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Airport-Airline Competition Plan UPDATE TO AIRLINE COMPETITION PLAN Philadelphia International Airport Prepared for Federal Aviation Administration in compliance with requirements of AIR21 Prepared by City of Philadelphia Division of Aviation Philadelphia, Pennsylvania November 2015 UPDATE TO AIRLINE COMPETITION PLAN Philadelphia International Airport Prepared for Federal Aviation Administration in compliance with requirements of AIR21 Prepared by City of Philadelphia Division of Aviation Philadelphia, Pennsylvania November 2015 CHICAGO AMSTERDAM CINCINNATI BERN DALLAS BOLOGNA SAN FRANCISCO GLASGOW WASHINGTON, D.C. LONDON TORONTO MANCHESTER MUMBAI READING www.leighfisher.com Executive Summary ES‐1 EXECUTIVE SUMMARY Scope of 2015 Airline Competition Plan Update The City of Philadelphia (City), owner and operator of Philadelphia International Airport (Airport) is required to prepare and periodically update an Airline Competition Plan describing the City’s programs and initiatives to enable and encourage competition among airlines at the Airport. Airline Competition Plans are required under Section 155 of the Wendell H. Ford Aviation Investment and Reform Act for the 21st Century (AIR‐21) and are submitted to the Federal Aviation Administration (FAA). FAA approval is required as a condition for the City to receive federal grants‐in‐aid or have additional passenger facility charge (PFC) applications or amendments approved. The sCity ha received FAA approval of its original Airline Competition Plan submitted in August 2000 and of updates submitted in February 2002, March 2004, and April 2008 (the 2008 Update). Under guidelines set forth in the FAA’s Airport Improvement Handbook Order 5100.38D (AIP Handbook) Appendix X dated September 30, 2014, this 2015 Competition Plan Update (2015 Update) is required to describe the provisions of a new Airport‐Airline Use and Lease Agreement (Airline Agreement) that became effective on July 1, 2015. The update is organized according to the AIP Handbook. As well as summarizing the new Airline Agreement, this 2015 Update documents progress made by the City in implementing the construction programs, policies, and initiatives described in the earlier Competition Plan reports. Besides successful negotiation of the new Airline Agreement, initiatives undertaken by the City since 2008 have involved the expansion and reconfiguration of terminal facilities, accommodation of new entrants, and increasing the number of common use gates available at the Airport. Implementation of Initiatives from 2008 Update Specific initiatives documented in the 2008 Update and their implementation status are as follows: Expanded Terminal E to provide 5 additional gates for preferential or common use. A project to expand Terminals D and E is nearing overall completion and provided a net increase of 5 gates. Three new gates are leased on a preferential‐use basis to Southwest Airlines, and two new gates are available for Domestic Common Use. Increased gates available on a common use basis. The City has increased the number of gates available on a common use basis from 22 in the 2008 Update to 29 as of August 2015. Accommodated new service by Alaska, Jet Blue, Qatar, and Spirit. Alaska started service at the Airport in June 2012 and as of April 2015 is scheduled to operate one daily departure to one destination (Seattle.) JetBlue Airways started service in May 2013 and as of April 2015 is scheduled to operatee fiv daily departures to one destination (Boston.) Qatar Airways started service in April 2014 and as of April 2015 is scheduled to operate one daily departure to one destination (Doha, Qatar.) Spirit Airlines started service in April 2013 and as of April 2015 is scheduled to operate an average of three daily departures to four destinations (Las Vegas, Dallas, Chicago, and Myrtle Beach.) New Airline Agreement The 2008 Update provided an overview of the Airline Agreement that extended to June 30, 2011 (prior Airline Agreement). The prior Airline Agreement was further extended twice – once to June 30, 2013 City of Philadelphia Philadelphia International Airport Competition Plan Update November 2015 PHL ES‐2 and again to June 30, 2015. With each of these extensions, the only material change was to expand the pre‐approved capital improvement program to include additional projects. Effective July 1, 2015, the City and the Signatory Airlines have negotiated a new Airport‐Airline Use and Lease Agreement that extends five years to June 30, 2020, with two optional one‐year extensions thereafter to June 30, 2022 (new Airline Agreement). The prior Airline Agreement incorporated the City’s objectives to accommodate expanded service by both new entrant and incumbent airlines and facilitated gate access to any airline desiring to serve the