Citigroup Bear, Stearns & Co. Inc. Siebert Brandford Shank & Co., LLC UBS Financial Services Inc.

Transcription

1 NEW ISSUE Dated: Date of Delivery $507,135,000 WAYNE COUNTY AIRPORT AUTHORITY Airport Revenue Bonds (Detroit Metropolitan Wayne County Airport) Series 2005 FULL BOOK-ENTRY Due: December 1, as shown on the cover The Wayne County Airport Authority (the Authority ) is issuing the Series 2005 Bonds (as defined herein) pursuant to its Master Bond Ordinance and Series 2005 Ordinance (each as defined herein) to provide funds to finance the cost of various capital projects at the Detroit Metropolitan Wayne County Airport (the Airport ). The Series 2005 Bonds are revenue obligations of the Authority payable solely from the Net Revenues derived by the Authority from the operation of the Airport. U.S. Bank National Association is Trustee under the Master Bond Ordinance. The Series 2005 Bonds are issuable as fully registered bonds in denominations of $5,000 or any integral multiple thereof. Interest on the Series 2005 Bonds is payable semiannually on June 1 and December 1 of each year, commencing December 1, 2005, until maturity or prior redemption. The Series 2005 Bonds will be subject to mandatory, optional and extraordinary redemption prior to maturity in the manner and at the times set forth herein. The Series 2005 Bonds, when issued, will be registered in the name of Cede & Co., as registered owner and nominee of The Depository Trust Company ( DTC ), to which principal, premium and interest payments will be made. DTC will act as securities depository for the Series 2005 Bonds. Purchasers of the Series 2005 Bonds will not receive certificates representing their interests in the Series 2005 Bonds purchased. Payment of the principal (including mandatory sinking fund payments) of and interest on the Series 2005 Bonds, when due, will be insured by a municipal bond insurance policy to be issued by MBIA Insurance Corporation upon delivery of the Series 2005 Bonds. This cover page contains information for quick reference only. It is not a summary of this issue. Prospective purchasers must read the entire Official Statement to obtain information essential to making an informed investment decision. See INVESTMENT CONSIDERATIONS for a discussion of certain factors that should be considered by prospective purchasers of the Series 2005 Bonds. In the opinion of Miller, Canfield, Paddock and Stone, P.L.C., Bond Counsel, under existing law as presently interpreted, and subject to the conditions described under the caption TAX MATTERS herein (i) the interest on the Series 2005 Bonds is excluded from gross income for federal income tax purposes (except for interest on any Series 2005 Bond held by a person who is a substantial user of the Airport or a related person as those terms are used in the Internal Revenue Code of 1986, as amended, and the regulations promulgated thereunder) and (ii) the interest on the Series 2005 Bonds is an item of tax preference for purposes of the federal alternative minimum tax imposed on individuals and corporations. Bond Counsel is also of the opinion that, under existing law as presently interpreted, the Series 2005 Bonds and the interest thereon are exempt from all taxation in the State of Michigan, except inheritance and estate taxes and taxes on gains realized from the sale, payment or other disposition thereof. The Series 2005 Bonds are offered when, as and if issued by the Authority and received by the Underwriters, subject to receipt of the approving legal opinion of Miller, Canfield, Paddock and Stone, P.L.C., Detroit, Michigan, Bond Counsel, and certain other conditions. Certain legal matters will be passed upon for the Underwriters by Foley & Lardner LLP. Government Finance Associates, Inc. serves as Financial Advisor to the Authority. It is expected that the Series 2005 Bonds in book-entry form will be available for delivery through DTC, on or about April 13, Citigroup Bear, Stearns & Co. Inc. Siebert Brandford Shank & Co., LLC UBS Financial Services Inc. Comerica Securities Loop Capital Markets, LLC JPMorgan April 1, 2005

2 MATURITIES, AMOUNTS, INTEREST RATES AND PRICES Maturity (December 1) Cusip No. Amount Interest Rate Price BD9 $8,490, % BC1 1,100, BE7 10,080, BF4 10,590, BH0 11,005, BG2 125, BJ6 11,720, BL1 12,330, BK3 15, BN7 12,305, BM9 700, * BP2 13,700, * BQ0 14,450, * BR8 15,190, * BS6 15,925, * BU1 15,640, BT4 1,100, * BV9 17,650, * BW7 18,590, * BX5 19,595, * BY3 20,650, * BZ0 21,765, * CA4 22,935, CB2 $76,195,000* Term Bond Due December 1, 2029; Interest Rate: 5.000%; Price: % CD8 $140,290,000* Term Bond Due December 1, 2034; Interest Rate: 5.000%; Price: % CC0 $15,000,000 Term Bond Due December 1, 2034; Interest Rate: 4.750%; Price: % * Priced to call at par on December 1, 2015.

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4 WAYNE COUNTY AIRPORT AUTHORITY DETROIT METROPOLITAN WAYNE COUNTY AIRPORT AUTHORITY BOARD MEMBERS Vernice Davis Anthony, Chairperson Michael M. Glusac, Vice-Chairperson David L. Treadwell, Secretary Edward A. Boike, Jr. Wayne S. Doran James B. Nicholson James Settles, Jr. AUTHORITY STAFF Lester W. Robinson Chief Executive Officer Daniel O. Kerber Executive Vice President - Operations Thomas J. Naughton Senior Vice President of Finance; Chief Financial Officer Genelle M. Allen Senior Vice President of Procurement/Performance Management and Contract Compliance Robert E. Murphy Senior Vice President of Facilities Management and Construction Emily K. Neuberger Senior Vice President and General Counsel John W. Vogel Senior Vice President of Business Development and Management Steven Economy Vice President of Governmental Relations D. Raul Fernandez Vice President of Financial Planning/Analysis MaryLou K. Posa Vice President and Associate General Counsel Istakur Rahman Vice President - Internal Auditor Terry Teifer Vice President of Treasury Gillian Tybinka Vice President of Human Resources Raymond J. Lambert Controller FINANCIAL ADVISOR Government Finance Associates, Inc. BOND COUNSEL Miller, Canfield, Paddock and Stone, P.L.C. AIRPORT CONSULTANT Reed & Associates, LLC

5 REGARDING THIS OFFICIAL STATEMENT This Official Statement does not constitute an offer to sell or the solicitation of an offer to buy any Series 2005 Bonds in any jurisdiction to any person to whom it is unlawful to make such offer in such jurisdiction. No dealer, salesman or other person has been authorized by the Wayne County Airport Authority (the Authority ) or the Underwriters to give any information or to make any representation other than that contained herein and, if given or made, such other information or representation must not be relied upon as having been authorized by the Authority or any other person. The information set forth herein has been obtained from the Authority, MBIA Insurance Corporation (the Bond Insurer ) (as to itself and the municipal bond insurance policy), Digital Assurance Certification, L.L.C. (as to itself), The Depository Trust Company ( DTC ) and other sources that are believed to be reliable, but the accuracy or completeness of the information is not guaranteed and the information is not to be construed as a representation by the Underwriters. The information and expressions of opinion herein are subject to change without notice, and neither the delivery of this Official Statement nor any sale made hereunder shall, under any circumstances, create the implication that there has been no change in the affairs of the Authority or the Airport or the other matters described herein since the date hereof. 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, its responsibilities to investors under the federal securities laws as applied to the facts and circumstances of this transaction, but the Underwriters do not guarantee the accuracy or completeness of such information. Other than with respect to information concerning the Bond Insurer contained under the caption BOND INSURANCE and in Appendix E (the form of Municipal Bond Insurance Policy), none of the information in this Official Statement has been supplied or verified by the Bond Insurer, and Insurer makes no representation or warranty, express or implied, as to (i) the accuracy or completeness of such information; (ii) the validity of the Series 2005 Bonds or (iii) the taxexempt status of the interest on the Series 2005 Bonds. Any statements made in this Official Statement, including the Appendices, involving matters of opinion or estimates, whether or not so expressly stated, are set forth as such and not as representations of fact, and no representation is made that any of such estimates will be realized. This Official Statement contains certain forward-looking statements and information that are based on the Authority s beliefs as well as assumptions made by and information currently available to the Authority. Such statements are subject to certain risks, uncertainties and assumptions. Should one or more of these risks or uncertainties materialize, or should underlying assumptions prove incorrect, actual results may vary materially from those anticipated, estimated or expected. The Series 2005 Bonds have not been registered under the Securities Act of 1933, as amended, nor has the Master Bond Ordinance been qualified under the Trust Indenture Act of 1939, as amended, in reliance upon exemptions contained in such Acts. The registration or qualification of the Series 2005 Bonds in accordance with applicable provisions of securities law of the states in which the Series 2005 Bonds have been registered or qualified and the exemption from registration or qualification in other states cannot be regarded as a recommendation thereof. In making an investment decision, investors must rely on their own examination of the Authority, the Bond Insurer, and DTC and the terms of the offering, including the merits and risks involved. The Series 2005 Bonds have not been recommended by any Federal or State securities commission or regulatory authority. Furthermore, the foregoing authorities have not confirmed the accuracy or determined the adequacy of this Official Statement. Any representation to the contrary may be a criminal offense. IN CONNECTION WITH THE OFFERING OF THE SERIES 2005 BONDS, THE UNDERWRITERS MAY OVERALLOT OR EFFECT TRANSACTIONS THAT STABILIZE OR MAINTAIN THE MARKET PRICE OF THE SERIES 2005 BONDS AT A LEVEL ABOVE THE LEVEL THAT MIGHT OTHERWISE PREVAIL IN THE OPEN MARKET. SUCH STABILIZING, IF COMMENCED, MAY BE DISCONTINUED AT ANY TIME WITHOUT NOTICE. THE PRICES AND OTHER TERMS RESPECTING THE OFFERING AND SALE OF THE SERIES 2005 BONDS MAY BE CHANGED FROM TIME TO TIME BY THE UNDERWRITERS AFTER THE SERIES 2005 BONDS ARE RELEASED FOR SALE, AND THE SERIES 2005 BONDS MAY BE OFFERED AND SOLD AT PRICES OTHER THAN THE INITIAL OFFERING PRICES, INCLUDING SALES TO DEALERS WHO MAY SELL THE SERIES 2005 BONDS INTO INVESTMENT ACCOUNTS.

6 TABLE OF CONTENTS Page INTRODUCTION...1 The Authority...1 Authorization...1 Purpose...2 Security for the Series 2005 Bonds...2 Bond Insurance...2 The Airport...2 APPLICATION OF THE SERIES 2005 BOND PROCEEDS...3 SECURITY FOR THE SERIES 2005 BONDS...4 Source of Payment...4 Bond Insurance...4 Bond Reserve Account...4 Rate Covenant...4 The Airline Agreements...5 Budgetary Procedures...6 Flow of Funds...6 Additional Indebtedness...8 Special Facilities Revenue Bonds...9 Junior Lien Bonds...9 Amendments to Certain Provisions of the Master Bond Ordinance...10 BOND INSURANCE...11 The Bond Insurance Policy...11 The Bond Insurer...12 Information Regarding the Bond Insurer...12 Financial Strength Ratings of the Bond Insurer...13 THE SERIES 2005 BONDS...13 General...13 Registration and Payment...14 Redemption of the Series 2005 Bonds...14 DETROIT METROPOLITAN WAYNE COUNTY AIRPORT...16 General...16 The Airport Service Region...16 Management of the Airport...18 Airport Facilities...20 Airport Activity...20 Airlines Providing Service at the Airport...24 AIRPORT FINANCIAL INFORMATION...27 Airport Indebtedness...27 Hedging Program...29 Financial Operations...29 Management Discussion of Airport Financial Operations...33 THE CAPITAL IMPROVEMENT PROGRAM...34 General Projects...34 Other CIP Projects...36 CIP Funding Sources...36 REPORT OF THE AIRPORT CONSULTANT...38 THE AIRLINE INDUSTRY...39 Airline Information...39 Recent Developments Affecting the Air Transportation Industry...39 INVESTMENT CONSIDERATIONS...40 Financial Condition of Airlines Serving the Airport...40 Impact of Uncertainties of the Airline Industry on the Airport...41 Revenues from Air Carriers...41 Effect of Airline Bankruptcies...41 Aviation Security Concerns...42 Regulations and Restrictions Affecting the Airport...42 Availability of Various Sources of Funding...43 Costs of 2005 Projects and Schedule...43 LITIGATION...44 RATINGS...45 UNDERWRITING...45 CONTINUING DISCLOSURE...45 The Disclosure Dissemination Agent - DAC...46 TAX MATTERS...46 General...46 Original Issue Discount...47 Amortizable Bond Premium...48 Market Discount...48 Future Developments...48 LEGAL MATTERS...49 FINANCIAL ADVISOR...49 INDEPENDENT AUDITORS...49 FORWARD LOOKING STATEMENTS...49 MISCELLANEOUS...50 APPENDIX A SUMMARY OF CERTAIN PROVISIONS OF THE MASTER BOND ORDINANCE AND THE SERIES 2005 ORDINANCE. A-1 APPENDIX B REPORT OF AIRPORT CONSULTANT... B-1 APPENDIX C BOOK-ENTRY SYSTEM... C-1 APPENDIX D SUMMARY OF THE AIRLINE AGREEMENTS... D-1 APPENDIX E SPECIMEN OF MUNICIPAL BOND INSURANCE POLICY...E-1 APPENDIX F AUDITED FINANCIAL STATEMENTS OF THE AIRPORT...F-1 APPENDIX G CONTINUING DISCLOSURE UNDERTAKING... G-1 APPENDIX H FORM OF BOND COUNSEL OPINION... H-1 i

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8 OFFICIAL STATEMENT $507,135,000 WAYNE COUNTY AIRPORT AUTHORITY Airport Revenue Bonds (Detroit Metropolitan Wayne County Airport) Series 2005 INTRODUCTION This Official Statement is furnished in order to set forth certain information in connection with the offering and sale by the Wayne County Airport Authority (the Authority ) of its $507,135,000 aggregate principal amount of Airport Revenue Bonds (Detroit Metropolitan Wayne County Airport), Series 2005 (the Series 2005 Bonds ). Unless otherwise indicated, capitalized terms used in this Official Statement have the meanings established in the Master Bond Ordinance (as defined below). See APPENDIX A SUMMARY OF CERTAIN PROVISIONS OF THE MASTER BOND ORDINANCE AND THE SERIES 2005 ORDINANCE MASTER BOND ORDINANCE Selected Definitions and SERIES 2005 ORDINANCE Selected Definitions. This Official Statement includes the cover page and Appendices hereto. The Authority The Authority is a political subdivision and instrumentality of the Charter County of Wayne, Michigan (the County ), which owns the Detroit Metropolitan Wayne County Airport (the Airport ) and Willow Run Airport (together, the Airports ). Until August 9, 2002, the County operated the Airports. Pursuant to an amendment to the Aeronautics Code of the State of Michigan, known as the Public Airport Authority Act (the Authority Act ), Public Act 90, Michigan Public Acts of 2002, effective March 26, 2002, the Authority has operational jurisdiction of the Airports, with the exclusive right, responsibility and authority to occupy, operate, control and use the Airports. Pursuant to the Authority Act, the Authority is liable for all of the obligations with respect to the Airports, with the exception of the County s pledge of its limited tax full faith and credit, subject to constitutional, statutory and charter tax rate limitations, associated with the $110,920,000 Airport Hotel Revenue Bonds (LTGO), Series 2001A and 2001B issued by the County. This includes all of the County s obligations on Outstanding Senior Lien Bonds (as defined below) and Junior Lien Bonds (as defined below) issued by the County under the County s Amended and Restated Master Airport Revenue Bond Ordinance No. 319 and its predecessor Ordinance 319, as amended and supplemented by various amending and supplemental ordinances adopted by the County, including the Series 2005 Ordinance adopted for each Outstanding Series of airport revenue bonds issued thereunder by the County (collectively, Ordinance 319 ). Pursuant to the Authority Act, the Authority is obligated to perform all of the duties, and is bound by all of the covenants, with respect to the Airports under any ordinances (including Ordinance 319), agreements or other instruments and under law. Under the Authority Act, all airport revenue bonds issued by the Authority may be issued on a parity basis with the Outstanding Senior Lien Bonds issued by the County under Ordinance 319 and Additional Bonds issued by the Authority under the Master Bond Ordinance, and secured by Net Revenues (defined in Security for the Series 2005 Bonds below). Authorization The Authority is issuing the Series 2005 Bonds pursuant to the provisions of Act 327, Public Acts of Michigan, 1945, as amended ( Act 327 ) and Act 94, Public Acts of Michigan, 1933, as amended ( Act 94 and together with Act 327, the Act ), the Authority Act, the Master Airport Revenue Bond Ordinance adopted by the Board of the Authority (the Board ) on September 26, 2003 (the Master Bond Ordinance ), a Notice of Intent to Issue Bonds published on August 1, 2001 (the 2001 Notice of Intent ), the Series 2005 Ordinance adopted by the Board on January 27, 2005 (the Series 2005 Ordinance ) and the Sale Order of the Chief Executive Officer and Chief Financial Officer of the Authority relating to the Series 2005 Bonds (the Sale Order, and collectively with the Master Bond Ordinance and the Series 2005 Ordinance, the Ordinance ). The Master Bond Ordinance assumes, amends and restates, as an ordinance of the Authority, Ordinance 319. All Series of Outstanding Bonds issued by the County under Ordinance 319, all Outstanding Bonds issued by the Authority, the Series 2005 Bonds

9 and any Additional Bonds issued by the Authority under the Master Bond Ordinance are collectively referred to herein as Senior Lien Bonds. All Series of Outstanding Junior Lien Bonds issued by the County under Ordinance 319 and any Additional Junior Lien Bonds issued by the Authority under the Master Bond Ordinance are collectively referred to herein as Junior Lien Bonds. U.S. Bank National Association is Trustee under the Master Bond Ordinance. The designated corporate trust office for its duties as Trustee is located at 535 Griswold, Buhl Building, Suite 550, Detroit, Michigan Purpose The Authority will use the proceeds from the sale of the Series 2005 Bonds, together with other available funds, to (i) pay a portion of the costs of certain capital projects at the Airport included in the Capital Improvement Program for the Airport (the CIP ), (ii) fund a deposit to the Bond Reserve Account to satisfy the Reserve Requirement, (iii) pay capitalized interest on the Series 2005 Bonds, and (iv) pay costs of issuing the Series 2005 Bonds. See APPLICATION OF THE SERIES 2005 BOND PROCEEDS and CAPITAL IMPROVEMENT PROGRAM. Security for the Series 2005 Bonds The Series 2005 Bonds are revenue obligations of the Authority. The Series 2005 Bonds will be secured by a lien on Net Revenues and will be secured equally and on a parity basis as to Net Revenues with all Outstanding Senior Lien Bonds and any Additional Bonds, including the Series 2005 Bonds. Pursuant to the Master Bond Ordinance, the Authority has irrevocably pledged Net Revenues on a senior lien basis for the payment of the Series 2005 Bonds, Outstanding Senior Lien Bonds and any Additional Bonds, and on a junior lien basis for the payment of Outstanding Junior Lien Bonds and any Additional Junior Lien Bonds. Net Revenues for any period means the excess of Revenues of the Airport remaining after deducting the Operation and Maintenance Expenses of the Airport for such period. As of the date of this Official Statement and prior to the issuance of the Series 2005 Bonds, the aggregate principal amount of Outstanding Senior Lien Bonds is $1,664,850,000, and the aggregate principal amount of Outstanding Junior Lien Bonds is $89,180,000. Following the issuance of the Series 2005 Bonds, the aggregate principal amount of Outstanding Senior Lien Bonds will be $2,171,985,000. As described under SECURITY FOR THE SERIES 2005 BONDS, the Master Bond Ordinance requires the maintenance of a Bond Reserve Account to secure all of the Outstanding Senior Lien Bonds, including the Series 2005 Bonds. The Master Bond Ordinance also includes a rate covenant by the Authority, and permits the issuance of Additional Bonds on a parity with the Series 2005 Bonds and the other Outstanding Senior Lien Bonds, subject to meeting certain tests under the Master Bond Ordinance. Bond Insurance Simultaneously with the issuance of the Series 2005 Bonds, MBIA Insurance Corporation (the Bond Insurer ) will issue its Financial Guaranty Insurance Policy (the Bond Insurance Policy ) to insure the payment, when due, of principal of and interest on the Series 2005 Bonds. See SECURITY FOR THE SERIES 2005 BONDS - Bond Insurance, BOND INSURANCE and APPENDIX E - SPECIMEN OF MUNICIPAL BOND INSURANCE POLICY. The Airport The Airport is the primary air carrier airport serving the Detroit - Ann Arbor - Flint metropolitan area. The Airport currently provides service from three terminal buildings (the Edward H. McNamara Terminal (the McNamara Terminal ), the L.C. Smith Terminal (the Smith Terminal ) and the Berry International Terminal), and related concourses. The Airport currently operates with six runways. 2

10 Detroit, Michigan is classified as a large hub by the Federal Aviation Administration (the FAA ). According to Airports Council International N.A. ( ACI ), in calendar year 2003, the Airport was the 10th busiest airport in the United States in terms of both total passengers and total operations. According to Authority records, the Airport had 17,608,113 enplaned passengers in calendar year 2004 and 16,359,665 enplaned passengers in calendar year 2003, representing a 7.6% increase year over year. Northwest Airlines, Inc. ( Northwest ) maintains a large connecting hub at the Airport. Northwest and its regional affiliates Mesaba Airlines, Inc. ( Mesaba ) and Pinnacle Airlines, Inc. ( Pinnacle ) accounted for approximately 78.9% of the total enplaned passengers at the Airport in Operating Year and 77.2% in Operating Year APPLICATION OF THE SERIES 2005 BOND PROCEEDS The Authority will use the net proceeds of the Series 2005 Bonds to pay a portion of the costs of certain capital projects at the Airport included within the CIP (the 2005 Projects ). The 2005 Projects include, among other things, the redevelopment of the North Terminal, an expansion and upgrade of the McNamara Terminal, safety and security-related projects, airfield rehabilitation and reconstruction projects, and a FAR Part 150 noise study. For more information regarding the CIP and the 2005 Projects, see THE CAPITAL IMPROVEMENT PROGRAM. The following table sets forth the estimated sources and uses of funds in connection with the issuance of the Series 2005 Bonds. Sources of Funds Par Amount of Series 2005 Bonds Net Original Issue Premium Estimated Investment Earnings $507,135, ,862, ,136, Total Sources of Funds $552,134, Uses of Funds 2005 Projects $420,228, Capitalized Interest 82,644, Bond Reserve Account 39,306, Costs of Issuance, including Underwriters Discount and Bond Insurance Premium 9,955, Total Uses of Funds $552,134, The Authority s Operating Year ends on September 30. 3

11 SECURITY FOR THE SERIES 2005 BONDS Source of Payment The Series 2005 Bonds will be secured by a lien on the Net Revenues of the Airport and will be secured equally and on parity with all Outstanding Senior Lien Bonds and any Additional Bonds. As of the date of this Official Statement and before the issuance of the Series 2005 Bonds, $1,664,850,000 aggregate principal amount of Senior Lien Bonds is Outstanding. Following the issuance of the Series 2005 Bonds, the aggregate principal amount of Outstanding Senior Lien Bonds will be $2,171,985,000. The Series 2005 Bonds are being issued pursuant to the provisions of the Act, the Authority Act and the Ordinance. The Series 2005 Bonds are revenue obligations of the Authority, payable solely from the Net Revenues derived by the Authority from the operation of the Airport. Under the Master Bond Ordinance, the Authority has irrevocably pledged Net Revenues for the payment of Senior Lien Bonds. Net Revenues for any period means the excess of Revenues of the Airport remaining after deducting the Operation and Maintenance Expenses of the Airport for such period. The land and facilities comprising the Airport have not been pledged or mortgaged pursuant to the Master Bond Ordinance, nor have they been pledged, nor are they permitted to be pledged, to secure payment of the Series 2005 Bonds, any other Senior Lien Bonds or any Junior Lien Bonds or other Authority obligations. The requirements for the issuance of Additional Bonds under the Master Bond Ordinance have been satisfied with respect to the Series 2005 Bonds. See SECURITY FOR THE SERIES 2005 BONDS - Additional Indebtedness. Bond Insurance Payment of the principal of and interest on the Series 2005 Bonds, when scheduled, will be insured by the Bond Insurance Policy to be issued by the Bond Insurer simultaneously with the delivery of the Series 2005 Bonds. See BOND INSURANCE and the specimen insurance policy, included as APPENDIX E. Bond Reserve Account Pursuant to the Master Bond Ordinance, a Bond Reserve Account has been established to secure the Bonds. At any time when Bonds are Outstanding, the Bond Reserve Account shall be maintained in an amount equal to the Reserve Requirement. The Reserve Requirement is defined by the Master Bond Ordinance to mean the maximum annual Debt Service requirements for each Series of Outstanding Bonds, which amount is required to be on deposit or otherwise provided for (e.g., through provision of a letter of credit, surety bond or insurance policy in the same amount) in the Bond Reserve Account. The deposit requirement into the Bond Reserve Account may be satisfied by a deposit at the time of issuance of each Series of Bonds or by an accumulation on a scheduled basis of Bond proceeds, investment earnings or other deposits which will result in an amount equal to the Reserve Requirement for such Series of Bonds being on deposit in the Bond Reserve Account no later than the date of the last scheduled application of all capitalized interest for such Series. Rate Covenant The Authority covenants in the Master Bond Ordinance to fix, charge and collect rates, fees, rentals and charges for the use and operation of the Airport as may be necessary or appropriate to produce Revenues in each Operating Year which will be at least sufficient to provide for (i) the payment of Operation and Maintenance Expenses for such Operating Year; (ii) together with passenger facility charge ( PFC ) proceeds deposited with the Trustee with respect to such Operating Year, the amount needed to make the deposits required under the Master Bond Ordinance for such Operating Year to the Bond Fund; and (iii) together with Other Available Moneys deposited with the Trustee with respect to such Operating Year (to the extent not needed to make deposits required under the Master Bond Ordinance for such Operating Year to the Bond Fund) and any unencumbered cash balance held in the Revenue Fund on the last day of the Operating Year preceding the Operating Year for which the calculation is made and not then required to be deposited in any Fund or Account, (A) the amounts needed to make 4

