$ 150,832$ 211,194$ 259,516$ $ 268,207 271,290$ 282,111$ 282,856$
Allocation of Indirect Cost Centers Airline Supported Areas 10,547$ 13,380$ 12,867$ 17,255$ 21,379$ 28,708$ 30,748$ 31,874$ 32,264$ 32,630$ Non-airline Supported Areas 8,442 9,065 9,867 10,682 13,086 16,404 17,432 18,094 18,234 18,437 18,989$ 18,989$ 22,446$ 22,733$ 27,937$ 34,465$ 45,112$ $ 48,180 49,968$ 50,498$ 51,067$
Source: Jefferies & Company, Inc. as of September 2, 2011 (based on information provided by the Metropolitan Washington Airports Authority). Columns may not add to totals shown because of rounding.
Sptember 9, 2011 Exhibit D-1
OPERATION AND MAINTENANCE EXPENSES Metropolitan Washington Airports Authority For Fiscal Years ending December 31 (dollars in thousands)
This exhibit is based on information from the sources indicated and assumptions provided by, or reviewed with and approved by, Airports Authority management, as described in the accompanying text. Inevitably, some of the assumptions used to develop the forecasts will not be realized and unanticipated events and circumstances could occur. Therefore, the actual results will vary from those forecast, and the variations could be material.
Airports Authority Historical Estimated Forecast ______2007______2008______2009______2010______2011______2012______2013______2014______2015______2016 _
Personnel expenses 127,254$ 135,217$ 138,937$ 147,639$ 157,019$ 161,728$ 166,579$ 171,575$ 176,723$ 182,025$ Utilities 20,447 24,870 27,758 23,709 31,356 32,297 33,266 34,264 35,292 36,350 Services 73,287 72,078 65,452 92,188 98,968 101,938 104,997 108,148 111,391 114,730 Supplies and materials 14,675 11,070 12,294 16,968 18,365 18,918 19,485 20,068 20,669 21,289 Miscellaneous 17,506 16,226 13,447 12,250 14,770 15,209 15,667 16,136 16,618 17,115 Equipment and facility expense 229 50 3,792 94 105 110 114 118 122 126 Total Airports 253,398$ $ 259,511 261,680$ 292,849$ 320,584$ 330,200$ $ 340,108 350,309$ 360,815$ 371,635$ Annual percent change 10.5% 2.4% 0.8% 11.9% 9.5% 3.0% 3.0% 3.0% 3.0% 3.0%
Source for historical data: Metropolitan Washington Airports Authority. Columns may not add to totals shown because of rounding. A-130
Sptember 9, 2011 Exhibit D-2
OPERATION AND MAINTENANCE EXPENSES Metropolitan Washington Airports Authority For Fiscal Years ending December 31 (dollars in thousands)
This exhibit is based on information from the sources indicated and assumptions provided by, or reviewed with and approved by, Airports Authority management, as described in the accompanying text. Inevitably, some of the assumptions used to develop the forecasts will not be realized and unanticipated events and circumstances could occur. Therefore, the actual results will vary from those forecast, and the variations could be material.
Reagan National Airport Historical Estimated Forecast ______2007______2008______2009______2010______2011______2012______2013______2014______2015______2016 _ Summary by Line Item Personnel expenses 52,713$ 59,283$ 59,909$ 63,355$ 66,233$ 68,219$ 70,266$ 72,373$ 74,544$ 76,781$ Utilities 7,623 8,680 9,309 7,865 10,999 11,329 11,669 12,019 12,380 12,751 Services 28,189 27,427 26,236 29,471 31,387 32,328 33,298 34,297 35,325 36,384 Supplies and materials 4,702 3,599 3,354 5,116 5,866 6,043 6,224 6,409 6,600 6,799 Miscellaneous 7,901 7,325 6,516 6,777 7,942 8,178 8,424 8,677 8,937 9,205 Equipment and facility expense 181 - 64 38 53 55 57 59 61 63 Total 101,309$ 106,314$ 105,388$ 112,622$ 122,479$ 126,152$ $ 129,938 133,834$ 137,847$ 141,983$
Summary by Cost Center Airfield 5,574$ 4,719$ 5,715$ 7,765$ 8,840$ 9,106$ 9,380$ 9,661$ 9,950$ 10,249$ Terminal A 3,738 2,697 2,627 3,417 4,062 4,184 4,310 4,439 4,572 4,708 A-131 Terminals B & C 12,070 10,900 11,339 11,484 12,218 12,584 12,962 13,351 13,751 14,163 Tenant Equipment ------Subtotal Airline Supported Areas 21,381$ 18,315$ 19,681$ 22,666$ 25,120$ 25,874$ 26,652$ 27,451$ 28,273$ 29,120$
Ground Transportation 6,209$ 5,785$ 5,871$ 6,681$ 6,826$ 7,031$ 7,242$ 7,459$ 7,683$ 7,914$ Aviation 1,249 2,109 1,960 1,879 2,117 2,179 2,244 2,311 2,380 2,452 Nonaviation 7 8 6 7 8 9 9 9 9 9 Subtotal Non-airline Supported Areas 7,465$ 7,903$ 7,837$ 8,567$ 8,952$ 9,219$ 9,495$ 9,779$ 10,072$ 10,375$
Maintenance 9,500$ 9,141$ 8,286$ 10,018$ 10,492$ 10,806$ 11,130$ 11,463$ 11,806$ 12,161$ Public Safety 17,605 20,286 20,946 21,362 22,667 23,347 24,048 24,769 25,512 26,278 Administration 35,371 39,392 36,446 39,204 40,873 42,099 43,362 44,663 46,003 47,383 Systems & Services 9,987 11,278 12,192 10,806 14,375 14,807 15,251 15,709 16,181 16,666 Subtotal Indirect Cost Centers 72,463$ 80,096$ 77,871$ 81,389$ 88,407$ 91,059$ $ 93,791 96,604$ 99,502$ 102,488$ Total 101,309$ 106,314$ 105,388$ 112,622$ 122,479$ 126,152$ $ 129,938 133,834$ 137,847$ 141,983$ Annual percent change 13.8% 4.9% -0.9% 6.9% 8.8% 3.0% 3.0% 3.0% 3.0% 3.0%
Allocation of Indirect Cost Centers Airline Supported Areas 47,775$ 47,430$ 46,915$ 55,254$ 61,216$ 63,048$ 64,935$ 66,878$ 68,879$ 70,391$ Non-airline Supported Areas 24,688 32,667 30,956 26,135 27,191 28,011 28,856 29,726 30,623 32,097 72,463$ 72,463$ 80,096$ 77,871$ 81,389$ 88,407$ 91,059$ $ 93,791 96,604$ 99,502$ 102,488$
Source for historical data: Metropolitan Washington Airports Authority. Columns may not add to totals shown because of rounding.
Sptember 9, 2011 Exhibit D-3
OPERATION AND MAINTENANCE EXPENSES Metropolitan Washington Airports Authority For Fiscal Years ending December 31 (dollars in thousands)
This exhibit is based on information from the sources indicated and assumptions provided by, or reviewed with and approved by, Airports Authority management, as described in the accompanying text. Inevitably, some of the assumptions used to develop the forecasts will not be realized and unanticipated events and circumstances could occur. Therefore, the actual results will vary from those forecast, and the variations could be material.
Dulles International Airport Historical Estimated Forecast ______2007______2008______2009______2010______2011______2012______2013______2014______2015______2016 _ Summary by Line Item Personnel expenses 74,541$ 75,934$ 79,028$ 84,285$ 90,787$ 93,509$ 96,313$ 99,202$ 102,179$ 105,244$ Utilities 12,823 16,191 18,449 15,844 20,358 20,968 21,597 22,245 22,912 23,599 Services 45,098 44,651 39,216 62,717 67,581 69,610 71,699 73,851 76,066 78,346 Supplies and materials 9,973 7,472 8,939 11,852 12,499 12,875 13,261 13,659 14,069 14,490 Miscellaneous 9,605 8,900 6,931 5,473 6,828 7,031 7,243 7,459 7,681 7,910 Equipment and facility expense 48 50 3,728 56 53 55 57 59 61 63 Total 152,089$ 153,197$ 156,292$ 180,226$ 198,105$ 204,048$ $ 210,170 216,475$ 222,968$ 229,652$
Summary by Cost Center Airfield 12,895$ 13,582$ 12,251$ 14,804$ 14,792$ 15,236$ 15,692$ 16,164$ 16,648$ 17,147$
A-132 Concourses C & D 4,793 4,464 4,132 4,574 4,679 4,820 4,965 5,114 5,267 5,426 Concourse B 5,525 6,716 7,029 7,556 7,898 8,135 8,380 8,632 8,890 9,157 Main Terminal 10,215 10,387 9,976 12,255 12,177 12,543 12,919 13,307 13,706 14,117 Airside Operations Building 9 7 44 3 4 4 4 4 4 4 International Arrivals Building 1,655 1,573 1,497 1,715 1,874 1,931 1,990 2,050 2,112 2,175 Concourse C IAB 448 417 386 295 302 311 320 329 339 349 Concourse A 1,435 1,585 1,569 1,800 1,859 1,915 1,972 2,031 2,092 2,155 Z Gates 192 138 193 239 279 287 296 305 314 323 Passenger Conveyance 19,132 19,742 19,077 27,664 30,397 31,308 32,248 33,215 34,212 35,238 Tenant Equipment ------Subtotal Airline Supported Areas 56,299$ 58,612$ 56,153$ 70,904$ 74,260$ 76,490$ 78,786$ 81,151$ 83,584$ 86,091$
Ground Transportation 7,421$ 9,000$ 10,080$ 12,296$ 12,127$ 12,489$ 12,864$ 13,250$ 13,648$ 14,057$ Aviation 351 438 364 493 632 650 669 689 709 729 Nonaviation 91 167 218 142 213 220 227 234 241 248 Cargo 126 416 1,894 544 684 705 727 749 771 794 Subtotal Non-airline Supported Areas 7,989$ 10,021$ 12,556$ 13,475$ 13,656$ 14,064$ 14,487$ 14,922$ 15,369$ 15,828$
Maintenance 14,726$ 13,886$ 14,272$ 15,704$ 16,775$ 17,278$ 17,796$ 18,329$ 18,879$ 19,445$ Public Safety 20,967 21,909 22,227 24,689 27,614 28,442 29,295 30,174 31,080 32,012 Administration 37,422 30,869 31,636 37,282 42,477 43,752 45,064 46,416 47,809 49,243 Systems & Services 14,686 17,900 19,446 18,172 23,324 24,022 24,742 25,483 26,247 27,033 Subtotal Indirect Cost Centers 87,801$ 84,565$ 87,582$ 95,848$ 110,190$ 113,494$ $ 116,897 120,402$ 124,015$ 127,733$ Total 152,089$ 153,197$ 156,292$ 180,226$ 198,105$ 204,048$ $ 210,170 216,475$ 222,968$ 229,652$ Annual percent change 8.4% 0.7% 2.0% 15.3% 9.9% 3.0% 3.0% 3.0% 3.0% 3.0%
Sptember 9, 2011 Exhibit D-3 (page 2 of 2)
OPERATION AND MAINTENANCE EXPENSES Metropolitan Washington Airports Authority For Fiscal Years ending December 31 (dollars in thousands)
Dulles International Airport Historical Estimated Forecast ______2007______2008______2009______2010______2011______2012______2013______2014______2015______2016 _
Allocation of Indirect Cost Centers Airline Supported Areas 61,919$ 60,668$ 57,602$ 67,726$ 73,445$ 75,647$ 77,912$ 80,246$ 82,651$ 84,865$ Non-airline Supported Areas 25,882 23,897 29,981 28,121 36,745 37,847 38,985 40,156 41,364 42,868 87,801$ 87,801$ 84,565$ 87,582$ 95,848$ 110,190$ 113,494$ $ 116,897 120,402$ 124,015$ 127,733$
Source for historical data: Metropolitan Washington Airports Authority. Columns may not add to totals shown because of rounding. A-133
Sptember 9, 2011 Exhibit E-1
REVENUES Metropolitan Washington Airports Authority For Fiscal Years ending December 31 (dollars and passengers in thousands)
This exhibit is based on information from the sources indicated and assumptions provided by, or reviewed with and approved by, Airports Authority management, as described in the accompanying text. Inevitably, some of the assumptions used to develop the forecasts will not be realized and unanticipated events and circumstances could occur. Therefore, the actual results will vary from those forecast, and the variations could be material.
Airports Authority Historical Estimated Forecast ______2007______2008______2009______2010______2011______2012______2013______2014______2015______2016 _ Airline revenues Terminal rents and user fees 138,342$ 139,643$ 158,761$ 191,545$ 237,129$ 272,216$ 281,497$ 287,400$ 302,129$ 301,718$ Landing and apron fees 78,682 82,290 96,935 101,638 120,855 137,109 141,951 144,386 146,684 148,174 International Arrival Building fees 9,100 9,372 11,897 18,013 21,103 32,013 31,632 32,138 32,928 32,617 Passenger Conveyance fees 18,294 17,704 17,508 6,653 7,357 7,403 7,431 7,609 7,715 7,762 Total airline revenues 244,419$ 249,008$ 285,100$ 317,848$ 386,444$ 448,741$ 462,511$ 471,533$ 489,456$ 490,270$ Annual percent change 6.6% 1.9% 14.5% 11.5% 21.6% 16.1% 3.1% 2.0% 3.8% 0.2%
Concession revenues Landside concession revenues Net public automobile parking (a) 79,199$ 77,104$ 73,168$ 73,391$ 75,061$ 74,582$ 75,990$ 77,477$ 78,998$ 80,542$ Rental car 34,418 35,949 38,865 44,305 40,672 37,838 39,251 40,711 42,213 43,760
A-134 Ground transportation fees 4,681 6,369 6,913 8,020 7,812 8,018 8,263 8,527 8,800 9,084 Subtotal 118,298$ 119,422$ 118,946$ 125,716$ 123,545$ 120,438$ 123,504$ 126,715$ 130,011$ 133,386$ Originating passengers 15,501 14,535 14,064 14,495 14,711 14,973 15,231 15,487 15,748 16,012 Revenue per originating passenger 7.63$ 8.22$ 8.46$ 8.67$ 8.40$ 8.04$ 8.11$ 8.18$ 8.26$ 8.33$
In-terminal concession revenues Food and beverage 14,986$ 15,860$ 15,627$ 16,475$ 18,022$ 18,694$ 19,380$ 20,092$ 20,833$ 21,598$ Newsstand and retail 11,354 11,921 11,901 11,838 12,552 13,019 13,507 14,019 14,551 15,104 Duty free 3,381 3,810 2,881 3,200 3,440 3,574 3,740 3,922 4,111 4,308 Display advertising 7,356 7,900 7,918 11,307 9,868 10,065 10,267 10,472 10,682 10,896 Other concessions 6,554 9,595 6,770 8,009 7,091 7,259 7,445 7,640 7,842 8,052 Subtotal 43,631$ 49,086$ 45,097$ 50,829$ 50,973$ 52,611$ 54,339$ 56,145$ 58,019$ 59,958$ Enplaned passengers 21,568 20,836 20,314 20,849 21,100 21,470 21,860 22,265 22,680 23,100 Revenue per enplaned passenger 2.02$ 2.36$ 2.22$ 2.44$ 2.42$ 2.45$ 2.49$ 2.52$ 2.56$ 2.60$
Airside concession revenues Fixed base operator 11,985 10,328 12,112 10,679 12,643 12,896 13,154 13,417 13,685 13,958 Inflight kitchen 6,243 6,873 6,705 6,769 6,910 7,154 7,460 7,796 8,145 8,511 Subtotal 18,228$ 17,201$ 18,817$ 17,447$ 19,553$ 20,050$ $ 20,614 21,213$ 21,830$ 22,469$ Total concession revenues 180,157$ 185,709$ 182,860$ 193,992$ 194,071$ 193,099$ 198,457$ 204,073$ 209,860$ 215,813$ Annual percent change 8.8% 3.1% -1.5% 6.1% 0.0% -0.5% 2.8% 2.8% 2.8% 2.8%
Sptember 9, 2011 Exhibit E-1 (page 2 of 2)
REVENUES Metropolitan Washington Airports Authority For Fiscal Years ending December 31 (dollars and passengers in thousands)
This exhibit is based on information from the sources indicated and assumptions provided by, or reviewed with and approved by, Airports Authority management, as described in the accompanying text. Inevitably, some of the assumptions used to develop the forecasts will not be realized and unanticipated events and circumstances could occur. Therefore, the actual results will vary from those forecast, and the variations could be material.
Airports Authority Historical Estimated Forecast ______2007______2008______2009______2010______2011______2012______2013______2014______2015______2016 _ Other operating revenues Rents 23,140$ 26,765$ 30,144$ 30,338$ 30,842$ 32,354$ 33,731$ 34,348$ 34,415$ 35,680$ TSA security fee 1,290 1,279 1,260 1,248 1,237 1,262 1,287 1,313 1,339 1,366 Utility reimbursements 7,289 8,806 8,876 8,105 9,312 9,500 9,691 9,886 10,084 10,285 Other revenues 6,344 8,384 6,313 6,693 7,679 7,832 7,989 8,149 8,312 8,477 Total other operating revenues 38,062$ 45,233$ 46,592$ 46,384$ 49,071$ 50,948$ 52,698$ 53,696$ 54,150$ 55,808$ Annual percent change 5.8% 18.8% 3.0% -0.4% 5.8% 3.8% 3.4% 1.9% 0.8% 3.1%
Investment earnings Debt Service Reserve Fund 10,847$ 12,173$ 13,122$ 15,680$ 15,753$ 15,837$ 16,627$ 16,627$ 16,627$ 16,627$ Bond funds 6,446 2,538 148 262 58 53 250 250 250 250 Unrestricted funds 15,217 8,863 2,581 1,048 1,018 6,412 6,604 10,203 14,012 14,433
A-135 Total investment earnings 32,510$ 23,574$ 15,852$ 16,991$ 16,829$ 22,302$ $ 23,481 27,080$ 30,889$ 31,310$ Annual percent change 17.2% -27.5% -32.8% 7.2% -1.0% 32.5% 5.3% 15.3% 14.1% 1.4%
Total Revenues 495,148$ 503,524$ 530,405$ 575,215$ 646,414$ 715,090$ $ 737,147 756,382$ 784,355$ 793,201$ Annual percent change 8.0% 1.7% 5.3% 8.4% 12.4% 10.6% 3.1% 2.6% 3.7% 1.1%
Source for historical data: Metropolitan Washington Airports Authority. Columns may not add to totals shown because of rounding. (a) Revenues are stated net of expenses and fees under parking management contract.
Sptember 9, 2011 Exhibit E-2
REVENUES Metropolitan Washington Airports Authority For Fiscal Years ending December 31 (dollars and passengers in thousands)
This exhibit is based on information from the sources indicated and assumptions provided by, or reviewed with and approved by, Airports Authority management, as described in the accompanying text. Inevitably, some of the assumptions used to develop the forecasts will not be realized and unanticipated events and circumstances could occur. Therefore, the actual results will vary from those forecast, and the variations could be material.
Reagan National Airport Historical Estimated Forecast ______2007______2008______2009______2010______2011______2012______2013______2014______2015______2016 _ Airline revenues Terminal rents and user fees $ 65,792 64,467$ 73,382$ 80,656$ 74,647$ 79,205$ 82,980$ 85,667$ 88,967$ $ 90,048 Landing fees 30,149 32,290 32,928 40,143 39,417 42,442 44,253 45,349 48,064 47,982 Total airline revenues 95,942$ 96,757$ 106,310$ 120,799$ 114,064$ 121,647$ 127,233$ 131,016$ 137,031$ 138,030$ Annual percent change 1.5% 0.9% 9.9% 13.6% -5.6% 6.6% 4.6% 3.0% 4.6% 0.7%
Concession revenues Landside concession revenues Net public automobile parking (a) 29,191$ 28,583$ 27,778$ 27,672$ 28,555$ 29,174$ 29,506$ 29,763$ 30,035$ $ 30,292 Rental car 19,433 20,736 23,248 28,170 23,872 20,500 21,148 21,759 22,397 23,040 Ground transportation fees 3, 270 3, 183 3, 732 4, 609 4, 426 4, 515 4, 605 4, 697 4, 791 4, 887 Subtotal 51,893$ $ 52,502 54,758$ 60,451$ 56,853$ 54,189$ 55,259$ 56,219$ 57,223$ $ 58,219
A-136 Originating passengers 7,688 7,226 7,173 7,454 7,807 7,987 8,080 8,151 8,228 8,303 Revenue per originating passenger$ 6.75 7.27$ 7.63$ 8.11$ 7.28$ 6.78$ 6.84$ 6.90$ 6.95$ 7.01$
In-terminal concession revenues Food and beverage $ 6,801 $ 7,117 7,109$ 7,563$ 8,679$ 9,044$ 9,330$ 9,599$ 9,880$ $ 10,164 Newsstand and retail 5,122 5,263 5,208 5,294 5,511 5,743 5,924 6,095 6,274 6,454 Duty free - 53 50 42 51 53 55 57 59 61 Display advertising 3,715 3,780 3,796 5,489 4,498 4,588 4,680 4,773 4,869 4,967 Other concessions 706 1,504 1,062 887 971 1,001 1,025 1,047 1,071 1,095 Subtotal 16,344$ $ 17,718 17,226$ 19,276$ 19,710$ 20,429$ 21,014$ 21,571$ 22,153$ $ 22,741 Enplaned passengers 9,294 8,978 8,767 9,036 9,450 9,655 9,765 9,850 9,940 10,025 Revenue per enplaned passenger$ 1.76 1.97$ 1.96$ 2.13$ 2.09$ 2.12$ 2.15$ 2.19$ 2.23$ 2.27$
Airside concession revenues Fixed base operator $ 205 -$ 740$ 780$ 657$ 670$ 683$ 697$ 711$ 725$ Inflight kitchen 767 752 720 701 750 782 807 830 854 879 Subtotal $ 972 $ 752 $ 1,460 $ 1,481 $ 1,407 $ 1,452 $ 1,490 $ 1,527 $ 1,565 $ 1,604 Total concession revenues $ 69,210 $ 70,972 73,443$ 81,209$ 77,970$ 76,070$ 77,763$ 79,317$ 80,941$ $ 82,564 Annual percent change 11.2% 2.5% 3.5% 10.6% -4.0% -2.4% 2.2% 2.0% 2.0% 2.0%
Sptember 9, 2011 Exhibit E-2 (page 2 of 2)
REVENUES Metropolitan Washington Airports Authority For Fiscal Years ending December 31 (dollars and passengers in thousands)
This exhibit is based on information from the sources indicated and assumptions provided by, or reviewed with and approved by, Airports Authority management, as described in the accompanying text. Inevitably, some of the assumptions used to develop the forecasts will not be realized and unanticipated events and circumstances could occur. Therefore, the actual results will vary from those forecast, and the variations could be material.
Reagan National Airport Historical Estimated Forecast ______2007______2008______2009______2010______2011______2012______2013______2014______2015______2016 _ Other operating revenues Rents $ 8,696 9,186$ 9,814$ 9,779$ 9,874$ 9,780$ 9,977$ $ 10,177 $ 10,343 $ 10,591 TSA security fee 888 878 866 855 844 860 877 895 913 931 Utility reimbursements 1,990 2,240 2,402 2,272 2,391 2,440 2,489 2,539 2,590 2,642 Other revenues 1,675 2,648 1,794 1,768 2,103 2,144 2,187 2,231 2,275 2,320 Total other operating revenues 13,250$ 14,952$ 14,876$ 14,673$ 15,212$ 15,224$ 15,530$ 15,842$ 16,121$ $ 16,484 Annual percent change 2.0% 12.8% -0.5% -1.4% 3.7% 0.1% 2.0% 2.0% 1.8% 2.3%
Investment earnings Debt Service Reserve Fund $ 4,521 $ 4,349 4,034$ 5,074$ 3,472$ 2,942$ 3,249$ 3,248$ 3,317$ $ 3,293 Bond funds 2, 830 890 46 112 16 14 89 82 92 88 Unrestricted funds 6,084 3,631 1,039 403 389 2,450 2,523 3,898 5,353 5,514
A-137 Total investment earnings $ 13,435 $ 8,870 $ 5,119 $ 5,589 $ 3,877 $ 5,406 $ 5,861 $ 7,229 $ 8,762 $ 8,895 Annual percent change 22.3% -34.0% -42.3% 9.2% -30.6% 39.4% 8.4% 23.3% 21.2% 1.5%
Total Revenues 191,835$ $ 191,551 $ 199,749 $ 222,270 $ 211,122 $ 218,347 $ 226,387 $ 233,403 $ 242,856 $ 245,974 Annual percent change 6.1% -0.1% 4.3% 11.3% -5.0% 3.4% 3.7% 3.1% 4.0% 1.3%
Source for historical data: Metropolitan Washington Airports Authority. Columns may not add to totals shown because of rounding. (a) Revenues are stated net of expenses and fees under parking management contract.
Sptember 9, 2011 Exhibit E-3
REVENUES Metropolitan Washington Airports Authority For Fiscal Years ending December 31 (dollars and passengers in thousands)
This exhibit is based on information from the sources indicated and assumptions provided by, or reviewed with and approved by, Airports Authority management, as described in the accompanying text. Inevitably, some of the assumptions used to develop the forecasts will not be realized and unanticipated events and circumstances could occur. Therefore, the actual results will vary from those forecast, and the variations could be material.
Dulles International Airport Historical Estimated Forecast ______2007______2008______2009______2010______2011______2012______2013______2014______2015______2016 _ Airline revenues Terminal rents and user fees $ 72,550 75,175$ 85,379$ 110,889$ 162,482$ 193,011$ 198,517$ 201,733$ 213,162$ 211,670$ Landing and apron fees 48,533 49,999 64,006 61,495 81,437 94,667 97,698 99,037 98,620 100,192 International Arrival Building fees 9,100 9,372 11,897 18,013 21,103 32,013 31,632 32,138 32,928 32,617 Passenger Conveyance fees 18,294 17,704 17,508 6,653 7,357 7,403 7,431 7,609 7,715 7,762 Total airline revenues 148,477$ 152,250$ 178,790$ 197,049$ 272,380$ 327,094$ 335,278$ 340,517$ 352,425$ 352,240$ Annual percent change 10.2% 2.5% 17.4% 10.2% 38.2% 20.1% 2.5% 1.6% 3.5% -0.1%
Concession revenues Landside concession revenues Net public automobile parking (a) $ 50, 009 $ 48, 522 $ 45, 390 $ 45, 719 $ 46, 506 $ 45, 408 $ 46, 484 $ 47, 714 $ 48, 963 $ 50, 250 Rental car 14,986 15,213 15,617 16,135 16,800 17,338 18,103 18,952 19,816 20,720
A-138 Ground transportation fees 1,411 3,186 3,182 3,411 3,386 3,503 3,658 3,830 4,009 4,197 Subtotal 66,405$ $ 66,920 64,189$ 65,265$ 66,692$ 66,249$ 68,245$ 70,496$ 72,788$ $ 75,167 Originating passengers 7,813 7,309 6,891 7,040 6,905 6,986 7,151 7,336 7,520 7,709 Revenue per originating passenger $ 8.50 9.16$ 9.31$ 9.27$ 9.66$ 9.48$ 9.54$ 9.61$ 9.68$ 9.75$
In-terminal concession revenues Food and beverage $ 8,185 $ 8,743 8,518$ 8,911$ 9,343$ 9,650$ 10,050$ 10,493$ 10,953$ $ 11,434 Newsstand and retail 6,232 6,658 6,692 6,544 7,041 7,276 7,583 7,924 8,277 8,650 Duty free 3,381 3,757 2,831 3,158 3,389 3,521 3,685 3,865 4,052 4,247 Display advertising 3,641 4,120 4,122 5,817 5,370 5,477 5,587 5,699 5,813 5,929 Other concessions 5,848 8,091 5,707 7,122 6,119 6,258 6,420 6,593 6,771 6,957 Subtotal 27,287$ $ 31,368 27,871$ 31,552$ 31,263$ 32,182$ 33,325$ 34,574$ 35,866$ $ 37,217 Enplaned passengers 12,274 11,858 11,547 11,813 11,650 11,815 12,095 12,415 12,740 13,075 Revenue per enplaned passenger $ 2.22 2.65$ 2.41$ 2.67$ 2.68$ 2.72$ 2.76$ 2.78$ 2.82$ 2.85$
Airside concession revenues Fixed base operator $ 11,780 $ 10,328 11,372$ 9,898$ 11,986$ 12,226$ 12,471$ 12,720$ 12,974$ $ 13,233 Inflight kitchen 5,476 6,121 5,985 6,067 6,160 6,372 6,653 6,966 7,291 7,632 Subtotal $ 17,256 $ 16,449 $ 17,357 $ 15,966 $ 18,146 $ 18,598 $ 19,124 $ 19,686 $ 20,265 $ 20,865 Total concession revenues 110,947$ 114,737$ 109,417$ 112,783$ 116,101$ 117,029$ 120,694$ 124,756$ 128,919$ 133,249$ Annual percent change 7.4% 3.4% -4.6% 3.1% 2.9% 0.8% 3.1% 3.4% 3.3% 3.4%
Sptember 9, 2011 Exhibit E-3 (page 2 of 2)
REVENUES Metropolitan Washington Airports Authority For Fiscal Years ending December 31 (dollars and passengers in thousands)
This exhibit is based on information from the sources indicated and assumptions provided by, or reviewed with and approved by, Airports Authority management, as described in the accompanying text. Inevitably, some of the assumptions used to develop the forecasts will not be realized and unanticipated events and circumstances could occur. Therefore, the actual results will vary from those forecast, and the variations could be material.