Airport. Specific provisions of the prior Airline Agreement, which were retained in the new Airline Agreement, covered: Conversion of airline premises from exclusive‐use to preferential‐use or common‐use status Designation of City control of domestic common‐use gates Accommodation and gate recapture rights Preapproval of a capital improvement program that is not subject to further airline majority‐ in‐interest (MII) approval Limitations on MII provisions for projects that are not included in the preapproved capital program City review and approval rights for accommodation or sublease arrangements between airlines Explicit dispute resolution procedures Under the first extension of the prior Airline Agreement, the Signatory Airlines pre‐approved $250 million in projects in support of the airfield components of the City’s long‐range Capacity Enhancement Program (CEP), including a portion of on‐ and off‐Airport facility relocations, certain land acquisition, and a portion of the wetlands reclamation and mitigation necessary for the CEP. Under the second extension of the prior Airline Agreement, the Signatory Airlines pre‐approved $734 million in projects both in support of the CEP and to fund other capital improvement projects, including: Extension of Runway 9R‐27L to the east by 1,500 feet to a total length of 12,000 feet and the construction of Taxiways EE and H in order to improve the flow and sequencing of aircraft to and from Terminals E and F and reduce taxiway complexity; Planning, design, and initial construction of the Terminal Modernization Program, which includes a redesigned and enhanced Terminal B and C ticketing area, which will include a new, automated baggage handling and screening system and a new, more spacious, centralized passenger security screening checkpoint to provide for greater efficiency and enhanced passenger flow; Replacement of the current rental car facility surface lots with a new, multi‐story consolidated rental car facility; An initial design for an automated people‐mover system between concourses that will make it easier for passengers to connect to other flights; City of Philadelphia Philadelphia International Airport Competition Plan Update November 2015 PHL ES‐3 Airside improvements to include new taxiway/aircraft holding bays/apron to better queue for departure; Continued rehabilitation of other existing airport infrastructure projects to include security upgrades, roof and window replacements, escalator upgrades, airport restrooms, roadways, concession programs and flight information display systems. The second extension also updated maintenance responsibilities between the City and the airlines serving the Airport. This update to the City’s Airline Competition Plan is intended primarily to provide to the FAA information regarding the provisions of the new Airline Agreement. The City continued the precedent established with the extensions of the prior Airline Agreement to expand the pre‐approved projects to include: 1. An additional $100 million to $250 million for the Terminal Modernization Program; and 2. Planning, design, and construction of a new FAA control tower consistent with FAA approved locations; or 3. Initial phases of planning, design, and construction of an extension to Runway 8‐26 and related airfield and terminal improvements up to $300 million. By December 31, 2016, the Signatory Airlines must select at least one of the three projects to proceed with, and at least one of the projects must be #2 or #3. In addition to these projects, an additional $173 million in renewal and rehabilitation projects were approved concurrently the execution of the new Airline Agreement. The new Airline Agreement largely clarifies provisions and simplifies language in the prior Airline Agreement. A number of sections in this 2015 Update indicate that there has been no change since the 2008 Update, as the provisions of the prior Airline Agreement were transferred to the new Airline Agreement. The 2015 Update provides FAA information regarding those provisions that have changed between the prior and new Airline Agreements. The 2015 Update also provides information on the policies, capital programs, and other initiatives demonstrating the City’s commitment to providing an operating environment that promotes competitive airline service to the Philadelphia region. City of Philadelphia Philadelphia International Airport Competition Plan Update November 2015 PHL 2015 Update i CONTENTS This Competition Plan Update is organized in accordance with the guidance provided in the FAA’s AIP Handbook. Section Page EXECUTIVE SUMMARY ............................................................................................. ES‐1 Scope of 2015 Airline Competition Plan Update ....................................................
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