12 the deposits required under the Master Bond Ordinance for such Operating Year to the Junior Lien Bond Fund, the Operation and Maintenance Reserve Fund, the Renewal and Replacement Fund, the Discretionary Fund and the Airport Development Fund, and (B) an amount not less than 25% of the Debt Service due and payable on Bonds during such Operating Year. Other Available Moneys means, for any Operating Year, the amount of money determined by the Chief Executive Officer in concurrence with the Chief Financial Officer to be transferred by the Authority for such Operating Year from PFCs or other sources other than Revenues to the Bond Fund or the Junior Lien Bond Fund. The Airline Agreements Signatory Airlines. A major portion of the Revenues deposited by the Authority into the Revenue Fund in accordance with the Master Bond Ordinance is derived from rentals, fees and charges imposed upon airlines operating at the Airport under agreements relating to their use of the Airport. The following airlines are parties to such agreements: America West Airlines, American Airlines, British Airways, Continental Airlines, Delta Air Lines, Federal Express, KLM Royal Dutch Airlines, Lufthansa German Airlines, Mesaba Airlines, Northwest Airlines, Pinnacle Airlines, Southwest Airlines, Spirit Airlines, United Airlines, United Parcel Service and US Airways (collectively, the Signatory Airlines ). United Airlines and US Airways are currently operating under the protection of the United States Bankruptcy Code. As of the date hereof, neither United Airlines nor US Airways has assumed or rejected its Airline Agreement; however, both airlines continue to make the payments owed to the Authority under their respective agreements. See INVESTMENT CONSIDERATIONS Effect of Airline Bankruptcies. The Signatory Airlines pay rentals for the lease of premises in the terminals at the Airport and Activity Fees (i.e., landing fees) for the common use of other terminal and airfield facilities. Weighted Majority Approval Rights. The agreements with the Signatory Airlines permit the Authority to issue airport revenue bonds to finance the costs of capital projects and include the annual debt service requirements of, and other deposit requirements and coverage requirements for, such bonds in the calculation of rates and charges payable by the Signatory Airlines, only after first receiving approval of a Weighted Majority of the Signatory Airlines for such capital projects. An affirmative Weighted Majority vote requires, in the aggregate, Signatory Airlines which landed 85% or more of the landed weight of all Signatory Airlines for the preceding twelve month period for which records are available, or all Signatory Airlines in number but one regardless of landed weight. Bonds. The Authority has received the requisite Weighted Majority approval permitting it to issue the Series 2005 Agreements. Northwest is a party to an Airport Use and Lease Agreement with respect to its use of the Airport. This agreement has a term ending September 30, The agreement provides for fixed rental rates for leased premises in the McNamara Terminal until Operating Year 2009, a cost center modified compensatory formula for calculating rental rates beginning in Operating Year 2009, and an airport residual cost formula for calculating Activity Fees during the entire term. Under this agreement, Northwest leases space in the McNamara Terminal on a preferential use and shared use basis. Northwest subleases gates and other facilities in the McNamara Terminal to its regional carriers, Mesaba and Pinnacle, as well as to its alliance partner, Continental Airlines. Delta Air Lines, also an alliance partner with Northwest and Continental Airlines, is moving its operations to the McNamara Terminal on March 29, 2005, and will sublease gates and other facilities from Northwest. Northwest also subleases ticket counter and office facilities in the McNamara Terminal to British Airways ( British ), Lufthansa German Airlines ( Lufthansa ) and Royal Jordanian Airlines, which provide international service from the McNamara Terminal. Mesaba, Pinnacle, British and Lufthansa each have executed an Airport Use and Lease Agreement substantially similar to Northwest s agreement. The term of Mesaba s and Pinnacle s agreements extend to September 30, 2032, while the term of British s and Lufthansa s agreements extend to January 1, Under these agreements, these airlines lease only shared use premises in the McNamara Terminal from the Authority and otherwise operate in space provided by Northwest. The remaining Signatory Airlines are parties to Amended and Restated Airport Agreements that expire on January 1, These agreements include the lease of exclusive and/or preferential use premises in the Smith Terminal and related concourses at fixed rental rates, and also provide for the same airport residual cost formula for 5

13 calculating Activity Fee rates as contained in the Airport Use and Lease Agreements related to the McNamara Terminal (Federal Express and United Parcel Service lease no terminal space). The Airport Use and Lease Agreements with Northwest, Mesaba, Pinnacle, British and Lufthansa, and the Amended and Restated Airport Agreements with the rest of the Signatory Airlines, are collectively referred to herein as the Airline Agreements. In the Authority s recent request to the Signatory Airlines for Weighted Majority approval related to the 2005 Projects (the 2005 Weighted Majority Request ), the Authority asked the Signatory Airlines to agree to certain revisions to the methodology for calculating terminal rentals beginning upon the later of (i) the opening of the new North Terminal (currently estimated to be in Summer 2008), and (ii) the beginning of Operating Year 2009 (October 1, 2008). The Authority is in the process of preparing an amendment to the Airline Agreements for the McNamara Terminal, incorporating the revised Signatory Airline rate-making methodology. See APPENDIX D SUMMARY OF THE AIRLINE AGREEMENTS. Following completion of the amended Airline Agreements for the airlines operating in the McNamara Terminal, the Authority will prepare new Airline Agreements for the Signatory Airlines currently operating in the Smith Terminal that approved the 2005 Weighted Majority Request. Of the Signatory Airlines that would occupy the new North Terminal, American Airlines, Spirit Airlines, Southwest Airlines and America West Airlines approved, and United Airlines and British disapproved, the 2005 Weighted Majority Request. US Airways did not cast a vote. The Airline Agreements for the North Terminal airlines will be effective upon the later of the opening of the new North Terminal and the beginning of Operating Year 2009 (October 1, 2008) and will be substantially similar to the Airline Agreements for the McNamara Terminal (as amended), including the September 30, 2032 expiration date and the revised terminal rental rate calculations, but would lease preferential use premises and shared use premises in the new North Terminal. The Authority does not anticipate that any of the North Terminal Signatory Airlines will execute new Airline Agreements prior to completion of the design of the new North Terminal and perhaps not until shortly before the opening of the new terminal. However, those Signatory Airlines now operating in the Smith Terminal that voted in favor of the 2005 Weighted Majority Request agreed, as part of their vote, to the implementation of the revised rates and charges methodology, to lease space in the new terminal, and to execute, prior to the completion of the North Terminal, a new Airline Agreement having a term through September 30, 2032, and incorporating such rates and charges methodology. Any airline that currently is a Signatory Airline but does not execute the new Airline Agreement prior to the opening of the new North Terminal will become a non-signatory Airline and will pay Activity Fees at the non-signatory Activity Fee rate, which currently includes a 25% surcharge. Budgetary Procedures The Master Bond Ordinance requires the Authority to adopt, prior to the commencement of each Operating Year, a budget sufficient to cover the Operation and Maintenance Expenses of the Airport for such Operating Year, the principal and interest payable during such Operating Year on Outstanding Senior Lien Bonds and Junior Lien Bonds, and other known financial requirements of the Master Bond Ordinance during such Operating Year. Flow of Funds Under the Master Bond Ordinance, the Authority is required to set aside and deposit all Revenues of the Airport into the Revenue Fund, and to apply all monies on deposit therein at such times and in accordance with the priorities established in the Master Bond Ordinance. The Chief Financial Officer may accumulate Revenues as received from time to time and shall cause the transfer of such accumulated Revenues to the Trustee on a periodic basis but not less often than monthly. In addition to the Revenue Fund, the Construction Fund and a Rebate Fund, the Master Bond Ordinance provides for the following funds and accounts: 6

14 Operation and Maintenance Fund Bond and Interest Redemption Fund Capitalized Interest Account Bond Reserve Account Junior Lien Bond and Interest Redemption Fund Junior Lien Capitalized Interest Account Swap Payment Account Junior Lien Bond Reserve Account Operation and Maintenance Reserve Fund Renewal and Replacement Fund Discretionary Fund Airport Development Fund The Master Bond Ordinance requires that the Revenues credited to the Revenue Fund shall be transferred from the Revenue Fund and credited to the following funds and accounts at the following times and in the following order of priority: (i) Monthly, by the fifteenth day of the month, to the Operation and Maintenance Fund, a sum sufficient to provide for payment of the Operation and Maintenance Expenses of the Airport for the next succeeding month; (ii) Monthly, on the first day of each month, to the Bond and Interest Redemption Fund (the Bond Fund ), an amount which is equal to 1/6th of the total amount of interest on the Bonds next coming due or such lesser amount as is necessary to assure that the amount set aside in the Bond Fund as of the first of such month is not less than the product of (a) 1/6th of the amount of interest next due on the Bonds and (b) the number of months elapsed since and including the last interest payment date for Bonds with semiannual interest payments or an amount equal to one month s accrued interest on the Bonds as provided in the applicable series ordinance for such Bonds (for Bonds with more frequent interest payments; and an amount which is equal to 1/12th of the amount of principal on the Bonds next coming due by maturity or as a Mandatory Redemption Requirement or such lesser amounts as is necessary to assure that the amount set aside in the Bond Fund as of the first of such month is not less than the product of (a) 1/12th of the amount of principal next due on the Bonds and (b) the number of months elapsed since and including the last principal payment date; sums set aside to pay principal and interest on the Bonds shall include sums required to pay obligations under a Swap Agreement entered into by the County prior to January 1, 1998; (iii) If at any time there is not on deposit in the Bond Reserve Account the amount required to be on deposit therein, an amount equal to such deficiency; (iv) Monthly, on the first day of each month, to the Junior Lien Bond and Interest Redemption Fund (the Junior Lien Bond Fund ), an amount equal to 1/6th of the total amount of interest on the Junior Lien Bonds next coming due or such lesser amount as is necessary to assure that any amount set aside in the Junior Lien Bond Fund as of the first of such month is not less than the product of (a) 1/6th of the amount of interest next due on the Junior Lien Bonds and (b) the number of months elapsed since and including the last interest payment date for Junior Lien Bonds with semiannual interest payments or an amount equal to one month s accrued interest on the Junior Lien Bonds as provided in the applicable series ordinance for such Junior Lien Bonds for Junior Lien Bonds with more frequent interest payments; and an amount which is equal to 1/12th of the amount of principal on the Junior Lien Bonds next coming due by maturity or as a Mandatory Redemption Requirement or such lesser amounts as necessary to assure that the amount set aside in the Junior Lien Bond Fund as of the first of such month is not less than the product of (a) 1/12th of the amount of principal next due on the Junior Lien Bonds and (b) the number of months elapsed since and including the last principal payment date; (v) Any amounts due and owing to a Swap Provider by the Authority pursuant to a Swap Agreement entered into after January 1, 1998 shall be payable when due from a Swap Payment Account established in the Junior Lien Bond Fund; (vi) If at any time there is not on deposit in the Junior Lien Bond Reserve Account the amount required to be on deposit therein, an amount equal to such deficiency; 7

15 (vii) Quarterly, on the last day of each fiscal quarter, to the Operation and Maintenance Reserve Fund, an amount equal to 1/48th of the estimated annual Operation and Maintenance Expenses of the Airport until the estimated Operation and Maintenance Expenses for the period of one month as projected in the most recent Authority budget for the Airport (the Operating Reserve Amount ) is on deposit in such fund; thereafter, the amount necessary to maintain an amount equal to the Operating Reserve Amount on deposit in such fund; (viii) Quarterly, on the last day of each fiscal quarter, to the Renewal and Replacement Fund, the sum of $125,000 until the sum of $2,500,000 (the Replacement Requirement ) is on deposit in the Renewal and Replacement Fund; thereafter, the lesser of $125,000 and the amount necessary to maintain an amount equal to the Replacement Requirement on deposit in such fund; (ix) $87,500; Quarterly, after satisfying all of the foregoing requirements, to the Discretionary Fund, the sum of (x) Quarterly, on the last day of each quarter of each Operating Year, beginning the last day of the first quarter of the Operating Year 1999, to the Airport Development Fund, one-quarter of the amount calculated in accordance with the applicable agreements and included in the budgeted rates and charges for the Airport for the Operating Year for deposit to the Airport Development Fund (See APPENDIX D - SUMMARY OF THE AIRLINE AGREEMENTS ); and (xi) Quarterly, prior to the Completion Date for the projects funded from each Series of Bonds, to the Rebate Fund, an amount sufficient to make the amount on deposit in the Rebate Fund equal to 90% of the estimated accrued amount subject to the rebate requirements of Section 148(f) of the Code, and annually, prior to the Completion Date, an amount sufficient to make the amount on deposit in the Rebate Fund equal to 100% of the amount required to be rebated to the United States Government pursuant to Section 148(f) of the Code, and annually, after the Completion Date, from the Revenue Fund, an amount sufficient to make the amount on deposit in the Rebate Fund equal to 100% of the amount required to be rebated to the United States Government pursuant to Section 148(f) of the Code. Neither the Trustee nor any owner of any Bond has a claim on any monies on deposit in the Rebate Fund. The Master Bond Ordinance provides that all interest earned or profit realized on investments or deposits of money for the funds and accounts established under the Master Bond Ordinance shall be credited and charged as follows. Earnings and profits on the Bond Reserve Account shall be (i) retained therein until the Reserve Requirement is on deposit, then (ii) prior to the Completion Date, credited to the Construction Fund in an amount equal to earnings and profits times a fraction, the numerator of which is the amount of capitalized interest payable on the next ensuing Bond Payment Date and the denominator of which is the total amount of interest payable on such Bond Payment Date, and credited to the general account of the Bond Fund in an amount equal to the remainder of such earnings and profits, and, then (iii) on and after the Completion Date with proceeds of a series of Bonds, credited to the general account of the Bond Fund. Earnings and profits on the Capitalized Interest Account of the Bond Fund shall be retained in such account until such account is fully funded and, thereafter, shall be credited to the Construction Fund. Earnings and profits on the Operation and Maintenance Reserve Fund shall be retained therein until the Operating Reserve Requirement is on deposit and, thereafter, shall be credited to the Revenue Fund. Earnings and profits on the Renewal and Replacement Fund shall be retained therein until the Replacement Requirement is on deposit, and, thereafter, shall be credited to the Revenue Fund. Interest earned or profit realized on investments or deposits of money in all other funds, accounts and sub-accounts established under the Master Bond Ordinance, and any losses on investments, shall be credited or charged to the fund, account or sub-account from which such investment was made. Additional Indebtedness The Master Bond Ordinance permits the issuance of one or more additional Series of Senior Lien Bonds on a parity with Outstanding Senior Lien Bonds so long as there exists no Default or Event of Default under the Master Bond Ordinance known to the Authority at the time such Series of Senior Lien Bonds is authorized to be issued by adoption of a Series Ordinance. Prior to issuing any additional Series of Senior Lien Bonds, the Authority must obtain an opinion of Bond Counsel that the issuance of such Series of Senior Lien Bonds will not impair the taxexempt status of any Outstanding Senior Lien Bonds or Junior Lien Bonds. 8

16 In addition, unless the purpose for which a Series of Senior Lien Bonds is to be issued is to finance the cost of completing the acquisition, construction and installation of capital projects with respect to which a Series of Senior Lien Bonds has previously been issued, and provided that such Series of Senior Lien Bonds proposed to be issued for such purpose are proposed to be issued in a principal amount not to exceed 10% of the face amount of Bonds originally issued to pay for the costs of the Authority s capital improvement program, the Authority must first provide a report of an Airport Consultant projecting Revenues and Revenue Fund balances plus Other Available Moneys and any amounts estimated to be available to pay capitalized interest for the first three full Operating Years commencing after completion of construction of the capital projects to be funded from the proceeds of the Series of Senior Lien Bonds proposed to be issued sufficient to satisfy the Rate Covenant, taking into account the Series of Bonds proposed to be issued. As an alternative to providing the report of an Airport Consultant described above, the Authority may authorize the issuance of a Series of Senior Lien Bonds if it delivers to the Trustee a certificate of the Chief Financial Officer (accompanied by a report of an independent auditor) certifying that, taking all Outstanding Senior Lien Bonds (other than any Senior Lien Bonds to be refunded by the Series of Senior Lien Bonds proposed to be issued) and the Series of Senior Lien Bonds proposed to be issued into account as if it had been issued at the beginning of the most recent Operating Year for which audited financial statements for the Authority are available, the Net Revenues together with Other Available Moneys actually deposited in the Bond Fund for such Operating Year were not less than 125% of the Debt Service with respect to such Outstanding Senior Lien Bonds and proposed Series of Senior Lien Bonds for such period. The Master Bond Ordinance permits the issuance of one or more Series of Refunding Bonds for the purpose of (i) refunding any Senior Lien Bonds or Junior Lien Bonds, (ii) paying Issuance Costs therefor, and (iii) making deposits into the Bond Reserve Account; provided that the issuance of Refunding Bonds is subject to the satisfaction of the requirements for the issuance of Additional Bonds if the principal and interest payable on such Refunding Bonds would exceed the principal and interest payable on the Bonds to be refunded by more than 20% in any Operating Year. In addition, the Authority may not deliver any additional Series of Refunding Bonds unless on or prior to the date of delivery thereof, there shall be deposited with the Trustee Sufficient Government Obligations and cash in an amount sufficient to effect payment at maturity or to pay the applicable Redemption Price or purchase price (in the event of tender) of the Bonds to be refunded together with interest on such Bonds to the redemption or payment date, which monies shall be held by the Trustee in a separate irrevocable trust account for the owners of Outstanding Bonds being refunded. Special Facilities Revenue Bonds The Master Bond Ordinance provides that the Authority may finance any special facilities permitted by law; provided, that (i) any bonds issued to finance such special facilities shall not be secured by Revenues of the Airport, and (ii) in the opinion of Bond Counsel, the financing of such special facilities does not conflict with the covenants or provisions of the Master Bond Ordinance. The Outstanding special facilities bonds are (i) $83,405,000 Special Airport Facilities Revenue Refunding Bonds (Northwest Airlines, Inc. Facilities), Series 1995, (ii) $15,235,000 Special Airport Facilities Revenue Bonds (Northwest Airlines, Inc. Facilities) Series 1999, and (iii) $110,920,000 Airport Hotel Revenue Bonds (Limited Tax General Obligation), Series 2001A and Series 2001B. Junior Lien Bonds The Master Bond Ordinance also permits the issuance of one or more Series of Junior Lien Bonds which would be payable from Net Revenues after making required deposits for the Senior Lien Bonds in the Bond Fund so long as there exists no Event of Default under the Master Bond Ordinance known to the Authority at the time such Junior Lien Bonds are authorized to be issued by adoption of a Series Ordinance. Prior to issuing any additional Series of Junior Lien Bonds, the Authority must obtain an opinion of Bond Counsel that the issuance of such Series of Junior Lien Bonds will not impair the tax-exempt status of any prior Series of Senior Lien Bonds or Junior Lien Bonds. The Master Bond Ordinance establishes a Junior Lien Bond Reserve Account in the Junior Lien Bond Fund for the benefit of the Holders of Junior Lien Bonds. Prior to issuing a Series of Junior Lien Bonds, or Junior Lien Bonds proposed to be issued to refund Bonds or Junior Lien Bonds, the Chief Financial Officer shall certify to the Trustee that the sum of (a) the Net Revenues 9

17 for the most recently completed Operating Year, (b) the amount of Other Available Moneys actually deposited in the Bond Fund for the most recently completed Operating Year, and (c) the average of (i) the amount of Other Available Moneys actually deposited in the Junior Lien Bond Fund for the most recently completed Operating Year, and (ii) each annual amount of Other Available Moneys which the Airport Consultant certifies to the Authority may reasonably be expected to be received by the Authority and deposited in the Junior Lien Bond Fund over the period that the proposed and Outstanding Series of Junior Lien Bonds are projected to be Outstanding, is not less than 110% of the Debt Service with respect to such Outstanding Bonds and Outstanding Junior Lien Bonds and of the average annual Debt Service with respect to the proposed Series of Junior Lien Bonds, in each case for the Operating Year in which the Series of Junior Lien Bonds is proposed to be issued and the four next succeeding Operating Years. In calculating Net Revenues, any unencumbered fund balance in the Revenue Fund on the last day of the Operating Year preceding the Operating Year for which the calculation is made may be taken into account as provided in the Master Bond Ordinance. In making the required calculations, the Authority shall also take into account (a) all Outstanding Senior Lien Bonds and Outstanding Junior Lien Bonds (other than Senior Lien Bonds or Junior Lien Bonds proposed to be refunded by the Series of Junior Lien Bonds proposed to be issued) and (b) the Series of Junior Lien Bonds proposed to be issued as if it had been issued at the beginning of the most recent Operating Year for which audited financial statements of the Authority are available. The certificate of the Chief Financial Officer shall also be accompanied by an Accountant s report verifying compliance with the requirements hereof. The aggregate principal amount of Junior Lien Bonds Outstanding is $89,180,000. Amendments to Certain Provisions of the Master Bond Ordinance The Master Bond Ordinance permits amendments to certain provisions of the Master Bond Ordinance with Bondholder consent. The Authority is seeking to amend certain provisions of the Master Bond Ordinance with the consent of the Holders of at least 50% of the aggregate principal amount of Outstanding Bonds and Junior Lien Bonds. Holders of the Authority s Airport Revenue Bonds (Detroit Metropolitan Wayne County Airport) Series 2003 (the Series 2003 Bonds ) and its Airport Revenue Bonds (Detroit Metropolitan Wayne County Airport) Series 2004 (the Series 2004 Bonds ) consented to the amendments of the Master Bond Ordinance when they purchased such bonds. By purchase of any of the Series 2005 Bonds or any book-entry interest therein, all registered owners of the Series 2005 Bonds and all owners of book-entry interests therein shall be deemed to have consented to the amendments of the Master Bond Ordinance contained in the Master Bond Ordinance, and those consents shall be binding on all subsequent Holders of the Series 2005 Bonds. The Master Bond Ordinance provides for the following amendments to become effective on or after the date on which the requisite Bondholder consent is obtained: (i) The term Authorized Officer in the Master Bond Ordinance may cease to include the consulting architect or engineer for the related component(s) of the CIP. (ii) Any Credit Entity providing a Credit Facility which is a surety bond or insurance policy shall be rated A/A2 or higher by Standard & Poor s (as hereinafter defined) or Moody s (as hereinafter defined). (iii) The transfer of the next month s Operation and Maintenance Expenses from the Revenue Fund to the Operation and Maintenance Fund shall occur by the 25th day of the month for the payment of the next calendar month s Operation and Maintenance Expenses. (iv) The Authority may hold the Revenue Fund, the Construction Fund, the Operation and Maintenance Reserve Fund, the Repair and Replacement Fund, the Airport Development Fund and the Rebate Fund outside of the trust established by the Master Bond Ordinance. (v) Under existing provisions, the Authority has the right without notice to the Trustee to demolish or remove any other structures now or hereafter existing as part of the Airport, without the obligation to make any replacement thereof or substitution therefor, provided that the Chief Executive Officer determines that the fair market value of the structures demolished or removed does not exceed $2,000,000. The amendment would increase this level upon the effective date of the amendment to $3,000,000, which amount shall be escalated each Operating 10