Dulles International Airport Historical Estimated Forecast ______2007______2008______2009______2010______2011______2012______2013______2014______2015______2016 _ Other operating revenues Rents $ 14,444 17,580$ 20,330$ 20,559$ 20,968$ 22,574$ 23,754$ 24,171$ 24,072$ $ 25,089 TSA security fee 401 400 394 394 394 402 410 418 426 435 Utility reimbursements 5,299 6,566 6,474 5,833 6,921 7,060 7,202 7,347 7,494 7,643 Other revenues 4,669 5,736 4,519 4,925 5,576 5,688 5,802 5,918 6,037 6,157 Total other operating revenues 24,812$ 30,282$ 31,716$ 31,710$ 33,859$ 35,724$ 37,168$ 37,854$ 38,029$ $ 39,324 Annual percent change 8.0% 22.0% 4.7% 0.0% 6.8% 5.5% 4.0% 1.8% 0.5% 3.4%
Investment earnings Debt Service Reserve Fund $ 6,327 $ 7,824 9,088$ 10,607$ 12,281$ 12,895$ 13,378$ 13,379$ 13,310$ $ 13,334 Bond funds 3, 616 1, 648 103 151 42 39 161 168 158 162 Unrestricted funds 9,133 5,232 1,541 645 629 3,962 4,081 6,305 8,659 8,919
A-139 Total investment earnings $ 19,075 $ 14,704 $ 10,732 $ 11,403 $ 12,953 $ 16,896 $ 17,620 $ 19,851 $ 22,127 $ 22,415 Annual percent change 13.9% -22.9% -27.0% 6.2% 13.6% 30.4% 4.3% 12.7% 11.5% 1.3%
Total Revenues 303,312$ $ 311,973 $ 330,656 $ 352,945 $ 435,292 $ 496,743 $ 510,760 $ 522,978 $ 541,500 $ 547,228 Annual percent change 9.2% 2.9% 6.0% 6.7% 23.3% 14.1% 2.8% 2.4% 3.5% 1.1%
Source for historical data: Metropolitan Washington Airports Authority. Columns may not add to totals shown because of rounding. (a) Revenues are stated net of expenses and fees under parking management contract.
Sptember 9, 2011 Exhibit E-4
CALCULATION OF SIGNATORY AIRLINE RENTALS, FEES, AND CHARGES Metropolitan Washington Airports Authority For Fiscal Years ending December 31 (dollars and passengers in thousands)
This exhibit is based on information from the sources indicated and assumptions provided by, or reviewed with and approved by, Airports Authority management, as described in the accompanying text. Inevitably, some of the assumptions used to develop the forecasts will not be realized and unanticipated events and circumstances could occur. Therefore, the actual results will vary from those forecast, and the variations could be material.
Historical Estimated Forecast ______2007______2008______2009______2010______2011______2012______2013______2014______2015______2016 _ Reagan National Airport
Allocated requirements of Airline Supported Areas Direct Operation and Maintenance Expenses (a) 21,381$ 18,315$ 19,681$ 22,666$ 25,120$ 25,874$ 26,652$ 27,451$ 28,273$ $ 29,120 Indirect Operation and Maintenance Expenses (a) 47,775 47,430 46,915 55,254 61,216 63,048 64,935 66,878 68,879 70,391 O&M Reserve requirement 728 579 90 1,536 332 431 444 457 470 393 Direct Debt Service (b) 43,810 44,122 46,604 47,990 41,082 41,885 42,726 44,207 46,854 47,001 Indirect Debt Service (b) 6,645 6,315 7,950 11,481 8,424 10,223 11,149 11,215 12,552 12,291 Debt Service coverage 12,614 12,609 13,638 14,868 12,377 13,027 13,469 13,855 14,851 14,823 Amortization of COMIP Expenditures 3,001 3,313 3,387 3,435 2,882 3,536 3,577 3,679 3,658 3,611 Fund deposits ------Federal Lease payment 1,643 1,830 1,943 2,110 1,872 1,928 1,986 2,045 2,106 2,164
A-140 Other requirements ------Total Requirement $ 137,598 $ 134,513 140,208$ 159,340$ 153,304$ 159,952$ 164,938$ 169,788$ 177,643$ $ 179,793 Less: Utility reimburements and TSA fees $ 2,563 $ 2,686 $ 2,776 $ 2,812 $ 2,674 $ 2,719 $ 2,764 $ 2,811 $ 2,858 $ 2,906 Net Requirement $ 135,036 $ 131,827 137,432$ 156,527$ 150,630$ 157,233$ 162,174$ 166,977$ 174,786$ $ 176,887 Signatory Airline Share of Net Requirement $ 113,481 $ 110,740 115,703$ 131,346$ 128,180$ 133,848$ 137,936$ 141,890$ 148,713$ $ 150,401 Less: Transfer of prior year Signatory Airline share of Net Remaining Revenues (c) $ 17,572 $ 14,014 $ 9,428 $ 10,607 $ 14,307 $ 12,404 $ 10,913 $ 11,089 $ 11,910 $ 12,600 Net Requirement $ 95,909 $ 96,726 106,276$ 120,739$ 113,873$ 121,444$ 127,023$ 130,801$ 136,803$ $ 137,801 Less: Payments by Signatory Cargo Carriers $ - $ 44 $ 107 $ 131 $ 128 $ 138 $ 144 $ 147 $ 156 $ 156 Passenger Signatory Airline payments $ 95,909 $ 96,682 106,168$ 120,609$ 113,745$ 121,306$ 126,879$ 130,654$ 136,647$ $ 137,645 Signatory enplaned passengers 9,177 8,865 8,657 8,924 9,326 9,529 9,637 9,721 9,810 9,894 Passenger Signatory Airline payments per passenger$ 10.45 $ 10.91 12.26$ 13.52$ 12.20$ 12.73$ 13.17$ 13.44$ 13.93$ $ 13.91
Columns may not add to totals shown because of rounding. (a) See Exhibit D-2. (b) See Exhibit C-2. (c) See Exhibit F-1.
Sptember 9, 2011 Exhibit E-5
CALCULATION OF SIGNATORY AIRLINE RENTALS, FEES, AND CHARGES Metropolitan Washington Airports Authority For Fiscal Years ending December 31 (dollars and passengers in thousands)
This exhibit is based on information from the sources indicated and assumptions provided by, or reviewed with and approved by, Airports Authority management, as described in the accompanying text. Inevitably, some of the assumptions used to develop the forecasts will not be realized and unanticipated events and circumstances could occur. Therefore, the actual results will vary from those forecast, and the variations could be material.
Historical Estimated Forecast ______2007______2008______2009______2010______2011______2012______2013______2014______2015______2016 _ Dulles International Airport
Allocated requirements of Airline Supported Areas Direct Operation and Maintenance Expenses (a) 56,299$ 58,612$ 56,153$ 70,904$ 74,260$ 76,490$ 78,786$ 81,151$ 83,584$ $ 86,091 Indirect Operation and Maintenance Expenses (a) 61,919 60,668 57,602 67,726 73,445 75,647 77,912 80,246 82,651 84,865 O&M Reserve requirement 1,196 1,011 145 2,591 534 739 760 783 806 787 Direct Debt Service (b) 67,287 74,372 96,110 88,329 140,843 177,025 181,792 183,053 193,808 192,901 Indirect Debt Service (b) 10,547 13,380 12,867 17,255 21,379 28,708 30,748 31,874 32,264 32,630 Debt Service coverage 19,459 21,938 27,244 26,396 40,555 51,433 53,135 53,732 56,518 56,383 Amortization of COMIP Expenditures 5,624 6,173 9,834 7,601 7,042 8,359 8,544 8,683 7,938 7,269 Fund deposits ------Federal Lease payment 1,798 1,478 1,345 1,483 1,718 1,769 1,822 1,877 1,933 1,990
A-141 Other requirements ------Total Requirement $ 224,128 $ 237,632 261,301$ 282,284$ 359,775$ 420,170$ 433,500$ 441,398$ 459,502$ 462,914$ Less: Utility reimburements and TSA fees $ 1,186 $ 1,186 $ 1,186 $ 1,186 $ 1,186 $ 1,186 $ 1,186 $ 1,186 $ 1,186 $ 1,186 Net Requirement $ 222,942 $ 236,446 260,115$ 281,099$ 358,589$ 418,984$ 432,314$ 440,212$ 458,316$ 461,728$ Signatory Airline Share of Net Requirement $ 201,942 $ 213,362 238,127$ 247,907$ 313,848$ 365,974$ 377,817$ 385,010$ 400,381$ 403,427$ Less: Transfer of prior year Signatory Airline share of Net Remaining Revenues (c) $ 57,110 $ 63,975 $ 62,925 $ 55,242 $ 47,307 $ 45,393 $ 49,253 $ 51,320 $ 54,805 $ 58,144 Net Requirement $ 144,833 $ 149,387 175,202$ 192,665$ 266,541$ 320,581$ 328,564$ 333,689$ 345,576$ 345,284$ Less: Payments by Signatory Cargo Carriers $ 1,169 $ 1,217 $ 1,359 $ 1,343 $ 1,794 $ 2,098 $ 2,165 $ 2,194 $ 2,183 $ 2,217 Passenger Signatory Airline payments $ 143,664 $ 148,170 173,843$ 191,322$ 264,747$ 318,483$ 326,399$ 331,495$ 343,394$ 343,066$ Signatory enplaned passengers 12,155 11,725 11,401 11,668 11,436 11,598 11,873 12,187 12,506 12,835 Passenger Signatory Airline payments per passenger$ 11.82 $ 12.64 15.25$ 16.40$ 23.15$ $ 27.46 $ 27.49 $ 27.20 $ 27.46 $ 26.73
Columns may not add to totals shown because of rounding. (a) See Exhibit D-3. (b) See Exhibit C-3. (c) See Exhibit F-1.
Sptember 9, 2011
[THIS PAGE INTENTIONALLY LEFT BLANK]
A-142 Exhibit F-1
APPLICATION OF REVENUES AND ALLOCATION OF NET REMAINING REVENUE Metropolitan Washington Airports Authority For Fiscal Years ending December 31 (dollars in thousands)
This exhibit is based on information from the sources indicated and assumptions provided by, or reviewed with and approved by, Airports Authority management, as described in the accompanying text. Inevitably, some of the assumptions used to develop the forecasts will not be realized and unanticipated events and circumstances could occur. Therefore, the actual results will vary from those forecast, and the variations could be material.
Historical Estimated Forecast ______2007 ______2008 ______2009 ______2010 ______2011 ______2012 ______2013 ______2014 ______2015 ______2016
Revenues (a) 495,148$ 503,524$ 530,405$ 575,215$ 646,414$ 715,090$ 737,147$ 756,382$ 784,355$ 793,201$
Application of Revenues (b) O&M Expenses (c) 253,398$ 259,511$ 261,680$ 292,849$ 320,584$ 330,200$ 340,108$ 350,309$ 360,815$ 371,635$ Required deposits to: Operation and Maintenance Fund (d) 2,676 2,298 357 5,794 1,236 1,603 1,651 1,700 1,751 1,803 Principal and Interest Accounts (e) 184,247 204,496 229,060 237,068 287,516 339,522 350,552 355,275 371,216 371,539 Redemption Accounts ------Debt Service Reserve Funds ------Subordinated Bond Funds ------Subordinated Reserve Funds ------Junior Lien Obligations Fund ------
A-143 Federal Lease Fund 4,830 4,958 5,066 5,101 5,122 5,275 5,433 5,596 5,764 5,937 Emergency Repair and Rehabilitation Fund ------General Purpose Fund 49,997 32,260 34,241 34,403 31,957 38,490 39,403 43,501 44,810 42,287 Total Application of Revenues 495,148$ $ 503,524 $ 530,405 $ 575,215 $ 646,414 $ 715,090 $ 737,147 $ 756,382 $ 784,355 $ 793,201
Calculation of Net Remaining Revenues (f) Deposit to General Purpose Fund 49,997$ 32,260$ 34,241$ 34,403$ 31,957$ 38,490$ 39,403$ 43,501$ 44,810$ 42,287$ Transfer from Airline Transfer Account (g) 74,682 77,989 72,353 65,849 61,614 57,797 60,165 62,409 66,715 70,743 Net Remaining Revenues 124,679$ $ 110,250 $ 106,594 $ 100,251 $ 93,570 $ 96,287 $ 99,568 $ 105,911 $ 111,525 $ 113,030
Allocation of Net Remaining Revenues (f) Authority share (transfer to Capital Fund) 46,689$ 37,897$ 40,745$ 38,638$ 35,773$ 36,122$ 37,159$ 39,196$ 40,781$ 41,360$ Signatory Airline share (transfer to Airline Transfer Account) 77,989 72,353 65,849 61,614 57,797 60,165 62,409 66,715 70,743 71,670 124 ,679$ 124,679$ $ 110,250 $ 106,594 $ 100,251 $ 93,570 $ 96,287 $ 99,568 $ 105,911 $ 111,525 $ 113,030 Signatory Airline share of Net Remaining Revenues Reagan National Airport $14,014 $9,428 $10,607 $14,307 $12,404 $10,913 $11,089 $11,910 $12,600 $12,504 Dulles International Airport 63,975 62,925 55,242 47,307 45,393 49,253 51,320 54,805 58,144 59,166 77 ,989$ 77,989$ $ 72,353 $ 65,849 $ 61,614 $ 57,797 $ 60,165 $ 62,409 $ 66,715 $ 70,743 $ 71,670
Source for historical data: Metropolitan Washington Airports Authority. Columns may not add to totals shown because of rounding. (a) See Exhibit E-1. (b) Application per the Indenture. (c) See Exhibit D-1. (d) Annual O&M Reserve increment. (e) Annual Debt Service is shown as a proxy for deposits to Principal and Interest Accounts. See Exhibit C-1. (f) Calculation and allocation per the Airline Agreement. (g) Signatory Airline share of prior year's Net Remaining Revenues.
Sptember 9, 2011 Exhibit F-2
SOURCES AND USES OF PFC REVENUES Metropolitan Washington Airports Authority For Fiscal Years ending December 31 (dollars in thousands)
This exhibit is based on information from the sources indicated and assumptions provided by, or reviewed with and approved by, Airports Authority management, as described in the accompanying text. Inevitably, some of the assumptions used to develop the forecasts will not be realized and unanticipated events and circumstances could occur. Therefore, the actual results will vary from those forecast, and the variations could be material.
Estimated Forecast ______2008______2009______2010______2011______2012______2013______2014______2015______2016______2017______2018 _
Reagan National Airport Enplaned passengers 9,450 9,655 9,765 9,850 9,940 10,025 10,095 10,166 Percent PFC-eligible 89% 89% 89% 89% 89% 89% 89% 89% Net PFC amount (a) $ 4.39 4.39$ 4.39$ 4.39$ 4.39$ 4.39$ 4.39$ 4.39$ PFC Revenues $ 36,922 $ 37,723 38,153$ 38,485$ 38,837$ 39,169$ 39,443$ $ 39,719
Dulles International Airport Enplaned passengers 11,650 11,815 12,095 12,415 12,740 13,075 13,533 14,006 Percent PFC-eligible 89% 89% 89% 89% 89% 89% 89% 89% Net PFC amount (a) $ 4394.39 $ 4394.39 $ 4394.39 $ 4394.39 $ 4394.39 $ 4394.39 $ 4394.39 $ 4394.39 PFC Revenues (Designated PFCs) $ 45,518 46,162$ 47,256$ 48,507$ 49,776$ 51,085$ 52,873$ $ 54,724 A-144 Total PFC Revenues $ 78,455 $ 78,521 80,088$ 82,440$ 83,885$ 85,409$ 86,992$ 88,613$ 90,254$ 92,316$ $ 94,443
Sptember 9, 2011 Exhibit F-2 (page 2 of 2)
SOURCES AND USES OF PFC REVENUES Metropolitan Washington Airports Authority For Fiscal Years ending December 31
This exhibit is based on information from the sources indicated and assumptions provided by, or reviewed with and approved by, Airports Authority management, as described in the accompanying text. Inevitably, some of the assumptions used to develop the forecasts will not be realized and unanticipated events and circumstances could occur. Therefore, the actual results will vary from those forecast, and the variations could be material.
Estimated Forecast 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 ______
Reagan National Airport PFC Fund balance begininng balance 7,252$ 12,492$ 19,236$ $ 1,188 -$ -$ -$ -$
PFC Revenues 36,922 37,723 38,153 38,485 38,837 39,169 39,443 39,719 Interim financing (b) - - - 53,855 31,861 (15,596) (39,443) (30,677)
Uses of PFC Revenues Pay-as-you-go expenditures Approved projects 31,682 30,979 18,363 17,091 8,545 - - - Future projects - - 37,838 76,437 62,152 23,573 - -
PFC Fund balance ending balance 7,252$ 12,492$ 19,236$ $ 1,188 -$ -$ -$ -$ 9,042$ A-145
Dulles International Airport PFC Fund balance begininng balance 11,998$ $ (2,484) $ 3,678 10,935$ 19,441$ 29,218$ 40,303$ $ 53,177
PFC Revenues 45,518 46,162 47,256 48,507 49,776 51,085 52,873 54,724
Uses of PFC Revenues Debt Service of PFC-Eligible Bonds Irrevocable commitment 35,000 35,000 35,000 35,000 35,000 35,000 - - Intended commitment 25,000 5,000 5,000 5,000 5,000 5,000 40,000 40,000
PFC Fund balance ending balance $ 11,998 $ (2,484) $ 3,678 10,935$ 19,441$ 29,218$ 40,303$ 53,177$ $ 67,900
Source for historical data: Metropolitan Washington Airports Authority. Columns may not add to totals shown because of rounding. (a) PFC of $4.50 less airline collection fee of $0.11. (b) Commercial Paper Notes to be repaid from PFC Revenues in 2016 through 2018.
Sptember 9, 2011 Exhibit G-1
DEBT SERVICE COVERAGE AND RATE COVENANT REQUIREMENT Metropolitan Washington Airports Authority For Fiscal Years ending December 31 (dollars in thousands)
This exhibit is based on information from the sources indicated and assumptions provided by, or reviewed with and approved by, Airports Authority management, as described in the accompanying text. Inevitably, some of the assumptions used to develop the forecasts will not be realized and unanticipated events and circumstances could occur. Therefore, the actual results will vary from those forecast, and the variations could be material.
Airports Authority Historical Estimated Forecast ______2007______2008______2009______2010______2011______2012______2013______2014______2015______2016 _ Debt Service Coverage Revenues (a) 495,148$ 503,524$ 530,405$ 575,215$ 646,414$ 715,090$ 737,147$ 756,382$ 784,355$ 793,201$ Transfer from General Purpose Fund 74,682 77,989 72,353 65,849 61,614 57,797 60,165 62,409 66,715 70,743 569,830$ 569,830$ 581,514$ 602,757$ 641,063$ 708,028$ 772,887$ 797,312$ 818,791$ 851,070$ 863,945$
Less: Operation and Maintenance Expenses (b) 253,398 259,511 261,680 292,849 320,584 330,200 340,108 350,309 360,815 371,635 Net Revenues [A] 316,432$ 322,003$ 341,077$ 348,215$ 387,445$ 442,687$ 457,204$ 468,482$ 490,255$ 492,310$
Bond Debt Service 184,247$ 204,496$ 232,732$ 319,081$ 347,516$ 379,522$ 390,552$ 395,275$ 411,216$ 411,539$ Less: Irrevocable PFC commitment - - (3,672) (35,000) (35,000) (35,000) (35,000) (35,000) (35,000) (35,000) Less: Intended PFC commitment - - - (47,013) (25,000) (5,000) (5,000) (5,000) (5,000) (5,000)
A-146 Total Annual Debt Service (c) [B] 184,247$ 204,496$ 229,060$ 237,068$ 287,516$ 339,522$ 350,552$ 355,275$ 371,216$ 371,539$
Debt service coverage ratio [A/B] 1.72 1.57 1.49 1.47 1.35 1.30 1.30 1.32 1.32 1.33
Sptember 9, 2011 Exhibit G-1 (page 2 of 2)
DEBT SERVICE COVERAGE AND RATE COVENANT REQUIREMENT Metropolitan Washington Airports Authority For Fiscal Years ending December 31 (dollars in thousands)
Airports Authority Historical Estimated Forecast ______2007______2008______2009______2010______2011______2012______2013______2014______2015______2016 _ Rate Covenant Requirement Section 6.04(a)(i) requirement Required deposits to: Principal and Interest Accounts (d) 184,247$ 204,496$ 229,060$ 237,068$ 287,516$ 339,522$ 350,552$ 355,275$ 371,216$ 371,539$ Redemption Accounts ------Debt Service Reserve Funds ------Subordinated Bond Funds ------Subordinated Reserve Funds ------Junior Lien Obligations Fund ------Federal Lease Fund 4,830 4,958 5,066 5,101 5,122 5,275 5,433 5,596 5,764 5,937 Emergency Repair and Rehabilitation Fund ------Total Section 6.04(a)(i) requirement [C] 189,077$ 209,455$ 234,126$ 242,169$ 292,638$ 344,797$ 355,985$ 360,871$ 376,980$ 377,476$
Section 6.04(a)(i) requirement Annual Debt Service [D] 184,247$ 204,496$ 229,060$ 237,068$ 287,516$ 339,522$ 350,552$ 355,275$ 371,216$ 371,539$
A-147 Coverage factor [E] 125% 125% 125% 125% 125% 125% 125% 125% 125% 125% Total Section 6.04(a)(i) requirement (F = D x E) [F] 230,308$ 255,620$ 286,325$ 296,335$ 359,395$ 424,403$ 438,190$ 444,094$ 464,020$ 464,424$
Rate Covenant Requirement (equal to the greater of [C] or [F]) [G] 230,308$ 255,620$ 286,325$ 296,335$ 359,395$ 424,403$ 438,190$ 444,094$ 464,020$ 464,424$
Result must not be less than zero [A-G] 86,123$ 66,382$ 54,752$ 51,880$ 28,049$ 18,284$ 19,015$ 24,388$ 26,236$ 27,885$
Source for historical data: Metropolitan Washington Airports Authority. Columns may not add to totals shown because of rounding. (a) See Exhibit E-1. (b) See Exhibit D-1. (c) See Exhibit C-1. (d) Annual debt service is used as a proxy for deposits to the Principal and Interest Accounts.
Sptember 9, 2011 Exhibit G-2
DEBT SERVICE COVERAGE Metropolitan Washington Airports Authority For Fiscal Years ending December 31 (dollars in thousands)
This exhibit is based on information from the sources indicated and assumptions provided by, or reviewed with and approved by, Airports Authority management, as described in the accompanying text. Inevitably, some of the assumptions used to develop the forecasts will not be realized and unanticipated events and circumstances could occur. Therefore, the actual results will vary from those forecast, and the variations could be material.
Reagan National Airport Historical Estimated Forecast ______2007______2008______2009______2010______2011______2012______2013______2014______2015______2016 _
Revenues (a) 191,835$ 191,551$ 199,749$ 222,270$ 211,122$ 218,347$ 226,387$ 233,403$ 242,856$ 245,974$ Transfer from General Purpose Fund 17,572 14,014 9,428 10,607 14,307 12,404 10,913 11,089 11,910 12,600 209 ,408$ 209,408$ 205,565$ 209,176$ 232,876$ 225,429$ 230,751$ 237,299$ 244,493$ 254,765$ 258,573$
Less: Operation and Maintenance Expenses (b) 101,309 106,314 105,388 112,622 122,479 126,152 129,938 133,834 137,847 141,983 Net Revenues [A] 108,098$ 99,251$ 103,788$ 120,254$ 102,950$ 104,599$ 107,361$ 110,659$ 116,918$ 116,590$
Bond Debt Service 75,763$ 76,862$ 76,995$ 86,236$ 76,322$ 80,006$ 82,344$ 83,985$ 89,105$ 88,683$ Less: Irrevocable PFC commitment ------Less: Intended PFC commitment ------
A-148 Total Annual Debt Service (c) [B] 75,763$ 76,862$ 76,995$ 86,236$ 76,322$ 80,006$ 82,344$ 83,985$ 89,105$ 88,683$
Debt service coverage ratio [A/B] 1.43 1.29 1.35 1.39 1.35 1.31 1.30 1.32 1.31 1.31
Source for historical data: Metropolitan Washington Airports Authority. Columns may not add to totals shown because of rounding. (a) See Exhibit E-2. (b) See Exhibit D-2. (c) See Exhibit C-2.
Sptember 9, 2011 Exhibit G-3
DEBT SERVICE COVERAGE Metropolitan Washington Airports Authority For Fiscal Years ending December 31 (dollars in thousands)
This exhibit is based on information from the sources indicated and assumptions provided by, or reviewed with and approved by, Airports Authority management, as described in the accompanying text. Inevitably, some of the assumptions used to develop the forecasts will not be realized and unanticipated events and circumstances could occur. Therefore, the actual results will vary from those forecast, and the variations could be material.
Dulles International Airport Historical Estimated Forecast ______2007______2008______2009______2010______2011______2012______2013______2014______2015______2016 _
Revenues (a) 303,312$ 311,973$ 330,656$ 352,945$ 435,292$ 496,743$ 510,760$ 522,978$ 541,500$ 547,228$ Transfer from General Purpose Fund 57,110 63,975 62,925 55,242 47,307 45,393 49,253 51,320 54,805 58,144 36 0,422$ 360,422$ 375,949$ 393,581$ 408,187$ 482,599$ 542,136$ 560,013$ 574,298$ 596,305$ 605,371$
Less: Operation and Maintenance Expenses (b) 152,089 153,197 156,292 180,226 198,105 204,048 210,170 216,475 222,968 229,652 Net Revenues [A] 208,333$ 222,751$ 237,289$ 227,961$ 284,494$ 338,088$ 349,843$ 357,823$ 373,337$ 375,719$
Bond Debt Service 108,483$ 127,634$ 155,737$ 232,845$ 271,194$ 299,516$ 308,207$ 311,290$ 322,111$ 322,856$ Less: Irrevocable PFC commitment - - (3,672) (35,000) (35,000) (35,000) (35,000) (35,000) (35,000) (35,000) Less: Intended PFC commitment - - - (47,013) (25,000) (5,000) (5,000) (5,000) (5,000) (5,000)
A-149 Total Annual Debt Service (c) [B] 108,483$ 127,634$ 152,065$ 150,832$ 211,194$ 259,516$ 268,207$ 271,290$ 282,111$ 282,856$
Debt service coverage ratio [A/B] 1.92 1.75 1.56 1.51 1.35 1.30 1.30 1.32 1.32 1.33
Source for historical data: Metropolitan Washington Airports Authority. Columns may not add to totals shown because of rounding. (a) See Exhibit E-3. (b) See Exhibit D-3. (c) See Exhibit C-3.
Sptember 9, 2011 Exhibit H-1
SUMMARY OF FINANCIAL FORECASTS Metropolitan Washington Airports Authority For Fiscal Years ending December 31 (dollars and passengers in thousands)
This exhibit is based on information from the sources indicated and assumptions provided by, or reviewed with and approved by, Airports Authority management, as described in the accompanying text. Inevitably, some of the assumptions used to develop the forecasts will not be realized and unanticipated events and circumstances could occur. Therefore, the actual results will vary from those forecast, and the variations could be material.
Airports Authority Historical Estimated Forecast ______2007______2008______2009______2010______2011______2012______2013______2014______2015______2016 _ Base Case Total Revenues 495,148$ 503,524$ 530,405$ 575,215$ 646,414$ 715,090$ 737,147$ 756,382$ 784,355$ 793,201$
Plus: Transfer from General Purpose Fund 74,682 77,989 72,353 65,849 61,614 57,797 60,165 62,409 66,715 70,743 Less: Operation and Maintenance Expenses 253,398 259,511 261,680 292,849 320,584 330,200 340,108 350,309 360,815 371,635 Net Revenues 316,432$ 322,003$ 341,077$ 348,215$ 387,445$ 442,687$ 457,204$ 468,482$ 490,255$ 492,310$
Bond Debt Service 184,247$ 204,496$ 232,732$ 319,081$ 347,516$ 379,522$ 390,552$ 395,275$ 411,216$ 411,539$ Less: Commitment of PFC Revenues - - (3,672) (82,013) (60,000) (40,000) (40,000) (40,000) (40,000) (40,000) Total Annual Debt Service 184,247$ 204,496$ 229,060$ 237,068$ 287,516$ 339,522$ 350,552$ 355,275$ 371,216$ 371,539$
A-150 Debt service coverage ratio 1.72 1.57 1.49 1.47 1.35 1.30 1.30 1.32 1.32 1.33
PFC Revenues 82,859$ 78,455$ 78,521$ 80,088$ 82,440$ 83,885$ 85,409$ 86,992$ 88,613$ 90,254$ PFC Fund balance -$ -$ -$ 19,250$ 10,008$ 22,915$ 12,123$ 19,441$ 29,218$ 40,303$
Stress Test Total Revenues 495,148$ 503,524$ 530,405$ 575,215$ 646,414$ 709,027$ 726,979$ 750,112$ 778,233$ 788,799$
Plus: Transfer from General Purpose Fund 74,682 77,989 72,353 65,849 61,614 57,797 55,258 49,244 50,582 52,295 Less: Operation and Maintenance Expenses 253,398 259,511 261,680 292,849 320,584 330,200 340,108 350,309 360,815 371,635 Net Revenues 316,432$ 322,003$ 341,077$ 348,215$ 387,445$ 436,625$ 442,129$ 449,047$ 468,000$ 469,459$
Bond Debt Service 184,247$ 204,496$ 232,732$ 319,081$ 347,516$ 379,522$ 390,552$ 395,275$ 411,216$ 411,539$ Less: Commitment of PFC Revenues - - (3,672) (82,013) (60,000) (38,000) (36,000) (36,000) (36,000) (36,000) Total Annual Debt Service 184,247$ 204,496$ 229,060$ 237,068$ 287,516$ 341,522$ 354,552$ 359,275$ 375,216$ 375,539$
Debt service coverage ratio 1.72 1.57 1.49 1.47 1.35 1.28 1.25 1.25 1.25 1.25
PFC Revenues 82,859$ 78,455$ 78,521$ 80,088$ 82,440$ 74,821$ 67,202$ 67,202$ 67,202$ 67,202$ PFC Fund balance -$ -$ -$ 19,250$ 10,008$ 15,850$ 291$ 236$ 181$ 127$
Source: See preceding exhibits and accompanying text. Columns may not add to totals shown because of rounding.