18 Year to reflect percentage increases in the Producer Price Index during the most recently ended 12-month period for which such index is available. BOND INSURANCE The Bond Insurance Policy guarantees the scheduled payment of principal of and interest on the Series 2005 Bonds, when due as set forth on the form of the Bond Insurance Policy included in APPENDIX E SPECIMEN OF MUNICIPAL BOND INSURANCE POLICY. The following information has been supplied by the Bond Insurer for inclusion in this Official Statement. The Authority makes no representation as to the accuracy or completeness of such information. The Bond Insurer accepts no responsibility for the accuracy or completeness of this Official Statement or any other information or disclosure contained herein, or omitted herefrom, other than with respect to the accuracy of the information regarding the Bond Insurer and its affiliates set forth under this heading. In addition, the Bond Insurer makes no representation regarding the Series 2005 Bonds or the advisability of investing in the Series 2005 Bonds. The Bond Insurance Policy The following information has been furnished by the Bond Insurer for use in this Official Statement. Reference is made to Appendix E for a specimen of the Bond Insurance Policy. The Bond Insurance Policy unconditionally and irrevocably guarantees the full and complete payment required to be made by or on behalf of the Authority to the Trustee or its successor of an amount equal to (i) the principal of (either at the stated maturity or by an advancement of maturity pursuant to a mandatory sinking fund payment) and interest on, the Series 2005 Bonds as such payments shall become due but shall not be so paid (except that in the event of any acceleration of the due date of such principal by reason of mandatory or optional redemption or acceleration resulting from default or otherwise, other than any advancement of maturity pursuant to a mandatory sinking fund payment, the payments guaranteed by the Bond Insurance Policy shall be made in such amounts and at such times as such payments of principal would have been due had there not been any such acceleration, unless the Bond Insurer elects in its sole discretion, to pay in whole or in part any principal due by reason of such acceleration); and (ii) the reimbursement of any such payment which is subsequently recovered from any Bondholder of the Series 2005 Bonds pursuant to a final judgment by a court of competent jurisdiction that such payment constitutes an avoidable preference to such Bondholder within the meaning of any applicable bankruptcy law (a Preference ). The Bond Insurance Policy does not insure against loss of any prepayment premium which may at any time be payable with respect to any Series 2005 Bonds. The Bond Insurance Policy does not, under any circumstance, insure against loss relating to: (i) optional or mandatory redemptions (other than mandatory sinking fund redemptions); (ii) any payments to be made on an accelerated basis; (iii) payments of the purchase price of Series 2005 Bonds upon tender by an owner thereof; or (iv) any Preference relating to (i) through (iii) above. The Bond Insurance Policy also does not insure against nonpayment of principal of or interest on the Series 2005 Bonds resulting from the insolvency, negligence or any other act or omission of the Trustee or any other paying agent for the Series 2005 Bonds. Upon receipt of telephonic or telegraphic notice, such notice subsequently confirmed in writing by registered or certified mail, or upon receipt of written notice by registered or certified mail, by the Bond Insurer from the Trustee or any owner of a Series 2005 Bond the payment of an insured amount for which is then due, that such required payment has not been made, the Bond Insurer on the due date of such payment or within one business day after receipt of notice of such nonpayment, whichever is later, will make a deposit of funds, in an account with U.S. Bank Trust National Association, in New York, New York, or its successor, sufficient for the payment of any such insured amounts which are then due. Upon presentment and surrender of such Series 2005 Bonds or presentment of such other proof of ownership of the Series 2005 Bonds, together with any appropriate instruments of assignment to evidence the assignment of the insured amounts due on the Series 2005 Bonds as are paid by the 11

19 Bond Insurer, and appropriate instruments to effect the appointment of the Bond Insurer as agent for such owners of the Series 2005 Bonds in any legal proceeding related to payment of insured amounts on the Series 2005 Bonds, such instruments being in a form satisfactory to U.S. Bank Trust National Association, U.S. Bank Trust National Association shall disburse to such owners or the Trustee payment of the insured amounts due on such Series 2005 Bonds, less any amount held by the Trustee for the payment of such insured amounts and legally available therefor. The Bond Insurer The Bond Insurer is the principal operating subsidiary of MBIA Inc., a New York Stock Exchange listed company (the Company ). The Company is not obligated to pay the debts of or claims against the Bond Insurer. The Bond Insurer is domiciled in the State of New York and licensed to do business in and subject to regulation under the laws of all 50 states, the District of Columbia, the Commonwealth of Puerto Rico, the Commonwealth of the Northern Mariana Islands, the Virgin Islands of the United States and the Territory of Guam. The Bond Insurer has three branches, one in the Republic of France, one in the Republic of Singapore and one in the Kingdom of Spain. New York has laws prescribing minimum capital requirements, limiting classes and concentrations of investments and requiring the approval of policy rates and forms. State laws also regulate the amount of both the aggregate and individual risks that may be insured, the payment of dividends by the Bond Insurer, changes in control and transactions among affiliates. Additionally, the Bond Insurer is required to maintain contingency reserves on its liabilities in certain amounts and for certain periods of time. The Bond Insurer does not accept any responsibility for the accuracy or completeness of this Official Statement or any information or disclosure contained herein, or omitted herefrom, other than with respect to the accuracy of the information regarding the policy and the Bond Insurer set forth under the heading BOND INSURANCE. Additionally, the Bond Insurer makes no representation regarding the Series 2005 Bonds or the advisability of investing in the Series 2005 Bonds. The Bond Insurance Policy is not covered by the Property/Casualty Insurance Security Fund specified in Article 76 of the New York Insurance Law. Information Regarding the Bond Insurer The following document filed by the Company with the Securities and Exchange Commission (the SEC ) is incorporated herein by reference: The Company s Annual Report on Form 10-K for the year ended December 31, Any documents filed by the Company pursuant to Sections 13(a), 13(c), 14 or 15(d) of the Exchange Act of 1934, as amended, after the date of the Company s most recent Quarterly Report on form 10-Q, and prior to the termination of the offering of the Series 2005 Bonds offered hereby shall be deemed to be incorporated by reference in this Official Statement and to be a part hereof. Any statement contained in a document incorporated or deemed to be incorporated by reference herein, or contained in this Official Statement, shall be deemed to be modified or superseded for purposes of this Official Statement to the extent that a statement contained herein or in any other subsequently filed document which also is or is deemed to be incorporated by reference herein modifies or supersedes such statement. Any such statement so modified or superseded shall not be deemed, except as so modified or superseded, to constitute a part of this Official Statement. The Company files annual, quarterly and special reports, information statements and other information with the SEC under File No Copies of the SEC filings (including (1) the Company s Annual Report on Form 10-K for the year ended December 31, 2004, and (2) the Company s Quarterly Reports on Form 10-Q for the quarters ended March 31, 2004, June 30, 2004 and September 30, 2004) are available (i) over the Internet at the SEC s web site at (ii) at the SEC s public reference room in Washington D.C.; (iii) over the Internet at the Company s web site at and (iv) at no cost, upon request to MBIA Insurance Corporation, 113 King Street, Armonk, New York The telephone number of the Bond Insurer is (914)

20 As of December 31, 2003, the Bond Insurer had admitted assets of $9.9 billion (audited), total liabilities of $6.2 billion (audited), and total capital and surplus of $3.7 billion (audited) determined in accordance with statutory accounting practices prescribed or permitted by insurance regulatory authorities. As of December 31, 2004, the Bond Insurer had admitted assets of $10.3 billion (unaudited), total liabilities of $6.9 billion (unaudited), and total capital and surplus of $3.3 billion (unaudited) determined in accordance with statutory accounting practices prescribed or permitted by insurance regulatory authorities. Financial Strength Ratings of the Bond Insurer Moody s Investors Service, Inc. rates the financial strength of the Bond Insurer Aaa. Standard & Poor s, a division of The McGraw-Hill Companies, Inc. rates the financial strength of the Bond Insurer AAA. Fitch Ratings rates the financial strength of the Bond Insurer AAA. Each rating of the Bond Insurer should be evaluated independently. The ratings reflect the respective rating agency s current assessment of the creditworthiness of the Bond Insurer and its ability to pay claims on its policies of insurance. Any further explanation as to the significance of the above ratings may be obtained only from the applicable rating agency. The above ratings are not recommendations to buy, sell or hold the Series 2005 Bonds, and such ratings may be subject to revision or withdrawal at any time by the rating agencies. Any downward revision or withdrawal of any of the above ratings may have an adverse effect on the market price of the Series 2005 Bonds. the Bond Insurer does not guaranty the market price of the Series 2005 Bonds nor does it guaranty that the ratings on the Series 2005 Bonds will not be revised or withdrawn. General THE SERIES 2005 BONDS The following is a summary of certain provisions of the Series 2005 Bonds. Reference is made to the Master Bond Ordinance, the Series 2005 Ordinance and the Series 2005 Bonds for the complete terms thereof and to APPENDIX A SUMMARY OF THE MASTER BOND ORDINANCE AND THE SERIES 2005 ORDINANCE for a more detailed description of such provisions. The Series 2005 Bonds will be dated their date of delivery, will be issuable as fully registered bonds in denominations of $5,000 or any integral multiple thereof and will bear interest from their date to their respective maturities in the amounts and at the interest rates set forth on the front cover of this Official Statement. Interest on the Series 2005 Bonds shall be payable on June 1 and December 1 of each year, commencing December 1, All payments of interest on the Series 2005 Bonds shall be paid to the registered owners entitled thereto by check or draft mailed to each registered owner at the address recorded on the registration books maintained by the Trustee as of the 15th day of the month prior to the Bond Payment Date. The principal of, and premium if any, on the Series 2005 Bonds are payable to the registered owners thereof, as shown on the registration books of the Authority maintained by the Trustee, upon maturity or prior redemption thereof and upon presentation and surrender thereof to the Trustee. Holders of at least $1,000,000 principal amount of the Series 2005 Bonds may request wire transfer of interest payments to a bank within the continental United States as directed by the Holder in writing to the Trustee. U.S. Bank National Association is Trustee under the Ordinance. The designated corporate trust office for its duties as Trustee is located at 535 Griswold, Buhl Building, Suite 550, Detroit, Michigan Although the 13

21 Trustee has accepted its duties as Trustee under the Ordinance, the Trustee has not reviewed this Official Statement and makes no representations as to the information contained herein. Registration and Payment The Series 2005 Bonds are issuable in fully registered form and are initially to be registered in the name of Cede & Co., as nominee for The Depository Trust Company, New York, New York ( DTC ), as securities depository for the Series 2005 Bonds. Purchases by beneficial owners of the Series 2005 Bonds ( Beneficial Owners ) are to be made in book-entry form. Payments to Beneficial Owners are to be made as described in APPENDIX C BOOK-ENTRY SYSTEM. Redemption of the Series 2005 Bonds Optional Redemption. The Series 2005 Bonds maturing on and after December 1, 2016 are subject to redemption at the option of the Authority prior to maturity on or any time after December 1, 2015, in whole or in part and by lot within a maturity in such manner as the Trustee may determine, at a redemption price of 100% of the principal amount thereof plus interest accrued to the date fixed for redemption. Mandatory Sinking Fund Redemption. The Series 2005 Bonds maturing in the years 2029 and 2034 are subject to Mandatory Sinking Fund Redemption prior to maturity, by lot in such manner as the Trustee may determine, at a redemption price of 100% of the principal amount thereof plus interest accrued to the date fixed for redemption, on December 1 of the years and in the principal amounts as follows: $76,195, % Term Bond Due December 1, 2029 Year Principal Amount December 1, 2027 $24,140,000 December 1, ,380,000 December 1, 2029* 26,675,000 $140,290, % Term Bond Due December 1, 2034 Year Principal Amount December 1, 2030 $25,050,000 December 1, ,475,000 December 1, ,985,000 December 1, ,555,000 December 1, 2034* 31,225,000 $15,000, % Term Bond Due December 1, 2034 Year Principal Amount * Final Maturity December 1, 2030 $3,000,000 December 1, ,000,000 December 1, ,000,000 December 1, ,000,000 December 1, 2034* 3,000,000 The amounts to be so redeemed may be reduced by the principal amounts of the related Series 2005 Bonds theretofore redeemed (otherwise than through operation of the Mandatory Sinking Fund Redemption described 14

22 above), or otherwise acquired and delivered to the Trustee, at least 45 days prior to the payment date for credit against the Mandatory Sinking Fund Redemption described above and shall be applied in direct order of date of redemption. Extraordinary Redemption. The Series 2005 Bonds are subject to redemption at the option of the Authority, at any time, in whole or in part (by lot in such manner as the Trustee may determine), in the event of destruction or taking of or damage to the Airport; but only if (i) the Airport has been restored to substantially the same condition as prior to such damage, destruction or taking and excess Net Proceeds remain; or (ii) the Authority has determined that the portion of the Airport damaged, destroyed or taken is not necessary to the operation of the Airport and that the failure of the Authority to repair and restore the same will not impair or otherwise adversely affect the revenue-producing capability of the Airport; or (iii) the Airport Consultant cannot provide a statement that Net Proceeds, together with other funds made available or to be made available by the Authority, are projected to be sufficient to pay the costs of the replacement, repair, rebuilding or restoration of the Airport. Such redemption shall be at a price equal to the principal amount of the Series 2005 Bonds to be redeemed plus interest accrued to the date fixed for redemption. Surplus Bond Proceeds Redemption for Series 2005 Bonds. The Series 2005 Bonds are subject to mandatory redemption at any time from surplus bond proceeds in the event the Authority determines not to use such proceeds to pay the costs of making capital improvements to the Airport. In such event, the Series 2005 Bonds shall be redeemed on the first date for which the requisite notice of redemption can be given at a price equal to the principal amount of the Series 2005 Bonds to be redeemed plus interest accrued to the date of redemption. Order of Redemption. In the event of a redemption in each case as described above, if less than all of the Outstanding Series 2005 Bonds are to be redeemed, the Trustee shall give notice, in the name of the Authority, of the Series 2005 Bonds to be redeemed, specifying the maturity thereof, selected by lot in such manner as the Trustee may determine, and, if such bonds are Term Bonds, the years in which sinking fund requirements are to be reduced as a result of such redemption and the amounts of such reductions. The Trustee shall redeem the Outstanding Series 2005 Bonds in such order of maturity as the Authority shall specify. Notice of Redemption. Notice of redemption will be mailed by the Trustee to each owner of Series 2005 Bonds whose Series 2005 Bonds are to be redeemed. Notice of redemption shall be given not less than 30 days prior to the date set for redemption. Failure to give notice in the manner described with respect to any Series 2005 Bond, or any defect in such notice, will not affect the validity of the redemption proceedings for any Series 2005 Bond with respect to which notice was properly given. To the extent that Cede & Co. is the registered owner for DTC, the Authority or the Trustee shall send such notice to DTC as registered owner. DTC will be responsible for notifying the Participants who in turn will forward such notice to the Beneficial Owners. See APPENDIX C BOOK-ENTRY SYSTEM. Unless the Trustee has funds on hand available to pay the redemption price of the Series 2005 Bonds to be redeemed, the effectiveness of the redemption shall be conditioned on the receipt by the Trustee of such funds on or before the redemption date. In case less than the full amount of an outstanding Bond is called for redemption, the Trustee upon presentation of the Series 2005 Bond called in part for redemption shall register, authenticate and deliver to the registered owner a new Series 2005 Bond in the principal amount of the portion of the original Series 2005 Bond not called for redemption. 15

23 DETROIT METROPOLITAN WAYNE COUNTY AIRPORT General The Airport is the primary air carrier airport serving southeastern Michigan and also serves portions of Ontario, Canada and northwestern Ohio. According to statistics compiled by ACI, in calendar year 2003, the Airport was the 10th busiest airport in the United States in terms of both total passengers and total operations. According to Authority records, the Airport had 17,608,113 enplaned passengers in calendar year 2004, and 16,359,665 enplaned passengers in calendar year 2003, representing a 7.6% increase year over year. The Airport serves a large origin and destination market and is a major connecting hub in the route system of Northwest. Northwest and its regional affiliates Mesaba and Pinnacle together accounted for approximately 78.9% of the total enplaned passengers at the Airport in Operating Year 2004 and approximately 77.2% in Operating Year Northwest, Mesaba and Pinnacle passengers represented 79.1% of total enplaned passengers in calendar year The Airport also is a major international gateway with significant air service to points in Asia, Europe and Canada. The Airport Service Region The Airport Service Region for the Airport (also referred to herein as the Region ) consists of the tencounty Detroit - Ann Arbor - Flint Consolidated Metropolitan Statistical Area (Genesee, Lapeer, Lenawee, Livingston, Macomb, Monroe, Oakland, St. Clair, Washtenaw and Wayne Counties). The Airport Service Region represented the eighth most populous metropolitan area in the United States in the 2000 Census. The area served by the Airport is classified as a large hub by the FAA. The Airport Service Region is illustrated on the following page. 16

24 AIRPORT SERVICE REGION DETROIT METROPOLITAN WAYNE COUNTY AIRPORT ROAD MILES FROM DETROIT TO: Cleveland 173 Fort Wayne 160 Lansing 85 Toledo 60 Flint 55 La ke Mi ch ig an MICHIGAN Flint Lansing Fort Wayne Lake Huron Detroit Toledo Lake Erie Cleveland CANADA INDIANA OHIO Lake Huron GENESEE LAPEER ST. CLAIR Flint 69 Port Huron Bishop Int l Airport LIVINGSTON Pontiac 96 OAKLAND Willow Run Airport Livonia 10 MACOMB Sterling Heights Warren Detroit 94 Lake St. Clair Detroit City Airport ONTARIO, CANADA 94 Ann Arbor WASHTENAW Ypsilanti WAYNE Dearborn Windsor Airport Windsor ONTARIO, CANADA County Boundary LENAWEE State/International Boundary MONROE 23 OHIO N Detroit Metropolitan Wayne County Airport Lake Erie 14 Willow Run Airport 275 Livonia WAYNE Westland Wayne 96 Dearborn Heights Romulus Taylor Detroit City Airport Dearborn Allen Park Detroit 94 Air Carrier Airport Commuter Airport/ General Aviation/Other Approximate Scale In Miles 94 Belleville Detroit Metropolitan Wayne County Airport 75 17

25 Management of the Airport The Board. The Authority is governed by a seven-member Board. The Authority Act requires that two Board members be appointed by the Governor of the State, one Board member be appointed by the Wayne County Board of Commissioners and four Board members be appointed by the Chief Executive Officer of the County. The current members of the Board are: Vernice Davis Anthony, Chairperson of the Authority, is President and Chief Executive Officer of the Greater Detroit Area Health Council. Ms. Anthony previously served as Senior Vice President for corporate affairs and community health at St. John Health System. In the health care and public health field, Ms. Anthony has held executive positions at the state and local level including serving as director of the County s Health Department, as well as holding positions with the City of Detroit Health Department. Ms. Anthony lives in Detroit, Michigan. Her four-year term on the Authority Board concludes in Michael M. Glusac, Vice-Chairperson of the Authority, is a senior advisor and past president of Detroit Renaissance. He served as Vice President of Government Affairs for the Chrysler Corporation, with responsibility for community relations and analysis of state and local government issues. Mr. Glusac is an attorney and has also served as executive director of SEMCOG and as president of the Michigan Municipal League. Mr. Glusac s sixyear term on the Authority Board concludes in He resides in Grosse Pointe Farms, Michigan. David L. Treadwell, Secretary of the Authority, is currently Chief Executive Officer of Oxford Automotive, Inc., a leading Tier 1 supplier of specialized welded metal assemblies and related services. Mr. Treadwell is the former President and Chief Executive Officer of Heritage Development, and the former Chairman and Chief Executive Officer of ASC Incorporated and President/Chief Executive Officer of Prechter Holdings. He serves as a board member of several public and private companies. Mr. Treadwell is a resident of Canton, Michigan. His term on the Authority Board expires in Edward A. Boike, Jr. is the County Commission s representative to the Board, and has served in such capacity since January 29, Mr. Boike has represented District 15 on the County Commission since 1988 and currently serves as the Chairman of the Committee on Environment, Drains and Sewers and Task Force on Noise Mitigation. He is Vice-Chair of the Health and Human Services Committee and serves on the Public Services and Rules Committee. Commissioner Boike, who resides in Taylor, Michigan, is also a member of the County Drainage Board, Health Choice of Wayne County, the County Solid Waste Planning Committee, Michigan Hazardous Waste Site Review Board, Wetlands Preservation Fund Executive Committee and the County Food Service and Sanitation Board. His term on the Authority Board expires in Wayne S. Doran is the former chairman of Ford Motor Land Development Corporation, and has significant experience in both strategic and operational aspects of real estate development. He also is a trustee for the Urban Land Institute and the National Realty Committee. Mr. Doran is a resident of Dearborn, Michigan. His six-year term on the Authority Board concludes in James B. Nicholson is President, Chief Executive Officer and principal shareholder of PVS Chemicals, Inc., an international manufacturer and marketer of water treatment and other chemical products. Before joining PVS in 1972, Mr. Nicholson held positions at the First National Bank of Chicago offices in London, England and Dublin, Ireland. Mr. Nicholson has served on the Huron Clinton Metropolitan Authority and the council of the graduate school of business at the University of Chicago, and is affiliated with the YMCA of Metropolitan Detroit and United Way Community Services. He lives in Grosse Pointe Farms, Michigan. Mr. Nicholson s eight-year term on the Authority Board concludes in James Settles, Jr. is the Director of UAW Region 1A, and has been with the UAW since 1968 when he joined UAW Local 600. Mr. Settles is a lifetime member of the NAACP and a member of the Coalition of Black Trade Unionists. Mr. Settles also serves as a Precinct Delegate and Board member of the Henry Ford Community College Employment and Training Development Center; the Detroit Public School Compact Association at McMichael Middle School and the North Rosedale Park Civic Association. Mr. Settles is a resident of Detroit, 18

26 Michigan. In November 2004, Mr. Settles was reappointed to the Authority Board by the Chief Executive Officer of the County for a term concluding in Board members serve without compensation for six-year terms, but may not serve for more than two terms. Other than Mr. Settles, who recently completed his initial term on the Authority Board and was re-appointed, the current Board appointees are serving for initial terms of different lengths in order to stagger the terms. The Board must meet not less than quarterly each year, and all meetings must be held in compliance with the Michigan Open Meetings Act. The Board appoints a Chief Executive Officer, who is responsible for, among other things, the dayto-day operation of the Airports, including the control, supervision, management and oversight of the functions of the Airports. The Board provides for the annual auditing of the accounts of the Authority to be performed by independent auditors. The Board appoints an audit committee of three Board members to supervise this process. The audit committee is to meet at least four times each year with the Chief Executive Officer, the Chief Financial Officer (who is appointed by the Chief Executive Officer) and the Authority s independent public auditors to review the financial condition, operations, performance and management of the Authority and the Airport. In addition, the Chief Executive Officer appoints an internal auditor to evaluate the Authority s internal accounting and administrative control system and conduct audits relating to the Authority s financial activities. Authority Staff. Lester W. Robinson is the Chief Executive Officer of the Authority. Mr. Robinson assumed this position upon the creation of the Authority in March 2002, and is responsible for the overall management and operations of the Airport and Willow Run Airport. Mr. Robinson was the Director of the County s Department of Airports from 2000 until its transfer to the Authority. Mr. Robinson previously served as President of Capital Financial Advisors International LLC, Assistant County Executive for the County, Chief of Staff for the Office of the County Executive, Chief Financial Officer for the County, Deputy Director Administration and Finance for the County Department of Airports, Auditor General for the County Commission, President and Chief Executive Officer of First Independence Corporation, Vice President of First of Michigan Corporation, and Staff Auditor and Senior Auditor of Ernst & Ernst and Coopers & Lybrand, respectively. Mr. Robinson received a B.A. in Business Administration from Michigan State University. Daniel O. Kerber is the Executive Vice President of Operations for the Authority. Mr. Kerber is responsible for the maintenance, environmental, police, security, fire/rescue, human resources, emergency management and airfield certification functions at both the Airport and Willow Run Airport. Mr. Kerber served as the Deputy Director of Airports Operation and Public Safety for the Airports from 1985 until the transfer of the Airports to the Authority. Mr. Kerber also served as the Assistant Director of Administration for the Wayne County Department of Public Services and as a Deputy Sheriff for the Sarasota County Sheriff s Department and for the Wayne County Sheriff s Department. Mr. Kerber received a B.A. from Madonna University and an M.A. in Liberal Studies from Eastern Michigan University. Thomas J. Naughton has served as the Senior Vice President of Finance and Chief Financial Officer for the Authority since its formation in Mr. Naughton was the Chief Financial Officer of the County from 1995 until 2002, and the Deputy Chief Financial Officer of the County from 1988 to He is responsible for overseeing the financial activities of the Airport. Mr. Naughton is a CPA with over 20 years of financial experience. Prior to his work for the County, Mr. Naughton was a Senior Manager, Audit for Ernst & Young LLP and a Senior Auditor for Derderian, Kann, Seyferth & Salucci. Mr. Naughton received a B.A. in Business Administration from Michigan State University. Genelle Allen has served as the Senior Vice President of Procurement/Performance Management and Contract Compliance for the Authority since Ms. Allen oversees the Authority s Purchasing Division, which is responsible for the procurement of all goods and services for all Authority departments and divisions. Ms. Allen also oversees and manages the approval of all Authority contracts, and the Authority s strategic plan, as well as standard operating procedures for the Authority s departments and divisions. Ms. Allen served as one of the Airport s in-house legal counsel from 1997 until assuming her present position. Ms. Allen previously served as a Supervising Assistant Corporation Counsel for the Municipal Affairs Section and Senior Assistant Corporation Counsel for the Real Property Section for the City of Detroit Law Department. Ms. Allen served as in-house legal counsel for the Cleveland Hopkins International Airport and Burke Lakefront Airport in Cleveland, Ohio prior to 19

27 practicing in the Detroit area. Ms. Allen received a B.A. from Wayne State University and a J.D. from the University of Detroit Mercy School of Law. Robert E. Murphy is the Senior Vice President of Facilities Management and Construction for the Authority. Mr. Murphy served as General Counsel of the Authority from its formation in 2002 until April 2004, and as Airport General Counsel for the County from 1983 until the transfer of the Airport to the Authority. From 1978 until 1983, Mr. Murphy was Airport General Counsel for the County Road Commission. Mr. Murphy began as an attorney for the County Road Commission in Mr. Murphy received a B.S. in Mechanical Engineering from Michigan State University and a J.D. from the University of Michigan. Emily K. Neuberger has served as Senior Vice President and General Counsel for the Authority since April Before joining the Authority, Ms. Neuberger was a partner at the law firm of Foley & Lardner LLP from 2001 to 2004, and Hopkins & Sutter from 1988 until its 2001 merger with Foley & Lardner LLP. Ms. Neuberger joined Hopkins & Sutter in 1982 after receiving a J.D. from Northwestern University School of Law. While in private practice, Ms. Neuberger represented the interests of airport operators, including the County and the Authority, in a variety of legal matters, and also represented other aviation industry participants primarily in connection with the issuance of debt for airport capital development. Ms. Neuberger received a B.A. from the University of Rochester in New York, and an M.A. from Western Michigan University. John W. Vogel has served as the Senior Vice President of Business Development and Management for the Authority since March Prior to that time, Mr. Vogel was President of Quality Concessions Ltd., a hospitality consulting company. Mr. Vogel previously held several positions with Host Marriott Services, serving as Vice President, Business Development in 1999, Vice President of Operations/Duty Free Division Department from 1994 to 2000 and Area General Manager, Inflight Catering Division Department Head from 1989 to Mr. Vogel received a degree in Hotel Restaurant Management from St. Louis Community College. Airport Facilities The Airport is located in the City of Romulus, County of Wayne, Michigan, approximately 20 miles by road southwest of the central business district of the City of Detroit. The Airport currently provides passenger services from three terminal buildings (the McNamara Terminal, the Smith Terminal and the Berry International Terminal). The Airport has four north-south runways in the primary wind direction and two east-west crosswind runways. Of the twelve current runway approaches, seven are equipped with precision instrument landing systems. The newest runway, operational since December 2001, is equipped with precision instruction landing systems for both runway approaches. Airport Activity Enplanements. The Airport had 17,608,113 enplaned passengers in calendar year According to ACI, the Airport was the 10 th busiest airport in the United States in calendar year 2003 in terms of both passengers and operations. Between calendar year 1995 and calendar year 2004, enplanements at the Airport grew at an average annual rate of approximately 2.3%, outpacing the 0.8% average annual growth rate of enplaned passengers in the United States for the same period. In Operating Year 2004, 17,316,780 million passengers were enplaned at the Airport, representing an increase of 6.4% from the number of enplaned passengers in Operating Year Enplanements in Operating Year 2003 increased 4.4% from the number of enplaned passengers in Operating Year Enplanements in Operating Year 2002 were 8.7% less than enplanements in Operating Year 2001, which ended just 19 days after September 11, In Operating Year 2004, Northwest and its regional affiliates (Mesaba and Pinnacle) accounted for approximately 78.9% of total enplaned passengers at the Airport, an increase of 1.7% from Operating Year The share of total enplanements at the Airport accounted for by international passengers decreased from 9.3% in Operating Year 1995 to 8.0% in Operating Year In Operating Year 2004, Northwest and Mesaba together accounted for approximately 80.9% of the total international enplanements at the Airport. 20

28 2004: The following table presents enplaned passenger traffic at the Airport for Operating Years 1995 through HISTORICAL ENPLANED PASSENGERS Operating Year 1995 Operating Year 2004 Operating Year (a) Domestic International Grand Total Percent Increase/ (Decrease) ,782,646 1,308,600 14,091, ,288,325 1,546,492 14,834, ,717,691 1,559,958 15,277, (b) 13,842,081 1,431,158 15,273, ,790,071 1,860,731 17,650, ,844,935 15,283,829 1,887,432 1,797,767 17,732,367 17,081, (3.7) ,345,141 1,247,416 15,592,557 (8.7) ,932,413 15,928,628 1,345,820 1,388,152 16,278,233 17,316, (a) Operating Year is December 1-November 30 for Operating Year Starting in Operating Year 1998, Operating Year begins October 1 and ends September 30. (b) Operating Year 1998 is a shortened (10-month) year. Additionally, Airport traffic was adversely affected by Northwest s labor strike of August-September Source: Wayne County Airport Authority records. The following table presents monthly enplanements at the Airport from January 2000 through December The enplanements at the Airport in January of 2005 were 1,266,

29 MONTHLY ENPLANEMENTS AT THE AIRPORT SINCE JANUARY (01 vs. 00) (02 vs. 00) (03 vs. 00) (04 vs. 00) January 1,226,302 1,210,593 1,016,264 1,173,346 1,155,372 (1.3)% (17.1)% (4.3)% (5.8)% February 1,332,369 1,266,476 1,134,444 1,205,666 1,256,854 (4.9) (14.9) (9.5) (5.7) March 1,607,644 1,559,679 1,477,325 1,414,642 1,518,663 (3.0) (8.1) (12.0) (5.5) April 1,540,971 1,505,764 1,325,948 1,324,298 1,496,559 (2.3) (14.0) (14.1) (2.9) May 1,542,945 1,518,544 1,392,887 1,353,615 1,462,965 (1.6) (9.7) (12.3) (5.2) June 1,607,484 1,589,364 1,461,898 1,453,236 1,595,894 (1.1) (9.1) (9.6) (0.7) July 1,627,740 1,644,276 1,542,962 1,557,933 1,685, (5.2) (4.3) 3.5 August 1,631,782 1,667,483 1,569,569 1,473,098 1,615, (3.8) (9.7) (1.0) September 1,406, ,929 1,245,814 1,271,346 1,397,314 (35.5) (11.4) (9.6) (0.7) October 1,502,142 1,124,009 1,370,932 1,425,996 1,525,239 (25.2) (8.7) (5.1) 1.5 November 1,402,823 1,131,763 1,277,570 1,282,260 1,432,174 (19.3) (8.9) (8.9) 2.1 December 1,307,523 1,169,674 1,402,551 1,425,996 1,466,405 (10.5) Total 17,736,548 16,294,554 16,218,164 16,359,665 17,608,113 (8.1)% (8.6)% (7.8)% (0.7)% Source: Wayne County Airport Authority records. 22

30 Originating and Connecting Passenger Activity. The Airport served 6,266,720 domestic originating passengers in calendar year The number of domestic originating enplaned passengers at the Airport increased an average of 1.1% per year between calendar years 1994 and 2003, and represented 44.3% of domestic enplaned passengers in calendar year After several years of decline following calendar year 2000, the number of domestic originating passengers enplaned in calendar year 2004 is forecast (based on three calendar quarters of actual data) to surpass calendar year 2003 levels. Domestic connecting passenger enplanements at the Airport increased an average of 3.4% per year between calendar years 1994 and In calendar year 2003, domestic connecting passengers accounted for approximately 55.7% of total domestic enplanements at the Airport. Domestic connecting traffic is forecast (based on three calendar quarters of actual data) to reach 8,589,800 enplaned passengers in calendar year 2004, the highest level in Airport history. Northwest and its affiliates accounted for 96.7% of total Airport connecting traffic in calendar year HISTORICAL DOMESTIC ORIGINATIONS AND CONNECTIONS Calendar Year 1994 Calendar Year 2004 Domestic Originations Domestic Connections Calendar Year Number % of Total Number % of Total ,677, ,827, ,050, ,301, ,323, ,781, ,567, ,029, ,764, ,845, ,229, ,848, ,627, ,637, ,736, ,323, ,327, ,695, ,266, ,893, (a) 6,958, ,589, Sources: U.S. Department of Transportation Origin & Destination Passenger Ticket Survey, 298c Commuter Data, and Airport Activity Statistics of Certificated Route Air Carriers, T100. (a) Estimated based on actual data through first three quarters of calendar year

31 Airlines Providing Service at the Airport As of January 31, 2005, the Airport was served by 21 scheduled U.S. passenger airlines, four foreign flag airlines, two cargo airlines and several charter airlines. Scheduled U.S. Passenger Airlines Air Wisconsin (United Express) America West Airlines* American Airlines* American Eagle Atlantic Southeast Airlines (Delta Connection) Comair (Delta Connection) CommutAir (Continental Express) Continental Airlines* Delta Air Lines* ExpressJet (Continental Express) Independence Air Mesa Airlines (United Express/US Airways Express) Mesaba Airlines* (Northwest Airlink) MidAtlantic Airways (US Airways Express) Northwest Airlines* PSA Airlines (US Airways Express) Piedmont Airlines (US Airways Express) Pinnacle Airlines* (Northwest Airlink) SkyWest Airlines (United Express) Spirit Airlines* Southwest Airlines* Trans States Airlines (US Airways Express) United Airlines* Foreign Flag Airlines Air Canada British Airways* Lufthansa German Airlines* Royal Jordanian Cargo Airlines Federal Express* United Parcel Service* Charter Airlines Champion Air Ryan International Trans Meridian USA3000 US Airways* * Signatory Airline. KLM Royal Dutch Airlines is a Signatory Airline, but currently is not operating at the Airport. 24

32 Northwest Airlines. Northwest is the dominant air carrier operating at the Airport, which serves as a primary connecting passenger hub in Northwest s route system. Northwest currently preferentially leases all of the domestic gates (currently 62 jet gates and 25 commuter gates) in the McNamara Terminal, and on a shared use basis with other international air carriers leases the 10 international gates in the McNamara Terminal. Northwest, together with its regional affiliates Mesaba and Pinnacle, accounted for 78.9% of passenger enplanements at the Airport in Operating Year 2004, and 79.8% in the first 3 months of Operating Year No other airline accounted for more than 5.0% of passenger enplanements at the Airport in Operating Year In Operating Year 2004, Northwest and its regional affiliates Mesaba and Pinnacle together accounted for approximately 74.8% of the aggregate airline rentals and Activity Fees component of the Airport s operating revenues. In its annual report to the SEC for the year ended December 31, 2004, Northwest Airlines Corporation ( NWA Corporation ), Northwest s indirect parent, reported a net loss applicable to common stockholders of $891 million (or $10.32 per common share), compared with net income of $236 million (or $2.62 per diluted common share) for the year ended December 31, An operating loss of $505 million was reported in 2004, compared with an operating loss of $265 million in Operating revenues for the year ended December 31, 2004 were $1.2 billion greater than the year ended December 31, For additional information regarding NWA Corporation and Northwest, see the Form 10-K for the fiscal year ended December 31, 2004 and other reports and information filed subsequent to December 31, 2004 by NWA Corporation with the SEC as described under THE AIRLINE INDUSTRY Airline Information below. The Authority has no information regarding the financial condition of Northwest other than from SEC filings and press releases of NWA Corporation. No assurance can be given concerning the present or future viability of NWA Corporation or Northwest. 25

33 Comparative market share information for airlines based on enplaned passengers for Operating Years 1995 and 2004 is shown in the following table. DOMESTIC AND INTERNATIONAL AIRLINE MARKET SHARES Detroit Metropolitan Wayne County Airport Operating Year 1995 and Operating Year 2004 Operating Year 1995 Percent of Total Percent of Market Operating Year 2004 Percent of Total Percent of Market AIRLINE Domestic America West Airlines 0.0% 0.0% 215, % 1.4% American Airlines 457, , American Trans Air 133, , Atlantic Coast Airlines , Atlantic Southeast Airlines , Business Express 19, Comair Airlines 42, , Continental Airlines 215, , Continental Express 44, , Delta Air Lines 354, , Independence Air , Mesaba Airlines 482, , Northwest Airlines 9,082, ,367, Pinnacle Airlines ,201, Southwest Airlines 521, , Spirit Airlines 158, , Sun Country 72, Trans World Airlines 255, United Airlines 401, , United Express 11, , US Airways 289, , US Airways Express 3, , ValuJet 51, Other 34, , Charter 152, , Subtotal-Domestic 12,782, % 100.0% 15,928, % 100.0% International American Trans Air 69, % 5.3% 1, % 0.1% British Airways 50, , Delta Air Lines 3, KLM-Royal Dutch Airlines 115, Lufthansa German Airlines , Mesaba Airlines 15, , Northwest Airlines 1,001, ,100, Sun Country 1, US Airways Other 1, , Charter 50, , Subtotal-International 1,308, % 100.0% 1,388, % 100.0% Total Enplanements 14,091, % 17,316, % Total may not add due to rounding. Source: Wayne County Airport Authority records. 26

34 AIRPORT FINANCIAL INFORMATION Airport Indebtedness General. Capital improvements at the Airport have been financed through the issuance of Senior Lien Bonds, Junior Lien Bonds, other indebtedness, PFCs, federal grants and other Airport funds. Such other indebtedness issued to finance capital improvements at the Airport includes Special Facility Revenue Bonds. In addition, to support the Authority s working capital needs at the Airport, the Authority has a $15,000,000 line of credit with Bank One. To date, the Authority has not drawn on such line of credit. After the issuance of the Series 2005 Bonds, the Authority will have outstanding $2,171,985,000 aggregate principal amount of Senior Lien Bonds and $89,180,000 aggregate principal amount of Junior Lien Bonds. The Series designations and outstanding principal amounts of these bonds are set forth below. The claim of Senior Lien Bonds to Net Revenues is senior to the Junior Lien Bonds. Senior Lien Bonds Outstanding Principal Amount Series 1994A $ 12,185,000 Series 1996A 49,110,000 Series 1996B 49,110,000 Series 1998A 807,850,000 Series 1998B 153,535,000 Series 2002A 141,720,000 Series 2002C 26,235,000 Series 2002D 76,030,000 Series 2003A1 75,000,000 Series 2003A2 75,000,000 Series 2003A3 64,975,000 Series 2003B 71,575,000 Series 2003C 50,950,000 Series ,575,000 Series ,135,000 Total $2,171,985,000 Junior Lien Bonds Outstanding Principal Amount Series 2001 $ 89,180,000 Total $ 89,180,000 27

35 Debt Service Requirements. The following table sets forth the annual debt service requirements accruing in each Bond Year on the outstanding Senior Lien Bonds and the Junior Lien Bonds, and the estimated annual debt service requirements accruing in each Bond Year on the Series 2005 Bonds: Bond Year Ending December 1 Outstanding Senior Lien Series 2005 Bonds 1 Bonds Total Outstanding Senior Lien Bonds Outstanding Junior Lien Bonds 2 Total Debt Service 2005 $ 119,105,895 $ 16,288,336 $ 135,394,231 $ 3,900,150 $ 139,294, ,320,307 25,718, ,038,732 3,895, ,934, ,142,505 25,718, ,860,930 3,891, ,752, ,484,762 25,718, ,203,187 92,667, ,870, ,147,326 35,308, ,455, ,455, ,085,548 35,335, ,420, ,420, ,911,725 35,341, ,253, ,253, ,482,478 35,351, ,834, ,834, ,176,047 35,386, ,562, ,562, ,092,506 35,396, ,488, ,488, ,609,428 35,408, ,017, ,017, ,243,615 35,426, ,670, ,670, ,371,735 35,457, ,829, ,829, ,276,735 35,438, ,715, ,715, ,136,767 35,452, ,589, ,589, ,289,716 35,510, ,800, ,800, ,941,294 35,548, ,490, ,490, ,598,702 35,562, ,161, ,161, ,458,911 35,591, ,050, ,050, ,427,023 35,617, ,044, ,044, ,490,146 35,648, ,138, ,138, ,389,834 35,675, ,065, ,065, ,323,105 35,676, ,999, ,999, ,225,135 35,709, ,934, ,934, ,123,264 35,735,750 57,859, ,859, ,963,666 35,777,000 57,740, ,740, ,806,976 35,807,000 57,613, ,613, ,616,906 35,850,750 57,467, ,467, ,178,680 35,879,000 50,057, ,057, ,928,750 35,928, ,928,750 $2,818,420,735 $1,018,268,161 $3,836,688,896 $104,355,100 $3,941,043,996 Source: Wayne County Airport Authority records for the Outstanding Senior Lien Bonds and Junior Lien Bonds, and Citigroup Global Markets Inc. for the Series 2005 Bonds. 1 Debt service requirements for the Outstanding Series 1996 Bonds, which were issued on a variable rate basis, are stated using a restructured synthetic fixed swap rate of 5.25% plus.40% for liquidity fees,.075% for remarketing fees and $20,000 annually for rating agency fees. Debt service requirements for the Outstanding Series 2002A Bonds, which were issued on a variable basis, are stated using an interest rate of 4.00%, plus.40% for liquidity facility fees,.075% for remarketing fees and $10,000 annually for rating agency fees. Debt service requirements for the Series 2003 Bonds are stated using assumed interest rates of 4.00% for the Series 2003A Bonds, 3.58% for the Series 2003B Bonds and 3.43% for the Series 2003C Bonds, plus.255% for broker dealer / auction agent fees. Debt service requirements for the Series 2004 Bonds are stated using assumed interest rates of 4.097% plus.255% for broker dealer / auction agent fees. 2 Debt service requirements for the Outstanding Junior Lien Bonds, which were issued on a variable rate basis, are stated using an interest rate of 4.00%, plus.175% for liquidity facility fees,.075% for remarketing fees and $10,000 annually for rating agency fees. The Authority is repaying the principal of the Junior Lien Bonds with funds received under its FAA letter of intent. Note: Totals may not add due to rounding. 28

36 PFC Revenues. The Authority transfers PFC revenues monthly to the Bond Fund for the purpose of paying Debt Service. Hedging Program The Authority has adopted an interest rate swap management plan and an associated debt management plan for the purpose of managing its overall debt service by maintaining a portion of its outstanding debt in conventional fixed-rate form, a portion of its outstanding debt in variable-rate form, and a portion of its outstanding debt in synthetic fixed-rate form. In furtherance of such plans, the Authority presently is a party to interest rate swap agreements (the Swap Agreements ) with respect to its Airport Revenue Refunding Bonds, Series 1996, Series 2003B, Series 2003C and Series The net effect of the Swap Agreements is that the Authority pays a fixed rate of interest to the counterparties under the Swap Agreements and the counterparties pay a variable rate of interest to the Authority. Excluding certain swap agreements which adjust variable rates from a Bond Market Association index to a LIBOR-based index, the current aggregate notional amount subject to the Swap Agreements is $232,329,000. Swap Agreement payments made by the Authority are secured by Net Revenues on a subordinated basis to Bonds and on parity with Junior Lien Bonds, except for the Authority s payment obligations under two Swap Agreements which became effective in 1996 with respect to portions of the Airport Revenue Refunding Bonds, Series 1996, maturing through 2008, which are secured by a pledge of the Bond Fund. See SECURITY FOR THE SERIES 2005 BONDS Flow of Funds herein. Financial Operations Historical Operating Results. The audited financial statements of the Airport for the Operating Year ended September 30, 2004, together with the report of KPMG LLP, independent auditors, relating thereto, are included herein as APPENDIX F. The following table sets forth historical operating results of the Airport for Operating Years 2000 through 2004 under accounting principles generally accepted in the United States. 29

37 HISTORICAL OPERATING RESULTS Detroit Metropolitan Wayne County Airport For Operating Years Ended September 30 (in thousands of dollars) Operating revenues: Landing and related fees $ 51,759 $ 68,905 $ 81,045 $ 82,294 $ 88,446 Concession fees 38,755 35,184 36,158 41,654 42,570 Parking fees 35,516 33,721 29,858 32,806 38,842 Rental facilities 28,355 24,440 30,772 37,959 36,028 Expense recoveries and other 7,942 8,581 8,755 12,255 9,341 Total operating revenues 162, , , , ,227 Operating expenses: Salaries, wages, and fringe benefits 49,215 53,763 60,310 60,729 60,239 Parking management expense 13,248 14,203 15,594 15,758 9,726 Janitorial services 5,239 4,879 5,336 5,467 3,419 Security 1,857 1,856 3,525 3,771 3,324 Utilities 11,570 10,251 12,951 18,829 19,331 Supplies, repairs, and other 45,976 40,117 59,390 68,157 87,233 Depreciation 35,405 36,267 60,703 93,586 95,070 Total operating expenses 162, , , , ,342 Operating Income (Loss) (183) 9,495 (31,221) (59,329) (63,115) Non-operating revenues (expenses): Passenger facility charges 45,997 43,774 61,056 63,370 67,902 Federal and state grants 1, ,303 8,478 10,046 Interest income and other 60,962 43,786 8,270 6,197 7,001 Interest expense (63,891) (57,037) (61,199) (82,004) (77,030) Amortization of bond issuance costs (1,310) (1,251) (1,526) Total non-operating revenue 44,275 31,243 13,120 (5,210) 6,393 Net loss before capital contributions and transfers 44,091 40,738 (18,101) (64,537) (56,723) Capital contributions ,529 38,341 23,249 57,961 Amortization of contributed capital 1 18,116 18,116 Operating transfers (1,993) Changes in net assets 62,207 82,383 20,240 (41,288) (755) Net assets beginning of year 363, , , , ,404 Net assets end of year $426,126 $508,509 $755,692 $714,404 $713,649 Sources: Audited Financial Statements of the Authority and Authority records. 1 During Operating Year 2001, the Authority adopted the provisions of Governmental Accounting Standards Board Statement No. 33 which requires capital contributions be recognized as revenues and not as contributed capital. Operating Year 2000 has not been restated. 30

38 The financial information presented above is prepared in accordance with accounting principles generally accepted in the United States using the full accrual basis of accounting. Depreciation expense is determined in accordance with the Authority s accounting policies, which provide for straight-line depreciation over the estimated useful lives of the assets acquired. The portion of the cost of capital assets that has been financed from bond proceeds is recovered, and revenue recognized, for accounting purposes, as bond principal is retired. These timing differences may lead to significant operating losses, when calculated in accordance with accounting principles generally accepted in the United States, during the years immediately following a significant capital expansion program, as was the case in Operating Years 2002, 2003 and 2004 (see table above). In 2002, the Authority placed a new terminal building and runway into service and recorded one-half year s depreciation on those assets. In 2003, the Authority recorded a full year s depreciation on those assets in accordance with its accounting policies. Depreciation expense, however, is not considered in calculating required Activity Fees using the Authority s residual rate setting methodology. The difference between the funding requirements for related bond principal and recorded depreciation expense contributed to the operating losses reported in 2002, 2003 and The Authority expects that this trend will reverse in future years as the funding requirements for bond principal increase. Similarly, capital contributions and PFCs are not considered Revenues under the Master Bond Ordinance, or the Airline Agreements for purposes of the residual methodology for calculating Activity Fees. However, PFCs are included as a credit in the residual Activity Fee calculation as the Authority transfers PFCs, monthly, into the Bond Fund to pay eligible Debt Service. Interest earnings on the Construction Fund and Bond Fund accounts are applied in accordance with the Master Bond Ordinance. Airline Revenue Requirement. The Master Bond Ordinance requires the Authority to adopt, prior to the commencement of each Operating Year, a budget covering the Operation and Maintenance Expenses of the Airport, the Debt Service payable on Senior Lien Bonds and Junior Lien Bonds, and other known monetary requirements of the Master Bond Ordinance and the Airport for such Operating Year. The Airline Agreements with the Signatory Airlines require the Authority to provide the Signatory Airlines with a projection of rentals and the Activity Fee rate for each Operating Year at least 60 days prior to the beginning of the Operating Year. As described in APPENDIX D SUMMARY OF THE AIRLINE AGREEMENTS, airline rates, fees and charges currently are calculated based on an Airport-wide residual rate setting methodology, with fixed terminal rental rates. Following the end of each Operating Year, the Authority must provide the Signatory Airlines with a report of rentals and Activity Fees actually chargeable for such year based on actual data for the year. The Signatory Airlines are required to pay additional amounts owed, and the Authority is required to refund airline overpayments, if the rates on which Signatory Airline Activity Fee payments had been based during the year were either too low or too high based on actual data. See APPENDIX D. The following table sets forth the Airport s operating results for Operating Year 2003 and Operating Year 2004, its budget for Operating Year 2005 (approved by the Authority Board on September 29, 2004), and the Authority s forecast for Operating Year 2005 as of December 31, 2004, in each case shown on the basis of the residual airline rate-making methodology under the Airline Agreements. The Operating Year 2003 results shown in the table below do not take into account retroactive adjustments made as a result of recalculations of the Activity Fee rate for years 1994 through These adjustments related primarily to investment income on the Bond Reserve Account, which were booked in Operating Year 2003 and are reflected in the Historical Operating Results table above. 31

39 OPERATING REVENUES AND OPERATING AND NON-OPERATING EXPENSES DETROIT METROPOLITAN WAYNE COUNTYAIRPORT For Operating Years 2003, 2004 and 2005 OY 2003 Actual OY 2004 Actual OY 2005 Budget OY 2005 Forecast Operating Revenues: Airline revenues: Airport landing and related fees $ 85,814,545 $ 88,446,344 $ 91,339,000 $ 85,300,000 Terminal building rentals and fees 24,132,369 23,247,245 23,294,000 23,700,000 Facility use fees 6,025,833 6,147,366 6,350,000 6,800,000 Total airline revenues $115,972,747 $117,840,955 $120,983,000 $115,800,000 Non-airline revenues: Parking $ 32,806,472 $ 38,842,280 $ 43,716,000 $ 44,600,000 Concessions 25,478,971 24,760,615 24,070,000 24,300,000 Car rental 15,760,146 16,723,940 17,000,000 17,900,000 Shuttle bus 5,860,035 4,544,805 5,076,000 5,300,000 Ground transportation 223, ,420 3,987,000 4,400,000 Other revenue 9,660,471 7,461,758 9,448,000 9,600,000 Total non-airline revenues $ 89,789,906 $ 93,192,818 $103,297,000 $106,100,000 Total Operating Revenues $205,762,653 $211,033,773 $224,280,000 $221,900,000 Operating Expenses: Salaries, wages and fringe benefits $ 58,579,476 $ 58,041,658 $ 61,608,000 $ 62,900,000 Materials and supplies 3,334,053 3,718,884 4,632,000 4,700,000 Parking management 15,757,657 9,726,476 10,817,000 11,500,000 Shuttle bus services 8,363,753 10,018,755 10,238,000 10,200,000 Janitorial services 5,466,664 3,419,294 2,352,000 2,200,000 Security 3,770,824 3,324,401 3,341,000 3,300,000 Professional and other contractual services 10,421,020 9,549,013 12,464,000 13,400,000 Utilities 18,819,130 19,320,419 20,743,000 21,000,000 Buildings and grounds maintenance 19,521,958 18,486,093 20,789,000 20,800,000 Equipment repair and maintenance 7,804,681 8,189,684 8,386,000 8,300,000 Elevator and escalator maintenance 4,034,180 4,473,043 4,365,000 4,300,000 Insurance 3,506,804 4,247,581 3,569,000 3,600,000 Other operating expenses 1,673,167 3,923,030 3,262,000 3,400,000 Total Operating Expenses $161,053,367 $156,438,331 $166,566,000 $169,600,000 Operating Income $ 44,709,286 $ 54,595,442 $ 57,714,000 $ 52,300,000 Non-Operating Revenues (Expenses): Federal and state grants $ 1,967,437 $ 777,030 $ 840,000 $ 1,300,000 Interest income and other 152, , , ,000 Net debt service requirement (35,560,615) (42,551,630) (44,225,000) (39,100,000) Capital lease obligations (3,560,461) (3,706,916) (3,313,000) (3,400,000) Funding requirements (6,766,302) (5,978,914) (7,763,000) (7,400,000) Operations and maintenance capital (942,279) (3,427,084) (3,503,000) (4,200,000) Total Non-Operating Expenses, net $(44,709,286) $(54,595,442) $(57,714,000) $(52,300,000) EXCESS REVENUE (EXPENSE) $ - $ - $ - $ - 32