Sptember 9, 2011 Exhibit H-2
SUMMARY OF FINANCIAL FORECASTS Metropolitan Washington Airports Authority For Fiscal Years ending December 31 (dollars and passengers in thousands)
This exhibit is based on information from the sources indicated and assumptions provided by, or reviewed with and approved by, Airports Authority management, as described in the accompanying text. Inevitably, some of the assumptions used to develop the forecasts will not be realized and unanticipated events and circumstances could occur. Therefore, the actual results will vary from those forecast, and the variations could be material.
Reagan National Airport Historical Estimated Forecast ______2007______2008______2009______2010______2011______2012______2013______2014______2015______2016 _ Base Case Airline revenues 95,942$ 96,757$ 106,310$ 120,799$ 114,064$ 121,647$ 127,233$ 131,016$ 137,031$ 138,030$ Concession revenues 69,210 70,972 73,443 81,209 77,970 76,070 77,763 79,317 80,941 82,564 Other operating revenues 26,684 23,822 19,996 20,262 19,088 20,630 21,391 23,071 24,883 25,379 Total Revenues 191,835$ 191,551$ 199,749$ 222,270$ 211,122$ 218,347$ 226,387$ 233,403$ 242,856$ 245,974$
Plus: Transfer from General Purpose Fund 17,572$ 14,014$ 9,428$ 10,607$ 14,307$ 12,404$ 10,913$ 11,089$ 11,910$ 12,600$ Less: Operation and Maintenance Expenses 101,309 106,314 105,388 112,622 122,479 126,152 129,938 133,834 137,847 141,983 Net Revenues 108,098$ 99,251$ 103,788$ 120,254$ 102,950$ 104,599$ 107,361$ 110,659$ 116,918$ 116,590$
Bond Debt Service 75,763$ 76,862$ 76,995$ 86,236$ 76,322$ 80,006$ 82,344$ 83,985$ 89,105$ 88,683$ A-151 Debt service coverage ratio 1.43 1.29 1.35 1.39 1.35 1.31 1.30 1.32 1.31 1.31
Signatory enplaned passengers 9,177 8,865 8,657 8,924 9,326 9,529 9,637 9,721 9,810 9,894 Passenger Signatory Airline payments per passenger 10.45$ 10.91$ 12.26$ 13.52$ 12.20$ 12.73$ 13.17$ 13.44$ 13.93$ 13.91$
Stress Test Airline revenues 95,942$ 96,757$ 106,310$ 120,799$ 114,064$ 121,648$ 135,374$ 138,596$ 146,132$ 147,769$ Concession revenues 69,210 70,972 73,443 81,209 77,970 71,578 67,480 68,343 69,222 70,119 Other operating revenues 26,684 23,822 19,996 20,262 19,088 20,612 21,356 23,035 24,849 25,344 Total Revenues 191,835$ 191,551$ 199,749$ 222,270$ 211,122$ 213,838$ 224,210$ 229,974$ 240,202$ 243,232$
Plus: Transfer from General Purpose Fund 17,572$ 14,014$ 9,428$ 10,607$ 14,307$ 12,404$ 8,658$ 8,874$ 9,056$ 9,639$ Less: Operation and Maintenance Expenses 101,309 106,314 105,388 112,622 122,479 126,152 129,938 133,834 137,847 141,983 Net Revenues 108,098$ 99,251$ 103,788$ 120,254$ 102,950$ 100,090$ 102,931$ 105,014$ 111,412$ 110,888$
Bond Debt Service 75,763$ 76,862$ 76,995$ 86,236$ 76,322$ 80,006$ 82,344$ 83,985$ 89,105$ 88,683$
Debt service coverage ratio 1.43 1.29 1.35 1.39 1.35 1.25 1.25 1.25 1.25 1.25
Signatory enplaned passengers 9,177 8,865 8,657 8,924 9,326 8,586 7,895 7,895 7,895 7,895 Passenger Signatory Airline payments per passenger 10.45$ 10.91$ 12.26$ 13.52$ 12.20$ 14.13$ 17.10$ 17.51$ 18.46$ 18.66$
Source: See preceding exhibits and accompanying text. Columns may not add to totals shown because of rounding.
Sptember 9, 2011 Exhibit H-3
SUMMARY OF FINANCIAL FORECASTS Metropolitan Washington Airports Authority For Fiscal Years ending December 31 (dollars and passengers in thousands)
This exhibit is based on information from the sources indicated and assumptions provided by, or reviewed with and approved by, Airports Authority management, as described in the accompanying text. Inevitably, some of the assumptions used to develop the forecasts will not be realized and unanticipated events and circumstances could occur. Therefore, the actual results will vary from those forecast, and the variations could be material.
Dulles International Airport Historical Estimated Forecast ______2007______2008______2009______2010______2011______2012______2013______2014______2015______2016 _ Base Case Airline revenues $ 148,477 152,250$ 178,790$ 197,049$ 272,380$ 327,094$ 335,278$ 340,517$ 352,425$ $ 352,240 Concession revenues 110,947 114,737 109,417 112,783 116,101 117,029 120,694 124,756 128,919 133,249 Other operating revenues 43,888 44,986 42,448 43,113 46,812 52,620 54,788 57,705 60,156 61,739 Total Revenues $ 303,312 311,973$ 330,656$ 352,945$ 435,292$ 496,743$ 510,760$ 522,978$ 541,500$ $ 547,228
Plus: Transfer from General Purpose Fund 57,110 63,975 62,925 55,242 47,307 45,393 49,253 51,320 54,805 58,144 Less: Operation and Maintenance Expenses 152,089 153,197 156,292 180,226 198,105 204,048 210,170 216,475 222,968 229,652 Net Revenues $ 208,333 222,751$ 237,289$ 227,961$ 284,494$ 338,088$ 349,843$ 357,823$ 373,337$ $ 375,719
Bond Debt Service $ 108,483 $ 127,634 155,737$ 232,845$ 271,194$ 299,516$ 308,207$ 311,290$ 322,111$ $ 322,856 Less: Commitment of PFC Revenues - - (3,672) (82,013) (60,000) (40,000) (40,000) (40,000) (40,000) (40,000)
A-152 Total Annual Debt Service $ 108,483 127,634$ 152,065$ 150,832$ 211,194$ 259,516$ 268,207$ 271,290$ 282,111$ $ 282,856
Debt service coverage ratio 1.92 1.75 1.56 1.51 1.35 1.30 1.30 1.32 1.32 1.33
Signatory enplaned passengers 12,155 11,725 11,401 11,668 11,436 11,598 11,873 12,187 12,506 12,835 Passenger Signatory Airline payments per passenger 11.82$ 12.64$ 15.25$ 16.40$ 23.15$ 27.46$ 27.49$ 27.20$ 27.46$ 26.73$
Stress Test Airline revenues $ 148,477 $ 152,250 178,790$ 197,049$ 272,380$ 329,093$ 341,852$ 354,984$ 369,092$ $ 373,683 Concession revenues 110,947 114,737 109,417 112,783 116,101 113,460 106,095 107,415 108,751 110,112 Other operating revenues 43,888 44,986 42,448 43,113 46,812 52,637 54,821 57,739 60,188 61,772 Total Revenues $ 303,312 311,973$ 330,656$ 352,945$ 435,292$ 495,189$ 502,769$ 520,138$ 538,031$ $ 545,567
Plus: Transfer from General Purpose Fund 57,110 63,975 62,925 55,242 47,307 45,393 46,600 40,370 41,525 42,655 Less: Operation and Maintenance Expenses 152,089 153,197 156,292 180,226 198,105 204,048 210,170 216,475 222,968 229,652 Net Revenues $ 208,333 222,751$ 237,289$ 227,961$ 284,494$ 336,534$ 339,198$ 344,033$ 356,588$ $ 358,570
Bond Debt Service $ 108,483 $ 127,634 155,737$ 232,845$ 271,194$ 299,516$ 308,207$ 311,290$ 322,111$ $ 322,856 Less: Commitment of PFC Revenues - - (3,672) (82,013) (60,000) (38,000) (36,000) (36,000) (36,000) (36,000) Total Annual Debt Service $ 108,483 127,634$ 152,065$ 150,832$ 211,194$ 261,516$ 272,207$ 275,290$ 286,111$ $ 286,856
Debt service coverage ratio 1.92 1.75 1.56 1.51 1.35 1.29 1.25 1.25 1.25 1.25
Signatory enplaned passengers 12,155 11,725 11,401 11,668 11,436 10,258 9,031 9,031 9,031 9,031 Passenger Signatory Airline payments per passenger 11.82$ 12.64$ 15.25$ 16.40$ 23.15$ 31.24$ 36.87$ 38.30$ 39.86$ 40.35$
Source: See preceding exhibits and accompanying text. Columns may not add to totals shown because of rounding.
Sptember 9, 2011
APPENDIX B
DEFINITIONS AND SUMMARY OF CERTAIN PROVISIONS OF THE INDENTURE
Page
DEFINITIONS B-1
SUMMARY OF CERTAIN PROVISIONS OF THE INDENTURE B-21
[THIS PAGE INTENTIONALLY LEFT BLANK] DEFINITIONS
The following are definitions of certain terms used in the Official Statement (except as otherwise set forth therein), a summary of certain provisions of the Indenture.
"Account" shall mean any account or subaccount created in any Fund created under the Master Indenture or under a Supplemental Indenture.
"Accreted Value" shall mean (a) with respect to any Capital Appreciation Bonds, as of any date of calculation, the sum of the amount set forth in a Supplemental Indenture as the amount representing the initial principal amount of such Capital Appreciation Bonds plus the interest accumulated, compounded and unpaid thereon as of the most recent compounding date, or (b) with respect to Original Issue Discount Bonds, as of the date of calculation, the amount representing the initial public offering price of such Original Issue Discount Bonds plus the amount of the discounted principal which has accreted since the date of issue; in each case the Accreted Value shall be determined in accordance with the provisions of the Supplemental Indenture authorizing the issuance of such Capital Appreciation Bonds or Original Issue Discount Bonds.
"Acts" shall mean, collectively, Chapter 598 of the Acts of Virginia General Assembly of 1985, as amended, and the District of Columbia Regional Airports Authority Act of 1985 (D.C. Law 6-67), as amended.
"Airport Consultant" shall mean a firm or firms of national recognition experienced in the field of planning the development, operation and management of airports and aviation facilities, selected and employed by the Airports Authority from time to time.
"Airports" shall mean Ronald Reagan Washington National Airport, located in Arlington County, Virginia, Washington Dulles International Airport, located in Fairfax County and Loudoun County, Virginia, and any other airport over which the Airports Authority assumes ownership or operating responsibility and that the Airports Authority designates as a part of the Airports under the Master Indenture; provided, however, that the requirements set forth in the Master Indenture for the issuance of additional Bonds shall be satisfied on the date designated by the Airports Authority for inclusion of such designated airport, assuming the issuance of additional Bonds in an amount equal to the aggregate principal of any indebtedness then outstanding, issued or incurred or otherwise payable from the revenues of such airport if such indebtedness is intended to be secured on a parity basis with the Bonds by the pledge of Net Revenues under the Master Indenture (including revenues of such designated airport).
"Airports Authority" shall mean the Metropolitan Washington Airports Authority, a public body politic and corporate created by the Commonwealth of Virginia and the District of Columbia with the consent of the Congress of the United States of America.
B-1 "Annual Debt Service" shall mean the amount of payments required to be made for principal of and interest on all Bonds, including mandatory sinking fund redemptions and Regularly Scheduled Hedge Payments to be made by the Airports Authority, and Airports Authority payments pursuant to Reimbursement Agreements with Credit Providers to reimburse such Credit Providers for debt service payments made, and to pay credit enhancement or liquidity support fees, in each case to the extent secured by the Indenture, scheduled to come due within a specified Fiscal Year, computed as follows:
(a) In determining the amount of principal to be funded in each year, payment shall (unless a different subsection of this definition applies for purposes of determining principal maturities or amortization) be assumed to be made on Outstanding Bonds (other than Short-Term/Demand Obligations) in accordance with any amortization schedule established by the governing documents setting forth the terms of such Bonds, including, as a principal payment, the Accreted Value of any Capital Appreciation Bonds or Original Issue Discount Bonds maturing or scheduled for redemption in such year; and in determining the amount of interest to be funded in each year, interest payable at a fixed rate shall (except to the extent any other subsection of this definition applies) be assumed to be made at such fixed rate and on the required funding dates.
(b) Except for any historical period for which the actual rate or rates are determinable and except as otherwise provided in the Master Indenture, Bonds that bear interest at a variable rate shall be deemed to bear interest at a fixed annual rate equal to (i) the average of the daily rates of such indebtedness during the 365 consecutive days (or any lesser period such indebtedness has been Outstanding) next preceding the date of computation; or (ii) with respect to any Bonds bearing interest at a variable rate which are being issued on the date of computation, the initial rate of such indebtedness upon such issuance.
(c) Any Bonds that bear interest at a variable rate and with respect to which there exists a Hedge Facility that obligates the Airports Authority to pay a fixed interest rate or a different variable interest rate shall (for the period during which such Hedge Facility is reasonably expected to remain in effect) be deemed to bear interest at the effective fixed annual rate or different variable rate thereon as a result of such Hedge Facility. In the case of any Bonds that bear interest at a fixed rate and with respect to which there exists a Hedge Facility that obligates the Airports Authority to pay a floating rate, Annual Debt Service shall (for the period during which such Hedge Facility is reasonably expected to remain in effect) be deemed to include the interest payable on such Bonds, less the fixed amounts received by the Airports Authority under the Hedge Facility, plus the amount of the floating payments (using the convention described in (b) above) to be made by the Airports Authority under the Hedge Facility.
(d) If all or any portion of an Outstanding Series of Bonds constitute Balloon Maturities, unissued Program Bonds or Short-Term/Demand Obligations, then, for purposes of determining Annual Debt Service, each maturity that constitutes a Balloon Maturity, unissued Program Bonds or Short-Term/Demand Obligations shall, unless otherwise provided in the Supplemental Indenture pursuant to which such Bonds are authorized or unless provision (e) of
B-2 this definition then applies to such maturity, be treated as if it were to be amortized over a term of not more than 30 years and with substantially level annual debt service funding payments commencing not later than the year following the year in which such Balloon Maturity, unissued Program Bonds or Short-Term/Demand Obligations were issued, and extending not later than 30 years from the date such Balloon Maturity, unissued Program Bonds or Short-Term/Demand Obligations were originally issued; the interest rate used for such computation shall be that rate quoted in The Bond Buyer 25 Revenue Bond Index for the last week of the month preceding the date of calculation as published by The Bond Buyer, or if that index is no longer published, another similar index designated by an Authority Representative, taking into consideration whether such Bonds bear interest which is or is not excluded from gross income for federal income tax purposes; with respect to any Series of Bonds only a portion of which constitutes Balloon Maturities, unissued Program Bonds or Short-Term/Demand Obligations, the remaining portion shall be treated as described in (a) above or such other provision of this definition as shall be applicable, and with respect to that portion of a Series that constitutes Balloon Maturities, all funding requirements of principal and interest becoming due in any year other than the stated maturity of the balloon indebtedness shall be treated as described in (a) above or such other provision of this definition as shall be applicable.
(e) Any maturity of Bonds that constitutes a Balloon Maturity as described in provision (d) of this definition and for which the stated maturity date occurs within 12 months from the date such calculation of Annual Debt Service is made, shall be assumed to become due and payable on the stated maturity date, and provision (d) above shall not apply thereto, unless there is delivered to the entity making the calculation of Annual Debt Service a certificate of an Authority Representative stating (i) that the Airports Authority intends to refinance such maturity, (ii) the probable terms of such refinancing and (iii) that the debt capacity of the Airports Authority is sufficient to successfully complete such refinancing; upon the receipt of such certificate, such Balloon Maturity shall be assumed to be refinanced in accordance with the probable terms set out in such certificate and such terms shall be used for purposes of calculating Annual Debt Service; provided that such assumption shall not result in an interest rate lower than that which would be assumed under provision (d) above and shall be amortized over a term of not more than 30 years from the expected date of refinancing.
(f) In any computation relating to the issuance of additional Bonds or the rate covenant required by the Master Indenture, there shall be excluded from the computation of Annual Debt Service principal of and interest on indebtedness for which funds are, or are reasonably expected to be, available for and which are irrevocably committed to make such payments, including without limitation any such funds in an escrow account or any such funds constituting capitalized interest held in any fund or account created by the Indenture.
"Authenticating Agent" shall mean the Trustee.
"Authority Facilities" shall have the same definition as such term has from time to time in the Acts.
B-3 "Authority Representative" shall mean the Chairman or the Vice Chairman of the Board of Directors, the President and Chief Executive Officer, the Executive Vice President and Chief Operating Officer, the Vice President and General Counsel, the Vice President for Finance and Chief Financial Officer, or the Manager of Treasury of the Airports Authority, or other representative of the Airports Authority designated as authorized to give directions to the Trustee under the Forty-second Supplemental Indenture.
"Balloon Maturities" shall mean, with respect to any Series of Bonds 50% or more of the principal of which matures on the same date or within a Fiscal Year, that portion of such Series, which matures on such date or within such Fiscal Year. For purposes of this definition, the principal amount maturing on any date shall be reduced by the amount of such Bonds scheduled to be amortized by prepayment or redemption prior to their stated maturity date. Commercial paper, bond anticipation notes or other Short-Term/Demand Obligations shall not be Balloon Maturities.
"Bond" or "Bonds" shall mean, for purposes of this summary, any bonds or any other evidences of indebtedness for borrowed money issued from time to time pursuant to the Master Indenture and the Supplemental Indentures. The term "Bond" or "Bonds" shall include notes, bond anticipation notes, commercial paper and other Short-Term/Demand Obligations, Regularly Scheduled Hedge Payments, and other securities, contracts or obligations incurred through lease, installment purchase or other agreements or certificates of participation therein, in each case to the extent secured by the Indenture; provided that Hedge Termination Payments to be made by the Airports Authority shall not be secured by the Indenture on a parity with the Bonds. The terms "Bond" and "Bonds" shall not include Subordinated Bonds or Junior Lien Obligations.
"Bond Authorizing Resolution" shall mean the resolution adopted by the Airports Authority on September 7, 2011, authorizing the issuance of the Series 2011C-D Bonds under the Indenture, authorizing the execution and delivery on behalf of the Airports Authority of the Forty- second Supplemental Indenture and other related agreements and approving, or duly delegating the authority to approve on behalf of the Airports Authority, the terms and details of the Series 2011C-D Bonds.
"Bond Counsel" shall mean an attorney or firm or firms of attorneys of national recognition, selected or employed by the Airports Authority and acceptable to the Trustee, experienced in the field of municipal bonds whose opinions are generally accepted by purchasers of municipal bonds.
"Bond Fund" shall mean the Metropolitan Washington Airports Authority Bond Fund created pursuant to the Master Indenture.
"Bond Payment Date" shall mean each April 1 and October 1, commencing April 1, 2012, and each redemption date. "Book-Entry System" shall mean the system maintained by the Securities Depository as described in the Forty-second Supplemental Indenture.
B-4 "Business Day" shall mean any day of the week other than Saturday, Sunday or a day which shall be, in the Commonwealth of Virginia, the State of New York or in the jurisdiction in which the Corporate Trust Office of the Trustee or the principal office of the Series 2011C-D Registrar is located, a legal holiday or a day on which banking corporations are authorized or obligated by law or executive order to close.
"Capital Appreciation Bonds" shall mean Bonds all or a portion of the interest on which is compounded and accumulated at the rates and on the dates set forth in a Supplemental Indenture and is payable only upon redemption or on the maturity date of such Bonds. Bonds which are issued as Capital Appreciation Bonds, but later convert to Bonds on which interest is paid periodically shall be Capital Appreciation Bonds until the conversion date and from and after such conversion date shall no longer be Capital Appreciation Bonds, but shall be treated as having a principal amount equal to their Accreted Value on the conversion date.
"Code" shall mean the Internal Revenue Code of 1986, as amended, including applicable Treasury Regulations, rulings and procedures promulgated thereunder or under the Internal Revenue Code of 1954, as amended.
"Common Debt Service Reserve Requirement" shall mean the amount to be deposited in the Common Reserve Account as provided in the Forty-second Supplemental Indenture, and such amount shall always be equal to the lesser of (i) 10% of the original par amount of the Series 2011C-D Bonds and any other Common Reserve Bonds; (ii) the Maximum Annual Debt Service on the Series 2011C-D Bonds and any other Common Reserve Bonds in any Fiscal Year; or (iii) 125% of the average Annual Debt Service for the Series 2011C-D Bonds and any other Common Reserve Bonds; provided that such amount may be recalculated at any time and that such amount shall be recalculated (a) upon the designation by the Airports Authority of any Common Reserve Bonds and (b) in connection with the redemption or purchase and cancellation of any Series 2011C-D Bonds or Common Reserve Bonds. The Airports Authority will combine funds from the debt service reserve accounts relating to the Series 1998B Bonds, the Series 2001A Bonds, the Series 2001B Bonds and proceeds of the Series 2011C-D Bonds to satisfy the Common Debt Service Reserve Requirement.
"Common Reserve Account" shall mean the account established for the Series 2011C- D Bonds and any other Common Reserve Bonds in the Debt Service Reserve Fund of the Forty- second Supplemental Indenture.
"Common Reserve Bonds" shall mean the Bonds of any other Series issued under the Master Indenture and designated in writing to the Trustee by an Authority Representative as being secured on a parity with the Series 2011C-D Bonds by amounts on deposit in the Common Reserve Account.
"Construction Fund" shall mean the Metropolitan Washington Airports Authority Construction Fund created pursuant to the Master Indenture.
B-5 "Corporate Trust Office" shall mean the office of the Trustee at which its principal corporate trust business is conducted, which at the date hereof is located in Baltimore, Maryland.
"Cost" when used with respect to Authority Facilities, shall have the same definition as such term has in the Acts.
"Credit Facility" or "Credit Facilities" shall mean, with respect to a Series of Bonds, the letter of credit, line of credit, municipal bond insurance, surety policy, or other form of credit enhancement and/or liquidity support, if any, for such Series of Bonds, provided for in the applicable Supplemental Indenture, including any alternate Credit Facility with respect to such Series of Bonds delivered in accordance with provisions of the Supplemental Indenture providing for the issuance of such Series of Bonds.
"Credit Provider" shall mean, with respect to a Series of Bonds, the provider of a Credit Facility, including municipal bond insurance, letter of credit, or liquidity support, if any, for such Series of Bonds specified in the applicable Supplemental Indenture.
"Debt Service Reserve Fund" shall mean the Metropolitan Washington Airports Authority Debt Service Reserve Fund created pursuant to the Master Indenture.
"DTC" shall mean The Depository Trust Company, New York, New York.
"Emergency Repair and Rehabilitation Fund" shall mean the Metropolitan Washington Airports Authority Emergency Repair and Rehabilitation Fund created pursuant to the Master Indenture.
"Event of Default" shall mean any one or more of the events set forth in the Master Indenture.
"Exempt Facilities" shall mean airports and functionally related and subordinate facilities within the meaning of and qualifying under Section 142 of the Code.
"Federal Lease" shall mean the Agreement and Deed of Lease, dated March 2, 1987, between the United States of America, acting through the Secretary of Transportation, and the Airports Authority, as the same may be amended or supplemented.
"Federal Lease Fund" shall mean the Metropolitan Washington Airports Authority Federal Lease Fund created pursuant to the Master Indenture.
"Fiscal Year" shall mean the fiscal year of the Airports Authority ending as of December 31 of each year or such other date as may be designated from time to time in writing by the Airports Authority to the Trustee.
B-6 "Fitch" shall mean Fitch Ratings, Inc. and its successors, if any, and if such corporation shall no longer perform the functions of a securities rating agency, "Fitch" shall mean any other nationally recognized Rating Agency designated by an Authority Representative.
"Forty-second Supplemental Indenture" shall mean the Forty-second Supplemental Indenture of Trust dated as of September 1, 2011, between the Airports Authority and the Trustee relating to the Series 2011C-D Bonds which supplements the Master Indenture.
"Fund" shall mean any fund created under the Master Indenture or under a Supplemental Indenture.
"General Purpose Fund" shall mean the Metropolitan Washington Airports Authority General Purpose Fund created pursuant to the Master Indenture.
"Government Certificates" shall mean (in the case of governmental obligations) evidences of ownership of proportionate interest in future interest or principal payments of Government Obligations, including depository receipts thereof. Investments in such proportionate interest must be limited to circumstances wherein (a) a bank or trust company acts as custodian and holds the underlying Government Obligations; (b) the owner of the investment is the real party in interest and has the right to proceed directly and individually against the obligor of the underlying Government Obligations; and (c) the underlying Government Obligations are held in a special account, segregated from the custodian's general assets, and are not available to satisfy any claim of the custodian, any person claiming through the custodian, or any person to whom the custodian may be obligated. "Government Certificates" shall also mean any other type of security or obligation that the Rating Agencies then maintaining ratings on any Bonds to be defeased have determined are permitted defeasance securities and qualify the Bonds to be defeased thereby for a rating in the highest category, or are otherwise acceptable to, each of the Rating Agencies.
"Government Obligations" shall mean direct and general obligations of, or obligations the timely payment of principal and interest on which are unconditionally guaranteed by, the United States of America.
"Hedge Facility" shall mean any rate swap transaction, basis swap transaction, cap transaction, floor transaction, collar transaction, or similar transaction, which is intended to convert or limit the interest rate payable with respect to any Bonds, and which (a) is designated in writing to the Trustee by an Authority Representative as a Hedge Facility to relate to all or part of one or more Series of Bonds; (b) is with a Qualified Hedge Provider or an entity that has been a Qualified Hedge Provider within the 60 day period preceding the date on which the calculation of Annual Debt Service or Maximum Annual Debt Service is being made; and (c) has a term not greater than the term of the designated Bonds or a specified date for mandatory tender or redemption of such designated Bonds.
"Hedge Termination Payment" shall mean an amount payable by the Airports Authority or a Qualified Hedge Provider, in accordance with a Hedge Facility, to compensate the other party to the Hedge Facility for any losses and costs that such other party may incur as a
B-7 result of an event of default or the early termination of the obligations, in whole or in part, of the parties under such Hedge Facility.
"Holder" or "Bondholder" shall mean the registered owner of any Bond; provided that with respect to any Series of Bonds which is insured by a bond insurance policy, the term "Holder" or "Bondholder" for purposes of all consents, directions, and notices provided for in the Indenture and any applicable Supplemental Indenture, shall mean the issuer of such bond insurance policy as long as such policy issuer has not defaulted under its policy; provided further that unless it is actually the beneficial owner of the Bonds in respect of which consent is requested, the policy issuer shall not have the power to act on behalf of the registered owners of any Bonds to consent to changes that (a) extend the stated maturity of or time for paying the interest on such Bonds, (b) reduce the principal amount of, purchase price for, or redemption premium or rate of interest payable on such Bonds, or (c) result in a privilege or priority of any Bond over any other Bond. A Qualified Hedge Provider shall only be considered a Bondholder to the extent specified in a Supplemental Indenture.
"Indenture" shall mean the Master Indenture as amended, supplemented, and restated from time to time in accordance with its terms.
"Interest Account" shall mean the Account of that name in the Bond Fund created pursuant to the Master Indenture.
"Junior Lien Indenture" shall mean the indenture or other documents of the Airports Authority providing for the issuance of and securing Junior Lien Obligations.
"Junior Lien Obligations" shall mean the Airports Authority's bonds, or other indebtedness or obligations subordinate to the Bonds and the Subordinated Bonds, but such term shall not include the Federal Lease or Special Facility Bonds. The term "Junior Lien Obligations" shall include notes, bond anticipation notes, commercial paper and other Short-Term/Demand Obligations, Regularly Scheduled Hedge Payments, Hedge Termination Payments, and other securities, contracts or obligations incurred through lease, installment purchase or other agreements or certificates of participation therein, in each case to the extent secured by a Junior Lien Indenture.
"Junior Lien Obligations Fund" shall mean the Metropolitan Washington Airports Authority Junior Lien Obligations Fund created pursuant to the Master Indenture for the purpose of providing all deposits and payments required by any Junior Lien Indenture, including reserves for debt service on Junior Lien Obligations.
"Master Indenture" shall mean the Master Indenture of Trust dated as of February 1, 1990, as amended and restated by the Amended and Restated Master Indenture of Trust dated as of September 1, 2001, as amended, between the Authority and the Trustee.
"Maximum Annual Debt Service" shall mean the maximum Annual Debt Service with respect to any specified indebtedness for any Fiscal Year during the term of such indebtedness.
B-8
"Moody's" shall mean Moody's Investors Service, Inc., a corporation existing under the laws of the State of Delaware, its successors and assigns, and, if such corporation shall no longer perform the functions of a securities rating agency, "Moody's" shall mean any other nationally recognized rating agency designated by an Authority Representative.
"Net Revenues" shall mean Revenues, plus transfers, if any, from the General Purpose Fund to the Revenue Fund, after provision is made for the payment of Operation and Maintenance Expenses.