40 Management Discussion of Airport Financial Operations Operating Year 2004 Compared to Operating Year Total operating revenues in Operating Year 2004 increased $5.3 million (2.6%) over Operating Year 2003 levels. Airline fees for Operating Year 2004 increased $1.9 million, primarily as a result of the increased Debt Service requirements in Operating Year Increased non-airline revenues and lower operating expenses offset the impact of the added Debt Service. The latter was achieved by the Authority s efforts at increasing non-airline revenues, reducing operating expenses and managing Debt Service and other funding requirements. Non-airline revenues increased $3.4 million, driven mainly by a record level of parking revenue. For Operating Year 2004, the $6.0 million increase in parking revenue was offset by reduced concession revenue of $0.7 million, primarily relating to the renegotiation of the duty free concession agreement, reduced shuttle revenue of $1.3 million and reduced other miscellaneous revenues related to one time items in Total operating expenses in Operating Year 2004 decreased from Operating Year 2003 levels by approximately $4.6 million (2.9%). The reductions in operating expenses were driven by re-bidding and reorganizing the Authority s parking management contract and shuttle service. The net effect was a savings of $4.4 million. Additional savings of $3.0 million were achieved in contracted janitorial services and building maintenance. These savings were partially offset by increases in employee benefits, legal services and insurance costs, and property taxes related to the McNamara Terminal power plant. Debt Service requirements in Operating Year 2004 increased by $7.0 million over the Operating Year 2003 levels. In an effort to minimize the cost to the airlines of this increase in debt service, Authority management took advantage of market gains on invested Bond Reserve Account deposits, and generated various one-time savings that reduced the total impact of new debt by $6.3 million in Operating Year Operating Year 2005 Budget Compared to Operating Year In preparing the budget for Operating Year 2005, the Authority limited new initiatives to those considered vital to accomplishing the Authority s mission and strategic goals and necessary to meet its performance plan objectives. The Authority is continuing many of the cost containment initiatives undertaken in the past several Operating Years through Operating Year In addition, the Authority has growth goals for non-airline revenues which it believes are aggressive and has held its approved staff positions to the same level as in Operating Year Budgeted airline revenues equal $121.0 million, representing a budgeted increase of $3.1 million (2.7%) over Operating Year 2004 results. The small increase in airline revenues reflects the Authority s cost containment efforts and a small increase in projected landed weights. Budgeted non-airline revenues for Operating Year 2005 are $10.1 million (10.8%) over the Operating Year This increase is driven by budgeted increases in all categories, but in particular parking and other ground transportation revenues. Non-airline revenues account for 46.0% of total Airport revenues in the budget compared to 44.2% in Operating Year Operating Year 2005 budgeted airline and non-airline revenue is $224.3 million, representing an increase of about $13.2 million (6.2%) over Operating Year 2004 revenues. Components causing the increase include increased operating expenses of $10.1 million (6.5%), an increase in Debt Service and coverage requirements of $3.4 million and increased capital acquisitions of $0.1 million. The Operating Year 2005 budget for capital acquisition is budgeted at $3.5 million, an increase of $0.1 million over the 2004 Operating Year level, and will be used primarily to replace existing vehicles and equipment. The Authority continues to defer scheduled replacements of capital equipment, a policy it has been following for the past three years in order to reduce operating expenses. The net Debt Service and coverage requirement for Operating Year 2005 represents an increase of $3.5 million over Operating Year 2004 amounts. The Operating Year 2005 budget sets the Activity Fee rate for the Signatory Airlines at $3.39 per thousand pounds of landed weight. This rate is 2.6% lower than the final Activity Fee rate for Operating Year The Signatory Airline Activity Fee rate is applied to an estimated landed weight of 26,081,000 thousand-pound units for 33

41 Operating Year 2005, representing an increase of 3.4% from Operating Year 2004 levels. The estimated cost per enplaned passenger for Operating Year 2005 is $6.84, 1.6% lower than the Operating Year 2004 cost per enplaned passenger of $6.95. Current Operating Year 2005 Forecast Compared to Operating Year 2005 Budget The Authority s current Operating Year 2005 forecast as of December 31, 2004, estimates total airline and non-airline revenue of $221.9 million, a reduction of $2.4 million (1.1%) from the Operating Year 2005 budget. This decrease primarily is attributable to the $5.1 million (11.6%) reduction in Debt Service. Forecast increases in non-airline revenues of approximately $2.8 million are offset by forecast increases in operating expenses of approximately $3.0 million. The latter result from an additional $1.3 in fringe benefits related to healthcare costs, $1.0 million in snow removal expenses caused by above average snowfall this winter, and lower than anticipated savings in parking management expense of approximately $0.7 million resulting from delayed acquisition of new technology equipment and additional snow removal cost in the parking decks. General THE CAPITAL IMPROVEMENT PROGRAM The Authority maintains the ongoing CIP to address the capital development needs of the Airport. The CIP includes terminal improvements, airfield improvements, airport support facilities improvements and an ongoing noise mitigation program. The 2005 Projects are part of the CIP Projects Two of the major elements of the current CIP are terminal projects, both of which are 2005 Projects. North Terminal Redevelopment Project. The Authority is engaged in a major redevelopment of the North Terminal complex at the Airport to support the operations of certain non-hubbing airlines. The North Terminal Redevelopment Project, as currently planned, includes the construction of 27 jet aircraft gates, a Federal Inspection Services ( FIS ) facility, approximately 650,000 square feet of terminal space, related apron reconstruction, including hydrant fueling, and a second overhead pedestrian bridge connecting the terminal to the parking deck. Six of the 27 gates planned will be controlled by the Authority for common and shared use and not leased to individual airlines. The Signatory Airlines unanimously approved the North Terminal Redevelopment Project with up to 29 gates in The inclusion of an FIS facility in the new terminal was approved pursuant to the 2005 Weighted Majority Request. Upon completion of the project, the new North Terminal will replace the Smith Terminal and the Berry International Terminal, both of which the Authority intends to demolish. All international flights at the Airport, other than those of Northwest and its code share partners, will operate from the new North Terminal. All charter flights at the Airport, both domestic and international, also will operate from the new North Terminal. The terminal design will include an in-line explosive detection system ( EDS ). The Authority intends to finance the costs of the FIS facility and the in-line EDS in the new North Terminal in the future with the proceeds of Additional Bonds and federal grants, and not as part of the 2005 Projects. See CIP Funding Sources Additional Bonds below. The total estimated cost of the North Terminal Redevelopment Project, including the FIS facility and the EDS, is $443 million 1. This cost does not include the estimated cost of the in-line EDS or the demolition of the Smith Terminal or the Berry International Terminal following completion of the new North Terminal. The Authority issued Bonds to fund North Terminal pre-construction costs in the amount of $70 million in December The Authority has engaged Gensler Architecture, Design and Planning, P.C. to design the new terminal complex, and a joint venture of Barton Malow Company and Walbridge Aldinger Co. to manage its construction. The Authority expects to use the proceeds of the Series 2005 Bonds and certain other funding sources 1 This cost includes a $20 million payment to Northwest to relinquish its contractual right to use a portion of the new North Terminal site for a new hangar facility. 34

42 (including federal grant funds) to pay the remaining $373 million of estimated construction and other costs of the North Terminal Redevelopment Project. The current estimated completion date for the project is Summer McNamara Terminal Phase II Project. An expansion and upgrade of the facilities at the McNamara Terminal also are in progress. Northwest, its regional carriers Mesaba and Pinnacle and its alliance partner Continental Airlines, as well as British, Royal Jordanian Airlines and Lufthansa, currently operate at the McNamara Terminal complex, which opened at the end of February, Northwest s other alliance partner, Delta Air Lines, also plans to relocate its operations to the McNamara Terminal on March 29, Northwest is managing and supervising the design and construction of the McNamara Terminal Phase II Project, which also is a 2005 Project. The project includes a 22 gate expansion of the terminal s B/C Concourse (the west concourse), related apron expansion, including hydrant fueling, and additional baggage handling capacity, loading bridges and gate systems, passenger moving walkways and Federal Inspection Services processing capacity. The Signatory Airlines unanimously approved the McNamara Terminal Phase II Project in Enhancements to the terminal s luggage system were approved pursuant to the 2005 Weighted Majority Request. The current estimated completion date for the project is summer The total estimated cost of the McNamara Terminal Phase II Project, including the luggage system enhancements, is $190 million. Bonds issued in 2002 and 2003 have funded a portion of the costs of the terminal expansion. The Authority expects to use the proceeds of the Series 2005 Bonds and certain other funding sources (including federal grant funds) to pay $77.4 million of the remaining estimated construction and other costs of the McNamara Terminal Phase II Project. An in-line EDS also is planned for the McNamara Terminal as part of the current CIP. The Authority intends to finance the costs of the luggage system enhancements and the in-line EDS in the McNamara Terminal in the future with proceeds of Additional Bonds and federal grants, and not as part of the 2005 Projects. Other 2005 Projects. The 2005 Projects also include a planning project for enhancements to Runway 3L/21R, the preliminary design of the reconstruction of Runway 3R/21L, a pavement management system, a taxiway infill project, certain security enhancements, a surface movement guidance control system project, a Part 150 noise study update, an automated parking revenue management system and expansion and upgrades to a cargo building for Northwest. The total estimated cost of these other 2005 Projects is approximately $ million. Plan of Finance for 2005 Projects. The following table sets forth the estimated plan of finance for the 2005 Projects: 35

43 2005 Projects Estimated Project Cost (in the thousands) Passenger Facility Charges Federal Grants Prior Bond Proceeds Series 2005 Bonds Future Financing 1. Terminal Projects a. North Terminal Redevelopment Project $443,000 $2,683 $ -- $ 84,317 $341,000 $15,000 b. McNamara Terminal Phase II Project 190, ,456 71,544 15,000 Total Terminal Projects 633,000 2, , ,544 30, Airfield Related Projects a. Perimeter Fencing and Security Enhancements 2, , b. Preliminary Design Runway 3R/21L Reconstruction and Pavement Management System 1, , c. Surface Movement Guidance System 1, , d. Runway 3L/21R Planning Total Airfield Related Projects 6, , , Other CIP Projects a. Part 150 Noise Study Update 1, , b. Automated Parking Revenue Management System 5, , Total Other CIP Projects 6, , , TOTAL ALL PROJECTS $646,573 $2,683 $5,889 $187,773 $420,228 $30,000 Other CIP Projects In addition to the 2005 Projects, the current CIP includes the design and construction of enhancements to Runway 3L/21R, the remaining design and reconstruction of Runway 3R/21L, other miscellaneous airfield and terminal projects, an Airport Master Plan, the Authority s residential sound insulation program, parking deck rehabilitation, Airport road projects, other support facilities, including an Authority administration building, utility projects, including a de-icing fluid force main to the Detroit Water and Sewer Department, the acquisition of Airport equipment and vehicles, a cargo building expansion for Northwest, and a hangar facility upgrade for Spirit Airlines. Many of the CIP projects already have been funded and are in progress. The Authority expects to fund the as yet unfunded CIP projects within the next several years. Funding sources are expected to include PFCs, additional federal grants and, subject to obtaining Weighted Majority approval for certain of these projects, the proceeds of Additional Bonds. The Authority anticipates that, upon completion of the pavement management system project (one of the 2005 Projects), additional significant airfield rehabilitation projects will be added to CIP. CIP Funding Sources Bonds. The Authority s funding sources for the CIP are PFCs, federal grants and the proceeds of Additional Additional Bonds. The Authority is authorized to issue airport revenue bonds to finance the cost of capital projects at the Airports and include the debt service on such bonds in the fees and charges of the Signatory Airlines, subject to receiving the approval of a Weighted Majority for such capital projects. See SECURITY FOR THE BONDS The Airline Agreements. Many of the projects in the Authority s current five-year CIP, including the 2005 Projects, already have been approved by a Weighted Majority; other CIP projects will require Weighted Majority approval before the Authority may issue bonds to fund any portion of the costs of these projects. The Authority is required from time to time to establish borrowing capacity by publishing a notice of intent to issue bonds pursuant to Act 94. Act 94 provides that prior to the issuance of revenue bonds, a notice of intent to issue bonds shall be published in a newspaper which has general circulation in the territory of the borrower. The notice must state the maximum amount of bonds to be issued, the purpose of the bonds, source of payment, right of referendum on the bonds, and other information. If within 45 days after the publication of the notice a petition, 36

44 signed by not less than 10% or 15,000 of the registered electors, whichever is less, residing within the limits of the borrower, is filed with the recording officer of the borrower requesting a referendum upon the question of the issuance of the bonds, then the bonds shall not be issued until approved by the vote of a majority of the electors of the borrower qualified to vote and voting on the bonds at a general or special election. Consistent with the requirement discussed above, on January 31, 2005, the Authority published a supplemental notice of intent (the Supplemental Notice ) to establish additional borrowing authority of $300 million for certain components of the CIP, including in-line explosive detection systems, federal inspection facilities, luggage system enhancements, and certain other improvements. On March 17, 2005, representatives of Service Employees International Union Local 3 ( SEIU Local 3 ) filed petitions with the Authority requesting a referendum with respect to the Supplemental Notice. The improvements being financed with the proceeds of the Series 2005 Bonds are covered by remaining borrowing authority under the 2001 Notice. See INTRODUCTION Authorization herein. Should the petitions filed by SEIU Local 3 be determined to meet the requirements of Act 94, then Additional Bonds to finance the improvements for which additional borrowing capacity is sought under the Supplemental Notice shall not be issued until approved by the vote of a majority of the electors of the County at a general or special election. The Authority intends to submit the petitions for review by the appropriate municipal election officials within the County. Passenger Facility Charges. Under the Aviation Safety and Capacity Expansion Act of 1990 (the PFC Act ), the FAA may authorize a public agency which controls an airport to impose a PFC of up to $4.50 for each qualifying enplaned passenger at such airport to be used to finance eligible airport-related projects. In order to receive authorization to impose a PFC and use the PFC revenue, the public agency must submit an application requesting that the FAA approve the imposition of a PFC for, and the use of PFC revenues on, specific eligible projects described in such application. PFCs are collected on behalf of airports by air carriers and their agents (the Collecting Carriers ) and remitted to the public agency. Under its current PFC approvals, the Authority has authority to impose and use $2.907 billion in PFCs, which includes amounts for the payment of principal, interest and other financing costs on Bonds issued to pay the PFC-eligible costs of the approved projects. The current estimated PFC expiration date is October 1, The Authority intends to file an amendment to its current PFC approvals, in order to obtain approval to leverage PFCs for certain of the 2005 Projects for which the Authority already has PFC pay-as-you-go approval, and to file a new application with the FAA for approval to use PFCs on a leveraged basis for those eligible 2005 Projects which have not yet received PFC approval. The plan of finance for the 2005 Projects assumes that the Authority will fund most of the PFC-eligible 2005 Projects with the proceeds of airport revenue bonds, and that the Authority will use PFC revenue to pay the Debt Service on the airport revenue bonds issued to pay for such PFC-eligible projects to the maximum extent possible. With respect to other PFC-eligible 2005 Projects, the Authority expects to fund a portion of the cost of the projects with federal grant funds, and to fund the balance of the cost (the local share) with the proceeds of airport revenue bond proceeds, with payment of the Debt Service on the bonds to be paid with PFC revenue. As part of the 2005 Weighted Majority Request, the Authority has agreed to allocate PFCs to pay PFCeligible debt service on Bonds issued for certain CIP projects, in the priority set forth therein. The Authority estimates that 89.8% of the total Debt Service on the Series 2005 Bonds will be paid with PFC revenue. The airline rates and charges calculations contained in the Report of the Airport Consultant reflect the assumed use of PFCs to pay PFC-eligible debt service. However, PFC revenues do not constitute Revenues as defined in the Master Bond Ordinance and are not pledged to or held by the Trustee for the benefit of the owners of Bonds unless and until, at the Authority s option, the PFC revenues are specifically transferred to the Bond Fund as Other Available Moneys. Grants. The Airport and Airway Improvement Act of 1982 created a grant program that is administered by the FAA. The FAA allocates federal grants through the Airport Improvement Program (the AIP ). The AIP grants include entitlement grants, which are allocated among airports by the FAA in accordance with a formula based on 37

45 enplaned passengers and cargo-landed weight, and discretionary grants, which are allocated by the FAA in accordance with its guidelines. FAA grants are subject to annual Congressional appropriation. The Authority expects to use federal grants to pay for a portion of the CIP, including a portion of the 2005 Projects. No assurance can be made that the FAA will award the additional federal grants that the Authority expects to obtain, or that, if awarded, the federal grant funds will be received in the amount or at the time contemplated by the Authority. The availability of the anticipated grant amounts is subject to future availability of federal discretionary funds that the FAA commits to the projects. In addition, the AIP expires periodically and federal reauthorization is required to continue. If the grants are not awarded or received, in whole or in part, application could be made to the FAA for approval to use additional PFC revenue to pay the unfunded costs of these projects or, alternatively, the Authority could request Weighted Majority approval of the unfunded costs, and if received, issue Additional Bonds to pay such costs. REPORT OF THE AIRPORT CONSULTANT The firm of Reed & Associates, LLC prepared a Report of the Airport Consultant, a copy of which is included in this Official Statement as Appendix B. The Report of the Airport Consultant forecasts Net Revenues, Revenue Fund balances and Other Available Moneys sufficient to meet the requirements of the Rate Covenant and the test set forth in the Master Bond Ordinance for the issuance of Additional Bonds. The information on the following table has been extracted from the Report of the Airport Consultant. The table assumes the issuance of the Series 2005 Bonds to fund the 2005 Projects as described herein, and the issuance of Additional Bonds to fund, in part, the costs of certain other CIP projects that have been approved by a Weighted Majority but have not been funded yet. The table shows actual (Operating Year 2004) and forecasted (Operating Years 2005 through 2011) Net Revenues, Revenue Fund balances and Other Available Moneys, Debt Service requirements on Outstanding Bonds, the Series 2005 Bonds and Additional Bonds as aforesaid, Debt Service Coverage (Senior Lien Bonds) and airline cost per enplaned passenger. Operating Year Net Revenues, Revenue Fund Balances and Other Available Moneys (in thousands) Total Debt Service Requirements (in thousands) (1) Debt Service Coverage (Senior Lien Bonds) Airline Cost Per Enplaned Passenger 2004 $143,257 $ 95, $ , , , , , , , , , , , , , , (1) Includes the forecasted Debt Service requirements on all Outstanding Bonds, and the estimated Debt Service requirements on the Series 2005 Bonds and Additional Bonds for other projects approved by a Weighted Majority but not yet funded, provided by Citigroup Global Markets Inc. Such Debt Service requirements are based on interest rate assumptions that are higher than current market rates, resulting in an assumed par amount of the Series 2005 Bonds of $524,455,000. See AIRPORT FINANCIAL INFORMATION Airport Indebtedness herein. The Report of the Airport Consultant should be read in its entirety for an understanding of the forecasts and the underlying assumptions. As noted in the Report of the Airport Consultant, any financial forecast is subject to uncertainties. Inevitably, some assumptions used to develop the forecasts will not be realized, and unanticipated events and circumstances may occur. The actual financial results achieved will vary from those forecasts, and the 38

46 variations may be material, particularly as they relate to possible additional terrorist acts or acts of war. See APPENDIX B - REPORT OF THE AIRPORT CONSULTANT. Airline Information THE AIRLINE INDUSTRY Certain Signatory Airlines (or their respective parent corporations) are subject to the information reporting requirements of the Securities Exchange Act of 1934, as amended (the Exchange Act ), and in accordance therewith, file reports and other information with the Securities and Exchange Commission (the SEC ). Only companies with securities listed on a national securities exchange or registered under 12(g) of the Exchange Act, or companies which are required to file with the SEC pursuant to 15(d) of the Exchange Act, are subject to the information-reporting requirements. British Airways is not subject to the information reporting requirements of the Exchange Act. Certain information, including financial information, concerning each reporting Signatory Airline (or its respective parent corporation) is disclosed in such reports and statements filed with the SEC. Such reports and statements can be inspected in the Public Reference Rooms of the SEC which can be located by calling the SEC at SEC In addition, electronically filed SEC Reports can be obtained from the SEC s website at In addition, each domestic Signatory Airline is required to file periodic reports of financial and operating statistics with the U.S. Department of Transportation (the DOT ). Such reports can be inspected at the following location: Office of Airline Information, Bureau of Transportation Statistics, Department of Transportation, Room 4201, 400 Seventh Street, S.W., Washington, D.C , and copies of such reports can be obtained from the U.S. Department of Transportation at prescribed rates. Neither the Authority nor the Underwriters undertake any responsibility for or make any representation as to the accuracy or completeness of (i) any reports and statements filed with the SEC or the U.S. Department of Transportation, or (ii) any material contained on the SEC s website as described in the preceding paragraph, including, but not limited to, updates of information on the SEC website or links to other Internet sites accessed through the SEC s website. Recent Developments Affecting the Air Transportation Industry Global Events. The terrorist attacks of September 11, 2001, the slowing national economy and certain other global events, including the on-going war in Iraq and the SARS outbreak in 2003, seriously disrupted the air transportation industry over the past several years, resulting in severe financial instability in the airline industry, particularly among the legacy airlines whose enplaned passengers have decreased since Several airlines have filed for bankruptcy protection, others continue to threaten to do so, and most airlines that have not filed for bankruptcy protection report continuing financial difficulties. Overall, the airline industry continues to struggle with increasingly higher costs for fuel, and depressed passenger revenue. In 2004, a number of factors resulted in a strong rebound in passenger traffic in the U.S., which is continuing, including lower airline fares due to the growth of low cost carriers and a rapid increase in capacity by both the legacy airlines and low-cost carriers. Airline load factors have increased dramatically, and are predicted to continue to increase in order to meet passenger demand in the highly competitive/low airfare environment. For further information regarding the financial condition and effect on operations of the airlines, including further information regarding the airlines reported load and capacity factors since September 11, 2001, reference is made to the statements and reports filed periodically by the airlines with the SEC. See - Airline Information above. Aviation Security. In response to the September 11, 2001 terrorists attacks, the Aviation and Transportation Security Act was enacted on November 19, 2001 (the Security Act ). The Security Act created the Transportation Security Administration ( TSA ), which is now part of the Department of Homeland Security ( DHS ). The Security Act calls for stronger cockpit doors on planes and an increased presence of armed federal marshals on flights. The Security Act requires that all security screeners at airports be federal employees. Security screeners must undergo criminal background checks and must be U.S. citizens. Airports that meet increased 39