"Operation and Maintenance Expenses" shall mean for any period, all expenses of the Airports Authority paid or accrued for the operation, maintenance, administration, and ordinary current repairs of the Airports. Operation and Maintenance Expenses shall not include: (a) the principal of, premium, if any, or interest payable on any Bonds, Subordinated Bonds and Junior Lien Obligations; (b) any allowance for amortization or depreciation of the Airports; (c) any other expense for which (or to the extent to which) the Airports Authority is or will be paid or reimbursed from or through any source that is not included or includable as Revenues; (d) any extraordinary items arising from the early extinguishment of debt; (e) rentals payable under the Federal Lease; and (f) any expense paid with amounts from the Emergency Repair and Rehabilitation Fund.
"Operation and Maintenance Fund" shall mean the Metropolitan Washington Airports Authority Operation and Maintenance Fund created pursuant to the Master Indenture.
"Opinion of Bond Counsel" shall mean a written opinion of Bond Counsel.
"Original Issue Discount Bonds" shall mean Bonds which are sold at an initial public offering price of less than face value and which are specifically designated as Original Issue Discount Bonds by the Supplemental Indenture under which such Bonds are issued.
"Outstanding" when used with reference to a Series of Bonds, shall mean, as of any date of determination, all Bonds of such Series theretofore authenticated and delivered except: (a) Bonds of such Series theretofore cancelled by the Trustee or delivered to the Trustee for cancellation; (b) Bonds of such Series which are deemed paid and no longer Outstanding as provided in the Master Indenture; (c) Bonds of such Series in lieu of which other Bonds of such Series have been issued pursuant to the provisions of the Master Indenture relating to Bonds destroyed, stolen or lost, unless evidence satisfactory to the Trustee has been received that any such Bond is held by a bona fide purchaser; (d) after any tender date as may be provided for in the applicable Supplemental Indenture, any Bond of such Series held by a Bondholder who has given a tender notice or was required to tender such Bond in accordance with the provisions of the applicable Supplemental Indenture and which was not so tendered and for which sufficient funds for the payment of the purchase price of which have been deposited with the Trustee or the Paying Agent, if any, or any tender agent appointed under such Supplemental Indenture; and (e) for purposes of any consent or other action to be taken under the Indenture by the Holders of a specified percentage of principal amount of Bonds of a Series or all Series, Bonds held by or for the account of the Airports Authority.
B-9 "Participant" shall mean one of the entities which deposit securities, directly or indirectly, in the Book-Entry System of the Securities Depository.
"Payment of a Series of Bonds" shall mean payment in full of all principal of, premium, if any, and interest on a Series of Bonds.
"Permitted Investments" shall mean and include any of the following, if and to the extent the same are at the time legal for the investment of the Airports Authority's money:
(a) Government Obligations and Government Certificates.
(b) Obligations issued or guaranteed by any of the following:
(i) Federal Home Loan Bank System; (ii) Export-Import Bank of the United States; (iii) Federal Financing Bank; (iv) Government National Mortgage Association; (v) Farmers Home Administration; (vi) Federal Home Loan Mortgage Corporation; (vii) Federal Housing Administration; (viii) Private Export Funding Corp; (ix) Federal National Mortgage Association; and (x) Federal Farm Credit Bank; or any indebtedness issued or guaranteed by any instrumentality or agency of the United States of America.
(c) Pre-refunded municipal obligations rated at the time of purchase in the highest rating category by, or otherwise acceptable to, the Rating Agencies and meeting the following conditions:
(i) such obligations are (A) not to be redeemed prior to maturity or the Trustee has been given irrevocable instructions concerning their calling and redemption and (B) the issuer of such obligations has covenanted not to redeem such obligations other than as set forth in such instructions;
(ii) such obligations are secured by Government Obligations or Government Certificates that may be applied only to interest, principal, and premium payments of such obligations;
(iii) the principal of and interest on such Government Obligations or Government Certificates (plus any cash in the escrow fund with respect to such pre-refunded obligations) are sufficient to meet the liabilities of the obligations;
B-10 (iv) the Government Obligations or Government Certificates serving as security for the obligations are held by an escrow agent or trustee; and
(v) such Government Obligations or Government Certificates are not available to satisfy any other claims, including those against the trustee or escrow agent.
(d) Direct and general long-term obligations of any state of the United States of America or the District of Columbia (a "State"), to the payment of which the full faith and credit of such State is pledged and that at the time of purchase are rated in either of the two highest rating categories by, or are otherwise acceptable to, the Rating Agencies.
(e) Direct and general short-term obligations of any State, to the payment of which the full faith and credit of such State is pledged and that at the time of purchase are rated in the highest rating category by, or are otherwise acceptable to, the Rating Agencies.
(f) Interest-bearing demand or time deposits with, or interests in money market portfolios rated AAA-m by Standard & Poor's issued by, state banks or trust companies or national banking associations that are members of the Federal Deposit Insurance Corporation ("FDIC"). Such deposits or interests must be (i) continuously and fully insured by FDIC, (ii) if they have a maturity of one year or less, with or issued by banks that at the time of purchase are rated in one of the two highest short term rating categories by, or are otherwise acceptable to, the Rating Agencies, (iii) if they have a maturity longer than one year, with or issued by banks that at the time of purchase are rated in one of the two highest rating categories by, or are otherwise acceptable to, the Rating Agencies, or (iv) fully secured by Government Obligations and Government Certificates. Such Government Obligations and Government Certificates must have a market value at all times at least equal to the principal amount of the deposits or interests. The Government Obligations and Government Certificates must be held by a third party (who shall not be the provider of the collateral), or by any Federal Reserve Bank or depositary, as custodian for the institution issuing the deposits or interests. Such third party should have a perfected first lien in the Government Obligations and Government Certificates serving as collateral, and such collateral is to be free from all other third party liens.
(g) Eurodollar time deposits issued by a bank with a deposit rating at the time of purchase in one of the top two short-term deposit rating categories by, or otherwise acceptable to, the Rating Agencies.
(h) Long-term or medium-term corporate debt guaranteed by any corporation that is rated in one of the two highest rating categories by, or is otherwise acceptable to, the Rating Agencies.
(i) Repurchase agreements, (i) the maturities of which are 30 days or less or (ii) the maturities of which are longer than 30 days and not longer than one year provided the collateral subject to such agreements are marked to market daily, entered into with financial institutions such as banks or trust companies organized under State law or national banking associations, insurance companies, or government bond dealers reporting to, trading with, and recognized as a primary
B-11 dealer by, the Federal Reserve Bank of New York and a member of the Security Investors Protection Corporation, or with a dealer or parent holding company that is rated at the time of purchase investment grade by, or otherwise acceptable to, the Rating Agencies. The repurchase agreement should be in respect of Government Obligations and Government Certificates or obligations described in paragraph (b) of this definition. The repurchase agreement securities and, to the extent necessary, Government Obligations and Government Certificates or obligations described in paragraph (b), exclusive of accrued interest, shall be maintained in an amount at least equal to the amount invested in the repurchase agreements. In addition, the provisions of the repurchase agreement shall meet the following additional criteria:
(A) the third party (who shall not be the provider of the collateral) has possession of the repurchase agreement securities and the Government Obligations and Government Certificates;
(B) failure to maintain the requisite collateral levels will require the third party having possession of the securities to liquidate the securities immediately; and
(C) the third party having possession of the securities has a perfected, first priority security interest in the securities.
(j) Prime commercial paper of a corporation, finance company or banking institution at the time of purchase rated in the highest short-term rating category by, or otherwise acceptable to, the Rating Agencies.
(k) Public housing bonds issued by public agencies. Such bonds must be: fully secured by a pledge of annual contributions under a contract with the United States of America; temporary notes, preliminary loan notes or project notes secured by a requisition or payment agreement with the United States of America; or state or public agency or municipality obligations at the time of purchase rated in the highest credit rating category by, or otherwise acceptable to, the Rating Agencies.
(l) Shares of a diversified open-end management investment company, as defined in the Investment Company Act of 1940, or shares in a regulated investment company, as defined in Section 851(a) of the Code, that is a money market fund that at the time of purchase has been rated in the highest rating category by, or is otherwise acceptable to, the Rating Agencies.
(m) Money market accounts of any state or federal bank, or bank whose holding parent company is rated at the time of purchase in one of the top two short-term or long-term rating categories by, or is otherwise acceptable to, the Rating Agencies.
(n) Investment agreements, the issuer of which is at the time of purchase rated in one of the two highest rating categories by, or is otherwise acceptable to, the Rating Agencies.
(o) Any debt or fixed income security, the issuer of which is rated at the time of purchase in the highest rating category by, or is otherwise acceptable to, the Rating Agencies.
B-12
(p) Investment agreements or guaranteed investment contracts that are fully secured by obligations described in items (a) or (b) of the definition of Permitted Investments which are (i) valued not less frequently than monthly and have a fair market value, exclusive of accrued interest, at all times at least equal to 103% of the principal amount of the investment, together with the interest accrued and unpaid thereon, (ii) held by the Trustee (who shall not be the provider of the collateral) or by any Federal Reserve Bank or a depository acceptable to the Trustee, (iii) subject to a perfected first lien on behalf of the Trustee, and (iv) free and clear from all third-party liens.
(q) Any other type of investment consistent with Airports Authority policy in which an Authority Representative directs the Trustee to invest and there is delivered to the Trustee a certificate of an Authority Representative stating that each of the Rating Agencies has been informed of the proposal to invest in such investment and each Rating Agency has confirmed that such investment will not adversely affect the rating then assigned by such Rating Agency to any of the Bonds.
"Principal Account" shall mean the Account of that name in the Bond Fund created pursuant to the Master Indenture.
"Program" shall mean a financing program identified in a Supplemental Indenture, including but not limited to a bond anticipation note or commercial paper program, (a) which is authorized and the terms thereof approved by a resolution adopted by the Airports Authority and the items required under the Master Indenture have been filed with the Trustee, (b) wherein the Airports Authority has authorized the issuance, from time to time, of notes, commercial paper or other indebtedness in an authorized amount, and (c) the authorized amount of which has met the additional bonds test set forth in the Master Indenture and the Outstanding amount of which may vary from time to time, but not exceed the authorized amount.
"Qualified Costs of Facilities" shall mean the Costs of Exempt Facilities which (a) will be charged to the Airports' capital account for federal income tax purposes or which would be so chargeable either with a proper election under the Code or but for a proper election to deduct such amount, and (b) were incurred and paid, or are to be incurred or paid, after the date on which the Airports Authority adopted a resolution or took some other official action toward the issuance of obligations to finance such Costs.
"Qualified Hedge Provider" shall mean a financial institution whose senior long-term debt obligations, or whose obligations under any Hedge Facility are (a) guaranteed by a financial institution, or subsidiary of a financial institution, whose senior long-term debt obligations, are rated at least "A1," in the case of Moody's and "A+," in the case of S&P, or the equivalent thereto in the case of any successor thereto, or (b) fully secured by obligations described in items (a) or (b) of the definition of Permitted Investments which are (i) valued not less frequently than monthly and have a fair market value, exclusive of accrued interest, at all times at least equal to 105% (or such lower percentage as shall be acceptable to the Rating Agencies) of the "notional amount" as defined in the Hedge Facility, together with the interest accrued and unpaid thereon,
B-13 (ii) held by the Trustee (who shall not be the provider of the collateral) or by any Federal Reserve Bank or a depository acceptable to the Trustee, (iii) subject to a perfected first lien on behalf of the Trustee, and (iv) free and clear from all third-party liens.
"Rating Agency" or "Rating Agencies" shall mean Moody's or Standard & Poor’s or Fitch or all of them and, if any such credit rating agency is no longer issuing applicable credit ratings, any other nationally recognized successor rating agency designated by the Airports Authority with the approval of the Trustee; provided that any such rating agency shall, at the time in question, be maintaining a rating on such Series of Bonds at the request of the Airports Authority.
"Rebate Amount" shall mean the amount, if any, determined pursuant to Section 148(f) of the Code to be paid to the United States of America with respect to the Series 2011C-D Bonds, as described in the Forty-second Supplemental Indenture.
"Record Date" shall mean shall mean the fifteenth (15th) day (regardless of whether a Business Day) of the calendar month immediately preceding a Bond Payment Date.
"Redemption Account" shall mean the Account of that name in the Bond Fund created pursuant to the Master Indenture.
"Register" shall mean, with respect to the Series 2011C-D Bonds, the registration books of the Airports Authority kept to evidence the registration and registration of transfer of the Series 2011C-D Bonds.
"Regularly Scheduled Hedge Payments" shall mean the regularly scheduled payments under the terms of a Hedge Facility which are due absent any termination, default or dispute in connection with such Hedge Facility.
"Reimbursement Agreement" shall mean, with respect to a Series of Bonds, any agreement or agreements in each case between a Credit Provider or Credit Providers and the Airports Authority under or pursuant to which a Credit Facility for such Series of Bonds is issued, and any agreement that replaces such original agreement that sets forth the obligations of the Airports Authority to such Credit Provider or Credit Providers and the obligations of such Credit Provider or Credit Providers to the Airports Authority.
"Released Revenues" shall mean Revenues of the Airports Authority in respect of which the Trustee has received the following:
(a) a request of an Authority Representative describing such Revenues and requesting that such Revenues be excluded from the pledge and lien of the Master Indenture on Net Revenues;
(b) either (i) an Airport Consultant's certificate to the effect that, based upon reasonable assumptions, projected Net Revenues after the Revenues covered by the Authority Representative's request are excluded, calculated in accordance with the additional Bonds test set
B-14 forth in the Master Indenture for each of the three full Fiscal Years following the Fiscal Year in which such certificate is delivered, will not be less than the larger of (A) the amounts needed for making the required deposits to the Principal Accounts, the Interest Accounts, and the Redemption Accounts, the Debt Service Reserve Fund, the Subordinated Bond Funds, the Subordinated Reserve Funds, the Junior Lien Obligations Fund, the Federal Lease Fund, and the Emergency Repair and Rehabilitation Fund or (B) an amount not less than 150% of the average Annual Debt Service for each Fiscal Year during the remaining term of all Bonds that will remain Outstanding after the exclusion of such Revenues (disregarding any Bonds that have been or will be paid or discharged); or
(ii) an Authority Representative's certificate to the effect that Net Revenues in the two most recently completed Fiscal Years, after the Revenues covered by the Authority Representative's request are excluded, were not less than the larger of (A) the amounts needed for making the required deposits to the Principal Accounts, the Interest Accounts, and the Redemption Accounts, the Debt Service Reserve Fund, the Subordinated Bond Funds, the Subordinated Reserve Funds, the Junior Lien Obligations Fund, the Federal Lease Fund, and the Emergency Repair and Rehabilitation Fund or (B) 135% of (1) average Annual Debt Service on all Bonds Outstanding in each such Fiscal Year (disregarding any Bonds that have been paid or discharged), plus (2) average Annual Debt Service with respect to any additional Bonds issued since the completion of such Fiscal Year or proposed to be issued at the time such certificate is delivered;
(c) an Opinion of Bond Counsel to the effect that (i) the conditions set forth in the Master Indenture to the release of such Revenues have been met and (ii) the exclusion of such Revenues from the pledge and lien of the Master Indenture will not, in and of itself, cause the interest on any Outstanding Bonds to be included in gross income for purposes of federal income tax;
(d) written confirmation from each of the Rating Agencies to the effect that the exclusion of such Revenues from the pledge and lien of the Master Indenture will not cause a withdrawal of or reduction in any unenhanced rating then assigned to the Bonds; and
(e) evidence that notice of the proposed Released Revenues was given to all current Credit Providers in respect of any Bonds at least 15 days prior to the proposed effective date of the release of such Revenues.
Upon the Trustee’s receipt of such documents, the Revenues described in the Authority Representative’s request shall be excluded from the pledge and lien of the Indenture, and the Trustee shall take all reasonable steps requested by the Authority Representative to evidence or confirm the release of such pledge and lien on the Released Revenues.
"Revenue Fund" shall mean the Metropolitan Washington Airports Authority Revenue Fund created pursuant to the Master Indenture.
B-15 "Revenues" shall mean all revenues of the Airports Authority received or accrued except (a) interest income on, and any profit realized from, the investment of moneys in any fund or account to the extent that such income or profit is not transferred to, or retained in, the Revenue Fund or the Bond Fund; (b) interest income on, and any profit realized from, the investment of moneys in any fund or account funded from the proceeds of Special Facility Bonds; (c) amounts received by the Airports Authority from, or in connection with, Special Facilities, unless such funds are treated as Revenues by the Airports Authority; (d) the proceeds of any passenger facility charge or similar charge levied by, or on behalf of, the Airports Authority, unless such funds are treated as Revenues by the Airports Authority; (e) grants-in-aid, donations, and/or bequests; (f) insurance proceeds which are not deemed to be revenues in accordance with generally accepted accounting principles; (g) the proceeds of any condemnation awards; (h) the proceeds of any sale of land, buildings or equipment; and (i) any other amounts which are not deemed to be revenues in accordance with generally accepted accounting principles or which are restricted as to their use. Unless otherwise provided in a Supplemental Indenture, there shall also be excluded from the term "Revenues" (a) any Hedge Termination Payments received by the Airports Authority and (b) any Released Revenues in respect of which the Airports Authority has filed with the Trustee the request of Authority Representative, Airport Consultant's or Authority Representative's certificate, Opinion of Bond Counsel and the other documents contemplated in the definition of the term "Released Revenues."
"Securities Depository" shall mean DTC, or its nominees and the successors and assigns of such nominee, or any successor appointed under the Forty-second Supplemental Indenture.
"Series 1998B Bonds" shall mean $30,210,000 of the Airports Authority’s Outstanding Airport System Revenue and Refunding Bonds, Series 1998B.
"Series 1998B Refunding Agreement" shall mean the refunding agreement dated as of September 1, 2011, between the Airports Authority and the Trustee relating to the redemption of the Series 1998B Bonds.
"Series 2001A Bonds" shall mean $165,670,000 of the Airports Authority’s Outstanding Airport System Revenue Bonds, Series 2001A.
"Series 2001A Refunding Agreement" shall mean the refunding agreement dated as of September 1, 2011, between the Airports Authority and the Trustee relating to the redemption of the Series 2001A Bonds.
"Series 2001B Bonds" shall mean $11,370,000 of the Airports Authority’s Outstanding Airport System Revenue Refunding Bonds, Series 2001B.
"Series 2001B Refunding Agreement" shall mean the refunding agreement dated as of September 1, 2011, between the Airports Authority and the Trustee relating to the redemption of all or a portion the Series 2001B Bonds.
B-16 "Series 2011C Bonds" shall mean the Airport System Revenue Refunding Bonds, Series 2011C, authorized to be issued pursuant to the Master Indenture and the Forty-second Supplemental Indenture.
"Series 2011C Cost of Issuance Subaccount" shall mean the subaccount established for the Series 2011C Bonds in the Construction Fund, as set forth in the Forty-second Supplemental Indenture.
"Series 2011C Interest Account" shall mean the account established for the Series 2011C Bonds in the Bond Fund, as set forth in the Forty-second Supplemental Indenture.
"Series 2011C Principal Account" shall mean the account established for the Series 2011C Bonds in the Bond Fund, as set forth in the Forty-second Supplemental Indenture.
"Series 2011C Redemption Account" shall mean the account established for the Series 2011C Bonds in the Bond Fund, as set forth in the Forty-second Supplemental Indenture.
"Series 2011C-D Custodian" shall mean Manufacturers and Traders Trust Company or its successor as custodian and bailee for the Trustee holding the Series 2011C Cost of Issuance Subaccount and the Series 2011D Cost of Issuance Subaccount pursuant to provisions of the Master Indenture.
"Series 2011C-D Paying Agent" shall mean, for all purposes of the Indenture with respect to the Series 2011C-D Bonds, the Trustee or such other paying agent appointed by the Trustee.
"Series 2011C-D Registrar" shall mean the keeper of the Register, which shall be the Trustee.
"Series 2011D Bonds" shall mean the Airport System Revenue Refunding Bonds, Series 2011D, authorized to be issued pursuant to the Master Indenture and the Forty-second Supplemental Indenture.
"Series 2011D Cost of Issuance Subaccount" shall mean the subaccount established for the Series 2011D Bonds in the Construction Fund, as set forth in the Forty-second Supplemental Indenture.
"Series 2011D Interest Account" shall mean the account established for the Series 2011D Bonds in the Bond Fund, as set forth in the Forty-second Supplemental Indenture.
"Series 2011D Principal Account" shall mean the account established for the Series 2011D Bonds in the Bond Fund, as set forth in the Forty-second Supplemental Indenture.
"Series 2011D Redemption Account" shall mean the account established for the Series 2011D Bonds in the Bond Fund, as set forth in the Forty-second Supplemental Indenture.
B-17 "Series of Bonds" or "Bonds of a Series" or "Series" shall mean a series of Bonds issued pursuant to the Master Indenture and a Supplemental Indenture.
"Short-Term/Demand Obligations" shall mean each Series of Bonds issued pursuant to the Master Indenture, the payment of principal of which is either (a) payable on demand by or at the option of the Holder at a time sooner than a date on which such principal is deemed to be payable for purposes of computing Annual Debt Service, or (b) scheduled to be payable within one year from the date of issuance and is contemplated to be refinanced for a specified period or term either (i) through the issuance of additional Short-Term/Demand Obligations pursuant to a commercial paper, auction Bond or other similar Program, or (ii) through the issuance of long- term Bonds pursuant to a bond anticipation note or similar Program.
"Sinking Fund Redemption Date" shall mean, with respect to each Series of the Series 2011C-D Bonds, the respective dates specified in the Forty-second Supplemental Indenture.
"Special Facility" shall mean any facility, improvement, structure, equipment or assets acquired or constructed on any land or in or on any structure or building at the Airports, the cost of construction and acquisition of which are paid for (a) by the obligor under a Special Facility Agreement, or (b) from the proceeds of Special Facility Bonds, or (c) both.
"Special Facility Agreement" shall mean an agreement entered into by the Airports Authority and one or more other parties, relating to the design, construction, and/or financing of any facility, improvement, structure, equipment, or assets acquired or constructed on any land or in or on any structure or building at the Airports, all or a portion of the payments under which (a) are intended to be excluded from Revenues and (b) may be pledged to the payment of revenue bonds, notes, or other obligations of the Airports Authority other than Bonds, Subordinated Bonds, or Junior Lien Obligations.
"Special Facility Bonds" shall mean any revenue bonds, notes, or other obligations of the Airports Authority other than Bonds, Subordinated Bonds or Junior Lien Obligations, issued to finance any facility, improvement, structure, equipment or assets acquired or constructed on any land or in or on any structure or building at the Airports, the payment of principal of, premium, if any, and interest on which are payable from and secured by the proceeds thereof and rentals, payments, and other charges payable by the obligor under a Special Facility Agreement.
"Standard & Poor's" or "S&P" shall mean Standard & Poor's Ratings Group, a corporation organized and existing under the laws of the State of New York, and its successors and assigns and, if such corporation shall no longer perform the functions of a securities rating agency, Standard & Poor's shall mean any other nationally recognized securities rating agency designated by an Authority Representative.
"Subordinated Bond Funds" shall mean the bond funds created pursuant to the Subordinated Indenture with respect to each series of Subordinated Bonds, held by the Subordinated Indenture Trustee, in which amounts are held to pay debt service on such series of Subordinated Bonds.
B-18
"Subordinated Bond" or "Subordinated Bonds" shall mean the Airports Authority's general airport subordinated revenue bonds or other obligations secured by the Subordinated Indenture. The term "Subordinated Bond" or "Subordinated Bonds" shall include notes, bond anticipation notes, commercial paper and other Short-Term/Demand Obligations, Regularly Scheduled Hedge Payments, Hedge Termination Payments, and other securities, contracts or obligations incurred through lease, installment purchase or other agreements or certificates of participation therein, in each case to the extent secured by the Subordinated Indenture.
"Subordinated Indenture" shall mean the Master Indenture of Trust relating to the Subordinated Bonds, dated as of March 1, 1988, between the Airports Authority and the Subordinated Indenture Trustee, as supplemented and amended.
"Subordinated Indenture Trustee" shall mean The National Bank of Washington, or its successor as trustee, under the Subordinated Indenture.
"Subordinated Reserve Funds" shall mean the debt service reserve funds created pursuant to the Subordinated Indenture with respect to certain series of Subordinated Bonds, held by the trustee under the Subordinated Indenture.
"Supplemental Indenture" shall mean an indenture supplementing or modifying the provisions of the Master Indenture entered into by the Airports Authority and the Trustee in accordance with the Master Indenture.
"Trustee" shall mean Manufacturers and Traders Trust Company (successor by merger to Allfirst Bank), and any successor to its duties under the Master Indenture.
B-19 SUMMARY OF CERTAIN PROVISIONS OF THE INDENTURE
The following, in addition to certain information provided under the heading "INTRODUCTION" and "THE SERIES 2011C-D BONDS" in Part I of this Official Statement, and "THE BONDS" in Part II of this Official Statement is a summary of certain provisions of the Master Indenture and the Forty-second Supplemental Indenture. This summary does not purport to be complete or definitive and reference is made to the Master Indenture and the Forty-second Supplemental Indenture for a complete recital of the terms of such documents. During the offering period for the Series 2011C-D Bonds, copies of the Master Indenture and the Forty-second Supplemental Indenture may be obtained from the Airports Authority.
General
The Master Indenture and the Forty-second Supplemental Indenture constitute an assignment by the Airports Authority to the Trustee, in trust, to secure payment of the Bonds, of the Airports Authority's interest in Net Revenues and sets forth the conditions of such assignments. The Master Indenture and the Forty-second Supplemental Indenture also provide for the issuance of the Series 2011C-D Bonds, define the terms thereof and determine the duties of the Trustee and the rights of the Bondholders.
Security for Bonds, Including Series 2011C-D Bonds
The Series 2011C-D Bonds are issued pursuant to and secured by the Master Indenture and the Forty-second Supplemental Indenture. All Bonds, including the Series 2011C-D Bonds, issued under the Master Indenture and at any time Outstanding shall be equally and ratably secured with all other Outstanding Bonds with the same right, lien and preference with respect to Net Revenues, without preference, priority or distinction on account of the date or dates or the actual time or times of the issuance or maturity of the Bonds. All Bonds of a particular Series shall in all respects be equally and ratably secured and shall have the same right, lien and preference established for the benefit of such Series of Bonds under the Master Indenture, including, without limitation, rights in any related Series Account in the Construction Fund, the Bond Fund or the Debt Service Reserve Fund. No mortgage, lien or security interest in the Airports or operating property of the Airports Authority has been pledged to secure the Bonds.
No Pledge of Certain Revenues
In addition to certain other revenues of the Airports Authority not pledged under the Master Indenture, revenues of the Dulles Corridor Enterprise Fund established by Resolution No. 07-16 of the Airports Authority are not pledged to the payment of the Airports Authority's obligations under the Master Indenture or the Forty-second Supplemental Indenture.
B-20 Revenues and Funds
Creation of Funds and Accounts. Pursuant to the Master Indenture and the Forty-second Supplemental Indenture, the following Funds, Accounts, and Subaccounts are established:
(a) Construction Fund, to be held by the Series 2011C-D Custodian, which shall contain with respect to the Series 2011C Bonds, the Series 2011C Cost of Issuance Subaccount and with respect to the Series 2011D Bonds, the Series 2011D Cost of Issuance Subaccount.
(b) Revenue Fund, to be held by the Airports Authority.
(c) Operation and Maintenance Fund, to be held by the Airports Authority.
(d) Bond Fund, to be held by the Trustee, which shall contain the following Accounts with respect to the Series 2011C-D Bonds:
(i) Series 2011C Interest Account;
(ii) Series 2011C Principal Account;
(iii) Series 2011C Redemption Account;
(iv) Series 2011D Interest Account;
(v) Series 2011D Principal Account;
(vi) Series 2011D Redemption Account;
(e) Debt Service Reserve Fund, to be held by the Trustee, which shall contain a Common Reserve Account established with respect to the Series 2011C-D Bonds and any other Common Reserve Bonds.
(f) Junior Lien Obligation Fund, to be held by the Airports Authority.
(g) Emergency Repair and Rehabilitation Fund, to be held by the Airports Authority.
(h) Federal Lease Fund, to be held by the Airports Authority.
(i) General Purpose Fund, to be held by the Airports Authority.
Amounts in the Revenue Fund are not pledged to secure Holders of the Bonds. Amounts in the Operation and Maintenance Fund are required to be used by the Airports Authority to pay Operation and Maintenance Expenses and are not pledged to secure Holders of the Bonds. Amounts
B-21 in the Emergency Repair and Rehabilitation Fund may be used by the Airports Authority to pay the costs of emergency repairs and replacements to the Airports and are not pledged to secure Holders of the Bonds. Amounts in the General Purpose Fund will be available for use by the Airports Authority for any lawful purpose and are not pledged to secure Holders of the Bonds.
Application of Series 2011C Bond Proceeds. There will be deposited, paid or transferred to (a) the Common Reserve Account a deposit to the Common Reserve Account in the Debt Service Reserve Fund to satisfy a portion of the Common Debt Service Reserve Requirement, (b) the Trustee amounts, as set forth in the Series 1998B Refunding Agreement, for redemption of the Series 1998B Bonds, (c) the Trustee amounts, as set forth in the Series 2001A Refunding Agreement, for redemption of the Series 2001A Bonds, and (d) the Series 2011C Cost of Issuance Subaccount, moneys to pay costs associated with the issuance of the Series 2011C Bonds.