47 security guidelines have the option to continue using federal employees or return to private security companies no later than Airports are permitted to use state or local law enforcement to provide security services. The Security Act also required that by December 31, 2002, sufficient explosive detection systems ( EDS ) be deployed at airports in the United States to screen all checked baggage. The Airport met this deadline and is screening all checked bags. The Homeland Security Act of 2002 (the Homeland Security Act ) amended the Security Act to allow an extension for installing the EDS until December 31, The Security Act mandates two civil aviation security fees to help pay the government s cost of providing civil aviation security services. The September 11 th Security Fee is levied on individual passenger tickets and consists of a fee of $2.50 for each flight segment, not to exceed $5.00 per one-way trip. The President has proposed a $3.00 increase in this September 11 th Security Fee in his 2006 budget. In addition to the fee charged to passengers, a fee may also be imposed on air carriers, which may not exceed, in the aggregate, the total amount paid in calendar year 2000 by the air carriers for screening passengers and property. This fee, designated the Aviation Infrastructure Security Fee, was imposed on air carriers by the TSA effective February 18, An April 2003 federal aid package for the airline industry waived certain of these security fees from June 1, 2003 through September 30, These fees resumed on October 1, The Homeland Security Act also created DHS to accomplish several primary goals, identified by the statute as (i) preventing terrorist attacks within the United States; (ii) reducing the nation s vulnerability to terrorism; (iii) minimizing the damage of, and assisting in the recovery from, terrorist attacks that do occur; and (iv) monitoring connections between illegal drug trafficking and terrorism and coordinating efforts to sever such connections. Under the Homeland Security Act, the TSA, including all TSA functions, personnel and assets, was transferred from DOT to DHS. The Office of Government Ethics has since designated the TSA as a distinct and separate component of DHS. The Homeland Security Act requires the FAA to provide war-risk hull loss and passenger, crew and thirdparty liability insurance. In addition, the statute eliminates the deductible to be paid for war-risk coverage. Finally, the Homeland Security Act caps the total premium paid by any airline for war-risk insurance at no more than twice the premium the airline was paying the DOT for its third-party policy as of June 19, The duration of this insurance has been extended through August 31, The Terrorism Risk Insurance Act also was enacted in This law established the Terrorism Insurance Program in the Department of the Treasury. This statute is intended to ensure the availability of property and casualty insurance for terrorism risk by having the federal government temporarily share the burden of compensating for insured losses. The program continues until December 31, Losses in connection with terrorist acts that are incurred by passenger or cargo air airlines are covered by the program, regardless of where the loss occurs. Financial Condition of Airlines Serving the Airport INVESTMENT CONSIDERATIONS The airlines serving the Airport all have been impacted by the global events described above and have experienced an increase in costs and a resulting decline in financial condition to varying degrees. Several airlines have filed for bankruptcy protection and are in various stages of their workouts. United Airlines has been in bankruptcy since December US Airways filed for bankruptcy protection in August 2002, emerged from bankruptcy in March 2003, and due to continuing financial difficulties, filed a second Chapter 11 bankruptcy proceeding on September 14, See Effect of Airline Bankruptcies below. For 2004, the airline industry reported net losses exceeding $9 billion. It is reasonable to assume that any significant financial or operational difficulties incurred by Northwest, the predominant airline servicing the Airport, could have a material adverse effect on the Airport, although financial or operational difficulties by any of the other Signatory Airlines also may, whether directly or indirectly, have an adverse impact on Revenues or Airport operations, the effect of which may be material. 40

48 Impact of Uncertainties of the Airline Industry on the Airport The Airport Service Region s demographic and economic characteristics comprise the underlying components of air transportation demand for passengers and commercial goods. These demand components are affected by individual airline decisions regarding air service, hubbing operations and aircraft fleet mix. There is no assurance that the Airport, despite a demonstrated level of airline service and operations, will continue to maintain such levels in the future. The continued presence of the airlines serving the Airport, and the levels at which that service will be provided, are a function of a variety of factors. Key factors that affect airline traffic at the Airport and the financial condition of the airlines, and therefore, the amount of Net Revenues available for payment of the Series 2005 Bonds, include: local, regional, national and international economic and political conditions; international hostilities; world health concerns; aviation security concerns; airline service and routes; airline airfares and competition; airline industry economics, including labor relations; availability and price of aviation fuel; capacity of the national air traffic control and airport systems; capacity of the Airport and competition from other airports; and business travel substitutes, including teleconferencing, videoconferencing and web-casting. Many of these factors are beyond the control of the Authority. Accordingly, no assurance can be given as to the levels of aviation activity that will be achieved at the Airport. As a result of the Airport s geographic location, facilities and capabilities and Northwest s investment in the Airport, the Authority expects that the Airport will remain a system hub for Northwest; however, no assurance can be given to that effect, regardless of Northwest s financial condition. If Northwest discontinues or reduces its hubbing operations at the Airport, its current level of activity may not be replaced by other carriers. See DETROIT METROPOLITAN WAYNE COUNTY AIRPORT Airlines Providing Service at the Airport Northwest Airlines above. Revenues from Air Carriers The derivation of Revenues from the operation of the Airport depends on many factors, many of which are not subject to the control of the Authority. Revenues may be affected by the ability of the Signatory Airlines, individually and collectively, to meet their respective obligations under the Airline Agreements. The revenues of the airlines serving the Airport may be materially affected by many factors including, without limitation, the following: declining demand; service and cost competition; mergers; the availability and cost of fuel and other necessary supplies; high fixed costs; high capital requirements; the cost and availability of financing; technological changes; national and international disasters and hostilities; the cost and availability of employees; strikes and other employee disruptions; the maintenance and replacement requirements of aircraft; the availability of routes and slots at various airports; litigation liability; regulation by the federal government; environmental risks and regulations; noise abatement concerns and regulation; deregulation; federal and state bankruptcy and insolvency laws; acts of war and terrorism and other risks. Most airlines, as a result of these and other factors, continue to operate at a loss, and several have filed for bankruptcy, ceased operations and/or have merged with other airlines. Historically, the airline industry s results have correlated with the performance of the economy. Effect of Airline Bankruptcies Since December 2000, Signatory Airlines filing for bankruptcy protection have included US Airways (which emerged from bankruptcy protection on March 31, 2003 and filed a subsequent bankruptcy proceeding on September 14, 2004) and United Airlines. The Authority is unable to predict how long any airline in bankruptcy will continue operating at the Airport or whether any of these airlines will liquidate in the future. Additional bankruptcies, liquidations or major restructurings of other airlines could occur. It is not possible to predict the impact on the Airport of the bankruptcies of United Airlines and US Airways or of any future bankruptcies, liquidations or major restructurings of other airlines. A bankruptcy of a Signatory Airline with significant operations at the Airport, such as Northwest, could have a material adverse effect on operations at the Airport, Revenues and the cost to the other airlines operating at the Airport. Currently, most of the domestic gates and related facilities at the Airport either are preferentially or exclusively leased to the Signatory Airlines pursuant to respective Airline Agreements. International gates are operated on a shared basis. In the event of bankruptcy proceedings involving any Signatory Airline, including 41

49 Northwest, the debtor or its bankruptcy trustee must determine whether to assume or reject its agreements with the Authority (a) within 60 days (or later if ordered by the court) with respect to its Airline Agreement or leases of nonresidential real property, or (b) prior to the confirmation of a plan or reorganization with respect to any other agreement. However, bankruptcy courts are courts of equity and can, and often do, grant exceptions to these statutory limitations. In the event of assumption and/or assignment of any agreement to a third party, the airline would be required to cure any pre- and post-petition monetary defaults and provide adequate assurance of future performance under the applicable Airline Agreement or other agreements. Rejection of an Airline Agreement or other agreement by any Signatory Airline that is a debtor in a bankruptcy proceeding would give rise to an unsecured claim of the Authority against the debtor s estate for damages, the amount of which may be limited by the Bankruptcy Code. However, the amounts unpaid as a result of a rejection of an Airline Agreement by a Signatory Airline in bankruptcy would be included in the calculation of the fees and charges of the remaining Signatory Airlines under their Airline Agreements. See APPENDIX D SUMMARY OF THE AIRLINE AGREEMENTS. Whether or not an Airline Agreement is assumed or rejected in a bankruptcy proceeding, it is not possible to predict the subsequent level of utilization of the gates leased under such agreement. Decreased utilization of gates could have a material adverse effect on Airport operations, as well as on Revenues and ultimately on the cost to the airlines of operating at the Airport. Neither United Airline nor US Airways has assumed or rejected its Airline Agreement yet. Aviation Security Concerns Concerns about the safety of airline travel and the effectiveness of security precautions, particularly in the context of the international hostilities (such as the war and continuing military action in Iraq), terrorist attacks, increased threat levels declared by the DHS and world health concerns, may influence passenger travel behavior and air travel demand. 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 selection of surface travel over air travel. See THE AIRLINE INDUSTRY Recent Developments Affecting the Air Transportation Industry Aviation Security. Because of the implementation of the Congressional mandate, effective January 1, 2003, to screen all checked baggage for explosives, as well as the impact on airport operations of procedures mandated under Code Orange (high) and Code Red (severe) national threat levels declared by the Department of Homeland Security under the Homeland Security Advisory System, there is the potential for significantly increased inconvenience and delays at many airports, including the Airport. Regulations and Restrictions Affecting the Airport The operations of the Airport are affected by various contractual, statutory and regulatory restrictions and limitations, including, without limitation, the provisions of the Airline Agreements, the PFC Act and other extensive federal legislation and regulations applicable to all airports in the United States. In the aftermath of the events of September 11, 2001, the Airport also has been required to implement enhanced security measures mandated by the FAA and DHS. See THE AIRLINE INDUSTRY Recent Developments Affecting the Air Transportation Industry Aviation Security above. It is not possible to predict whether future restrictions or limitations on Airport operations will be imposed, whether future legislation or regulations will affect anticipated federal funding or PFC collections for capital projects for the Airport, whether additional requirements will be funded by the federal government or require funding by the Authority or whether such restrictions or legislation or regulations would adversely affect Revenues. See THE CAPITAL IMPROVEMENT PROGRAM CIP Funding Sources above. 42

50 Availability of Various Sources of Funding The plan of finance for the 2005 Projects assumes that (1) PFC revenues will be available in certain amounts and at certain times for the payment of a portion of the Debt Service on the Series 2005 Bonds and (2) federal grants will be received in certain amounts and at certain times to pay certain capital project costs. See CAPITAL IMPROVEMENT PROGRAM CIP Funding Sources. No assurance can be given that these sources of funding actually will be available in the amounts or on the schedule assumed. The amount of PFC revenue collected for the Airport in future years will vary based upon the actual number of PFC-eligible passenger enplanements at the Airport. No assurance can be given that any level of enplanements will be realized. A shortfall in projected PFC collections could have an adverse impact on the timely payment of principal of or interest on the Series 2005 Bonds. This adverse impact could be direct or indirect. For example, PFC shortfalls could result in sufficient increases in Activity Fees at the Airport as to impact negatively the airlines desire to operate at the Airport. Furthermore, under the terms of the PFC Act, the FAA may terminate the Authority s authority to impose a PFC if the Authority s PFC revenues are not being used for approved projects in accordance with the FAA s approval, the PFC Act or the regulations promulgated thereunder, or if the Authority otherwise violates the PFC Act or regulations. The FAA may also terminate the Authority s authority to impose a PFC for a violation by the Authority of the Airport Noise and Capacity Act. The PFC termination provisions contained in the regulations provide both informal and formal procedural safeguards. A process that will last a minimum of 180 days is required before the FAA can terminate the Authority s authority to impose a PFC for a violation of the PFC Act. In addition, although the FAA s PFC regulations require Collecting Carriers (as defined above) to account for PFC collections separately, and indicate that such funds are to be regarded as trust funds held by the Collecting Carriers for the beneficial interest of the public agency imposing the PFC, recent bankruptcy court decisions indicate that in a bankruptcy proceeding involving a Collecting Carrier, it is likely that PFCs will not be treated as trust funds and that airports are not entitled to any priority over other creditors of the Collecting Carrier as to such funds. Also, as discussed under CAPITAL IMPROVEMENT PROGRAM CIP Funding Sources Grants above, the assumptions with respect to entitlement and discretionary funding, although considered reasonable by the Authority, are inherently subject to certain uncertainties and contingencies. Actual entitlement and/or discretionary funding levels and timing may vary and such differences may be material. From time to time, the AIP expires. In 2003, Congress passed a four-year $60 billion FAA reauthorization bill; however, no assurance can be given that reauthorization will occur when that legislation expires, or at what levels the program may be funded in the future. The President s proposed fiscal year 2006 budget includes a $500 million reduction in AIP funding. To the extent that any portion of the funding assumed in the plan of finance for the 2005 Projects is not available as anticipated, the Authority may be required to issue Additional Bonds or Junior Lien Bonds to pay the costs of the 2005 Projects and to increase airline rates and charges to pay debt service on the Series 2005 Bonds and to fund the required coverage thereon. Costs of 2005 Projects and Schedule The estimated costs of, and the projected schedule for, the 2005 Projects and the other projects included in the CIP depend on various sources of funding, and are subject to a number of uncertainties. Northwest has provided the cost estimates for the McNamara Terminal Phase II Project, and the Authority makes no assurance as to the accuracy of such cost estimates. The ability of the Authority to complete these projects within the current budgets and on the current schedules may be adversely affected by various factors including: (1) estimating errors, (2) design and engineering errors, (3) changes to the scope of the projects, (4) delays in contract awards, (5) material and/or labor shortages, (6) delays due to airline operational needs, (7) unforeseen site conditions, (8) adverse weather conditions, (9) contractor defaults, (10) labor disputes, (11) unanticipated levels of inflation, (12) litigation and (13) environmental issues. No assurance can be given that the costs of the projects will not exceed the current budget for these projects or that the completion 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 or Junior Lien Bonds, which would require a new Weighted Majority approval for the projects with increased costs. The issuance of Additional Bonds may result in increased costs per enplaned passenger to the airlines. No assurance can be given 43

51 that the Authority would receive the required airline approvals, or that, absent such approvals, an alternative source of funding would be available. At present, the Authority is unable to estimate the costs associated with each of the risks identified above and the total impact of these risks if such events were to occur. LITIGATION Except for those matters described below, there is no litigation pending, or to the knowledge of the Authority, threatened against or affecting the Authority or the Airport, or, to its knowledge, any basis therefor, wherein an unfavorable decision, ruling or outcome would have a material impact on the financial condition of the Airport or would adversely affect the transactions contemplated by this Official Statement, or the validity of the Series 2005 Bonds, the Master Bond Ordinance, or any agreement or instrument to which the Authority is a party and which is used or contemplated for use in the transactions contemplated by this Official Statement. The Authority is a party to various legal proceedings that have arisen in the ordinary course of business of the Airport. Although the outcome of these lawsuits cannot currently be determined, Authority management does not believe these matters will have a material adverse effect, financial or otherwise, on the Airport. A & E Parking, et al. v. Wayne County Airport Authority (Wayne County Circuit Court), No CZ. In March 2003, the Authority implemented a fee charged to off-airport transportation providers for access to facilities at the Airport for the purposes of passenger pick-up. The Authority has assigned a flat fee to commercial vehicles based upon the frequency of visits to the Airport. The Authority plans to install an automated vehicle identification ( AVI ) system to electronically track commercial vehicles as they enter and exit Airport property. Plaintiffs in this action, various off-airport parking owners, hotel owners and other commercial entities, sought injunctive relief against the Authority alleging that the access fee is an impermissible tax. As such, pursuant to the Authority Act, the Authority has no taxing authority and the fee would be illegal under the applicable law. The Authority has asserted that the vehicle access fee is authorized under State and federal law, and that the fee is not a tax. In September 2004, the Court ruled in favor of the Authority, finding that the vehicle access fee is not a tax. However, the Court determined that the Authority did not implement the fee in compliance with Airport rules and regulations, and ordered the Authority to suspend collection of the fee until the Authority complied in all respects with its rules and regulations in adopting the fee and afforded the Plaintiffs an opportunity to present their views on the fee to the Board in public. The Board held a public meeting concerning the imposition of the vehicle access fee in November 2004 and, with the approval of the Court, the Authority resumed collection of the fee immediately thereafter. In February 2005, the Court granted the Authority s Motion for Summary Disposition, and dismissed the Plaintiffs case with prejudice. Plaintiffs have filed an appeal from the trial court s order with the Michigan Court of Appeals. The Authority continues to collect the fee. The Authority will continue to vigorously defend its right to impose the fee. Federal Investigation. The Federal Bureau of Investigation, the United States Environmental Protection Agency and the U.S. Attorneys Office in the Eastern District of Michigan are investigating two incidents of dead fish in the Detroit River in May 1999 and May 2001 allegedly attributable to discharges by the Airport from its storm water retention ponds into the County s drains leading to the Detroit River in violation of the Airport s National Pollutant Discharge Elimination System permit (the NPDES Permit ). In September 2001, the U.S. Environmental Protection Agency issued a Request for Information to the Airport pursuant to Section 104(e) of the Comprehensive Environmental Response, Compensation and Liability Act (CERCLA), 42 U.S.C. 9604(e), seeking information concerning the Airport s storm water discharge activities on May 16 and May 17, The Airport timely responded to this request in October In December 2001, the U.S. Attorneys Office issued a grand jury subpoena duces tecum to the Airport, seeking documents regarding the Airport s NPDES Permit activities and construction activities related to storm water management, as well as information related to Airport employees responsible for management of storm water permits and related activities from 1988 to the present. The Airport responded to this subpoena in February In September 2003, additional grand jury subpoenas were issued to a number of Airport employees, requiring grand jury testimony as fact witnesses in connection with the matter. 44

52 It is possible that the Authority and/or several of its employees may be indicted as a result of this investigation. In the view of the Authority, there were no such violations, criminal or otherwise, of the NPDES Permit that resulted in either the 1999 or 2001 incidents of dead fish. If the Authority is indicted by the grand jury, the Authority will mount a vigorous defense. The Authority believes that substantial defenses are available to both it and its employees and that criminal convictions are unlikely. Convictions could result in fines or imprisonment of individuals, fines for the Airport and other administrative sanctions under Section 508(a) of the federal Clean Water Act. RATINGS It is anticipated that on or before the date of delivery of the Series 2005 Bonds, Moody s Investors Service, Inc. ( Moody s ), Standard & Poor s Ratings Services, a division of The McGraw Hill Companies, Inc. ( Standard & Poor s ) and Fitch, Inc. ( Fitch ) will assign their municipal bond ratings of Aaa, AAA and AAA, respectively, to the Series 2005 Bonds, in each case with the understanding that upon delivery of the Series 2005 Bonds, a policy insuring the payment when due of the principal and interest on the Series 2005 Bonds will be issued by the Bond Insurer. Moody s, Standard & Poor s and Fitch have assigned their municipal bond ratings of A2 (Stable), A (Stable) and A (Stable), respectively, to the Series 2005 Bonds, based upon the underlying credit without regard to bond insurance. Any explanation of the significance of such ratings may be obtained from Moody s, Standard & Poor s and Fitch, respectively. A rating reflects only the views of the rating agency assigning such rating. There is no assurance that such ratings will remain in effect for any given period of time or that they may not be lowered, suspended or withdrawn entirely by such rating agencies, if in their judgment, circumstances so warrant. Any such downward change in or suspension or withdrawal of such ratings may have an adverse effect on the market price of the Series 2005 Bonds. Neither the Authority nor the Underwriters have undertaken any responsibility either to bring to the attention of the registered owners of the Series 2005 Bonds any proposed change in or withdrawal of such ratings or to oppose any such revision or withdrawal. UNDERWRITING The Series 2005 Bonds are being purchased by Citigroup Global Markets Inc. as representative of the Underwriters listed on the cover page of this Official Statement (the Underwriters ). The Underwriters have agreed, subject to certain conditions, to purchase the Series 2005 Bonds at an aggregate purchase price of $517,576, (equal to the par amount of the Series 2005 Bonds less an underwriting discount of $2,421,047.99, less original issue discount in an aggregate amount of $519,241.30, plus original issue premium in an aggregate amount of $13,382,202.75) pursuant to a Bond Purchase Agreement between the Authority and the Underwriters. The Bond Purchase Agreement provides that the Underwriters will purchase all of the Series 2005 Bonds, if any are purchased. The Underwriters reserve the right to join with dealers and other underwriters in offering the Series 2005 Bonds to the public. The obligations of the Underwriters to accept delivery of the Series 2005 Bonds are subject to various conditions of the bond purchase agreement. The Underwriters may offer and sell the Series 2005 Bonds to certain dealers (including depositing the Series 2005 Bonds into investment trusts, which investment trusts may be sponsored by the Underwriters) and others at prices lower than the public offering prices stated on the front cover page hereof. The initial public offering prices may be changed from time to time by the Underwriters. CONTINUING DISCLOSURE In order to permit the Underwriters to comply with the Rule, the Authority will covenant and agree for the benefit of the Holders or Beneficial Owners of the Series 2005 Bonds in a Continuing Disclosure Undertaking to provide certain annual financial information and operating data and notices of certain enumerated events, if material. See APPENDIX G CONTINUING DISCLOSURE UNDERTAKING for the detailed provisions of the Continuing Disclosure Undertaking, including the specific nature of the information to be provided on an annual basis and the events as to which notice is to be given, if material. 45

53 Breach of the Continuing Disclosure Undertaking will not constitute a default under the Master Bond Ordinance. The sole and exclusive remedy of any Holder or Beneficial Owner of the Series 2005 Bonds for enforcement of the provisions of the Continuing Disclosure Undertaking shall be an action for mandamus or specific performance to cause the Authority to comply with its obligations thereunder. The Authority is in compliance with all undertakings previously entered into by it pursuant to 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 ( Rule 15c2-12 ). In the Continuing Disclosure Undertaking, the Authority will agree to use its best efforts to require certain obligated persons (at this time only Northwest) to provide certain annual financial information and operating data, unless the Authority is no longer required to do so under Rule 15c2-12. The Authority has not undertaken to provide additional information regarding any person that is not obligated under an Airline Agreement, lease or other agreement having a term of more than one year to pay a portion of the debt service on the Series 2005 Bonds and providing at least 20% of the revenues of the Airport for the prior two Operating Years. Northwest has agreed in its agreements with the Airport to provide to the Authority such information with respect to Northwest as the Authority deems reasonably necessary in order for the Authority to issue Series 2005 Bonds in compliance with the requirements of the Rule. The Disclosure Dissemination Agent DAC In order to provide certain continuing disclosure with respect to the Series 2005 Bonds in accordance with Rule 15c2-12, as the same may be amended from time to time, the Authority has entered into a Disclosure Dissemination Agent Agreement ( Disclosure Dissemination Agreement ) for the benefit of the Holders of the Series 2005 Bonds with Digital Assurance Certification, L.L.C. ( DAC ), under which the Authority has designated DAC as Disclosure Dissemination Agent. The Disclosure Dissemination Agent has only the duties specifically set forth in the Disclosure Dissemination Agreement. The Disclosure Dissemination Agent s obligation to deliver the information at the times and with the contents described in the Disclosure Dissemination Agreement is limited to the extent the Authority has provided such information to the Disclosure Dissemination Agent as required by this Disclosure Dissemination Agreement. The Disclosure Dissemination Agent has no duty with respect to the content of any disclosures or notice made pursuant to the terms of the Disclosure Dissemination Agreement. The Disclosure Dissemination Agent has no duty or obligation to review or verify any information in the Annual Report, Audited Financial Statements, notice of Notice Event or Voluntary Report, or any other information, disclosures or notices provided to it by the Authority and shall not be deemed to be acting in any fiduciary capacity for the Authority, the Holders of the Series 2005 Bonds or any other party. The Disclosure Dissemination Agent has no responsibility for the Authority s failure to report to the Disclosure Dissemination Agent a Notice Event or a duty to determine the materiality thereof. The Disclosure Dissemination Agent shall have no duty to determine or liability for failing to determine whether the Authority has complied with the Disclosure Dissemination Agreement. The Disclosure Dissemination Agent may conclusively rely upon certifications of the Authority at all times. General TAX MATTERS In the opinion of Miller, Canfield, Paddock and Stone, P.L.C., Bond Counsel, based on its examination of the documents described in its opinion, under existing law as presently interpreted, the interest on the Series 2005 Bonds is excluded from gross income for federal income tax purposes, except for any period when the Series 2005 Bonds are held by a substantial user of the Airport or a person deemed related thereto (as such terms are used in Section 147(a) of the Internal Revenue Code of 1986, as amended (the Code )). Interest on the Series 2005 Bonds is an item of tax preference for purposes of the federal alternative minimum tax imposed on individuals and corporations. The opinion is subject to the condition that the Authority comply with all requirements of the Code that must be satisfied subsequent to the issuance of the Series 2005 Bonds in order that interest thereon be (or continue to be) excluded from gross income for federal income tax purposes. This requirement may include 46

54 rebating certain earnings to the United States. Failure to comply with any of such requirements could cause the interest on the Series 2005 Bonds to be included in gross income retroactive to the date of issuance of the Series 2005 Bonds. The Authority has covenanted to comply with all such requirements. Bond Counsel will express no opinion regarding other federal tax consequences arising with respect to the Series 2005 Bonds and interest thereon. Bond Counsel is further of the opinion that under existing law as presently interpreted, the Series 2005 Bonds and the interest thereon are exempt from all taxation provided by the laws of the State of Michigan except inheritance and estate taxes and taxes on gains realized from the sale, payment or other disposition thereof. Additional federal tax consequences relative to the Series 2005 Bonds and interest thereon include the following matters. The following is a general description of some of these consequences, but is not intended to be complete or exhaustive, and investors should consult their tax advisors with respect to these matters. For federal income tax purposes: (a) tax-exempt interest, including interest on the Series 2005 Bonds, is included in the calculation of modified adjusted gross income required to determine the taxability of social security or railroad retirement benefits; (b) the receipt of tax exempt interest, including interest on the Series 2005 Bonds, by life insurance companies may affect the federal income tax liabilities of such companies; (c) the amount of certain loss deductions otherwise allowable to property and casualty insurance companies will be reduced (in certain instances below zero) by 15% of, among other things, tax-exempt interest, including interest on the Series 2005 Bonds; (d) interest incurred or continued to purchase or carry the Series 2005 Bonds may not be deducted in determining federal income tax; (e) commercial banks, thrift institutions and other financial institutions may not deduct their costs of carrying certain obligations; (f) interest on the Series 2005 Bonds will be included in effectively connected earnings and profits for purposes of computing the branch profits tax on certain foreign corporations doing business in the United States; and (g) passive investment income, including interest on the Series 2005 Bonds, may be subject to federal income taxation 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. Original Issue Discount For federal income tax purposes, if the initial public offering price of a Series 2005 Bond as shown on the cover of this Official Statement is less than the stated redemption price at maturity, then such Series 2005 Bond is considered to have an original issue discount equal to the difference between such initial offering price and the amount payable at maturity (such Series 2005 Bonds are referred to as OID Bonds ). The original issue price of each OID Bond will be the initial offering price to the public at which a substantial amount of OID Bonds are sold, and the issue date will be the date on which an OID Bond is first issued to the public. In the opinion of Bond Counsel, under existing law as presently interpreted, the original issue discount on an OID Bond accrued in the hands of a registered owner is treated for federal income tax purposes as tax exempt interest as described below. The registered owner s basis for determining gain or loss on a sale, maturity or other disposition of an OID Bond generally will equal the registered owner s cost, increased by any original issue discount that accrued while the owner held the OID Bond as described below. Generally, any gain or loss incurred by a U.S. registered owner on the sale, exchange or payment at maturity of an OID Bond (based on the registered owner s basis) would be taxable as capital gain or loss (assuming the OID Bond is held as a capital asset), which would be long term or short term depending on whether the OID Bond was held for more than the applicable period for treatment of long term capital gain. Subject to the modification described in the next paragraph for certain subsequent registered owners, the original issue discount accrued in each accrual period will equal the original issue price of the OID Bond (increased by the amount of the original issue discount accrued in all prior accrual periods without regard to the modifications discussed in the next paragraph) multiplied by the yield to the maturity of the OID Bond (determined on the basis of compounding at the close of each accrual period and properly adjusted for the length of the accrual period) less the interest payable on such OID Bond during such accrual period. For purposes of this paragraph, accrual period means a six month period (or shorter period from the date of original issue of the OID Bond) which ends on a day in the calendar year corresponding to the maturity date of the OID Bond or the date six months before such maturity date. The original issue discount so accrued in a particular accrual period will then be considered to accrue ratably on each day of the accrual period. 47