Application of Series 2011D Bond Proceeds. There will be deposited, paid or transferred to (a) the Common Reserve Account a deposit to the Common Reserve Account in the Debt Service Reserve Fund to satisfy a portion of the Common Debt Service Reserve Requirement, (b) the Trustee amounts, as set forth in the Series 2001B Refunding Agreement, for redemption of the Series 2001B Bonds and, (c) the Series 2011D Cost of Issuance Subaccount, moneys to pay costs associated with the issuance of the Series 2011D Bonds.
Flow of Funds
The Indenture provides that on the first Business Day of each month (a) amounts in the Revenue Fund, excluding any transfers from the General Purpose Fund during the current Fiscal Year, and (b) 1/12 of the amount of any transfers from the General Purpose Fund for the current Fiscal Year, shall be withdrawn from the Revenue Fund and deposited or transferred as set forth under the heading, "THE BONDS--Security and Source of Payment for the Bonds--Flow of Funds" in Part II of this Official Statement.
Required Deposits
Moneys are required to be deposited with respect to the Series 2011C-D Bonds as described below. The Supplemental Indenture setting forth the terms of any additional Series of Bonds may require deposits to the applicable debt service and debt service reserve accounts and subaccounts with respect to such Series of Bonds, and, if such Series of Bonds is subject to mandatory purchase at the option of the Bondholder, will require deposits to a purchase fund for such Series of Bonds.
Debt Service Deposits. (a) So long as any Series 2011C Bonds are Outstanding, the Forty-second Supplemental Indenture requires that payments be made to the Trustee for the purposes of debt service payments on Series 2011C Bonds in the following manner:
Interest Account. Beginning on October 1, 2011, and on the first (1st) Business Day of each month thereafter, an amount equal to one-sixth (1/6) of the interest payment due on April 1, 2012, and thereafter beginning on the first (1st) Business Day of April, 2012, and on the first (1st) Business Day of each month thereafter, an amount equal to one-sixth (1/6) of the next
B-22 interest payment due after such date with respect to the Series 2011C Bonds shall be deposited to the Series 2011C Interest Account, provided the Airports Authority shall be entitled to a credit immediately before each Bond Payment Date for interest earned on the monthly deposits made by the Airports Authority.
Principal Account. Beginning on October 1 of any year which is one year prior to a maturity date with respect to the Series 2011C Bonds, and on the first (1st) Business Day of each month thereafter, an amount equal to one-twelfth (1/12) of the next principal payment due after such date with respect to the Series 2011C Bonds shall be deposited to the Series 2011C Principal Account.
(b) So long as any Series 2011D Bonds are Outstanding, the Forty- second Supplemental Indenture requires that payments be made to the Trustee for the purposes of debt service payments on Series 2011D Bonds in the following manner:
Interest Account. Beginning on October 1, 2011, and on the first (1st) Business Day of each month thereafter, an amount equal to one-sixth (1/6) of the interest payment due on April 1, 2012, and thereafter beginning on the first (1st) Business Day of April, 2012, and on the first (1st) Business Day of each month thereafter, an amount equal to one-sixth (1/6) of the next interest payment due after such date with respect to the Series 2011D Bonds shall be deposited to the Series 2011D Interest Account, provided the Airports Authority shall be entitled to a credit immediately before each Bond Payment Date for interest earned on the monthly deposits made by the Airports Authority.
Principal Account. Beginning on October 1 of any year which is one year prior to a maturity date with respect to the Series 2011D Bonds, and on the first (1st) Business Day of each month thereafter, an amount equal to one-twelfth (1/12) of the next principal payment due after such date with respect to the Series 2011D Bonds shall be deposited to the Series 2011D Principal Account.
Debt Service Reserve Fund Deposit. The Forty-second Supplemental Indenture provides that any other Series of Bonds may be secured with amounts on deposit in the Common Reserve Account if the Trustee receives from an Authority Representative written directions to include such additional Bonds as “Common Reserve Bonds” on a parity with the Series 2011C-D Bonds and the Common Debt Service Reserve Requirement shall be recalculated in connection with such written direction.
Subject to the requirements of Section 506 of the Master Indenture and upon instructions from the Airports Authority, the Trustee may substitute a Credit Facility in lieu of cash or investments, or cash and investments in lieu of a Credit Facility in order to satisfy the Common Debt Service Reserve Requirement.
Beginning on the first (1st) Business Day of each month after a withdrawal from the Common Reserve Account in the Debt Service Reserve Fund to pay interest on the immediately preceding Bond Payment Date, and on the first (1st) Business Day of each month thereafter
B-23 except April and October, an amount equal to one-fifth (1/5) of any deficiency resulting from such payment shall be deposited to the Common Reserve Account, (A) beginning on the first (1st) Business Day of each month after a withdrawal from the Common Reserve Account to pay principal on the immediately preceding Bond Payment Date, and the first (1st) Business Day of each month thereafter except each October, an amount equal to one-eleventh (1/11) of any deficiency resulting from a payment on the immediately preceding Bond Payment Date shall be deposited in the Common Reserve Account, and (B) beginning on the first (1st) Business Day of each month except each January, an amount equal to one-eleventh (1/11) of the amount necessary to cure any deficiency in the Common Reserve Account determined by the valuation pursuant to Section 514(b) of the Master Indenture, as of the beginning of the current Fiscal Year resulting from a change in market valuation of assets shall be deposited to the Common Reserve Account. See "THE SERIES 2011C-D BONDS--Security and Source of Payment--Debt Service Reserve Fund" in Part I of this Official Statement.
To the extent not needed to maintain the balance therein equal to the Common Debt Service Reserve Requirement, earnings on investments of the Common Reserve Account in the Debt Service Reserve Fund shall be transferred after each Bond Payment Date directly to the Revenue Fund.
Computation and Payment of Rebate Amount
Except with respect to earnings on Funds and Accounts that qualify for an exemption provided by the Code, the Airports Authority will compute and pay any Rebate Amount required by the Code with respect to the Series 2011C-D Bonds.
No payment shall be made if the Airports Authority delivers to the Trustee an Opinion of Bond Counsel to the effect that such payment is not required under the Code to prevent the Series 2011C-D Bonds from being "arbitrage bonds" within the meaning of Section 148 of the Code.
Investment of Moneys
Moneys in all Funds and Accounts shall be invested as soon as practicable upon receipt in Permitted Investments, as directed by the Airports Authority or as selected by the Trustee in the absence of direction by the Airports Authority; provided that the maturity date on which such Permitted Investments may be redeemed at the option of the holder thereof shall coincide as nearly as practicable with (but in no event later than) dates on which moneys in the Funds and Accounts for which the investments were made will be required for the purposes thereof and provided further that in the absence of direction from the Airports Authority the Trustee shall select Permitted Investments in accordance with prudent investment standards.
Additional Bonds
The Airports Authority has issued, and expects to issue in the future, additional Bonds. Under the Indenture, the Airports Authority is permitted to issue one or more Series of additional Bonds on a parity with the outstanding Bonds, if:
B-24 The Airports Authority has provided to the Trustee the following evidence indicating that, as of the date of issuance of such additional Bonds, the Airports Authority is in compliance with the rate covenant established by the Indenture (the “Rate Covenant”) (discussed under “Rate Covenant” below) as evidenced by: (a) the Airports Authority’s most recent audited financial statements, and the Airports Authority’s unaudited statements for the period, if any, from the date of such audited statements through the most recently completed Fiscal Year quarter, and (b) if applicable, evidence of compliance with the Indenture’s requirement of remedial action (discussed under “Rate Covenant” below); and either
(i) an Airport Consultant has provided to the Trustee a certificate stating that, based upon reasonable assumptions, projected Net Revenues will be sufficient to satisfy the Rate Covenant (disregarding any Bonds that have been or will be paid or discharged immediately after the issuance of the additional Bonds proposed to be issued) for each of the next three full Fiscal Years following issuance of the additional Bonds, or each full Fiscal Year from issuance of the additional Bonds through two full Fiscal Years following completion of the Projects financed by the additional Bonds proposed to be issued, whichever is later; provided that, if Maximum Annual Debt Service with respect to all Bonds to be Outstanding following the issuance of the proposed additional Bonds in any Fiscal Year is greater than 110% of Annual Debt Service for such Bonds in any of the test years, then the last Fiscal Year of the test must use such Maximum Annual Debt Service; provided further, that if capitalized interest on any Bonds and proposed additional Bonds is to be applied in the last Fiscal Year of the period described in this sentence, the Airport Consultant shall extend the test through the first full Fiscal Year for which there is no longer capitalized interest, or
(ii) an Authority Representative has provided to the Trustee a certificate stating that Net Revenues in the most recently completed Fiscal Year were not less than the larger of (1) the amounts needed for making the required deposits to the Principal Accounts, the Interest Accounts, and the Redemption Accounts, the Debt Service Reserve Fund, the Subordinated Bond Funds, the Subordinated Reserve Funds, the Junior Lien Obligations Fund, the Federal Lease Fund, and the Emergency Repair and Rehabilitation Fund or (2) 125% of (a) Annual Debt Service on Bonds Outstanding in such Fiscal Year (disregarding any Bonds that have been paid or discharged or will be paid or discharged immediately after the issuance of such additional Bonds proposed to be issued), plus (b) Maximum Annual Debt Service with respect to such additional Bonds proposed to be issued.
With respect to additional Bonds proposed to be issued to refund Outstanding Bonds, the Airports Authority may issue such refunding Bonds if the test described above is met, or if the Airports Authority has provided to the Trustee evidence that (a) the aggregate Annual Debt Service in each Fiscal Year with respect to all Bonds to be Outstanding after issuance of such refunding Bonds will be less than the aggregate Annual Debt Service in each such Fiscal Year through the last Fiscal Year in which Bonds are Outstanding prior to the issuance of such refunding Bonds, and (b) the Maximum Annual Debt Service with respect to all Bonds to be Outstanding after issuance of such refunding Bonds will not exceed the Maximum Annual Debt Service with respect to all Bonds outstanding immediately prior to such issuance.
B-25 The issuance of the Series 2011C-D Bonds will comply with the provisions of the Master Indenture described above.
General Covenants of the Airports Authority
The covenants set forth below apply to the Series 2011C-D Bonds and to any other Series of Bonds issued under the Master Indenture.
Payment of Principal and Interest. The Airports Authority covenants to promptly pay or cause to be paid from Net Revenues (except to the extent payable from bond proceeds or other limited sources of payment specified in the Master Indenture) the principal of, premium, if any, and interest on each Bond, as and when due.
Pledge of Net Revenues. As security for the payment of the principal of, and interest and any premium on, the Bonds, the Airports Authority has granted to the Trustee a pledge of and lien on Net Revenues, as and when received by the Airports Authority, from and after the date of the Master Indenture without any physical delivery thereof or further act.
The Airports Authority has covenanted and agreed that it will not create any pledge, lien or encumbrance upon, or permit any pledge, lien or encumbrance to be created on, Revenues or Net Revenues except for a pledge, lien or encumbrance subordinate to the pledge and lien granted by the Master Indenture for the benefit of the Bonds and the pledge and lien granted by the Subordinated Indenture for the benefit of the Subordinated Bonds. The Airports Authority has previously issued Subordinated Bonds secured by a pledge of Net Revenues that is subordinated to the pledge of Net Revenues securing the Bonds as to moneys that have not been transferred by the Trustee to the Subordinated Indenture Trustee. See "AUTHORITY INDEBTEDNESS --Subordinated Bonds" in Part I of this Official Statement.
In addition to Bonds issued under the Master Indenture, the Airports Authority may issue, at any time and from time to time, in one or more series (a) Special Facility Bonds, (b) other bonds, notes or other obligations payable solely from and secured solely by revenues other than Revenues and Net Revenues, and (c) bonds, notes or other obligations payable from Net Revenues on a basis subordinate to the Bonds (including the Series 2011C-D Bonds) and the Subordinated Bonds.
Management of Airports. The Airports Authority has covenanted not to take, or allow any person to take, any action which would cause the Federal Aviation Administration (the "FAA"), or any successor to the powers and authority of the FAA to suspend or revoke the Airports' operating certificates. The Airports Authority will comply with all valid acts, including the Acts, rules, regulations, orders and directives of any governmental, legislative, executive, administrative or judicial body applicable to the Airports and with the Federal Lease, unless the same shall be contested in good faith, all to the end that the Airports will remain in operation at all times.
Operation and Maintenance of Airports. The Airports Authority has covenanted that it will operate and maintain the Airports as a revenue producing enterprise in accordance with the Federal Lease and the Acts. The Airports Authority will make such repairs to the Airports as shall be
B-26 necessary or appropriate in the prudent management thereof. The Airports Authority has covenanted that it will operate and maintain the Airports in a manner which will entitle it at all times to charge and collect fees, charges and rentals in accordance with airport use agreements, if any, or as otherwise permitted by law, and shall take all reasonable measures permitted by law to enforce prompt payment to it of such fees, charges and rentals when and as due.
Insurance. The Airports Authority has covenanted that it will at all times (a) carry insurance, or cause insurance to be carried, with a responsible insurance company or companies authorized and qualified under the laws of any state of the United States of America to assume the risk thereof, covering such properties of the Airports as are customarily insured, and against loss or damage from such causes as are customarily insured against, by enterprises engaged in a similar type of business, or (b) have adopted and maintain a risk financing plan for property and casualty losses in accordance with the Federal Lease.
Financial Records and Statements. The Airports Authority has covenanted to have an annual audit made by independent certified public accountants of recognized standing and shall within 120 days after the end of each of its Fiscal Years furnish to the Trustee copies of the balance sheet of the Airports Authority as of the end of such Fiscal Year and complete audited financial statements of the Airports Authority for such Fiscal Year, all in reasonable detail.
Rate Covenant
Pursuant to the Indenture, the Airports Authority has covenanted that it will take all lawful measures to fix and adjust from time to time the fees and other charges for the use of the Airports, including services rendered by the Airports Authority, pursuant to airport use agreements or otherwise, calculated to be at least sufficient to produce Net Revenues to provide for the larger of either:
(a) The amounts needed for making the required deposits in each Fiscal Year to the Principal Accounts, the Interest Accounts, and the Redemption Accounts, the Debt Service Reserve Fund, the Subordinated Bond Funds, the Subordinated Reserve Funds, the Junior Lien Obligations Fund, the Federal Lease Fund and the Emergency Repair and Rehabilitation Fund; or
(b) An amount not less than 125% of the Annual Debt Service with respect to Bonds for such Fiscal Year.
Provided that any computation required above shall exclude from Net Revenues any capital gain resulting from any sales or revaluation of Permitted Investments.
The Airports Authority has covenanted that if, upon the receipt of the audit report for a Fiscal Year, the Net Revenues in such Fiscal Year are less than the amount specified above, the Airports Authority will require the Airport Consultant to make recommendations as to the revision of the Airports Authority’s schedule of rentals, rates, fees and charges, and upon receiving such recommendations or giving reasonable opportunity for such recommendations to be made, the Airports Authority, on the basis of such recommendations and other available information, will take
B-27 all lawful measures to revise the schedule of rentals, rates, fees and charges for the use of the Airports as may be necessary to produce the specified amount of Net Revenues in the Fiscal Year following the Fiscal Year covered by such audit report.
In the event that Net Revenues for any Fiscal Year are less than the amount specified above, but the Airports Authority has promptly taken in the next Fiscal Year all available lawful measures to review the schedule of rentals, rates, fees and charges for the use of the Airports to comply with these remedial requirements, there will be no Event of Default under the Indenture; provided, however, that if, after the Airports Authority has complied with these remedial requirements, Net Revenues are not sufficient to provide for the specified amount in the Fiscal Year in which such adjustments are required to be made (as evidenced by the audit report for such Fiscal Year), such failure will be an Event of Default under the Indenture.
Tax Covenants
The Airports Authority has covenanted to comply with certain tax covenants with respect to the tax exemption of the Series 2011C-D Bonds, including, among other matters, the use, expenditure and investment of proceeds and the rebate of certain "arbitrage profit" to the United States Treasury. See "TAX MATTERS" in Part I of this Official Statement.
The Airports Authority has also covenanted not to cause an amount less than 95% of the proceeds of the Series 2011C-D Bonds and investment income therefrom to be expended for Qualified Cost of Facilities, and agrees to make or to direct the Trustee to make any transfers necessary to satisfy such covenant.
Default and Remedies
Events of Default. The Master Indenture provides that an Event of Default with respect to one Series of Bonds shall not cause an Event of Default with respect to any other Series of Bonds unless such event or condition on its own constitutes an Event of Default with respect to such other Series of Bonds. Each of the following is defined as an "Event of Default" with respect to each Series of Bonds under the Master Indenture:
(a) If payment by the Airports Authority in respect of any installment of interest on any Bond of such Series shall not be made in full when the same becomes due and payable;
(b) If payment by the Airports Authority in respect of the principal of any Bond of such Series shall not be made in full when the same becomes due and payable, whether at maturity or by proceedings for redemption or otherwise;
(c) If payment of the purchase price of any Bond of such Series tendered for optional or mandatory tender for purchase, if provided for in the Supplemental Indenture providing for the issuance of such Series, shall not be paid in full as and when due in accordance therewith;
B-28 (d) If the Airports Authority shall fail to observe or perform any covenant or agreement on its part under the Master Indenture (other than the Rate Covenant) for a period of 60 days after the date on which written notice of such failure, requiring the same to be remedied, shall have been given to the Airports Authority by the Trustee, or to the Airports Authority and the Trustee by the Holders of at least 25% in aggregate principal amount of Bonds of a Series then Outstanding. If the breach of covenant or agreement is one which cannot be completely remedied within 60 days after written notice has been given, it shall not be an Event of Default with respect to such Series as long as the Airports Authority has taken active steps within the 60 days after written notice has been given to remedy the failure and is diligently pursuing such remedy;
(e) If the Airports Authority is required under the Rate Covenant to take measures to revise the schedule of rentals, rates, fees and charges for the use of the Airports and Net Revenues in the Fiscal Year in which such adjustments are made are less than the amount specified in the Rate Covenant contained in the Master Indenture (See "THE BONDS--Security and Source of Payment for the Bonds--Rate Covenant") in Part II of this Official Statement; and
(f) If the Airports Authority shall institute proceedings to be adjudicated a bankrupt or insolvent, or shall consent to the institution of bankruptcy or insolvency proceedings against it, or shall file a petition, answer or consent seeking reorganization or relief under the federal Bankruptcy Code or any other similar applicable federal or state law, or shall consent to the filing of any such petition or to the appointment of a receiver, liquidator, assignee, trustee or sequestrator (or other similar official) of the Airports Authority or of any substantial part of its property, or shall make an assignment for the benefit of creditors, or shall admit in writing its inability to pay its debts generally as they become due.
No Acceleration or Cross Default. There shall be no rights of acceleration with respect to any Bonds, including the Series 2011C-D Bonds. An Event of Default with respect to one Series of Bonds shall not cause an Event of Default with respect to any other Series of Bonds unless such event or condition on its own constitutes an Event of Default with respect to such other Series of Bonds.
Remedies and Enforcement of Remedies. The Master Indenture provides that upon the occurrence and continuance of any Event of Default with respect to a Series of Bonds, the Trustee may, or, upon the written request of the Holders of not less than 25% in an aggregate principal amount of such Series of Bonds, together with indemnification of the Trustee to its satisfaction therefor shall, proceed forthwith to protect and enforce its rights and the rights of the Bondholders under the Master Indenture and under the Acts and such Bonds by such suits, actions, injunction, mandamus or other proceedings, as the Trustee, being advised by counsel, shall deem expedient.
Regardless of the happening of an Event of Default, the Trustee, if requested in writing by the Holders of not less than 25% in aggregate principal amount of a Series of Bonds, shall, upon being indemnified to its satisfaction therefor, institute and maintain such suits and proceedings as it may be advised shall be necessary or expedient (a) to prevent any impairment of the security under the Master Indenture by any acts or omissions to act which may be unlawful or in violation thereof, or (b) to preserve or protect the interests of the Holders of such Series of Bonds, provided that such
B-29 request is in accordance with law and the provisions of the Master Indenture, and, in the sole judgment of the Trustee, is not unduly prejudicial to the interest of the Holders of Bonds of each Series not making such request.
The remedies provided for in the Master Indenture with respect to reaching Funds or Accounts thereunder shall be limited to the Funds or Accounts thereunder pledged to the applicable Series of Bonds with respect to which an Event of Default exists.
Application of Revenues and Other Moneys After Default. The Master Indenture provides that during the continuance of an Event of Default with respect to any Series of Bonds, all moneys received by the Trustee with respect to such Series of Bonds pursuant to any right given or action taken under the provisions of the Master Indenture shall, after payment of the costs and expenses of the proceedings which resulted in the collection of such moneys and of the fees, expenses and advances incurred or made by the Trustee with respect thereto, be applied according to the accrued debt service deposits or payments with respect to each such Series as follows:
(a) Unless the principal amounts of all such Outstanding Bonds shall have become due and payable:
First: To the payment to the persons entitled thereto of all installments of interest then due on such Bonds in the order of maturity of such installments, and, if the amount available shall not be sufficient to pay in full any installment or installments maturing on the same date, then to the payment thereof ratably, according to the amounts due thereon to the persons entitled thereto, without any discrimination or preference; and
Second: To the payment to the persons entitled thereto of the unpaid principal amounts of any Bonds which shall have become due (other than Bonds of such Series previously called for redemption for the payment of which moneys are held pursuant to the provisions of the Master Indenture), whether at maturity or by proceedings for redemption or otherwise or upon the tender of any Bond pursuant to the terms of the Supplemental Indenture providing for the issuance of such Bonds, in the order of their due dates, and if the amounts available shall not be sufficient to pay in full all the Bonds of such Series due on any date, then to the payment thereof ratably, according to the principal amounts due on such date, to the persons entitled thereto, without any discrimination or preference.
(b) If the principal amounts of all Outstanding Bonds shall have become due and payable, to the payment of the principal amounts and interest then due and unpaid upon such Bonds without preference or priority of principal over interest or of interest over principal, or of any installment of interest over any other installment of interest, or of any Bond over any other such Bond, ratably, according to the amounts due respectively for principal and interest, to the persons entitled thereto without any discrimination or preference.
Whenever moneys are to be applied by the Trustee as described in (a) and (b) above, such moneys shall be applied on the date fixed by the Trustee and, upon such date, interest on the principal amounts to be paid on such dates shall cease to accrue if so paid.
B-30
Remedies Not Exclusive. No remedy conferred upon or reserved to the Trustee or the Bondholders or any Credit Provider under the Master Indenture is intended to be exclusive of any other remedy, but each and every such remedy shall be cumulative and shall be in addition to every other remedy given under the Master Indenture or existing at law or in equity or by statute (including the Acts) on or after the date of the Master Indenture.
Remedies Vested in the Trustee. All rights of action (including the right to file proof of claims) under the Master Indenture or under any of the Bonds of any Series may be enforced by the Trustee without the possession of any of the Bonds of such Series or the production thereof in any trial or other proceedings relating thereto. Any such suit or proceeding instituted by the Trustee may be brought in its name as the Trustee without the necessity of joining as plaintiffs or defendants any Holders of the applicable Series of Bonds. Subject to the provisions of the Master Indenture, any recovery or judgment shall be for the equal benefit of the Holders of the Outstanding Bonds of such Series.
Control of Proceedings. If an Event of Default with respect to a Series of Bonds shall have occurred and be continuing, the Master Indenture provides that the Holders of a majority in aggregate principal amount of Bonds of such Series then Outstanding shall have the right, at any time, by any instrument in writing executed and delivered to the Trustee, to direct the method and place of conducting any proceeding to be taken with respect to funds or assets solely securing such Series of Bonds in connection with the enforcement of the terms and conditions thereof, provided that such direction is in accordance with law and the provisions of the Master Indenture (including indemnity to the Trustee as provided in the Master Indenture) and, in the sole judgment of the Trustee, is not unduly prejudicial to the interest of the Bondholders of each Series of Bonds not joining in such direction, and provided further, that nothing in this section shall impair the right of the Trustee in its discretion to take any other action under the Master Indenture which it may deem proper and which is not inconsistent with such direction by Bondholders.
If an Event of Default with respect to all Series of Bonds shall have occurred and be continuing, the Holders of a majority in aggregate principal amount of all Bonds then Outstanding shall have the right, at any time, by any instrument in writing executed and delivered to the Trustee, to direct the method and place of conducting any proceeding to be taken with respect to Net Revenues or other assets securing all Bonds in connection with the enforcement of the terms and conditions of the Master Indenture, provided that such direction is in accordance with law and the provisions of the Master Indenture (including indemnity to the Trustee as provided in the Master Indenture) and, in the sole judgment of the Trustee, is not unduly prejudicial to the interest of Bondholders not joining in such direction and provided further that nothing shall impair the right of the Trustee in its discretion to take any other action under the Master Indenture which it may deem proper and which is not inconsistent with such direction by Bondholders.
Individual Bondholder Action Restricted. No Holder of any Bond of any Series shall have any right to institute any suit, action or proceeding in equity or at law for the enforcement of the Master Indenture or for the execution of any trust thereunder or for any remedy thereunder unless:
B-31 (i) an Event of Default has occurred (A) under paragraph (a), (b) or (c) of "Events of Default" of which the Trustee is deemed to have notice, or (B) under paragraph (d), (e) or (f) of "Events of Default" of which the Trustee has actual knowledge or as to which the Trustee has been notified in writing;
(ii) the Holders of at least 25% in aggregate principal amount of the applicable Series of Bonds then Outstanding shall have made written request to the Trustee to proceed to exercise the powers granted in the Master Indenture or to institute such action, suit or proceeding in its own name;
(iii) such Bondholders shall have offered the Trustee indemnity as provided in the Master Indenture;
(iv) the Trustee shall have failed or refused to exercise the powers granted under the Master Indenture or to institute such action, suit or proceeding in its own name for a period of 60 days after receipt by it of such request and offer of indemnity; and
(v) during such 60-day period, no direction inconsistent with such written request has been delivered to the Trustee by the Holders of a majority in aggregate principal amount of the applicable Series of Bonds then Outstanding as provided in the Master Indenture.
No one or more Holders of Bonds shall have any right in any manner whatsoever to affect, disturb or prejudice the security of the Master Indenture or to enforce any right thereunder except in the manner provided therein and for the equal benefit of the Holders of all Bonds Outstanding of all affected Series.
Nothing contained in the Master Indenture shall affect or impair, or be construed to affect or impair, the right of the Holder of any Bond (i) to receive payment of the principal of or interest on such Bond on or after the due date thereof, or (ii) to institute suit for the enforcement of any such payment on or after such due date; provided, however, no Holder of any Bond may institute or prosecute any such suit or enter judgment therein if, and to the extent that, the institution or prosecution of such suit or the entry of judgment therein would, under applicable law, result in the surrender, impairment, waiver or loss of the lien of the Master Indenture on the moneys, funds and properties pledged under the Master Indenture for the equal and ratable benefit of all Holders of Bonds of such Series.
Waiver of Event of Default. No delay or omission of the Trustee, of any Holder of Bonds or, if provided by Supplemental Indenture, any Credit Provider to exercise any right or power accruing upon any Event of Default shall impair any such right or power or shall be construed to be a waiver of any such Event of Default or an acquiescence therein. Every power and remedy given by the Master Indenture to the Trustee, the Holders of Bonds and, if provided by Supplemental Indenture, any Credit Provider may be exercised from time to time and as often as may be deemed expedient by them.
B-32 The Trustee with the consent of the Credit Providers, if provided by Supplemental Indenture (provided, however, that such Credit Provider’s consent may be required only in connection with an Event of Default on a Series of Bonds with respect to which such Credit Provider is providing a Credit Facility) may waive any Event of Default with respect to the Bonds, which, in the Trustee's opinion, shall have been remedied at any time, regardless of whether any suit, action or proceeding has been instituted before the entry of final judgment or decree in any suit, action or proceeding instituted by the Trustee under the provisions of the Master Indenture, or before the completion of the enforcement of any other remedy under the Master Indenture.
Notwithstanding anything contained in the Master Indenture to the contrary, the Trustee, upon the written request of the applicable Credit Provider, if any, or Holders of at least a majority of the aggregate principal amount of Bonds of a Series then Outstanding, with respect to an Event of Default affecting only such Series (or a majority of the aggregate principal amount of all Bonds then Outstanding, with respect to an Event of Default affecting all Series of Bonds) shall waive any Event of Default under the Master Indenture and its consequences, provided, however, that, a default in the payment of the principal amount of, premium, if any, or interest on any Bond, when the same shall become due and payable by the terms thereof or upon call for redemption, may not be waived without the written consent of the Holders of all the Bonds of such Series at the time Outstanding to which an Event of Default applies and the consent of the Credit Provider, if any.
In case of any waiver by the Trustee of an Event of Default under the Master Indenture, the Airports Authority, the Trustee, the Credit Provider, if any, and the Bondholders shall be restored to their former positions and rights under the Master Indenture, but no such waiver shall extend to any subsequent or other Event of Default or impair any right consequent thereon. The Trustee shall not be responsible to any one for waiving or refraining any Event of Default in accordance with the Master Indenture.
The Trustee
Trustee Not Required to Take Action Unless Indemnified. Except as expressly required in the Master Indenture, the Trustee shall not be required to institute any proceeding in which it may be a defendant or to take any action to enforce its rights and expose it to liability, or be deemed liable for failure to take such action, unless and until the Trustee shall have been indemnified against all reasonable costs, liability and damages.
Right to Deal in Bonds and Take Other Actions. The Trustee may in good faith buy, sell or hold and deal in any Bonds of any Series, including the Series 2011C-D Bonds, as if it were not such Trustee and may commence or join any action which a Holder is entitled to take with like effect as if the Trustee were not the Trustee.
Trustee's Fees and Expenses. If the Airports Authority fails to properly pay any reasonable fees, costs or expenses of the Trustee incurred in the performance of its duties, the Trustee may reimburse itself from any surplus moneys on hand in any Fund or Account held by it except any amounts in the Bond Fund.