55 A modification of the foregoing rules will generally apply to a registered owner who acquired an OID Bond by purchase if the cost of the OID Bond to that purchaser exceeds the sum of (a) the original issue price of the OID Bond and (b) the total original issue discount accrued under the rules of the preceding paragraph during the entire period prior to the registered owner s purchase of the OID Bond. In that case, the amount of the original issue discount considered to accrue in an accrual period will equal (i) the amount determined under the rules of the preceding paragraph reduced by (ii) the portion of such excess purchase price allocable to the days beginning on the date of such purchase and ending on the stated maturity date of the OID Bond. Such excess would be allocated so as to equal a constant percentage of the original issue discount accrued on each such day in the remaining period to maturity as described above. For this purpose, a purchase is any acquisition of an OID Bond other than one in which the registered owner s basis in such OID Bond is determined by reference to the basis of the OID Bond in the hands of the person from whom acquired (such as a gift). Amortizable Bond Premium For federal income tax purposes, if the initial offering price of a Series 2005 Bond as shown on the cover of this Official Statement is greater than the stated redemption price at maturity (such Series 2005 Bonds are hereafter referred to as Premium Bonds ), then the difference between a purchaser s cost basis of the Premium Bonds and the amounts payable on the Premium Bonds (other than the payment of the stated interest thereon) constitutes an amortizable bond premium. Such amortizable bond premium is not deductible from gross income, but is treated for federal income tax purposes as an offset to the amount of stated tax exempt interest paid on the Premium Bonds and is taken into account by certain corporations in determining adjusted current earnings for the purpose of computing the alternative minimum tax, which may also affect liability for the branch profits tax imposed by Section 884 of the Code. In general, the amount of amortizable bond premium allocated to each accrual period is the excess of the stated interest on a Premium Bond allocable to such accrual period over the product of the bond purchaser s adjusted acquisition price at the beginning of the accrual period multiplied by the discount rate that, when used in computing the present value of all remaining payments to be made on such Premium Bond (including stated interest) produces an amount equal to the holder s basis in the Premium Bonds. For purposes of this calculation, the adjusted acquisition price at the beginning of any accrual period is equal to the purchaser s original basis in the Premium Bond decreased by (i) the amount of bond premium amortized in prior accrual periods and (ii) the amount of any payments previously made on the Premium Bond other than payments of stated interest on such Premium Bond. The amount of amortizable bond premium allocable to each taxable year is deducted from the bond purchaser s adjusted basis on such Premium Bonds to determine taxable gain upon disposition (including sale, redemption or payment at maturity) of such bonds. Market Discount Pursuant to amendments made to the Code by the Omnibus Budget Reconciliation Act of 1993, the market discount rules of the Code apply to the Series 2005 Bonds. Accordingly, Holders acquiring their Bonds subsequent to the initial issuance of the Series 2005 Bonds will generally be required to treat market discount recognized under the provisions of the Code as ordinary taxable income (as opposed to capital gain income). Holders should consult their own tax advisors regarding the application of the market discount provisions of the Code and the advisability of making any of the elections relating to market discount allowed by the Code. Future Developments NO ASSURANCE CAN BE GIVEN THAT ANY FUTURE LEGISLATION, OR CLARIFICATIONS OR AMENDMENTS TO THE CODE, IF ENACTED INTO LAW, WILL NOT CONTAIN PROPOSALS WHICH COULD CAUSE THE INTEREST ON THE SERIES 2005 BONDS TO BE SUBJECT DIRECTLY OR INDIRECTLY TO FEDERAL OR STATE OF MICHIGAN INCOME TAXATION, ADVERSELY AFFECT THE MARKET PRICE OR MARKETABILITY OF THE SERIES 2005 BONDS, OR OTHERWISE PREVENT THE HOLDERS FROM REALIZING THE FULL CURRENT BENEFIT OF THE STATUS OF THE INTEREST THEREON. FURTHER, NO ASSURANCE CAN BE GIVEN THAT ANY SUCH FUTURE LEGISLATION, OR ANY ACTIONS OF THE INTERNAL REVENUE SERVICE, INCLUDING, BUT NOT LIMITED TO, 48

56 SELECTION OF THE SERIES 2005 BONDS FOR AUDIT EXAMINATION, OR THE COURSE OF ANY EXAMINATION OF THE SERIES 2005 BONDS, OR OTHER BONDS WHICH PRESENT SIMILAR TAX ISSUES, WILL NOT AFFECT THE MARKET PRICE OF THE SERIES 2005 BONDS. INVESTORS SHOULD CONSULT WITH THEIR TAX ADVISORS AS TO THE TAX CONSEQUENCES OF THEIR ACQUISITION, HOLDING OR DISPOSITION OF THE SERIES 2005 BONDS. LEGAL MATTERS The authorization, issuance and sale by the Authority of the Series 2005 Bonds are subject to the approval of Miller, Canfield, Paddock and Stone, P.L.C., Detroit, Michigan, as Bond Counsel. The proposed form of the approving opinion of Bond Counsel is included in this Official Statement as APPENDIX H. Certain legal matters will be passed upon for the Authority by its General Counsel and for the Underwriters by their counsel, Foley & Lardner LLP. Miller, Canfield, Paddock and Stone, P.L.C. is currently representing or periodically represents Northwest and Citigroup Global Markets Inc. in certain matters unrelated to the issuance of the Series 2005 Bonds. Miller, Canfield, Paddock and Stone, P.L.C. has obtained written consents from the Authority, Northwest and Citigroup Global Markets Inc. with respect to such matters. Foley & Lardner LLP is currently representing the Authority on certain matters unrelated to the issuance of the Series 2005 Bonds, including representation of a consortium of airports and airport authorities, including the Authority, in bankruptcy proceedings involving United Airlines and US Airways. Citigroup Global Markets Inc. and the Authority have consented with respect to such matters. FINANCIAL ADVISOR Government Finance Associates, Inc. (the Financial Advisor ) serves as Financial Advisor to the Authority. The Financial Advisor is a financial advisory and consulting organization and is not engaged in the business of underwriting, marketing or trading municipal securities or any other negotiated instruments. The Financial Advisor has provided advice as to the plan of financing and the structuring of the Series 2005 Bonds and has reviewed and commented on certain legal documentation, including this Official Statement. The advice on the plan of financing and the structuring of the Series 2005 Bonds was based upon materials provided by sources of information believed to be reliable, but the Financial Advisor has not audited, authenticated or otherwise verified such information, including material contained in this Official Statement. INDEPENDENT AUDITORS The financial statements of the Authority as of and for the year ended September 30, 2004, included as APPENDIX F, have been audited by KPMG LLP, independent auditors for the period and to the extent stated in their report appearing in APPENDIX F. FORWARD LOOKING STATEMENTS The statements contained in this Official Statement, and in any other information provided by the Authority, that are not purely historical, are forward-looking statements, including statements regarding the Authority s expectations, hopes, intentions, or strategies regarding the future. Readers should not place undue reliance on forward-looking statements. All forward-looking statements included in this Official Statement are based on information available to the Authority on the date hereof, and the Authority assumes no obligation to update any such forward-looking statements. It is important to note that the actual results of the Airport could differ materially from those in such forward-looking statements. 49

57 The forward-looking statements herein are necessarily based on various assumptions and estimates and are inherently subject to various risks and uncertainties, including risks and uncertainties relating to the possible invalidity of the underlying assumptions and estimates and possible changes or developments in social, economic, business, industry, market, legal and regulatory circumstances and conditions and actions taken or omitted to be taken by third parties, including customers, suppliers, business partners and competitors, and legislative, judicial and other governmental authorities and officials. Assumptions related to the foregoing involve judgments with respect to, among other things, future economic, competitive and market conditions and future business decisions, all of which are difficult or impossible to predict accurately and many of which are beyond the control of the Authority. Any of such assumptions could be inaccurate and, therefor, there can be no assurance that the forward-looking statements included in this Official Statement would prove to be accurate. MISCELLANEOUS This Official Statement has been duly authorized by the Board of the Authority, and duly executed and delivered by the Chief Executive Officer of the Authority. The Appendices are integral parts of this Official Statement and must be read together with all other parts of this Official Statement. WAYNE COUNTY AIRPORT AUTHORITY By: /s/ Lester W. Robinson Chief Executive Officer 50

58 APPENDIX A SUMMARY OF CERTAIN PROVISIONS OF THE MASTER BOND ORDINANCE AND THE SERIES 2005 ORDINANCE

59 [THIS PAGE INTENTIONALLY LEFT BLANK]

60 SUMMARY OF CERTAIN PROVISIONS OF THE MASTER BOND ORDINANCE AND THE SERIES 2005 ORDINANCE APPENDIX A The following is a summary of certain provisions of the Master Bond Ordinance and the Series 2005 Ordinance. This summary does not purport to be comprehensive or definitive and is qualified in its entirety by reference to and subject to the provisions of the complete Master Bond Ordinance and the Series 2005 Ordinance. Capitalized terms used herein have the meanings established in the Master Bond Ordinance and the Series 2005 Ordinance, as more particularly described herein; see Selected Definitions from Master Bond Ordinance, and Selected Definitions from the Series 2005 Ordinance sections below. This summary should be read in conjunction with the description of the Series 2005 Bonds and the Master Bond Ordinance in the Official Statement, particularly the sections entitled APPLICATION OF THE SERIES 2005 BOND PROCEEDS, SECURITY FOR THE SERIES 2005 BONDS, and THE SERIES 2005 BONDS. MASTER BOND ORDINANCE The Wayne County Airport Authority, State of Michigan (the Authority ) has adopted the Master Bond Ordinance to provide for the acquisition and construction of capital improvements (the Capital Improvement Program ) at the Detroit Metropolitan Wayne County Airport (the Airport ). The Master Bond Ordinance contemplates and authorizes the issuance of several Series of Bonds or Junior Lien Bonds through adoption of a Series Ordinance, authorizing the issuance and sale of each such Series of Bonds or Junior Lien Bonds in accordance with the provisions of the Master Bond Ordinance and amending and supplementing the Master Bond Ordinance. In addition, the Master Bond Ordinance contains certain requirements which must be met prior to the issuance of such additional Series of Bonds. See SECURITY FOR THE SERIES 2005 BONDS Additional Indebtedness. Selected Definitions The following are definitions of certain of the terms used in the Master Bond Ordinance. The words and terms used in the Master Bond Ordinance shall have the following meanings, unless some other meaning is plainly intended and shall be either singular or plural, as the context may require. Accountant means an independent certified public accountant or a firm of independent certified public accountants having a favorable reputation for skill in performing similar duties to the duties imposed on the Accountant under the Master Bond Ordinance selected by the Authority Board from recommendations made by the Audit Committee as provided in Act 90. Act 90 means Act 90, Public Acts of Michigan, Act 94 means Act 94, Public Acts of Michigan, 1933, as amended. Act 34 means Act 34, Public Acts of Michigan, 2001, as amended. Act 327 or Aeronautics Code means Act 327, Public Acts of Michigan, 1945, as amended. Additional Bonds means airport revenue bonds of equal standing with the Bonds, issued under and in accordance with the Master Bond Ordinance for the purposes set forth in Section 208 of the Master Bond Ordinance. Airport means the entire Detroit Metropolitan Wayne County Airport, including all of its properties, real, personal or mixed, all buildings and all other improvements, additions or extensions thereto located thereon or appurtenant thereto, now existing or hereafter acquired. A-1

61 Airport Consultant means any professionally qualified person, firm or corporation recognized in the air transportation industry and of favorable reputation for skill and experience in performing the duties of providing consulting services to airport operators at airports comparable in size and function to the Airport. Airport Development Fund means the fund created pursuant to Section 501G of the Master Bond Ordinance. Airport Discretionary Fund means the fund created by Section 501F of the Master Bond Ordinance. Authority means the Wayne County Airport Authority created by Act 90. Authority Board means the governing body of the Authority. Authorized Officer means the Chief Executive Officer, the Chief Financial Officer, or officer designated by the Authority Board for the Authority or the designee of any of them, plus, in the case of required certification of Requisition Certificates and Completion Certificates, and unless a majority of bondholders consent to eliminating this requirement, the Consulting Architect or Engineer for the related component(s) of the Capital Improvement Program. Bonds means any bond or Series of bonds, established and created by the County under Section 202A of Ordinance No. 319 or by the Authority under Section 202A of the Master Bond Ordinance and issued pursuant to a Series Ordinance, and Reimbursement Obligations of equal standing with the Bonds established and created by a Series Ordinance. Bond Counsel means any nationally recognized bond counsel acceptable to the Trustee and the Authority. Bond Fund means the fund created pursuant to Section 501B of the Master Bond Ordinance. Bond Payment Date means any of the dates specified in a Series Ordinance for payment of interest, or interest and principal on the Bonds or Junior Lien Bonds. Bond Reserve Account means the account in the Bond Fund created pursuant to Section 501B of the Master Bond Ordinance. Bondholder or any similar term means any person or party who shall be the registered owner of any Bond or Junior Lien Bond. Capital Improvement Program means the ongoing program of capital improvements at the Airports, as approved by the County prior to August 9, 2002, or since that date by the Authority as the successor to the County, as the same may be modified from time to time by the Authority. Chief Executive Officer means the Chief Executive Officer of the Authority. Chief Financial Officer means the Chief Financial Officer of the Authority. Code means the Internal Revenue Code of 1986, as amended, and the regulations, rulings and court decisions thereunder, as the context may require. Completion Date means the date on which the acquisition, construction and installation of the portion of the Capital Improvement Program to be financed with the proceeds of a particular Series of Bonds or Junior Lien Bonds is complete, as evidenced by the filing of a Completion Certificate with the Trustee. Construction Fund means the fund created pursuant to Section 401 of the Master Bond Ordinance. Consulting Architect or Engineer means an independent architect or engineer or firm of professional architects or engineers, registered pursuant to the laws of the State of Michigan, from time to time selected by the Authority in accordance with its procurement policy and Act 90 to design or supervise the design and oversee the construction and installation of the Capital Improvement Program or components of the Capital Improvement Program. County means the Charter County of Wayne, State of Michigan. Credit Entity means with respect to a Series of Bonds or Junior Lien Bonds or a maturity of such Series a commercial bank, a bond insurance company, any other financial institution or combination of such financial institutions or governmental entity which issues a Credit Facility for such Series of A-2

62 Bonds or Junior Lien Bonds or maturities but only while such Credit Facility is outstanding or Reimbursement Obligations or Junior Lien Reimbursement Obligations or other amounts are outstanding under any written agreement with a Credit Entity pursuant to which a Credit Facility is issued. Credit Facility means one or more credit facilities with respect to a Series of Bonds or Junior Lien Bonds or maturity of such Series consisting of an irrevocable and unconditional letter of credit, line of credit, bond purchase agreement, municipal bond insurance policy, surety bond or other credit enhancement facility issued by a Credit Entity as described in Section 213 of the Master Bond Ordinance to provide moneys for the purpose of paying the principal (whether upon tender or upon maturity or redemption) of and the interest on such Series of Bonds or Junior Lien Bonds but only while such Credit Facility is outstanding. Debt Service means the amount scheduled to become due and payable annually on all Outstanding Bonds and Junior Lien Bonds as (i) interest, exclusive of interest capitalized on such Outstanding Bonds and Junior Lien Bonds and paid from the proceeds of a Series of Bonds or Junior Lien Bonds or investment earnings on such capitalized interest, plus (ii) principal, plus (iii) Mandatory Redemption Requirements. For purposes of calculating Debt Service: (i) All principal payments shall be made as and when the same shall become due or upon mandatory redemption; (ii) Outstanding Variable Rate Bonds shall be deemed to bear interest during any period after the date of calculation at a fixed annual rate equal to the weighted average of the actual rates on such Variable Rate Bonds for each day during the 365 consecutive days (or any lesser period such Variable Rate Bonds have been Outstanding) ending on the last day of the month next preceding the date of computation, or at the effective fixed annual rate thereon as a result of a Swap Agreement with respect thereto; provided, that such effective fixed annual rate for Variable Rate Bonds subject to a Swap Agreement must be utilized as long as such Swap Agreement is contracted to remain in full force and effect, and provided further, that for purposes of establishing compliance with the requirements of Section 208 of the Master Bond Ordinance, Outstanding Variable Rate Bonds shall be deemed to bear interest as provided for Variable Rate Bonds proposed to be issued in clause (iii) below; (iii) Variable Rate Bonds proposed to be issued shall be deemed to bear interest at a fixed annual rate equal to the average of the interest rates published in The Bond Buyer Revenue Bond Index during the twelve (12) months preceding the date of issuance of such Variable Rate Bonds, or at the effective fixed annual rate thereon as a result of a Swap Agreement with respect to such Variable Rate Bonds; and provided, that such effective fixed annual rate must be utilized only so long as such Swap Agreement is contracted to remain in full force and effect; (iv) Any computation of Debt Service shall recognize and give effect to the alternative, rather than the cumulative, nature of obligations on Bonds or Junior Lien Bonds, including any related Reimbursement Obligations or Junior Lien Reimbursement Obligations to a provider of credit enhancement or a liquidity facility securing payment of such Bonds or Junior Lien Bonds. A termination payment which becomes payable pursuant to the terms of a Swap Agreement entered into after 1996 shall constitute interest as provided in Act 34. Default means a default or event of default as such terms are defined in Section 701 of the Master Bond Ordinance. Government Obligations means any of the following which at the time of investment are legal investments under Michigan law for the moneys proposed to be invested therein: investments described in Section 506(i) or (ii) of the Master Bond Ordinance. A-3

63 Insurance Consultant means an independent person or a firm of persons having skill and experience in dealing with the insurance requirements of enterprises similar to the Airport and in performing the duties to be imposed upon it by the Master Bond Ordinance. Issuance Costs means items of expense payable or reimbursable directly or indirectly by or to the Authority and related to the authorization, sale and issuance of Bonds or Junior Lien Bonds and authorization of the Master Bond Ordinance, which items of expense shall include, but not be limited to, application fees and expenses, publication costs, printing costs, costs of reproducing documents, filing and recording fees, Bond Counsel, financial and other consultants fees, initial Trustee s fees, underwriters fees and discount, costs of credit ratings, costs of Credit Facilities and charges for execution, transportation and safekeeping of the Bonds or Junior Lien Bonds and related documents, and other costs, charges and fees in connection with the foregoing. Junior Lien Bond Fund means the fund created pursuant to Section 501C of the Master Bond Ordinance. Junior Lien Bonds means any bonds or Series of bonds, issued by the County under Section 202B of Ordinance No. 319 or by the Authority under Section 202B of the Master Bond Ordinance, issued pursuant to a Series Ordinance and payable from Net Revenues deposited in the Junior Lien Bond Fund after satisfaction of requirements for funding the Bond Fund, and Junior Lien Reimbursement Obligations established and created by a Series Ordinance. Junior Lien Reimbursement Obligations means any obligations to repay a Credit Entity for payments of Debt Service made with respect to a Series of Bonds or Junior Lien Bonds, as provided in any written agreement between the Authority and a Credit Entity pursuant to which a Credit Facility is issued, which Junior Lien Reimbursement Obligations may be evidenced by Refunding Bonds or Junior Lien Bonds or contractual undertakings with the Credit Entity. Mandatory Redemption Requirement means as to each Series of Bonds or Junior Lien Bonds for any year, the principal amount of Bonds or Junior Lien Bonds of such series subject to mandatory sinking fund redemption in such year, as provided in the Series Ordinance or Sale Resolution for each Series of Bonds or Junior Lien Bonds. Master Bond Ordinance means the Master Bond Ordinance as from time to time restated, amended or supplemented by supplemental ordinances in accordance with the terms and provisions hereof, and shall include the Series Ordinance and Sale Resolution (if any) or Order (if any) of the Chief Executive Officer, for each Series of Bonds or Junior Lien Bonds. Net Proceeds means the gross proceeds derived by the Authority from insurance or as an award arising from condemnation of all or part of either of the Airports, less payment of attorneys fees and other expenses properly incurred in the collection thereof. Net Revenues means Revenues less Operation and Maintenance Expenses. Operating Reserve Amount means the amount required in Section 501D of the Master Bond Ordinance to be on deposit in the Operation and Maintenance Reserve Fund. Operating Year means the fiscal year of the Authority. Operation and Maintenance Expenses means the reasonable expenses of administration, operation and maintenance of the Airport. Operation and Maintenance Fund means the fund created pursuant to Section 501A of the Master Bond Ordinance. Operation and Maintenance Reserve Fund means the fund created pursuant to Section 501D of the Master Bond Ordinance. Ordinance No. 319 means Amended and Restated Ordinance No. 319 of the County, most recently dated April 14, 1998, and effective August 16, 1998, and superseded and replaced by the Master Bond Ordinance. Other Available Moneys means, for any Operating Year, the amount of money determined by the Chief Financial Officer in concurrence with the Chief Executive Officer to be transferred by the A-4

64 Authority for such Operating Year from PFCs or other sources other than Revenues to the Bond Fund or the Junior Lien Bond Fund. Outstanding means, as of any date, all Bonds or Junior Lien Bonds which have been authenticated and delivered by the Trustee (including Bonds or Junior Lien Bonds tendered which may be owned by the Authority, from time to time prior to the remarketing thereof), except: (i) Bonds or Junior Lien Bonds (or portions of Bonds or Junior Lien Bonds) for the payment or redemption of which there shall be held in trust by the Trustee under the Master Bond Ordinance (whether at or prior to maturity or redemption) (a) moneys equal to the principal amount or Redemption Price thereof, as the case may be, with interest to the date of maturity or redemption or (b) Sufficient Government Obligations in such principal amounts, having such maturities and bearing such interest, as together with the moneys described in clause (a), if any, shall be sufficient without reinvestment to pay when due the principal amount or Redemption Price, as the case may be, with interest due to the date of maturity or redemption; provided, that if such Bonds or Junior Lien Bonds are to be redeemed, notice of such redemption shall have been given as provided in Article III of the Master Bond Ordinance or provisions satisfactory to the Trustee shall have been made for giving of such notice, (ii) Bonds or Junior Lien Bonds in lieu of or substitution for which other Bonds or Junior Lien Bonds shall have been delivered pursuant to Ordinance No. 319 or the Master Bond Ordinance, (iii) Bonds or Junior Lien Bonds deemed to have been paid or defeased as provided under Ordinance No. 319 or the Master Bond Ordinance and (iv) Bonds or Junior Lien Bonds subject to a mandatory tender which have not been tendered prior to the related tender date which are deemed to have been redeemed. Passenger Facility Charge or PFC means the passenger facility charge as authorized under 49 U.S.C , or any predecessor or successor law, and as approved by the Federal Aviation Administration (or successor agency) from time to time, or such other similar charge imposed by the Authority on passengers enplaned at the Airport. Person means any natural person, firm, partnership, entity or public body. Plans and Specifications means the drawings, plans, blueprints and technical specifications approved by the Authority and relating to the design, installation and construction of various components of the Capital Improvement Program, as amended from time to time. Program Costs shall be deemed to include the costs of design, acquisition, construction, installation, and financing of the Capital Improvement Program, including, but not limited to obligations of the Authority incurred for: (a) machinery, furnishings and equipment and for labor and to contractors, builders and materialmen in connection with the planning, design, acquisition, construction and installation of capital projects which comprise part of the Capital Improvement Program or any portion thereof; (b) the cost of contract bonds and of insurance of all kinds that may be required or necessary during the course of construction of capital projects which comprise part of the Capital Improvement Program or any portion thereof which is not paid by the contractor or contractors or otherwise provided for; (c) architectural and engineering expenses for test borings, surveys, estimates, Plans and Specifications and preliminary investigations therefor, and for supervising construction, as well as for the performance of all other duties required for the proper construction of capital projects which comprise part of the Capital Improvement Program or any portion thereof; (d) Issuance Costs; (e) all other costs which the Authority shall be required to pay, under the terms of any contract or contracts approved by the County or the Authority as the successor of the County, for the planning, design, acquisition, construction and installation of capital projects which comprise part of the Capital Improvement Program or any portion thereof including any legal costs and master planning, environmental and economic impact studies undertaken in connection therewith; (f) any sums required to reimburse the County, the Authority or any air carrier (pursuant to an agreement with the Authority) for advances made by it for any of the above items, or for any other costs incurred and for work done by any of them which are properly chargeable to the Capital Improvement Program; and (g) any other costs properly chargeable to the Construction Fund under Act 94. A-5