B-33 Removal and Resignation of Trustee. The Trustee may resign at any time. Written notice of such resignation shall be given to the Airports Authority and such resignation shall take effect upon the appointment and qualification of a successor Trustee. In addition, the Trustee may be removed at any time by the Airports Authority but only for cause by Supplemental Indenture so long as (a) no Event of Default shall have occurred and be continuing, and (b) the Airports Authority determines, in such Supplemental Indenture, that the removal of the Trustee shall not have an adverse effect upon the rights or interests of the Bondholders. In the event of the resignation or removal of the Trustee or in the event of the Trustee is dissolved or otherwise becomes incapable to act as the Trustee, the Airports Authority shall be entitled to appoint a successor Trustee.
Supplemental Indentures
Supplemental Indentures Not Requiring Consent of Bondholders. The Airports Authority and the Trustee may, without the consent of or notice to any of the Holders enter into one or more Supplemental Indentures for one or more of the following purposes:
(a) To cure any ambiguity or formal defect or omission in the Indenture;
(b) To correct or supplement any provision in the Indenture which may be inconsistent with any other provision therein, or to make any other provision with respect to matters or questions arising thereunder which shall not materially adversely affect the interests of the Holders;
(c) To grant or confer upon the Holders any additional rights, remedies, powers or authority that may lawfully be granted to or conferred upon them;
(d) To secure additional revenues or provide additional security or reserves for payment of the Bonds;
(e) To preserve the excludability of interest on the Bonds from gross income for purposes of federal income taxes or to change the tax covenants set forth in the Master Indenture or any Supplemental Indenture pursuant to an Opinion of Bond Counsel that such action will not adversely affect such excludability;
(f) To provide for the issuance of a Series of Bonds under the Master Indenture;
(g) To remove the Trustee in accordance with the Master Indenture; and
(h) To add requirements the compliance with which is required by a Rating Agency in connection with issuing a rating with respect to a Series of Bonds.
(i) To accommodate the technical, operational and structural features of Bonds which are issued or are proposed to be issued or of a Program which has been authorized or is proposed to be authorized, including, but not limited to, changes needed to accommodate bond anticipation notes, commercial paper, auction Bonds, Hedge Facilities, Short-
B-34 Term/Demand Obligations and other variable rate or adjustable rate Bonds, Capital Appreciation Bonds, Original Issue Discount Bonds and other discounted or compound interest Bonds or other forms of indebtedness which the Airports Authority from time to time deems appropriate to incur;
(j) To accommodate the use of a Credit Facility for specific Bonds or a specific Series of Bonds; and
(k) To comply with the requirements of the Code as are necessary, in the Opinion of Bond Counsel, to prevent the federal income taxation of the interest on any of the Bonds, including, without limitation, the segregation of Revenues into different funds.
Supplemental Indentures Requiring Consent of Bondholders. The Holders of not less than a majority in aggregate principal amount of the Bonds Outstanding may consent to or approve, from time to time, which consent to or approval shall be in writing and shall not be withheld unreasonably, the execution by the Airports Authority and the Trustee of such Supplemental Indentures as shall be deemed necessary and desirable by the Airports Authority for the purpose of modifying, altering, amending, adding to or rescinding any of the terms or provisions contained in the Indenture; provided, that if any Supplemental Indenture modifying, altering, amending, adding to or rescinding any of the terms and provisions of the Indenture contains provisions which affect the rights and interests of less than all Series of Bonds and the section of the Master Indenture relating to Supplemental Indentures not requiring consent of Holders is inapplicable, then such Supplemental Indenture shall require the consent only of the Holders of a majority in Outstanding principal amount of the Series of Bonds so affected; and provided further, that nothing shall permit or be construed as permitting a Supplemental Indenture that would:
(a) extend the stated maturity of or time for paying interest on any Bond or reduce the principal amount of or the redemption premium or rate of interest payable on any Bond, without the consent of the Holder of such Bond;
(b) prefer or give a priority to any Bond over any other Bond, without the consent of the Holder of each Bond then Outstanding not receiving such preference or priority; or
(c) reduce the aggregate principal amount of Bonds then Outstanding the consent of the Holders of which is required to authorize such Supplemental Indenture, without the consent of the Holders of all Bonds then Outstanding.
If the Holders of the required principal amount or number of the Bonds Outstanding shall have consented to and approved the execution of a Supplemental Indenture as provided in the Master Indenture, no Holder of any Bond shall have any right to object to the execution thereof, or to object to any of the terms and provisions contained therein or to the operation thereof, or in any manner to question the propriety of the execution thereof, or to enjoin or restrain the Trustee or the Airports Authority from executing the same or from taking any action pursuant to the provisions thereof.
B-35
Satisfaction and Discharge
If payment of all principal of, premium, if any, and interest on a Series of Bonds in accordance with the terms of such Bonds is made, or is provided for as described below, and if all other sums payable by the Airports Authority under the Master Indenture with respect to such Series of Bonds shall be paid or provided for then the liens, estates and security interests granted thereby shall cease with respect to such Series of Bonds, provided that the rebate provisions, if any, of the related Supplemental Indenture shall survive so long as there is any amount due to the federal government pursuant to such Supplemental Indenture.
Payment of a Series of Bonds, including the Series 2011C-D Bonds, may be provided for by the deposit with the Trustee of moneys, noncallable Government Obligations, noncallable Government Certificates or pre-refunded municipal obligations (as described in paragraph (c) of the definition of Permitted Investments in the Master Indenture) or any combination thereof. The moneys and the maturing principal and interest income on such Government Obligations, noncallable Government Certificates, or pre-refunded municipal obligations, if any, shall be sufficient and available to pay, when due, the principal of, whether at maturity or upon fixed redemption dates, premium, if any, and interest on such Bonds. The moneys, Government Obligations, noncallable Government Certificates and pre-refunded municipal obligations shall be held by the Trustee irrevocably in trust for the Holders of such Bonds solely for the purpose of paying the principal or redemption price of, including premium, if any, and interest on such Bonds as the same shall mature or become payable upon prior redemption, and, if applicable, upon simultaneous direction, expressed to be irrevocable, to the Trustee as to the dates upon which any such bonds are to be redeemed prior to their respective maturities.
If payment of any of the Series 2011C-D Bonds is so provided for, the Trustee shall mail a notice so stating to each Holder of such Series 2011C-D Bonds.
Bonds, the payment of which has been provided for, shall no longer be deemed Outstanding under the Master Indenture. The obligation of the Airports Authority in respect of such Bonds shall nevertheless continue but the Holders thereof shall thereafter be entitled to payment only from the moneys, Government Obligations, Government Certificates, and pre-refunded municipal obligations deposited with the Trustee to provide for the payment of such a series of Bonds.
No Bond may be so provided for if, as a result thereof or of any other action in connection with which the provision for payment of such Bond is made, the interest payable on any Bond with respect to which an Opinion of Bond Counsel has been rendered that such interest is excluded from gross income for federal income tax purpose is made subject to federal income taxes. The Trustee shall receive and may rely upon an Opinion of Bond Counsel (which may be based upon a ruling or rulings of the Internal Revenue Service) to the effect that the provisions of this paragraph will not be breached by so providing for the payment of any Bonds.
B-36 Non-Presentment of Series 2011C-D Bonds
If any Series 2011C-D Bond is not presented for payment of principal of, premium, if any, and interest on the Series 2011C-D Bonds within two (2) years after delivery of such funds to the Trustee and absent knowledge by the Trustee of any continuing Event of Default, the moneys shall, upon request by the Airports Authority, be paid to the Airports Authority free of any trust or lien and thereafter the Holder of such Series 2011C-D Bond shall look only to the General Purpose Fund of the Airports Authority and then only to the extent of the amounts so received by the Airports Authority without interest thereon. Prior to the transfer of any moneys, the Trustee shall give notice of such transfer to each affected Holder and publish such notice in a newspaper of general circulation in the Washington, D.C. metropolitan area. The Trustee shall have no further responsibility with respect to such moneys or payment of principal of, premium, if any, and interest on the Series 2011C-D Bonds.
Governing Law
The Master Indenture, the Forty-second Supplemental Indenture and the Series 2011C-D Bonds shall be governed and construed in accordance with the laws of the Commonwealth of Virginia.
B-37 [THIS PAGE INTENTIONALLY LEFT BLANK]
APPENDIX C
SUMMARY OF CERTAIN PROVISIONS OF THE AIRPORT USE AGREEMENT AND PREMISES LEASE
The following is a summary of certain provisions of the Airport Use Agreement and Premises Lease (the “Airline Agreement”), to which reference is made for a complete statement of its provisions and contents. The Airline Agreement signed by each of the Signatory Airlines is substantially identical except for provisions relating to the Premises and assigned Aircraft Parking Positions for each Signatory Airline. The Airline Agreement governs both Airports. An airline may become a Signatory Airline at one or both of the Airports.
DEFINITIONS
Certain words and terms used in this summary are defined in the Airline Agreement and have the same meanings in this summary, except as defined otherwise in this Official Statement. Some, but not all, of the definitions in the Airline Agreement are set forth below. Certain of these definitions have been abbreviated or modified for purposes of this summary.
“Additional Projects” shall mean capital expenditures for construction, acquisitions, and improvements related to the Airports, other than small capital items includable as O&M Expenses in accordance with Airports Authority policy and other than those Projects included in the Capital Development Program.
“Airfield Net Requirement” shall mean at each Airport the Total Requirement attributable to the Airfield Cost Center, less (i) Aircraft Parking Position Charges and Dulles International Jet Apron Fees, if any; (ii) direct utility or other reimbursements attributable or allocable to the Airfield Cost Center; and (iii) Transfers, if any, allocable to the Airfield Cost Center.
“Airline Supported Area” shall mean for each Airport the Airfield, Terminal and Equipment Cost Centers at that Airport and at Dulles International shall also include the International Arrivals Building (“IAB”), the Airside Operations Building (“AOB”), and the Passenger Conveyance System Cost Centers.
“Bonds” shall mean Senior Bonds, Subordinated Bonds, and other Indebtedness.
“Capital Development Program” shall mean the construction, acquisition and improvements to the Airports, as more particularly described in Exhibits N-1 and D-1 attached to the Airline Agreements, including the Dulles International Stage II Development Plan.
“Capital Charges” shall mean (i) Debt Service, (ii) Depreciation Requirements and (iii) Amortization Requirements.
C-1
“Common Use Premises” shall mean those areas at the Airport which two or more Scheduled Air Carriers are authorized to use, as shown on Exhibits N-B and D-B attached to the Airline Agreement. For purposes of calculating rentals, fees, and charges under the Airline Agreement, such common Use Premises shall be deemed Rentable Space; provided, however, no leasehold interests shall accrue to or be acquired by any authorized user thereof.
“Cost Centers” shall mean those areas of functional activities established by the Airports Authority at each Airport, as set forth in Exhibits N-E and D-E attached to the Airline Agreement, and as may be amended by the Airports Authority.
“Debt Service” shall mean, as of any date of calculation for any Rate Period, the amounts required pursuant to the terms of any Indenture to be collected during said period for the payment of Bonds, plus fees and amounts payable to providers of any form of credit enhancement used in connection with Bonds.
“Debt Service Coverage” shall mean, as of any date of calculation for any period, an amount equal to twenty-five percent (25%) of the portion of Debt Service attributable to Senior Bonds or Subordinated Bonds, plus such other amounts as may be established by any financing agreement or arrangements with respect to Other Indebtedness.
“Dulles International Stage II Development (or “Dulles Stage II”)” shall mean specific Projects identified as such in Exhibit D-1 to the Airline Agreement, which Projects shall generally include the initial New Midfield Concourse(s), Passenger Conveyances, and other related improvements at Dulles International.
“Equipment” shall mean that equipment and devices owned by the Airports Authority and leased to the Airline, which may include but shall not be limited to, baggage make-up and baggage claim conveyors and devices, loading bridges, 400 Hz, and preconditioned air units.
“Extraordinary Coverage Protection Payments” shall mean those payments, if any, required by the Signatory Airlines if Revenues plus Transfers less Operating and Maintenance Expenses at each Airport are projected to be less than one hundred twenty-five percent (125%) of the sum of Debt Service on Senior Bonds and Debt Service on Subordinated Bonds at each Airport.
“Federal Lease” shall mean the Agreement and Deed of Lease, dated March 2, 1987, between the United States of America, acting through the Secretary of Transportation, and the Airports Authority, as the same may be amended or supplemented.
“Fiscal Year” shall mean the annual accounting period for the Airports Authority for its general accounting purposes which, at the time of entering into the Airline Agreement, is the period of twelve consecutive months beginning with the first day of October of any year.
“Indenture” shall mean the Senior Indenture, Subordinated Indenture, or Other Indenture, including amendments, supplements, and successors thereto.
C-2
“Majority-in-Interest” shall mean, at each Airport, for the Airfield Cost Center, fifty percent (50%) in number of all Signatory Airlines and Signatory Cargo Carriers at such Airport which together landed more than sixty percent (60%) of Signatory Airlines’ and Signatory Cargo Carriers” landed weight at that Airport during the most recent six (6) full month period for which the statistics are available, and for the Airline Supported Areas (excluding the Airfield Cost Center), fifty percent (50%) in number of Signatory Airlines at such Airport which together were obligated to pay more than sixty percent (60%) of the sum of Terminal Rentals, Common Use Charges, IAB Charges, AOB Rentals, Passenger Conveyance Charges, and Equipment Charges at such Airport during the most recent six (6) full month period for which statistics are available.
“Operation and Maintenance Expenses” or “O&M Expenses” shall mean for any period all expenses of the Airports Authority paid or accrued for the operation, maintenance, administration, and ordinary current repairs of the Airports. Operations and Maintenance Expenses shall not include (i) the principal of, premium, if any, or interest payable on any Bonds; (ii) any allowance for amortization or depreciation of the Airports; (iii) any other expense for which (or to the extent to which) the Airports Authority is or will be paid or reimbursed from or through any source that is not included or includable as Revenues; (iv) any extraordinary items arising from the early extinguishment of debt; (v) rentals payable under the Federal Lease; and (vi) any expense paid with amounts from the Emergency R&R Fund.
“Original Cost Estimate” shall mean for one or more or all of the Projects in the Capital Development Program (as the context shall determine) the amount specified for such Project in Exhibits N- 1 and D-1 to the Airline Agreement.
“Passenger Conveyances” shall mean the Dulles International mobile lounges, buses, or other ground transportation devices, including any underground people mover systems provided by the Airports Authority at Dulles International for the movement of passengers and other persons (i) between aircraft, on the one hand, and the Dulles International Main Terminal or the IAB, on the other, (ii) between and among the Existing or New Midfield Concourse and the Dulles International Main Terminal, and (iii) between and among the Dulles International Main Terminal and IAB at Dulles International.
“Permanent Premises” shall mean those Premises designated as such in Exhibits N-B and D-B to the Airline Agreement.
“Plateau Amount” shall mean, at Reagan National, the amount of eight million dollars ($8,000,000) in Fiscal Year 1990, and at Dulles International the amount of twelve million dollars ($12,000,000) in Fiscal Year 1990. Both amounts shall be subject to annual escalation in accordance with changes in the U.S. Implicit Price Deflator Index. The base date for such adjustment shall be the index for October 1, 1989.
“Premises” shall mean areas at the Airports, whether Permanent Premises or Temporary Airline Premises, leased by the Airline pursuant to Article 6 of the Airline Agreement. Premises shall include Exclusive, Preferential, and Joint Use Premises.
“Revenues” shall mean all revenues of the Airports Authority received or accrued except (i) interest income on, and any profit realized from, the investment of moneys in any fund or account to the extent that such income or profit is not transferred to, or retained in, the Revenue Fund or the Bond Fund
C-3
created by the Senior Indenture or the Bond Funds created by the Subordinated Indenture; (ii) interest income on, and any profit realized from, the investment of moneys in any fund or account funded from the proceeds of Special Facility Bonds; (iii) amounts received by the Airports Authority from, or in connection with, Special Facilities, unless such funds are treated as Revenues by the Airports Authority; (iv) the proceeds of any passenger facility charge or similar charge levied by, or on behalf of, the Airports Authority, unless such funds are treated as Revenues by the Airports Authority; (v) grants-in-aid, donations, and/or bequests; (vi) insurance proceeds which are not deemed to be revenues in accordance with generally accepted accounting principles; (vii) the proceeds of any condemnation awards; (viii) the proceeds of any sale of land, buildings or equipment; and (ix) any other amounts which are not deemed to be revenues in accordance with generally accepted accounting principles or which are restricted as to their use.
“Senior Bonds” shall mean any bonds or other financing instrument or obligation issued pursuant to the Senior Indenture.
“Senior Indenture” shall mean the Master Indenture of Trust dated as of February 1, 1990, securing the Airports Authority’s Airport System Revenue Bonds, as such may be amended or supplemented.
“Special Facility” shall mean any facility, improvement, structure, equipment, or assets acquired or constructed on any land or in or on any structure or building at the Airports, the cost of construction and acquisition of which are paid for (i) by the obligor under the Special Facility Agreement, or (ii) from the proceeds of Special Facility Bonds, or (iii) both.
“Sub-Center(s)” shall mean either a Terminal or Equipment Sub-Center.
“Subordinated Bonds” shall mean any bonds or other financing instrument or obligation issued pursuant to the Subordinated Indenture.
“Subordinated Indenture” shall mean the Master Indenture of Trust dated March 1, 1988, securing the Airports Authority’s General Airport Subordinated Revenue Bonds, as such may be supplemented or amended.
“Temporary Airline Premises” or “TAP” shall mean areas of the Airports that are temporarily occupied by the Airline pursuant to Article 5 of the Airline Agreement during the course of the Capital Development Program.
“Terminal Sub-Centers” shall mean those individual facilities at each Airport that are included in the Terminal Cost Center at that Airport, and described in Exhibits N-E and D-E of the Airline Agreement. At Reagan National, Terminal Sub-Centers shall mean the Main Terminal (which shall also include the Existing North Terminal), the Interim Hangar 11 Terminal, and the New North Terminal. At Dulles International, Terminal Sub-Centers shall mean the Dulles International Main Terminal, the existing Midfield Concourses, and the New Midfield Concourses.
C-4
“Terminal Sub-Center Net Requirement” shall mean, for each Terminal Sub-Center at each Airport, the Total Requirement attributable or allocable to each such Terminal Sub-Center, less direct utility or other reimbursements attributable or allocable to said Terminal Sub-Center.
“Total Requirement” shall mean, with respect to any Direct Cost Center or Terminal or Equipment Sub-Center, that portion of the sum of (i) O&M Expenses; (ii) required deposits under the Senior Indenture to maintain the O&M Reserve; (iii) Capital Charges; (iv) Debt Service Coverage; (v) required deposits to any Debt Service Reserve Fund; (vi) Federal Lease payment; (vii) Dulles Rate Credit Amortization Requirements (at Dulles International only); (viii) required deposits to the Emergency R&R Fund; and (ix) Extraordinary Coverage Protection Payments, if any, properly attributable or allocable to each said Direct Cost Center or Sub-Center.
“Transfers” shall mean the amounts to be transferred by the Airports Authority to reduce Signatory Airline rentals, fees, and charges as set forth in Section 9.05 of the Airline Agreement.
TERM
With the exception of certain surviving agreements, all prior agreements between the Airports Authority and the Airlines expired on December 31, 1989. The Airline Agreement for each Signatory Airline becomes effective as of January 1, 1990, provided that the Airline had executed the Airline Agreement by February 28, 1990. If executed after February 28, 1990, the Airline Agreement is effective for that Signatory Airline upon execution by such Signatory Airline and the Airports Authority. The Airline Agreement expires on September 30, 2014 unless the Airports Authority exercises its unilateral right, exercisable on December 31, 2004, or on September 30 of any year thereafter on 180 days notice to the Signatory Airlines. In addition, each Signatory Airline may terminate its Airline Agreement commencing in Fiscal Year 2005, in the event that the Airports Authority proceeds to issue Bonds for a project after an MII disapproval of the project the estimated cost of which exceeds $25,000,000. After such MII disapproval the Airports Authority must defer the Bond issue for such project for one year. Thereafter, the Airports Authority may proceed with the project, but if the MII approval has still not been obtained each Signatory Airline has the right for 60 days from notification by the Airports Authority of its intent to proceed with the project to terminate the Agreement upon 180 days notice to the Airports Authority. (See “Additional Projects”).
COST CENTERS
The Airline Agreement divides each of the Airports into areas (the “Cost Centers”) which are described both in terms of geographic location and function. The Airline Agreement establishes separate Cost Centers for Reagan National and Dulles International. The Cost Centers at each Airport are divided into two groups: the Direct Cost Centers (Airfield, Terminal, Equipment, Ground Transportation, Aviation and Non- Aviation, and, at Dulles International only, International Arrivals Building (“IAB”), Airside Operations Buildings (“AOB”), Cargo and Passenger Conveyance System) and the Indirect Cost Centers (Maintenance, Public Safety, Systems and Services, and Administrative). In addition, there are Sub-Centers created with the Terminal and Equipment Cost Centers. The Direct Cost Centers and Sub-Centers are used to account for both costs and revenues. The Indirect Cost Centers primarily serve to accumulate certain costs which are in turn allocated to the Direct Cost Centers and Sub-Centers.
C-5
The Signatory Airlines pay rentals, fees and charges based on their lease of Premises in, and usage of, those Direct Centers and Sub-Centers which are within the Airline Supported Areas. The Airline Supported Areas at Reagan National are the Airfield, Terminal and Equipment Cost Centers. At Dulles International they are the Airfield, Terminal, Equipment, AOB, IAB and Passenger Conveyance System Cost Centers. The Total Requirement for each of the Direct Cost Centers and Sub-Centers in the Airline Supported Areas is determined by allocating to it Operation and Maintenance Expenses, deposits into certain funds and reserves required under any Indenture, allocation of the Total Requirements of the Indirect Cost Centers, Capital Charges (including Debt Service), Debt Service Coverage, Federal Lease payments, and Extraordinary Coverage Protection Payments, if any. The Cost Centers at Dulles International also have certain additional amortization requirements allocated to them.
REVENUE-SHARING; CALCULATION OF TRANSFERS
The Airports Authority and the Signatory Airlines have agreed to share in the Net Remaining Revenue of the Airports each Fiscal Year. The Airports Authority’s share of Net Remaining Revenue is deposited into the Airports Authority Capital Fund. The Signatory Airlines’ share of Net Remaining Revenue (“Transfers”) is deposited into an Airline Transfer Account in the Revenue Fund and used to reduce rentals, fees and charges in the following Fiscal Year. This reduction is accomplished by allocating Transfers to the various Cost Centers and Sub-Centers in the Airlines Supported Areas.
At the end of each Fiscal Year, the amount of Net Remaining Revenue for each Airport is determined by taking total Revenues (plus Transfers, if any, from the previous Fiscal Year) and subtracting from that amount various costs and expenses, including O&M Expenses, Debt Service, Federal Lease payments, various reserve and fund deposit requirements, but excluding Debt Service Coverage. The amount of Net Remaining Revenue so determined for each Airport is allocated between the Airports Authority and Signatory Airlines as follows:
(1) an amount equal to 100% of the depreciation on certain assets and equipment is allocated to the Airports Authority;
(2) an amount equal to 100% of the Debt Service Coverage on Subordinated Bonds included in the calculation of rentals, fees, and charges and collected from the Signatory Airlines, and 100% of the Debt Service Coverage on Bonds issued to fund Equipment, is allocated to the Signatory Airlines;
(3) the remainder is allocated 50% to the Airports Authority, 50% to the Signatory Airlines until the Airports Authority’s share reaches the Plateau Amount ($8,000,000 at Reagan National, and $12,000,000 at Dulles International, in each case stated in 1990 dollars and escalated for inflation thereafter)
(4) the remainder in any Fiscal Year in which the Plateau Amount is reached, is allocated 75% to the Signatory Airlines, 25% to the Airports Authority at the Airport at which the Plateau Amount has been reached.
C-6
AIRLINE RENTALS, FEES AND CHARGES
Terminal Rentals for Premises are charged to each of the Signatory Airlines on a square footage basis. The Terminal Sub-Center Net Requirement for the Signatory Airlines’ share of each Terminal Sub- Center is determined. This amount is reduced by Transfers allocable to such Sub- Center to determine the adjusted requirement. An average Signatory Airline rental rate per square foot is determined for each Terminal Sub- Center by dividing the adjusted requirement so determined by total square footage of Signatory Airlines’ Premises in that Sub-Center. This average rental rate is then weighted for the various types of Signatory Airline rentable space within each Terminal Sub- Center.
Landing Fees are charged to the Signatory Airlines on the basis of landed weight of aircraft. The Airfield Net Requirement for each Airport is determined by subtracting Transfers and certain other Revenues allocable to the Airfield from the Total Requirement of the Airfield. The Landing Fee rate is calculated by dividing each Airport’s Airfield Net Requirement by the total landed weight of aircraft of all air transportation companies and general aviation operating at that Airport. Each Signatory Airline pays Landing Fees which are determined as the product of the appropriate Airport’s Landing Fee rate and such Signatory Airline’s total landed weight. Each Signatory Airline also pays Common Use Charges (or, if the Signatory Airline is a commuter airline and its number of Enplaning Passengers is below a certain threshold, Low Volume Common Use Fees), Equipment Charges, Passenger Security Reimbursements, and, at Dulles International, International Arrivals Building Charges, Airside Operations Buildings Rentals, Passenger Conveyance Charges and, commencing January 1, 1992, Ramp Area Charges.
COMMITMENT TO PAY AIRPORT FEES AND CHARGES
The Airports Authority shall include in the calculation of rentals, fees and charges Extraordinary Coverage Protection Payments if and to the extent necessary to ensure that total Revenues of each Airport, plus Transfers from the previous year, less Operation and Maintenance Expenses at that Airport, are at least equal to 125% of the Debt Service on Senior Bonds and Subordinated Bonds at that Airport.
MAJORITY-IN-INTEREST APPROVAL PROCEDURES
The Airports Authority shall initiate the Majority-in-Interest approval process by delivering the request for approval to the Signatory Airlines at the appropriate Airport for the appropriate cost center. The request will be deemed to have been approved unless the Airports Authority receives, within thirty (30) days, written notice of disapproval from the Signatory Airlines representing a Majority-in-Interest at such Airport for such cost center.
BILLING OF AIRPORT FEES AND CHARGES
Approximately sixty days prior to the end of each Fiscal Year, the Airports Authority is required to notify the Signatory Airlines of the estimated rates for rentals, fees and charges for the next ensuing Fiscal Year. Such rates are based on estimates of the activity at each Airport and on the estimated costs of operating each Airport. Terminal Rentals, Common Use Charges, Equipment Charges, Passenger Conveyance Charges, Aircraft Parking Position Charges, Passenger Security Reimbursement and Air side Operations Building Rentals are due and payable in advance, without demand or invoice, on the first
C-7
calendar day of each month. Payment for Landing Fees, Low Volume Common Use Fees, Dulles International Jet Apron Fees, and International Arrivals Building Charges for each month are due and payable on the tenth calendar day of the next month without demand or invoice.
Payment for all other fees and charges under the Airline Agreement are due within twenty days of the date of the Airports Authority’s invoice for such fees and charges. The Airports Authority is required to make an annual adjustment to Signatory Airlines’ rentals, fees and charges, effective on the first day of each Fiscal Year. The Airports Authority is authorized, but not required, to make a mid-year adjustment to the Signatory Airlines’ rentals, fees and charges if warranted by revised estimates of activity and costs, and the impact of the prior Fiscal Year audits, at the Airports. The Airports Authority may also adjust Signatory Airlines’ rentals, fees, and charges at any time under certain circumstances, including when it is projected that total rentals, fees and charges at their current rates would vary by more than five percent from the total rentals, fees and charges that would be payable if rates were based on more current financial and activity data then available. The rental, fees and charges payable by the Signatory Airlines may also be recalculated and increased as appropriate as Projects in the Capital Development Program are completed and as their costs become allocable to the Airline Supported Areas.
GRANT OF RIGHTS; OBLIGATIONS OF AIRPORTS AUTHORITY AND SIGNATORY AIRLINES
Each Signatory Airline is granted the right to operate its air transportation business at each Airport at which it is Signatory Airline and to perform all operations and functions incidental, necessary or proper thereto. The Airports Authority has agreed not to grant to any airline any rates or terms and conditions at the Airports more favorable to such airline than those granted or available to a Signatory Airline, unless the more favorable rates and conditions are offered to the Signatory Airlines. This grant includes the right to use, subject to certain restrictions, the Signatory Airline’s leased Premises and Equipment, the Common Use Premises and certain other support facilities at the Airports. Each of the Signatory Airlines and the Airports Authority have certain specified obligations with respect to the maintenance and operation of the Airports. The Airports Authority has certain specified insurance obligations with respect to the Airports, and each Signatory Airline has certain public liability and property insurance obligations.
LEASE OF PREMISES; ACCOMMODATION PROVISIONS
Premises at each Airport are leased to the Signatory Airlines on an exclusive, joint or preferential use basis. Initially, the Airports Authority will lease Temporary Airline Premises to the Signatory Airlines. As the Capital Development Program is completed, the Airports Authority will begin to lease Permanent Premises to the Signatory Airlines. The Airports Authority will have the right to periodically reallocate space in the Terminal area in accordance with a utilization study conducted by the Airports Authority. In addition, the Airports Authority has the right to require accommodation by a Signatory Airline of another airline on the Signatory Airline’s Premises in order to meet the needs of expanding airlines and new entrants.
C-8
SUBLEASE AND ASSIGNMENT
All subleases and assignments of leased Premises, and handling agreements, must be approved by the Airports Authority. No sublease, voluntary assignment or handling agreement relieves a Signatory Airline from primary liability for the payment of rentals, fees and charges.
NO ABATEMENT OR SUSPENSION OF PAYMENTS
The Airline Agreement provides that the Signatory Airlines shall not abate, suspend, postpone, set- off or discontinue any payments of Airport rentals, fees and charges which they are obligated to pay thereunder if such abatement would interfere with the Airports Authority’s ability to meet the rate covenant or any additional bonds test under the Indenture.
CAPITAL DEVELOPMENT PROGRAM
The Airline Agreement contains as exhibits thereto a list of those Projects which are a part of the Capital Development Program approved by the Signatory Airlines. Subject to the provisions with respect to the Dulles International Stage II Development Plan, the Airports Authority must issue Bonds to fund the Capital Development Program and, to the extent Bond proceeds are available, has covenanted to build the Projects of the Capital Development Program. So long as the cost of the Capital Development Program does not exceed the Original Cost Estimate, adjusted for inflation and airline approved scope changes, plus an agreed upon contingency (25% at Reagan National; 20% at Dulles International), no further Signatory Airline approvals are required. If the cost exceeds that amount, certain cost control measures apply, and, under certain circumstances, Signatory Airline approvals may be required.
DULLES INTERNATIONAL STAGE II DEVELOPMENT PLAN
The Airports Authority may undertake the construction of the Dulles International Stage II Development Plan if (1) the cost of the New Midfield Concourse(s) is to be financed as a Special Facility, (2) if Signatory Airlines at Dulles International accounting for at least 50% of Dulles International Enplaning Passengers during the most recent 12-month period have agreed to lease at least 66.67% of the airline leasable premises in the New Midfield Concourse(s) or (3) if approved by a Majority-in-Interest of Signatory Airlines at Dulles International. If none of these conditions applies, design of Dulles International Stage II may nevertheless commence once there are at least 8,000,000 Enplaning Passengers at Dulles International in the most recent 12-month period; construction may commence once there are at least 9,500,000 Enplaning Passengers at Dulles International in such period. In any event, design and construction may commence on January 1, 2000. Under certain circumstances, certain cost control measures also apply to the Dulles International Stage II Development Plan.
ADDITIONAL PROJECTS
The Airports Authority may build projects at the Airports in addition to the Capital Development Program (“Additional Projects”) from funds in the Airports Authority Capital Fund or from the proceeds of Bonds. Except as described in the following sentence, Additional Projects are not subject to Signatory Airline approval. Additional Projects which are in Airline Supported Areas and which are to be funded
C-9
from the proceeds of Bonds may be undertaken by the Airports Authority only if: (1) such projects fall within certain specified types of projects (e.g., safety projects, replacement of airport capacity projects, government required projects, fully Federal funded Airfield projects); or (2) such projects have been approved by a Majority-in-Interest of the Signatory Airlines; or (3) during Fiscal Years 1995 through 1999, Bonds issued for such projects, together with Bonds previously issued for Additional Projects in Airline Supported Areas, do not exceed $100,000,000 (unescalated) at each Airport; (4) during Fiscal Years 2000 through 2004, any such project in excess of $25,000,000 (unescalated) which has been disapproved by a Majority-in-Interest has been deferred for one year; (5) during Fiscal Years 2005 through 2014, any such project in excess of $25,000,000 (escalated from 2001) which has been disapproved by a Majority-in- Interest has been deferred for one year; if Bonds are thereafter to be issued for any such project each Signatory Airline will have a 60 day option to terminate its Airline Agreement upon 180 days written notice to the Airports Authority.
DULLES TOLL ROAD AND RAIL SYSTEM TO DULLES AIRPORT
The Airline Agreement provides, that unless and until additional costs are agreed upon in writing by the Majority-in-Interest of the Signatory Airlines at Dulles for the Airport Cost Center, the aggregate of all capital costs of any Rail System to Dulles which the Authority may pay from Revenues is $10,000,000, and that all such costs are to be allocated to the Dulles ground transportation cost center. Further, the agreement provides that no operation and maintenance costs associated with any Rail System to Dulles may be paid from Revenues (other than from the Authority’s share of Net Remaining Revenues in the Authority’s Capital Fund), unless otherwise agreed to in writing by the Majority-in-Interest of Signatory Airlines at Dulles for the Airport Cost Center.
The Airline Agreement also provides (i) that each Airline disclaims any right to share in the revenue of the Dulles Toll Road, (ii) that any expenditure by the Authority of Dulles Toll Road revenue, or other funds not constituting Revenues, to operate, maintain and improve the Dulles Toll Road and to design and construct the Rail System to Dulles will not be a Project or an Additional Project within the Airline Supported Areas, will not require any approval by the Airline, and may not be recovered through rentals, fees and charges of an Airline, and (iii) that no Airline will be responsible to the Authority or to any holder of Dulles Toll Road Revenue Bonds for the payment of principal and interest on any such bonds.
DEFAULT BY SIGNATORY AIRLINES
The following, among others, are defined as Events of Default: (1) the failure of a Signatory Airline to pay any rentals, fees or charges when due or after the expiration of any applicable grace period; (2) the dissolution, receivership, insolvency or bankruptcy of a Signatory Airline; (3) the discontinuance by a Signatory Airline of its air transportation business at the Airports; (4) the failure by a Signatory Airline to cure its default in the performance of any material covenant or provision in the Airline Agreement upon thirty days of receipt of notice of such failure or, if impossible to cure within such time, the failure to diligently pursue steps to cure within a reasonable period of time; (5) the failure of a Signatory Airline to cease any unauthorized business, practice, or act within thirty days of receipt of notice from the Airports Authority to do so; or (6) the taking of any appropriate judicial or governmental action which substantially limits or prohibits a Signatory Airline’s operations at the Airports for a period of thirty days.
C-10
SUBORDINATION TO INDENTURE
The Airline Agreement and all rights granted to the Signatory Airlines under it are expressly subordinated and subject to the lien and provisions of the pledges made by the Airports Authority in any prior Indenture, or any Indenture executed by the Airports Authority after the Airline Agreement, to issue Bonds.
TERMINATION
The Airports Authority may terminate a Signatory Airline’s Agreement upon the happening of certain Events of Default, and the expiration of any cure period as described in the Airline Agreement. So long as Bonds are outstanding, a Signatory Airline has no right to terminate its Airline Agreement other than as described under “Term” and “Additional Projects” above.
C-11 [THIS PAGE INTENTIONALLY LEFT BLANK]
APPENDIX D
BOOK-ENTRY ONLY SYSTEM
INFORMATION REGARDING DTC AND THE BOOK-ENTRY ONLY SYSTEM
The description that follows of the procedures and record keeping with respect to beneficial ownership interests in the Series 2011C-D Bonds, payments of principal, premium, if any, and interest on the Series 2011C-D Bonds to DTC, its nominee, Participants, defined below, or Beneficial Owners, confirmation and transfer of beneficial ownership interests in the Series 2011C-D Bonds and other bond- related transactions by and between DTC, Participants and Beneficial Owners is based solely on information furnished by DTC, and neither the Airports Authority, the Trustee, nor the Underwriters make any representation as to the accuracy of such information.
General. The Depository Trust Company, New York, New York (“DTC”) will act as securities depository for the Series 2011C-D Bonds. The Series 2011C-D Bonds will be issued as fully-registered securities registered in the name of Cede & Co. (DTC’s partnership nominee) or such other name as may be requested by an authorized representative of DTC. One fully-registered Series 2011C-D Bond will be issued for each subseries of the Series 2011C-D Bonds in the aggregate principal amount of each maturity, and will be deposited with DTC.
DTC, the world’s largest securities depository, is a limited-purpose trust company organized under the New York Banking Law, a “banking organization” within the meaning of the New York Banking Law, a member of the Federal Reserve System, a “clearing corporation” within the meaning of the New York Uniform Commercial Code, and a “clearing agency” registered pursuant to the provisions of Section 17A of the Securities Exchange Act of 1934. DTC holds and provides asset servicing for over 3.5 million issues of U.S. and non-U.S. equity issues, corporate and municipal debt issues, and money market instruments (from over 100 countries) that its participants (“Direct Participants”) deposit with DTC. DTC also facilitates the settlement among Direct Participants of securities transactions, such as transfers and pledges, in deposited securities through electronic computerized book-entry changes between Direct Participants’ accounts. This eliminates the need for physical movement of securities certificates. Direct Participants include securities brokers and dealers, banks, trust companies, clearing corporations, and certain other organizations. DTC is a wholly-owned subsidiary of The Depository Trust & Clearing Corporation (“DTCC”). DTCC is the holding company for DTC, National Securities Clearing Corporation and Fixed Income Clearing Corporation, all of which are registered clearing agencies. DTCC is owned by the users of its regulated subsidiaries. Access to the DTC system is also available to others such as both U.S. and non-U.S. securities brokers and dealers, banks, and trust companies that clear through or maintain a custodial relationship with a Direct Participant, either directly or indirectly (“Indirect Participants”). DTC has Standard & Poor’s highest rating: AAA. The DTC Rules applicable to DTC and its Participants are on file with the Securities and Exchange Commission. More information about DTC can be found at www.dtcc.com and www.dtc.org.
Purchases of Series 2011C-D Bonds under the DTC system must be made by or through Direct Participants, which will receive a credit for such Series 2011C-D Bonds on DTC’s records. The ownership interest of each actual purchaser of each Series 2011C-D Bond (“Beneficial Owner”) is in turn to be recorded on the Direct and Indirect Participants’ records. Beneficial Owners will not receive written confirmation from DTC of their purchase. Beneficial Owners are, however, expected to receive written confirmations providing details of the transaction, as well as periodic statements of their holdings, from the Direct or Indirect Participant through which the Beneficial Owner entered into the transaction. Transfers of
D-1
ownership interests in the Series 2011C-D Bonds are to be accomplished by entries made on the books of Participants acting on behalf of Beneficial Owners. Beneficial Owners will not receive certificates representing their ownership interests in the Series 2011C-D Bonds, except in the event that use of the book-entry system for the Series 2011C-D Bonds is discontinued.
To facilitate subsequent transfers, all Series 2011C-D Bonds deposited by Participants with DTC are registered in the name of DTC’s partnership nominee, Cede & Co, or such other name as may be requested by an authorized representative of DTC. The deposit of Series 2011C-D Bonds with DTC and their registration in the name of Cede & Co. or such other DTC nominee effect no change in beneficial ownership. DTC has no knowledge of the actual Beneficial Owners of the Series 2011C-D Bonds; DTC’s records reflect only the identity of the Direct Participants to whose accounts such Series 2011C-D Bonds are credited, which may or may not be the Beneficial Owners. The Direct and Indirect Participants will remain responsible for keeping account of their holdings on behalf of their customers.
Conveyance of notices and other communications by DTC to Direct Participants, by Direct Participants to Indirect Participants, and by Direct Participants and Indirect Participants to Beneficial Owners will be governed by arrangements among them, subject to any statutory or regulatory requirements as may be in effect from time to time.
Neither DTC nor Cede & Co. (nor any other DTC nominee) will consent or vote with respect to the Series 2011C-D Bonds unless authorized by a Direct Participant in accordance with DTC’s MMI Procedures. Under its usual procedures, DTC mails an Omnibus Proxy to the Airports Authority as soon as possible after the record date. The Omnibus Proxy assigns Cede & Co.’s consenting or voting rights to those Direct Participants to whose accounts the Series 2011C-D Bonds are credited on the record date (identified in a listing attached to the Omnibus Proxy).
Principal and interest payments on the Series 2011C-D Bonds will be made to Cede & Co., or such other nominee as may be requested by an authorized representative of DTC. DTC’s practice is to credit Direct Participants’ accounts upon DTC’s receipt of funds and corresponding detail information from the Airports Authority, on the payable date in accordance with their respective holdings shown on DTC’s records. Payments by Participants to Beneficial Owners will be governed by standing instructions and customary practices, as is the case with securities held for the accounts of customers in bearer form or registered in “street name,” and will be the responsibility of such Participant and not of DTC, the Trustee, or the Airports Authority, subject to any statutory requirement as may be in effect from time to time. Payment of principal and interest to DTC is the responsibility of the Airports Authority or the Trustee, disbursement of such payments to Direct Participants shall be the responsibility of DTC, and disbursement of such payments to the Beneficial Owners shall be the responsibility of Direct and Indirect Participants.
DTC may discontinue providing its services as securities depository with respect to the Series 2011C-D Bonds at any time by giving reasonable notice to the Airports Authority or the Trustee. Under such circumstances, in the event that a successor securities depository is not obtained, Series 2011C-D Bond certificates are required to be printed and delivered. The Airports Authority may decide to discontinue use of the system of book-entry transfers through DTC (or a successor securities depository). In that event, Series 2011C-D Bond certificates will be printed and delivered.
So long as Cede & Co. is the registered owner of the Series 2011C-D Bonds, as nominee for DTC, references herein to Bondholders or registered owners of the Series 2011C-D Bonds (other than under the caption “Tax Status of Interest on the Series 2011C-D Bonds”) shall mean Cede & Co., as aforesaid, and shall not mean the Beneficial Owners of the Series 2011C-D Bonds.
D-2
When reference is made to any action which is required or permitted to be taken by the Beneficial Owners, such reference shall only relate to those permitted to act (by statute, regulation or otherwise) on behalf of such Beneficial Owners for such purposes. When notices are given, they shall be sent by the Trustee to DTC only.
NEITHER THE AIRPORTS AUTHORITY NOR THE TRUSTEE WILL HAVE ANY RESPONSIBILITY OR OBLIGATION TO DTC PARTICIPANTS, TO INDIRECT PARTICIPANTS, OR TO ANY BENEFICIAL OWNER WITH RESPECT TO (i) THE ACCURACY OF ANY RECORDS MAINTAINED BY DTC, ANY DTC PARTICIPANT, OR ANY INDIRECT PARTICIPANT; (ii) ANY NOTICE THAT IS PERMITTED OR REQUIRED TO BE GIVEN TO THE OWNERS OF THE SERIES 2011C-D BONDS UNDER THE INDENTURE; (iii) THE PAYMENT BY DTC OR ANY DTC PARTICIPANT OR INDIRECT PARTICIPANT OF ANY AMOUNT WITH RESPECT TO THE PRINCIPAL OR INTEREST DUE WITH RESPECT TO THE SERIES 2011C-D BONDS; (iv) ANY CONSENT GIVEN OR OTHER ACTION TAKEN BY DTC AS THE OWNER OF SERIES 2011C-D BONDS; OR (v) ANY OTHER MATTER.
D-3 [THIS PAGE INTENTIONALLY LEFT BLANK]
APPENDIX E
FORM OF OPINION OF CO-BOND COUNSEL Hogan Lovells US LLP Washington, D.C.
and
Lewis, Munday, Harrell and Chambliss Washington, D.C.
Metropolitan Washington Airports Authority Airport System Revenue Refunding Bonds Series 2011C – $185,390,000
We have acted as Bond Counsel to the Metropolitan Washington Airports Authority (the “Airports Authority”) in connection with the issuance of its Airport System Revenue Refunding Bonds, Series 2011C, in the aggregate principal amount of $185,390,000 (the “Series 2011C Bonds”). The Series 2011C Bonds are authorized and issued pursuant to Resolution No. 11-23, adopted by the Board of Directors of the Airports Authority (the “Board of Directors”) on September 7, 2011, (the “Resolution”), and as supplemented by a Pricing Certificate dated September 20, 2011 (the “Pricing Certificate”), executed by the Chairman of the Board of Directors and the Chairman of the Finance Committee of the Board of Directors (the Resolution and the Pricing Certificate together, the “Authorizing Resolution”), and are issued under and secured by the Amended and Restated Master Indenture of Trust dated as of September 1, 2001, as amended (the “Master Indenture”), between the Airports Authority and Manufacturers and Traders Trust Company (successor to Allfirst Bank), as trustee (the “Trustee”), as supplemented by the Forty-second Supplemental Indenture of Trust dated as of September 1, 2011 (the “Forty-second Supplemental Indenture”), between the Airports Authority and the Trustee (the Master Indenture and the Forty-second Supplemental Indenture, together, the “Indenture”). All capitalized terms used and not defined herein shall have the same meanings set forth in the Indenture.
The Series 2011C Bonds are being issued as fully registered bonds, dated the date of delivery, and are being issued in denominations of $5,000 each or any integral multiple thereof. The Series 2011C Bonds mature, bear interest, are payable and are subject to redemption prior to maturity in the manner and upon the terms and conditions set forth therein and in the Indenture. The Series 2011C Bonds do not constitute a debt or financial obligation, nor a pledge of the faith and credit or taxing power, of the District of Columbia or the Commonwealth of Virginia or any political subdivision thereof. The Airports Authority has no taxing power.
In our capacity as Bond Counsel, we have examined Va. Code Ann. § 5.1-152 et seq. (2001) (codifying Chapter 598 of the Acts of Virginia General Assembly of 1985, as amended) and the District of Columbia Regional Airports Authority Act of 1985, as amended, codified at D.C. Code. Ann. § 9-901 et seq. (2001) (together the “Acts”), the Metropolitan Washington Airports Act of 1986, Title VI of Public Law 99-500 as re-enacted in Public Law 99-591, and as amended by Section 7(c)(i) of Public Law 102-225, Title VII of Public Law 102-240, and Title IX of Public Law 104-264 (the “Federal Act”), a form of the Series 2011C Bonds, and such other documents, records of the Airports
E-1-1
Authority and other instruments as we deem necessary to form an appropriate basis for us to render this opinion, including original counterparts or certified copies of the Authorizing Resolution, the Indenture, a certified transcript of the record of proceedings of the Board of Directors preliminary to and in the authorization of the Series 2011C Bonds, and certificates of the Airports Authority (including specifically a tax certificate and the Pricing Certificate) and others delivered in connection with the issuance of the Series 2011C Bonds. As to questions of fact material to our opinion, we have relied upon representations of the Airports Authority and other parties contained in the Indenture, such certified proceedings, reports, certificates and other instruments, without undertaking to verify the same by independent investigation. We have assumed the genuineness of all signatures, the legal capacity of all natural persons, the accuracy, completeness and authenticity of original documents, and the conformity with original documents of copies submitted to us.
We have not been engaged and have not undertaken to consider the adequacy of the Net Revenues or other financial resources of the Airports Authority, its ability to provide for payment of the Series 2011C Bonds, or the accuracy, completeness, or sufficiency of the Official Statement dated September 21, 2011, or other offering material relating to the Series 2011C Bonds, and we express no opinion herein relating to such matters.
Based upon, subject to and limited by the foregoing, it is our opinion that, as of the date hereof and under existing law:
1. The Airports Authority validly exists as a public body politic and corporate under the Acts, with the power under the Acts to execute and deliver the Indenture and to issue the Series 2011C Bonds.
2. The Series 2011C Bonds have been duly authorized, executed and delivered by the Airports Authority and are valid and binding limited obligations of the Airports Authority, payable solely from the Net Revenues and other sources provided therefor in the Indenture.
3. The Indenture has been duly authorized, executed and delivered by the Airports Authority and, assuming due authorization, execution and delivery by the Trustee of the Forty-second Supplemental Indenture, constitutes a valid and binding obligation of the Airports Authority, enforceable against the Airports Authority.
4. Pursuant to the Acts, the Indenture creates a lien on the Net Revenues of the Airports Authority for the benefit of the Series 2011C Bonds, on a parity with the lien thereon of Bonds heretofore or hereafter issued by the Airports Authority under the Indenture.
5. The interest on the Series 2011C Bonds is excluded from gross income for federal income tax purposes, except for any period during which such Series 2011C Bonds are held by a person who is a “substantial user” of the facilities financed or a “related person,” as those terms are used in Section 147(a) of the Internal Revenue Code of 1986, as amended (the “Code”). It should be noted, however, that interest on the Series 2011C Bonds will be treated as an item of tax preference in calculating the federal alternative minimum tax liability imposed on individuals, trusts, estates, and corporations. The opinion set forth in the first sentence of this paragraph assumes compliance by the Airports Authority with certain requirements of the Code that must be met subsequent to the issuance of the Series 2011C Bonds in order that the interest thereon be, or continue to be, excluded from gross
E-1-2
income for federal income tax purposes. The Airports Authority has covenanted to comply with such requirements. Failure to comply with such requirements could cause the interest on the Series 2011C Bonds to be includable in gross income for federal income tax purposes retroactive to the date of issuance of the Series 2011C Bonds. We express no opinion herein regarding other federal tax consequences arising with respect to the Series 2011C Bonds.
6. The interest on the Series 2011C Bonds is exempt from all income taxation by the Commonwealth of Virginia and from all taxation by the District of Columbia, except estate, inheritance and gift taxes. We express no opinion herein regarding other Commonwealth of Virginia, District of Columbia, or other state or local tax consequences arising with respect to the Series 2011C Bonds.
It is to be understood that the rights of the owners of the Series 2011C Bonds and the enforceability of the Series 2011C Bonds and the Indenture may be subject to and limited by bankruptcy, insolvency, reorganization, moratorium and other similar laws affecting creditors’ rights heretofore or hereafter enacted; and may also be subject to and limited by the exercise of judicial discretion, procedural and other defenses based on particular factual circumstances and equitable principles in appropriate cases, to the reasonable exercise by the Commonwealth of Virginia and its governmental bodies of the police power inherent in the sovereignty of the Commonwealth of Virginia, and to the exercise by the United States of powers delegated to it by the United States Constitution; and while certain remedies and other provisions of the Indenture are subject to the aforesaid exceptions and limitations and, therefore, may not be enforceable in accordance with their respective terms, such unenforceability would not preclude the enforcement of the obligations of the Airports Authority to pay the principal of, premium, if any, and interest on, the Series 2011C Bonds from the Net Revenues of the Airports Authority.
This opinion is issued as of the date hereof, and we assume no obligation to (i) monitor or advise you or any other person of any changes in the foregoing subsequent to the delivery hereof; (ii) update, revise, supplement or withdraw this opinion to reflect any facts or circumstances that may hereafter come to our attention, or any changes in law, regulation, or governmental agency guidance, or the interpretation of any of the foregoing, that may hereafter occur, or for any other reason whatsoever; or (iii) review any legal matters incident to the authorization, issuance, and validity of the Series 2011C Bonds, the exemption from federal or state income tax of the Series 2011C Bonds, or the purposes to which the proceeds of the Series 2011C Bonds are to be applied, after the date hereof.
E-1-3 [THIS PAGE INTENTIONALLY LEFT BLANK]
FORM OF OPINION OF CO-BOND COUNSEL Hogan Lovells US LLP Washington, D.C.
and
Lewis, Munday, Harrell and Chambliss Washington, D.C.
Metropolitan Washington Airports Authority Airport System Revenue Refunding Bonds Series 2011D – $10,385,000
We have acted as Bond Counsel to the Metropolitan Washington Airports Authority (the “Airports Authority”) in connection with the issuance of its Airport System Revenue Refunding Bonds, Series 2011D, in the aggregate principal amount of $10,385,000 (the “Series 2011D Bonds”). The Series 2011D Bonds are authorized and issued pursuant to Resolution No. 11-23, adopted by the Board of Directors of the Airports Authority (the “Board of Directors”) on September 7, 2011, (the “Resolution”), and as supplemented by a Pricing Certificate dated September 20, 2011 (the “Pricing Certificate”), executed by the Chairman of the Board of Directors and the Chairman of the Finance Committee of the Board of Directors (the Resolution and the Pricing Certificate together, the “Authorizing Resolution”), and are issued under and secured by the Amended and Restated Master Indenture of Trust dated as of September 1, 2001, as amended (the “Master Indenture”), between the Airports Authority and Manufacturers and Traders Trust Company (successor to Allfirst Bank), as trustee (the “Trustee”), as supplemented by the Forty-second Supplemental Indenture of Trust dated as of September 1, 2011 (the “Forty-second Supplemental Indenture”), between the Airports Authority and the Trustee (the Master Indenture and the Forty-second Supplemental Indenture, together, the “Indenture”). All capitalized terms used and not defined herein shall have the same meanings set forth in the Indenture.
The Series 2011D Bonds are being issued as fully registered bonds, dated the date of delivery, and are being issued in denominations of $5,000 each or any integral multiple thereof. The Series 2011D Bonds mature, bear interest, are payable and are subject to redemption prior to maturity in the manner and upon the terms and conditions set forth therein and in the Indenture. The Series 2011D Bonds do not constitute a debt or financial obligation, nor a pledge of the faith and credit or taxing power, of the District of Columbia or the Commonwealth of Virginia or any political subdivision thereof. The Airports Authority has no taxing power.
In our capacity as Bond Counsel, we have examined Va. Code Ann. § 5.1-152 et seq. (2001) (codifying Chapter 598 of the Acts of Virginia General Assembly of 1985, as amended) and the District of Columbia Regional Airports Authority Act of 1985, as amended, codified at D.C. Code. Ann. § 9-901 et seq. (2001) (together the “Acts”), the Metropolitan Washington Airports Act of 1986, Title VI of Public Law 99-500 as re-enacted in Public Law 99-591, and as amended by Section 7(c)(i) of Public Law 102-225, Title VII of Public Law 102-240, and Title IX of Public Law 104-264 (the “Federal Act”), a form of the Series 2011D Bonds, and such other documents, records of the Airports Authority and other instruments as we deem necessary to form an appropriate basis for us to render this
E-2-1
opinion, including original counterparts or certified copies of the Authorizing Resolution, the Indenture, a certified transcript of the record of proceedings of the Board of Directors preliminary to and in the authorization of the Series 2011D Bonds, and certificates of the Airports Authority (including specifically a tax certificate and the Pricing Certificate) and others delivered in connection with the issuance of the Series 2011D Bonds. As to questions of fact material to our opinion, we have relied upon representations of the Airports Authority and other parties contained in the Indenture, such certified proceedings, reports, certificates and other instruments, without undertaking to verify the same by independent investigation. We have assumed the genuineness of all signatures, the legal capacity of all natural persons, the accuracy, completeness and authenticity of original documents, and the conformity with original documents of copies submitted to us.
We have not been engaged and have not undertaken to consider the adequacy of the Net Revenues or other financial resources of the Airports Authority, its ability to provide for payment of the Series 2011D Bonds, or the accuracy, completeness, or sufficiency of the Official Statement dated September 21, 2011, or other offering material relating to the Series 2011D Bonds, and we express no opinion herein relating to such matters.
Based upon, subject to and limited by the foregoing, it is our opinion that, as of the date hereof and under existing law:
1. The Airports Authority validly exists as a public body politic and corporate under the Acts, with the power under the Acts to execute and deliver the Indenture and to issue the Series 2011D Bonds.
2. The Series 2011D Bonds have been duly authorized, executed and delivered by the Airports Authority and are valid and binding limited obligations of the Airports Authority, payable solely from the Net Revenues and other sources provided therefor in the Indenture.
3. The Indenture has been duly authorized, executed and delivered by the Airports Authority and, assuming due authorization, execution and delivery by the Trustee of the Forty-second Supplemental Indenture, constitutes a valid and binding obligation of the Airports Authority, enforceable against the Airports Authority.
4. Pursuant to the Acts, the Indenture creates a lien on the Net Revenues of the Airports Authority for the benefit of the Series 2011D Bonds, on a parity with the lien thereon of Bonds heretofore or hereafter issued by the Airports Authority under the Indenture.
5. The interest on the Series 2011D Bonds is excluded from gross income for federal income tax purposes, and is not included in the computation of the federal alternative minimum tax imposed on individuals, trusts, estates and, except as provided in the following sentence, corporations. For corporations only, interest on the Series 2011D Bonds is taken into account in determining adjusted current earnings for purposes of the adjustment to alternative minimum taxable income used in computing the alternative minimum tax on corporations (as defined for alternative minimum tax purposes). The opinion set forth in the first sentence of this paragraph assumes compliance by the Airports Authority with certain requirements of the Code that must be met subsequent to the issuance of the Series 2011D Bonds in order that the interest thereon be, or continue to be, excluded from gross income for federal income tax purposes. The Airports Authority has covenanted to comply with such
E-2-2
requirements. Failure to comply with such requirements could cause the interest on the Series 2011D Bonds to be includable in gross income for federal income tax purposes retroactive to the date of issuance of the Series 2011D Bonds. We express no opinion herein regarding other federal tax consequences arising with respect to the Series 2011D Bonds.
6. The interest on the Series 2011D Bonds is exempt from all income taxation by the Commonwealth of Virginia and from all taxation by the District of Columbia, except estate, inheritance and gift taxes. We express no opinion herein regarding other Commonwealth of Virginia, District of Columbia, or other state or local tax consequences arising with respect to the Series 2011D Bonds.
It is to be understood that the rights of the owners of the Series 2011D Bonds and the enforceability of the Series 2011D Bonds and the Indenture may be subject to and limited by bankruptcy, insolvency, reorganization, moratorium and other similar laws affecting creditors’ rights heretofore or hereafter enacted; and may also be subject to and limited by the exercise of judicial discretion, procedural and other defenses based on particular factual circumstances and equitable principles in appropriate cases, to the reasonable exercise by the Commonwealth of Virginia and its governmental bodies of the police power inherent in the sovereignty of the Commonwealth of Virginia, and to the exercise by the United States of powers delegated to it by the United States Constitution; and while certain remedies and other provisions of the Indenture are subject to the aforesaid exceptions and limitations and, therefore, may not be enforceable in accordance with their respective terms, such unenforceability would not preclude the enforcement of the obligations of the Airports Authority to pay the principal of, premium, if any, and interest on, the Series 2011D Bonds from the Net Revenues of the Airports Authority.
This opinion is issued as of the date hereof, and we assume no obligation to (i) monitor or advise you or any other person of any changes in the foregoing subsequent to the delivery hereof; (ii) update, revise, supplement or withdraw this opinion to reflect any facts or circumstances that may hereafter come to our attention, or any changes in law, regulation, or governmental agency guidance, or the interpretation of any of the foregoing, that may hereafter occur, or for any other reason whatsoever; or (iii) review any legal matters incident to the authorization, issuance, and validity of the Series 2011D Bonds, the exemption from federal or state income tax of the Series 2011D Bonds, or the purposes to which the proceeds of the Series 2011D Bonds are to be applied, after the date hereof.
E-2-3 [THIS PAGE INTENTIONALLY LEFT BLANK]
APPENDIX F
FORM OF CONTINUING DISCLOSURE AGREEMENT, AS AMENDED
NOTICE OF AMENDMENT TO CONTINUING DISCLOSURE AGREEMENT
and
AMENDMENT TO CONTINUING DISCLOSURE AGREEMENT
DATED: June 1, 2009
This NOTICE OF AMENDMENT TO CONTINUING DISCLOSURE AGREEMENT is provided to you pursuant to Section 12 of the Continuing Disclosure Agreement (the “Disclosure Agreement”), dated as of June 1, 2002 executed and delivered by the Metropolitan Washington Airports Authority (the “Issuer”) and Digital Assurance Certification, L.L.C. (the “Disclosure Dissemination Agent”). As provided in Section 12 of the Disclosure Agreement, the Disclosure Agreement will be amended as provided below as of June 1, 2009 unless you provide written objection to us within 10 days of the dated date stated above.
AMENDMENT TO CONTINUING DISCLOSURE AGREEMENT
The Disclosure Agreement is amended as follows:
1. Amendments to Section 1. Definitions.
(a) The following definition shall be added:
“Effective Date” means July 1, 2009, or such later date as the Securities and Exchange Commission shall state as the effective date for the amendments to the Rule pursuant to Release No. 34-59062 (Dec. 5, 2008).
(b) The first two sentences of the term “National Repository” are amended to read:
“National Repository” means, prior to the Effective Date, any Nationally Recognized Municipal Securities Information Repository for purposes of the Rule, and thereafter the MSRB. Prior to the Effective Date, the list of National Repositories maintained by the United States Securities and Exchange Commission shall be conclusive for purposes of determining National Repositories.
2. Date Amendments to take Effect.
The amendments to the Disclosure Agreement provided in this notice shall take effect June 1, 2009.
F-1
The Disclosure Dissemination Agent has caused this Amendment to Continuing Disclosure Agreement to be executed, on the date first written above, by an officer duly authorized.
DIGITAL ASSURANCE CERTIFICATION, L.L.C., as Disclosure Dissemination Agent
By: Name: Paula Stuart Title: Chief Executive Officer
F-2
This Continuing Disclosure Agreement (the “Disclosure Agreement”), dated as of June 1, 2002, is executed and delivered by Metropolitan Washington Airports Authority (the “Issuer”), and Digital Assurance Certification, L.L.C., as exclusive Disclosure Dissemination Agent (the “Disclosure Dissemination Agent” or “DAC”) for the benefit of the Holders and Underwriters (hereinafter defined) of the Bonds (hereinafter defined) and in order to provide certain continuing disclosure with respect to the Bonds in accordance with Rule 15c2-12 of the United States Securities and Exchange Commission under the Securities Exchange Act of 1934, as the same may be amended from time to time (the “Rule”).
SECTION 1. Definitions. Capitalized terms not otherwise defined in this Disclosure Agreement shall have the meaning assigned in the Rule or, to the extent not in conflict with the Rule, in the Official Statement (hereinafter defined). The capitalized terms shall have the following meanings:
“Annual Report” means an Annual Report of the Issuer, as described in and consistent with Section 3 of this Disclosure Agreement.
“Annual Filing Date” means the date, set in Sections 2(a) and 2(f), by which the Annual Report is to be filed with the Repositories.
“Annual Financial Information” means annual financial information as such term is used in paragraph (b)(5)(i) of the Rule and specified in Section 3(a) of this Disclosure Agreement.
“Audited Financial Statements” means the financial statements (if any) of the Issuer, for the prior fiscal year, certified by an independent auditor as prepared in accordance with generally accepted accounting principles or otherwise, as such term is used in paragraph (b)(5)(i) of the Rule and specified in Section 3(b) of this Disclosure Agreement. “Bonds” means the bonds as listed on the attached Exhibit A, as supplemented from time to time by the Issuer.
“Certification” means a written certification of compliance signed by the Disclosure Representative stating that the Annual Report, Audited Financial Statements, Voluntary Report or Notice Event notice delivered to the Disclosure Dissemination Agent is the Annual Report, Audited Financial Statements, Voluntary Report or Notice Event notice required to be submitted to the Repositories under this Disclosure Agreement. A Certification shall accompany each such document submitted to the Disclosure Dissemination Agent by the Issuer and include the full name of the Bonds and the 9-digit CUSIP numbers for all Bonds to which the document applies.
“Disclosure Representative” means the Chief Financial Officer of the Issuer or his or her designee, or such other person as the Issuer shall designate in writing to the Disclosure Dissemination Agent from time to time as the person responsible for providing Information to the Disclosure Dissemination Agent.
“Disclosure Dissemination Agent” or “DAC” means Digital Assurance Certification, L.L.C, acting in its capacity as Disclosure Dissemination Agent hereunder, or any successor Disclosure Dissemination Agent designated in writing by the Issuer pursuant to Section 9 hereof.
“Holder” means any person (a) having the power, directly or indirectly, to vote or consent with respect to, or to dispose of ownership of, any Bonds (including persons holding Bonds through nominees, depositories or other intermediaries) or (b) treated as the owner of any Bonds for federal income tax purposes.
F-3
“Information” means the Annual Financial Information, the Audited Financial Statements (if any), the Notice Event notices, and the Voluntary Reports.
“Issue” means the Bonds offered in the corresponding Official Statement listed in Exhibit A.
“Notice Event” means an event listed in Sections 4(a) of this Disclosure Agreement.
“MSRB” means the Municipal Securities Rulemaking Board established pursuant to Section 15B(b)(1) of the Securities Exchange Act of 1934.
“National Repository” means any Nationally Recognized Municipal Securities Information Repository for purposes of the Rule. The list of National Repositories maintained by the United States Securities and Exchange Commission shall be conclusive for purposes of determining National Repositories. Currently, the following are National Repositories:
1. DPC Data Inc. One Executive Drive Fort Lee, New Jersey 07024 (201) 346-0701 (phone) (201) 947-0107 (fax) Email: [email protected]
2. Interactive Data Attn: Repository 100 Williams Street New York, New York 10038 (212) 771-6999 (phone) (212) 771-7390 (fax for secondary market information) (212) 771-7391 (fax for primary market information) Email: [email protected]
3. Bloomberg Municipal Repositories P.O. Box 840 Princeton, New Jersey 08542-0840 (609) 279-3225 (phone) (609) 279-5962 (fax) Email: [email protected]
4. Standard & Poor’s J.J. Kenny Repository 55 Water Street 45th Floor New York, New York 10041 (212) 438-4595 (phone) (212) 438-3975 (fax) Email: [email protected]
“Obligated Person” has the meaning provided in the Rule, including the Issuer and each person identified as such for an Issue in Exhibit A or in any Annual Report. The term shall include, unless otherwise provided by the Rule, each airline or other entity using the airport facilities of the Issuer under a lease or use agreement extending for more than one year from the date in question and including bond debt service as
F-4
part of the calculation of rates and charges, under which lease or use agreement such airline or other entity has paid amounts equal to at least 20% of the Revenues (as defined in the Master Trust Indenture pursuant to which the Bonds are issued) of the Issuer for each of the two prior fiscal years of the Issuer.
“Official Statement” means that Official Statement prepared by the Issuer in connection with each respective issue of Bonds, as listed on Exhibit A.
“Repository” means the MSRB, each National Repository and the State Depository (if any).
“State Depository” means any public or private depository or entity designated by the Commonwealth of Virginia, as a state information depository (if any) for the purpose of the Rule. The list of state information depositories maintained by the United States Securities and Exchange Commission shall be conclusive as to the existence of a State Depository.
“Underwriters” means the underwriters of any Issue , as listed in Exhibit A.
“Voluntary Report” means the information provided to the Disclosure Dissemination Agent by the Issuer pursuant to Section 7.
SECTION 2. Provision of Annual Reports.
(a) The 150th day after the end of each fiscal year of the Issuer, commencing with the fiscal year ending December 31, 2002 and each anniversary thereof is the Annual Filing Date. The Issuer shall provide, annually, an electronic copy of the Annual Report and Certification to the Disclosure Dissemination Agent not later than one (1) business day prior to the Annual Filing Date. Promptly upon receipt of an electronic copy of the Annual Report and the Certification, the Disclosure Dissemination Agent shall provide an Annual Report to each National Repository and the State Depository (if any). The Annual Report may be submitted as a single document or as separate documents comprising a package, and may cross-reference other information as provided in Section 3 of this Disclosure Agreement.
(b) If on the fifteenth (15th) day prior to the Annual Filing Date, the Disclosure Dissemination Agent has not received a copy of an Annual Report and Certification, the Disclosure Dissemination Agent shall contact the Disclosure Representative by telephone and in writing (which shall be by facsimile and e- mail) to remind the Issuer of its undertaking to provide the Annual Report pursuant to Section 2(a). Upon such reminder, the Disclosure Representative shall either (i) provide the Disclosure Dissemination Agent with an electronic copy of the Annual Report and the Certification no later than one (1) business day prior to the Annual Filing Date, or (ii) instruct the Disclosure Dissemination Agent in writing that the Issuer will not be able to file the Annual Report within the time required under this Disclosure Agreement, state the date by which the Annual Report for such year will be provided and instruct the Disclosure Dissemination Agent that a Notice Event as described in Section 4(a)(12) has occurred and to immediately send a notice to the MSRB and the State Depository (if any) in substantially the form attached as Exhibit B.
(c) If the Disclosure Dissemination Agent has not received an Annual Report and Certification by 12:00 noon on the first business day following the Annual Filing Date for the Annual Report, a Notice Event described in Section 4(a)(12) shall have occurred and the Issuer irrevocably directs the Disclosure Dissemination Agent to immediately send a notice to the MSRB and the State Depository (if any) in substantially the form attached as Exhibit B.
(d) If Audited Financial Statements of the Issuer are prepared but not available prior to the Annual Filing Date, the Issuer shall, when the Audited Financial Statements are available, provide in a
F-5
timely manner an electronic copy to the Disclosure Dissemination Agent, accompanied by a Certificate for filing with each National Repository and the State Depository (if any).
(e) The Disclosure Dissemination Agent shall:
(i) determine the name and address of each Repository each year prior to the Annual Filing Date; (ii) upon receipt, promptly file each Annual Report received under Section 2(a) with each National Repository, and the State Depository, (if any); (iii) upon receipt, promptly file each Audited Financial Statement received under Section 2(d) with each National Repository, and the State Depository (if any); (iv) upon receipt, promptly file the text of each disclosure to be made with the MSRB and the State Depository (if any) together with a completed copy of the MSRB Material Event Notice Cover Sheet in the form attached as Exhibit C, describing the event by checking the box indicated below when filing pursuant to the Section of this Disclosure Agreement indicated below:
1. “Principal and interest payment delinquencies,” pursuant to Sections 4(c) and 4(a)(1);
2. “Non-Payment related defaults,” pursuant to Sections 4(c) and 4(a)(2); 3. “Unscheduled draws on debt service reserves reflecting financial difficulties,” pursuant to Sections 4(c) and 4(a)(3); 4. “Unscheduled draws on credit enhancements reflecting financial difficulties,” pursuant to Sections 4(c) and 4(a)(4); 5. “Substitution of credit or liquidity providers, or their failure to perform,” pursuant to Sections 4(c) and 4(a)(5); 6. “Adverse tax opinions or events affecting the tax-exempt status of the security,” pursuant to Sections 4(c) and 4(a)(6); 7. “Modifications to rights of securities holders,” pursuant to Sections 4(c) and 4(a)(7); 8. “Bond calls,” pursuant to Sections 4(c) and 4(a)(8);
9. “Defeasances,” pursuant to Sections 4(c) and 4(a)(9);
10. “Release, substitution, or sale of property securing repayment of the securities,” pursuant to Sections 4(c) and 4(a)(10);
11. “Ratings changes,” pursuant to Sections 4(c) and 4(a)(11);
12. “Failure to provide annual financial information as required,” pursuant to Section 2(b)(ii) or Section 2(c), together with a completed copy of Exhibit B to this Disclosure Agreement; and
F-6
13. “Other material event notice (specify),” pursuant to Section 7 of this Disclosure Agreement, together with the summary description provided by the Disclosure Representative.
(v) provide the Issuer evidence of the filings of each of the above when made, which shall be by means of the DAC system, for so long as DAC is the Disclosure Dissemination Agent under this Disclosure Agreement.
(f) The Issuer may adjust the Annual Filing Date upon change of its fiscal year by providing written notice of such change and the new Annual Filing Date to the Disclosure Dissemination Agent, and the Repositories, provided that the period between the existing Annual Filing Date and new Annual Filing Date shall not exceed one year.
SECTION 3. Content of Annual Reports.
(a) Each Annual Report shall contain Annual Financial Information with respect to the Issuer, including information of the types provided in the Official Statement under the headings for each Issue described in Exhibit A.
(b) Audited Financial Statements prepared in accordance with generally accepted accounting principles will be included in each Annual Report or otherwise provided pursuant to Section 2(d).
Any or all of the items listed above may be included by specific reference from other documents, including official statements of debt issues with respect to which the Issuer is an Obligated Person, which have been previously filed with each of the National Repositories or the Securities and Exchange Commission. If the document incorporated by reference is a final official statement, it must be available from the MSRB. The Issuer will clearly identify each such document so incorporated by reference.
SECTION 4. Reporting of Notice Events.
(a) The occurrence of any of the following events, if material, with respect to the Bonds constitutes a Notice Event:
1. Principal and interest payment delinquencies;
2. Non-payment related defaults;
3. Unscheduled draws on debt service reserves reflecting financial difficulties;
4. Unscheduled draws on credit enhancements relating to the Bonds reflecting financial difficulties;
5. Substitution of credit or liquidity providers, or their failure to perform;
6. Adverse tax opinions or events affecting the tax-exempt status of the Bonds;
7. Modifications to rights of Bondholders;
8. Bond calls;
9. Defeasances;
F-7
10. Release, substitution, or sale of property securing repayment of the Bonds; and
11. Rating changes on the Bonds.
(a) The Issuer shall promptly notify the Disclosure Dissemination Agent in writing upon the occurrence of a Notice Event. Such notice shall instruct the Disclosure Dissemination Agent to report the occurrence pursuant to subsection (c). Such notice shall be accompanied with the text of the disclosure that the Issuer desires to make, the written authorization of the Issuer for the Disclosure Dissemination Agent to disseminate such information, and the date the Issuer desires for the Disclosure Dissemination Agent to disseminate the information. No such notice shall be deemed an official notice unless given or authorized by the Disclosure Representative; and no such notice of Notice Events described in (a)(8) above need be given any earlier than notice, if any, of the underlying event is given to the Holders of Bonds under the Master Indenture.
(b) The Disclosure Dissemination Agent is under no obligation to notify the Issuer or the Disclosure Representative of an event that may constitute a Notice Event. In the event the Disclosure Dissemination Agent so notifies the Disclosure Representative, the Disclosure Representative will within five business days of receipt of such notice, instruct the Disclosure Dissemination Agent that (i) a Notice Event has not occurred and no filing is to be made or (ii) a Notice Event has occurred and the Disclosure Dissemination Agent is to report the occurrence pursuant to subsection (c), together with the text of the disclosure that the Issuer desires to make, the written authorization of the Issuer for the Disclosure Dissemination Agent to disseminate such information, and the date the Issuer desires for the Disclosure Dissemination Agent to disseminate the information.
(c) If the Disclosure Dissemination Agent has been instructed by the Issuer as prescribed in subsection (a) or (b)(ii) of this Section 4 to report the occurrence of a Notice Event, the Disclosure Dissemination Agent shall promptly file a notice of such occurrence with the State Depository (if any) and the MSRB.
SECTION 5. CUSIP Numbers. Whenever providing information to the Disclosure Dissemination Agent, including but not limited to Annual Reports, documents incorporated by reference to the Annual Reports, Audited Financial Statements, notices of Notice Events, and Voluntary Reports filed pursuant to Section 7(a), the Issuer shall indicate the full name of the Bonds and the 9-digit CUSIP numbers for the Bonds as to which the provided information relates.
SECTION 6. Additional Disclosure Obligations. The failure by the Disclosure Dissemination Agent to advise the Issuer that state and federal laws, including securities laws and disclosure obligations thereunder, may apply to the Issuer shall not constitute a breach by the Disclosure Agent of any of its duties and responsibilities under this Disclosure Agreement. The Issuer acknowledges and understands that the duties of the Disclosure Dissemination Agent relate exclusively to execution of the mechanical tasks of disseminating information as described in this Disclosure Agreement.
SECTION 7. Voluntary Reports.
(a) The Issuer may instruct the Disclosure Dissemination Agent to file information with the Repositories, from time to time pursuant to a Certification of the Disclosure Representative accompanying such information (a “Voluntary Report”).
(b) Nothing in this Disclosure Agreement shall be deemed to prevent the Issuer from disseminating any other information through the Disclosure Dissemination Agent using the means of dissemination set
F-8
forth in this Disclosure Agreement or including any other information in any Annual Report, Annual Financial Statement, Voluntary Report or Notice Event notice, in addition to that required by this Disclosure Agreement. If the Issuer chooses to include any information in any Annual Report, Annual Financial Statement, Voluntary Report or Notice Event notice in addition to that which is specifically required by this Disclosure Agreement, the Issuer shall have no obligation under this Disclosure Agreement to update such information or include it in any future Annual Report, Annual Financial Statement, Voluntary Report or Notice Event notice.
SECTION 8. Termination of Reporting Obligation. The obligations of the Issuer and the Disclosure Dissemination Agent under this Disclosure Agreement shall terminate with respect to an issue of Bonds upon the legal defeasance, prior redemption or payment in full of all of the Bonds of such issue, when the Issuer is no longer an obligated person with respect to the Bonds, or upon delivery by the Disclosure Representative to the Disclosure Dissemination Agent of an opinion of nationally recognized bond counsel to the effect that continuing disclosure is no longer required.
SECTION 9. Disclosure Dissemination Agent. The Issuer has appointed Digital Assurance Certification, L.L.C. as exclusive Disclosure Dissemination Agent under this Disclosure Agreement. The Issuer may, upon thirty days written notice to the Disclosure Dissemination Agent and the Trustee, replace or appoint a successor Disclosure Dissemination Agent. Upon termination of DAC’s services as Disclosure Dissemination Agent, whether by notice of the Issuer or DAC, the Issuer agrees to appoint a successor Disclosure Dissemination Agent or, alternately, agrees to assume all responsibilities for compliance with disclosure requirements pursuant to the Rule performed by the Disclosure Dissemination Agent under this Disclosure Agreement for the benefit of the Holders and Underwriters of the Bonds. Notwithstanding any replacement or appointment of a successor, the Issuer shall remain liable until payment in full for any and all sums owed and payable to the Disclosure Dissemination Agent. The Disclosure Dissemination Agent may resign at any time by providing thirty days’ prior written notice to the Issuer.
SECTION 10. Remedies in Event of Default. If the Issuer fails to comply with any provision of this Disclosure Agreement, any Holder or Underwriter may take action in the Circuit Court of Arlington, Virginia to seek specific performance by court order to compel the Issuer to comply with its obligations under this Disclosure Agreement; provided that any Holder or Underwriter seeking to require compliance with this Disclosure Agreement shall first provide to the Disclosure Representative at least 30 days’ prior written notice of the Issuer’s failure, giving reasonable details of such failure, following which notice the Issuer shall have 30 days to comply. Any failure by a party to perform in accordance with this Disclosure Agreement shall not constitute a default with respect to any Bonds or under any other document relating to any Bonds, and all rights and remedies shall be limited to those expressly stated herein.
SECTION 11. Duties, Immunities and Liabilities of Disclosure Dissemination Agent.
(a) The Disclosure Dissemination Agent shall have only such duties as are specifically set forth in this Disclosure Agreement. The Disclosure Dissemination Agent’s obligation to deliver the information at the times and with the contents described herein shall be limited to the extent the Issuer has provided such information to the Disclosure Dissemination Agent as required by this Disclosure Agreement. The Disclosure Dissemination Agent shall have no duty with respect to the content of any disclosures or notice made pursuant to the terms hereof. The Disclosure Dissemination Agent shall have no duty or obligation to review or verify any Information or any other information, disclosures or notices provided to it by the Issuer and shall not be deemed to be acting in any fiduciary capacity for the Issuer, the Holders of the Bonds or any other party. The Disclosure Dissemination Agent shall have only such duties as are specifically set forth in this Disclosure Agreement. The Disclosure Dissemination Agent shall have no responsibility for the Issuer’s failure to report to the Disclosure Dissemination Agent a Notice Event or a
F-9
duty to determine the materiality thereof. The Disclosure Dissemination Agent shall have no duty to determine, or liability for failing to determine, whether the Issuer has complied with this Disclosure Agreement. The Disclosure Dissemination Agent may conclusively rely upon certifications of the Issuer at all times.
THE ISSUER AGREES TO INDEMNIFY AND SAVE THE DISCLOSURE DISSEMINATION AGENT AND ITS RESPECTIVE OFFICERS, DIRECTORS, EMPLOYEES AND AGENTS, HARMLESS AGAINST ANY LOSS, EXPENSE AND LIABILITIES WHICH THEY MAY INCUR ARISING OUT OF OR IN THE EXERCISE OR PERFORMANCE OF THEIR POWERS AND DUTIES HEREUNDER, INCLUDING (IF THE ISSUER IS FIRST GIVEN THE REASONABLE OPPORTUNITY TO DEFEND THE DISCLOSURE DISSEMINATION AGENT AGAINST THE SAME USING COUNSEL REASONABLY ACCEPTABLE TO DAC,) THE COSTS AND EXPENSES (INCLUDING ATTORNEYS FEES) OF DEFENDING AGAINST ANY CLAIM OF LIABILITY, BUT EXCLUDING LIABILITIES DUE TO THE DISCLOSURE DISSEMINATION AGENT’S GROSS NEGLIGENCE OR WILLFUL MISCONDUCT OR ITS FAILURE TO COMPLY WITH THE TERMS OF THIS DISCLOSURE AGREEMENT OR THE TERMS OF ITS ENGAGEMENT LETTER WITH THE ISSUER, DATED AS OF JUNE 1, 2002, AS THE SAME MAY BE AMENDED OR SUPPLEMENTED FROM TIME TO TIME.
The obligations of the Issuer under this Section shall survive resignation or removal of the Disclosure Dissemination Agent and defeasance, redemption or payment of the Bonds.
(b) The Disclosure Dissemination Agent may, from time to time, consult with legal counsel (either in-house or external) of its own choosing in the event of any disagreement or controversy, or question or doubt as to the construction of any of the provisions hereof or its respective duties hereunder, and neither of them shall incur any liability and shall be fully protected in acting in good faith upon the advice of such legal counsel.
SECTION 12. Amendment; Waiver. Notwithstanding any other provision of this Disclosure Agreement, the Issuer and the Disclosure Dissemination Agent may amend this Disclosure Agreement and any provision of this Disclosure Agreement may be waived, if such amendment or waiver is supported by an opinion of counsel expert in federal securities laws acceptable to both the Issuer and the Disclosure Dissemination Agent to the effect that such amendment or waiver does not materially impair the interests of Holders of the Bonds and would not, in and of itself, cause the undertakings herein to violate the Rule if such amendment or waiver had been effective on the date hereof but taking into account any subsequent change in or official interpretation of the Rule; provided neither the Issuer or the Disclosure Dissemination Agent shall be obligated to agree to any amendment modifying their respective duties or obligations without their consent thereto.
Notwithstanding the preceding paragraph, the Disclosure Dissemination Agent shall have the right to adopt amendments to this Disclosure Agreement necessary to comply with modifications to and interpretations of the provisions of the Rule as announced by the Securities and Exchange Commission from time to time by giving not less than 20 days written notice of the intent to do so together with a copy of the proposed amendment to the Issuer. No such amendment shall become effective if the Issuer shall, within 20 days following the giving of such notice, send a notice to the Disclosure Dissemination Agent in writing that it objects to such amendment.
SECTION 13. Beneficiaries. This Disclosure Agreement shall inure solely to the benefit of the Issuer, the Disclosure Dissemination Agent, the Underwriters, and the Holders from time to time of the Bonds, and shall create no rights in any other person or entity.
F-10
SECTION 14. Governing Law. This Disclosure Agreement shall be governed by the laws of the Commonwealth of Virginia (other than with respect to conflicts of laws).
SECTION 15. Counterparts. This Disclosure Agreement may be executed in several counterparts, each of which shall be an original and all of which shall constitute but one and the same instrument.
The Disclosure Dissemination Agent and the Issuer have caused this Continuing Disclosure Agreement to be executed, on the date first written above, by their respective officers duly authorized.
DIGITAL ASSURANCE CERTIFICATION, L.L.C., as Disclosure Dissemination Agent
By:______Name:______Title:______
METROPOLITAN WASHINGTON AIRPORTS AUTHORITY, as Issuer
By:______Norman M. Glasgow, Jr. Chairman
F-11
EXHIBIT A
NAME AND CUSIP NUMBERS OF BONDS
Name of Issuer: Metropolitan Washington Airports Authority Obligated Person(s): None Name of Bond Issue: Airport System Revenue Refunding Bonds, Series 2011C Airport System Revenue Refunding Bonds, Series 2011D Date of Issuance: September 29, 2011 Date of Official Statement: September 21, 2011 Underwriter(s): J.P. Morgan Securities LLC, et al.
CUSIP Numbers: Series 2011C Series 2011D 592646Y98 5926462J1 592646Z22 5926462K8 592646Z30 5926462L6 592646Z48 5926462M4 592646Z55 5926462N2 592646Z63 5926462P7 592646Z71 5926462Q5 592646Z89 5926462R3 592646Z97 5926462S1 5926462A0 5926462T9 5926462B8 5926462U6 5926462C6 5926462V4 5926462D4 5926462W2 5926462E2 5926462X0 5926462F9 5926462Y8 5926462G7 5926462Z5 5926462H5 5926463A9 5926463B7 5926463C5 5926463D3
Content of Annual Reports: Each Annual Report shall contain financial information or operating data with respect to the Issuer and the Airports (“Annual Financial Information”), including information substantially similar to the types set forth in the Official Statement under the following captions or in the following appendices: "AIRPORTS AUTHORITY FINANCIAL INFORMATION" in Part I of the Official Statement and "THE AIRPORT SERVICE REGION AND AIRPORTS ACTIVITY — Airports Activity," and "Historical Enplanement Activity" in Part II of the Official Statement and in the Report of the Airport Consultant which is included as Appendix A to the Official Statement. Annual Financial Information may but is not required to, include Audited Financial Statements and may be provided by delivery of the Issuer's Comprehensive Annual Financial Report or in any other format deemed convenient by the Issuer.
F-12
EXHIBIT B
NOTICE TO REPOSITORIES OF FAILURE TO FILE ANNUAL REPORT
Issuer ______
Name of Bond Issue: ______
Date of Issuance: ______
NOTICE IS HEREBY GIVEN that the Issuer has not provided an Annual Report with respect to the above-named Bonds as required by the Disclosure Agreement, dated as of ______, between the Issuer and Digital Assurance Certification, L.L.C., as Disclosure Dissemination Agent. The Issuer has notified the Disclosure Dissemination Agent that it anticipates that the Annual Report will be filed by ______.
Dated: ______
Digital Assurance Certification, L.L.C., as Disclosure Dissemination Agent, on behalf of the Issuer
______cc: Issuer
F-13
EXHIBIT C
MATERIAL EVENT NOTICE COVER SHEET
This cover sheet and material event notice should be sent to the Municipal Securities Rulemaking Board and the State Information Depository, if applicable, pursuant to Securities and Exchange Commission Rule 15c2-12(b)(5)(i)(C) and (D).
Issuer’s and/or Other Obligated Person’s Name: ______Issuer’s Six-Digit CUSIP Number: ______or Nine-Digit CUSIP Number(s) of the bonds to which this material event notice relates: ______Number of pages of attached material event notice: _____ Description of Material Events Notice (Check One): 1. ___Principal and interest payment delinquencies 2. ___Non-Payment related defaults 3. ___Unscheduled draws on debt service reserves reflecting financial difficulties 4. ___Unscheduled draws on credit enhancements reflecting financial difficulties 5. ___Substitution of credit or liquidity providers, or their failure to perform 6. ___Adverse tax opinions or events affecting the tax-exempt status of the security 7. ___Modifications to rights of securities holders 8. ___Bond calls 9. ___Defeasances 10. ___Release, substitution, or sale of property securing repayment of the securities 11. ___Rating changes 12. ___Failure to provide annual financial information as required 13. ___Other material event notice (specify) ______
I hereby represent that I am authorized by the issuer or its agent to distribute this information publicly: Signature: ______Name: ______Title: ______Employer: ______Address: ______City, State, Zip Code: ______Voice Telephone Number: ______
F-14
Please print the material event notice attached to this cover sheet in 10-point type or larger, The cover sheet and notice may be faxed to the MSRB at (703) 683-1930 or sent to CDINet, Municipal Securities Rulemaking Board, 1900 Duke Street, Suite 600, Alexandria, VA 22314. Contact the MSRB at (703) 797- 6600 with questions regarding this form or the dissemination of this notice.
F-15
[THIS PAGE INTENTIONALLY LEFT BLANK]
Airport System Revenue Refunding Bonds, Series 2011C and Series 2011D