65 Rating Agency means any nationally recognized rating service then rating the Bonds or Junior Lien Bonds. Rebate Fund means the fund created pursuant to Section 503 of the Master Bond Ordinance. Redemption Price means the principal of any Bond or Junior Lien Bonds which has been called for redemption, together with any premium thereon. Refunding Bonds means any Bonds or Junior Lien Bonds issued pursuant to Section 209 of the Master Bond Ordinance. Reimbursement Obligations means any obligations to repay a Credit Entity for payments of Debt Service made with respect to a Series of Bonds as provided in any written agreement between the Authority (as successor to the County or otherwise) and a Credit Entity pursuant to which a Credit Facility is issued, which Reimbursement Obligations may be evidenced by the Bonds of such Series, Refunding Bonds or contractual undertakings with the Credit Entity. Renewal and Replacement Fund means the fund created pursuant to Section 501D of the Master Bond Ordinance. Replacement Requirement means the amount required in Section 501D of the Master Bond Ordinance to be on deposit in the Renewal and Replacement Fund. Reserve Requirement means an amount equal to the maximum annual Debt Service requirements for each Series of Outstanding Bonds which amount is required to be on deposit or, if permitted by law, otherwise provided for (including, but not limited to, through provision of a letter of credit, surety bond or insurance policy in the same amount) in the Bond Reserve Account; provided, however, that such requirement may be satisfied by a deposit at the time of issuance of a Series of Bonds or by an accumulation on a scheduled basis of Bond proceeds, investment earnings or other deposits which will result in an amount equal to the Reserve Requirement for such Series of Bonds being on deposit no later than the date of the last scheduled application of all capitalized interest for such Series; provided, further, that with respect to a Series of Bonds which are proposed to be issued as Variable Rate Bonds, the Reserve Requirement shall be calculated utilizing the assumptions set forth under subparagraph (iii) of the definition of Debt Service; and provided that in no event shall the Reserve Requirement exceed the maximum permitted by the Code. Any Reserve Requirement with respect to one or more Series of Junior Lien Bonds shall be established by the related Series Ordinance. Revenue Fund means the fund created pursuant to Section 501 of the Master Bond Ordinance. Revenues means the general revenues derived from the operation of the Airport, which shall include all moneys deposited in the Revenue Fund, from whatever source, and all income derived from the charges, fees, rentals and rates charged for services, facilities and commodities furnished by the Airport, whether such income shall be derived from its function as an Airport or not, and including, but not by way of limitation, concessions, rentals, auto parking fees, service charges derived from the operation of the terminal complex buildings and facilities, airplane landing fees, non-airline gasoline fees and miscellaneous charges and rentals from other facilities and services and investment earnings or general revenues derived from the operation of the Airport accumulated by the Authority prior to deposit in the Revenue Fund; provided, however, that the term Revenues shall not be construed to include (i) rentals or other amounts to be paid in the future by any Person pursuant to a lease or other agreement with the County or the Authority, which rentals or other amounts are pledged for the payment of bonds issued to provide funds to construct Special Facilities, (ii) the proceeds of federal grants or Passenger Facility Charges, or the proceeds of any other grant, charge or tax intended as a replacement therefor or other capital contributions from any source, or (iii) the Net Proceeds of insurance or condemnation proceeds resulting from the damage or destruction or taking of any portion of the Airport. Sale Resolution or Sale Order means a resolution or resolutions of the County adopted by the County Commission in accordance with Ordinance No. 319 prior to the Approval Date or the Authority adopted by the Authority Board in accordance with Article II of the Master Bond Ordinance or an Order of the County Executive Officer of the County prior to the Approval Date or of the Chief Executive Officer of the Authority authorizing the sale of a Series of Bonds or Junior Lien Bonds in A-6

66 accordance with the terms and provisions of Ordinance No. 319 or the Master Bond Ordinance and a Series Ordinance. Series means a Series of Bonds or Junior Lien Bonds issued and sold pursuant to a Series Ordinance and the Master Bond Ordinance or Ordinance No Series Ordinance means an ordinance or ordinances, including, if necessary, a Sale Resolution or Order, of the County prior to the Approval Date or the Authority as successor to the County authorizing the issuance and sale of a Series of Bonds or Junior Lien Bonds in accordance with the provisions hereof, adopted by the County (prior to the Approval Date) or the Authority as successor to the County or executed by the County Executive or the County (prior to the Approval Date) or the Authority s Chief Executive Officer in accordance with Article X of the Master Bond Ordinance. Special Facilities means a building or buildings or facilities constructed at the Airport for the use of any Person including both terminal and non-terminal improvements for the use of such Person, either exclusively or in common with others, or for public use as agreed upon by the Authority and such Person, for which rentals or other amounts are to be paid by such Person pursuant to a lease or other agreement assumed by or with the Authority, which rentals or other amounts are pledged for the payment of bonds issued by the County or the Authority to construct such facilities. Sufficient Government Obligations means (a) direct obligations of the United States of America or (b) obligations the principal of and interest on which are fully guaranteed by the United States of America, and which (i) are not redeemable at the option of the issuer and (ii) without reinvestment of the interest, come due at such times and in such amounts as to be fully sufficient to pay the principal or Redemption Price and interest, respectively, as each becomes due on the Bonds or Junior Lien Bonds. Swap Agreement means any interest rate exchange or swap, hedge or other similar agreement or agreements entered into in connection with the issuance of obligations or other evidences of indebtedness or in connection with the Authority s then Outstanding Bonds or Junior Lien Bonds within the limitations provided by Act 34 or its predecessor statute. Swap Provider means any party with whom the Authority (as successor to the County or otherwise) has or shall enter into a Swap Agreement. Trustee means an independent bank or trust company qualified and appointed pursuant to Article IX of the Master Bond Ordinance to act as Trustee under the Master Bond Ordinance and any company into which the Trustee may be merged or converted or with which it may be consolidated, or any company resulting from any merger, conversion or consolidation to which the Trustee shall be a party, or any company to which the Trustee may sell or transfer all or substantially all of its corporate trust business, provided such company shall be a trust company or bank which is qualified to be a successor Trustee under Section 907 of the Master Bond Ordinance, or any other bank or trust company at any time substituted in its place pursuant to the Master Bond Ordinance. Variable Rate Bonds means any Bonds or Junior Lien Bonds the interest rate on which is not fixed to maturity as of the date of the calculation being performed. Defeasance The statutory lien upon the Net Revenues established by the Master Bond Ordinance shall continue until payment in full of the principal or Redemption Price and interest on the Bonds and Junior Lien Bonds or until sufficient cash or Sufficient Government Obligations shall have been deposited in trust for payment in full of all Bonds and Junior Lien Bonds to be defeased and sufficient funds shall have also been provided for paying all other obligations payable under the Master Bond Ordinance by the Authority with respect to the Bonds and Junior Lien Bonds to be defeased. If any of the Bonds or Junior Lien Bonds are to be called for redemption prior to maturity, irrevocable instructions to call the Bonds or Junior Lien Bonds for redemption shall be given to the Trustee after such deposit has been made. A-7

67 Upon deposit of sufficient cash or Sufficient Government Obligations, as provided above, the statutory lien shall be terminated with respect to the Bonds or Junior Lien Bonds to be paid or defeased, the holders of such Bonds or Junior Lien Bonds shall have no further rights under the Master Bond Ordinance except for payment from the deposited funds and the replacement or transfer of registration of Bonds or Junior Lien Bonds, and such Bonds or Junior Lien Bonds shall no longer be considered to be Outstanding. The Authority shall not defease Variable Rate Bonds without having first obtained a confirmation of the rating on such Variable Rate Bonds from each nationally-recognized rating agency then rating the Variable Rate Bonds indicating that the rating on such Variable Rate Bonds will not be reduced or withdrawn due to the defeasance. Proceeds; Construction Fund; Surplus Bond Proceeds The proceeds of the sale of each Series of Bonds or Junior Lien Bonds shall be immediately deposited with the Trustee in the Funds and Accounts as specified in the Series Ordinance for such Series, provided, that (i) an amount equal to the accrued interest and premiums, if any, received on the delivery of such Series of Bonds or Junior Lien Bonds and an amount equal to any capitalized interest on such Series of Bonds or Junior Lien Bonds to be paid from Bond or Junior Lien Bond proceeds shall be deposited in the Bond Fund or Junior Lien Bond Fund, as appropriate and (ii) any Bond or Junior Lien Bond proceeds required to satisfy a Reserve Requirement shall be deposited in the Bond Reserve Account in the Bond Fund or the Junior Lien Bond Reserve Account in the Junior Lien Bond Fund, as appropriate and (iii) Bond or Junior Lien Bond proceeds to be used to pay Program Costs shall be deposited in a separate account established for such Series in the Construction Fund. The Issuance Costs for a Series of Bonds or Junior Lien Bonds shall be paid or reimbursed by the Trustee out of the Construction Fund upon presentation of a requisition certificate by the Authority. The Trustee shall make disbursements from the Construction Fund to pay or reimburse other Program Costs in accordance with requisition certificates submitted by the Authority from time to time, executed by an Authorized Officer supported by an itemization of the Program Costs being financed with the proceeds of the particular Series of Bonds or Junior Lien Bonds for which payment or reimbursement is requisitioned thereby in sufficient detail to evidence the purpose for which such costs were incurred. The Authority shall proceed with reasonable dispatch to acquire, construct, install and complete capital projects or to cause the same to occur substantially in accordance with the Plans and Specifications. Completion of construction and installation of capital improvements shall be signified by the prompt filing with the Trustee of a completion certificate ( Completion Certificate ) executed by an Authorized Officer. All proceeds of a Series of Bonds or Junior Lien Bonds and investment earnings thereon deposited in the related account in the Construction Fund in excess of the amount actually used for construction or required for completion of construction (other than sums for construction for which payment is not yet due) of the capital improvements in anticipation of which such Series of Bonds or Junior Lien Bonds was issued and capitalized interest remaining on deposit in the related subaccount in the Capitalized Interest Account ( Surplus Bond Proceeds ) shall, if permitted by law, and subject to the Master Bond Ordinance, be used to satisfy any rebate obligations with respect to such Series of Bonds or Junior Lien Bonds or for such other capital projects (and capitalized interest related thereto) in the Capital Improvement Program or, upon receipt of a Completion Certificate, be immediately transferred by the Trustee to the general account in the Bond Fund or Junior Lien Bond Fund as appropriate, designated the Surplus Bond Proceeds Account to be applied as follows. Surplus Bond Proceeds may be applied, in certain instances, to (i) make principal payments next coming due on the Bonds or Junior Lien Bonds and (ii) redeem Bonds or Junior Lien Bonds. In no event shall Surplus Bond Proceeds so transferred to the A-8

68 Bond Fund or Junior Lien Bond Fund or the investment income thereon be used to pay interest on the Bonds or Junior Lien Bonds unless in the opinion of Bond Counsel such use would not impair the tax exempt status of the Bonds or Junior Lien Bonds. Investments Except as in the Master Bond Ordinance otherwise provided, or as further limited by agreement with a Credit Entity, moneys in the Funds and Accounts established in the Master Bond Ordinance and moneys derived from the proceeds of sale of the Bonds or Junior Lien Bonds may be invested at the oral direction of the Chief Financial Officer, confirmed in writing, to the extent consistent with Act 94 as then in effect, by the Trustee or by the Chief Financial Officer, as the case may be, in investments permitted by Act 20, Michigan Public Acts of 1943, as amended. Investment of moneys in the Bond Fund or Junior Lien Bond Fund being accumulated for payment of the next maturing principal or interest payment of the Bonds or Junior Lien Bonds shall be limited to (i) direct obligations of the United States of America or obligations the principal of and interest on which are unconditionally guaranteed by the United States of America; and (ii) bonds, debentures, notes or other evidence of indebtedness issued or guaranteed by any of the following federal agencies and provided such obligations are backed by the full faith and credit of the United States of America (stripped securities are only permitted if they have been stripped by the agency itself); U.S. Export-Import Bank (Eximbank) direct obligations or fully guaranteed certificates of beneficial ownership; Farmers Housing Administration (FmHA) certificates of beneficial ownership; Federal Financing Bank; Federal Housing Administration Debentures (FHA); General Services Administration Participation Certificates; Government National Mortgage Association (GNMA or Ginnie Mae ) GNMA-guaranteed mortgagebacked bonds, GNMA-guaranteed pass-through obligations; U.S. Maritime Administration Guaranteed Title XI financing; U.S. Department of Housing and Urban Development (HUD) Project Notes, Local Authority Bonds, New Communities Debentures U. S. government guaranteed debentures, U.S. Public Housing Notes and Bond U.S. government guaranteed public housing notes and bonds; bearing maturity dates not later than one (1) business day prior to the date of the next maturing principal or interest payment on the Bonds or Junior Lien Bonds and any securities representing investment of the same shall be kept on deposit with the Trustee. Investment of moneys in the Bond Reserve Account or the Junior Lien Bond Reserve Account shall be limited to obligations bearing maturity dates or subject to redemption at the option of the owner thereof, not later than five years from the date of the investment or such lesser period of time until final maturity of the related Bonds or Junior Lien Bonds. The Authority shall cause investments credited to the Bond Reserve Account and the Junior Lien Bond Reserve Account to be valued at least semiannually by the Accountant on the first day of each Operating Year and semiannually thereafter, at the then market value thereof, and, in the event such investments are valued at less than 90% of the related Reserve Requirement, budget such additional deposits at the beginning of the next quarter in an amount necessary to restore the Bond Reserve Account or the Junior Lien Reserve Account, as the case may be, to the full amount of the related Reserve Requirement within 18 months. A-9

69 Covenants and Representations of the Authority Management The operation, maintenance and management of the Airport shall continue to be under the supervision and control of the Authority. The Chief Executive Officer shall establish and enforce reasonable rules and regulations governing the operation and use of the Airport, operate the Airport in an efficient and economical manner, maintain the properties constituting the Airport in good repair and in sound operating condition for so long as the same are necessary to the operation of the Airport on a Revenue-producing basis. Powers conferred on the Authority shall, unless otherwise specifically provided, be exercised or performed by the Chief Executive Officer. Operating Year The Airport shall continue to be operated on the basis of an Operating Year which currently begins on October 1 of each year. No Free Service or Use No free service or use of the Airport, or service or use of the Airport at less than cost, shall be furnished by the Airport to any person, firm or corporation, public or private, or to any public agency or instrumentality. Insurance Generally While any Bonds or Junior Lien Bonds remain Outstanding under the Master Bond Ordinance the Authority shall maintain or cause to be maintained insurance (which may include self-insurance) on all physical properties belonging to the Airport and/or operations of the Airport, or the kinds and in the amounts normally carried by agencies engaged in the operation of airports and reasonably available to the Authority. The Authority shall retain an Insurance Consultant for the Airport for the purpose of determining compliance with this requirement. The Authority shall, and the Trustee may, demand, collect and sue for the insurance money that may become due and payable under any policies payable to it. Any appraisal or adjustment of any loss of damages and any settlement or payment of indemnity therefor that may be agreed upon between the Authority and any insurer shall be evidenced to the Trustee by a certificate signed by the Authorized Officer. The Authority shall require the Insurance Consultant to report to it annually on December 1 on the adequacy of the Authority s insurance coverage under the Master Bond Ordinance. A signed copy of any reports of any Insurance Consultant required hereby shall be filed with the Chief Financial Officer and copies thereof shall be sent to the Trustee. Notice of Taking; Cooperation of Parties If any public authority or entity attempts to take or damage all or any part of the Airport through eminent domain proceedings, the Authority shall take prompt and appropriate measures to protect and enforce its rights and interests and those of the Trustee in connection with such proceedings. Upon A-10

70 receiving notice of the institution of eminent domain proceedings by any public instrumentality, body, agency or officer, the Authority shall deliver written notice thereof to the Trustee. Insurance and Eminent Domain Proceeds All Net Proceeds of all hazard insurance and all Net Proceeds resulting from eminent domain proceedings (excluding proceeds of insurance or condemnation awards which relate to Special Facilities and which are required under the terms of the related Series Ordinance to be otherwise directed) shall be paid to the Trustee and shall be deposited and applied at the election of the Authority as follows: (1) deposited in the Construction Fund which shall be reactivated as necessary and used to promptly replace, repair, rebuild or restore the Airport to substantially the same condition as that which existed prior to such damage, destruction or taking, with such alterations and additions as the Authority may determine and as will not impair or otherwise adversely affect the revenue-producing capability of the Airport, provided that prior to the commencement of such replacement, repair, rebuilding or restoration, the Authority shall deliver to the Trustee a report of an Airport Consultant setting forth (A) an estimate of the total cost of the replacement, repair, rebuilding or restoration, (B) the estimated date upon which such replacement, repair, rebuilding or restoration will be substantially complete, and (C) a statement to the effect that Net Proceeds, together with other funds made available or to be made available or caused to be made available by the Authority, are projected to be sufficient to pay the costs of the replacement, repair, rebuilding or restoration of the Airport; or (2) deposited in the Bond Fund or the Junior Lien Bond Fund, as the case may be and applied to the redemption of first the Bonds and then the Junior Lien Bonds, provided that Bonds or Junior Lien Bonds may be redeemed only if (A) the Airport has been restored to substantially the same condition as prior to such damage, destruction or taking or (B) the Authority has determined that the portion of the Airport damaged, destroyed or taken is not necessary to the operation of the Airport and that the failure of the Authority to repair and restore the same will not impair or otherwise adversely affect the revenue-producing capability of the Airport; or (C) the Airport Consultant has been unable to make the statement required by subparagraph (1)(C) of this paragraph. If the Authority does not apply Net Proceeds or cause them to be applied, to replace, repair, rebuild, or restore the Airport, the Authority shall first redeem or purchase the Bonds and after redemption or purchase of all of the Bonds the Authority shall redeem or purchase the Junior Lien Bonds, in each case in accordance with Article III of the Master Bond Ordinance and the relevant Series Ordinance and transfer from the Construction Fund to the Bond Fund and the Junior Lien Bond Fund amounts sufficient to pay the Redemption Price or purchase price of the Bonds and the Junior Lien Bonds to be redeemed or purchased. If the Authority elects to apply Net Proceeds, or cause them to be applied, to replace, repair, rebuild, or restore the Airport, the Authority shall retain such Net Proceeds in the Construction Fund and shall make disbursements therefrom, to the extent practicable, in accordance with the procedures and requirements set forth in Section 402 of the Master Bond Ordinance for requisitions from the Construction Fund. Payment of Charges and Covenant Against Encumbrances Except as permitted in the Master Bond Ordinance, the Authority shall not create or suffer to be created any lien or charge upon the Airport or any part thereof, or on the Net Revenues. The Authority A-11

71 shall pay or cause to be discharged, or shall make adequate provision to satisfy and discharge, within 60 days after the same become due and payable, all lawful costs, expenses, liabilities and charges relating to the maintenance, repair, replacement or improvement of the properties constituting the Airport and the operation of the Airport if unpaid. The Authority shall not be required to pay or cause to be discharged, or make provision for the payment, satisfaction and discharge of, any lien, charge, cost, liability, claim or demand so long as the validity thereof is contested in good faith and by appropriate legal proceedings and so long as such contest will not cause an imminent sale or foreclosure of the Airport or any significant part thereof. Sale of Airport The Master Bond Ordinance generally prohibits the Authority from selling, transferring, assigning or otherwise disposing of all or any part of the properties constituting the Airport, with the following exceptions: (i) the right to sell or dispose of any real property or any machinery, fixtures, apparatus or other personal property which is part of the Airport if the Authority determines that such property is not or is no longer needed or useful and that such sale will not impair the operating efficiency of the Airport or reduce the Authority s ability to satisfy the rate covenant as projected by the Airport Consultant; (ii) the right, without notice to the Trustee, to demolish or remove (a) all or any part of the passenger terminal facilities, including concourses, existing at the Airport on November 1, 1997, which are to be replaced through the construction of passenger terminal facilities, including concourses, as part of the Capital Improvement Program, or (b) any other structures now or hereafter existing as part of the Airport, without obligation to make any replacement thereof or substitution therefor, provided that the Airport Director determines that the fair market value of the structures demolished or removed does not exceed $2,000,000. (iii) notwithstanding the provisions of (ii) (a) above, the right to demolish or remove any structure if the Airport Director determines that such structure has become inadequate, unsuitable or unnecessary, if: (a) prior to such removal or demolition the Authority gives written notice thereof to the Trustee, and (b) (1) structures having a utility value at the Airport at least equal to that of the property demolished or removed are constructed, acquired, or substituted, or (2) there shall be filed with the Trustee prior to such demolition or removal a certificate signed by the Authorized Officer and approved by the Airport Consultant stating that Net Revenues for the Operating Year next succeeding that in which such demolition or removal occurs are projected to be sufficient to enable the Authority to meet the rate covenant, and in such case no substitution or replacement shall be required. Proceeds resulting from any abandonment, sale or disposition of properties constituting the Airport shall be deposited, in the Authority s sole discretion, in the Construction Fund if the amount then A-12

72 on deposit therein is insufficient to pay Program Costs, or otherwise to the Renewal and Replacement Fund unless some other disposition is required by law or by contract. Other Authority Covenants So long as any Bond or Junior Lien Bond is Outstanding, the Authority covenants to comply or cause compliance with all applicable laws, orders, rules or regulations of any municipal or other governmental authority relating to the construction, use and operation of the Airport, and further covenants that it shall not create a lien upon the Airport. Events of Default Each of the following events is an Event of Default under the Master Bond Ordinance: (a) the Authority shall default in the payment of the principal or Redemption Price of any Bond or Bonds or Junior Lien Bonds when and as the same shall become due, whether at maturity or upon redemption or otherwise; (b) payment of any installment of interest on any Bond or Bonds or Junior Lien Bonds shall not be made, when and as the same shall become due; (c) the Authority shall fail or refuse to comply with the provisions of the Master Bond Ordinance or shall default in the performance or observance of any other of the covenants, agreements or conditions contained in the Master Bond Ordinance, any supplemental ordinance, any resolution, or in the Bonds or Junior Lien Bonds and such failure, refusal or default shall continue for a period of 45 days after written notice specifying such default and requesting that it be corrected, to the Authority by the Trustee or to the Authority and the Trustee by the Holders of not less than 20% in principal amount of the outstanding Bonds and Junior Lien Bonds provided that if prior to the expiration of such 45-day period the Authority institutes action reasonably designed to cure such default, no such Event of Default shall be deemed to have occurred upon the expiration of such 45-day period for so long as the Authority pursues such curative action with reasonable diligence; (d) any proceeding shall be instituted by or against the Authority seeking to adjudicate it a bankrupt or insolvent, or seeking liquidation, winding up, reorganization, arrangement, adjustment, protection, relief, or composition of it or its debts under any law relating to bankruptcy, insolvency or reorganization or relief of debtors, or seeking the entry of an order for relief of debtors, or seeking the entry of an order for relief or the appointment of a receiver, trustee, or other similar official for it or for any substantial part of its property and, in the case of any such proceeding instituted against it (but not instituted by it), either such proceeding shall remain undismissed or unstayed for a period of 30 days or any of the actions sought in such proceeding (including, without limitation, the entry of an order for relief against it or the appointment of a receiver, trustee or other similar official for it or for any substantial part of its property) shall occur; or the Authority shall take any action to authorize any of the actions set forth above in this subsection (d). No default in the payment of the principal of, interest on or Redemption Price of any Junior Lien Bond shall be considered a default for any Bond. A-13

73 Remedies Upon the happening and continuance of any Event of Default specified in the Master Bond Ordinance, the Trustee may, or upon the request of the holders of not less than 20% in principal amount of the Outstanding Bonds and Junior Lien Bonds shall proceed, in its own name, to protect and enforce its rights and the rights of the Bondholders, by suit, action, or other proceedings, and to protect and enforce the statutory lien on the Net Revenues and enforce and compel the performance of all duties of the officials of the Authority. The Trustee shall on behalf of the Bondholders be entitled as a matter of right, upon application to a court of competent jurisdiction, to have appointed a receiver of the Authority for the business and property of the Airport, or any part thereof, including all Revenues, issues, income, receipts and profits derived, received or had by the Authority thereof or therefrom, with such power as the Authority may have to operate and maintain such business and property, collect, receive and apply all Revenues, income, receipts and profits arising therefrom, and prescribe fees and other charges in the same way and manner as the Authority might do. The Trustee is entitled to indemnification against fees, costs, expenses and liabilities for its enforcing any of the remedies permitted by the Master Bond Ordinance on the terms provided by the Master Bond Ordinance in connection with its exercise of any of the foregoing remedies Limitation on Rights of Bondholders No individual Bondholders may initiate legal proceedings to enforce rights under the Master Bond Ordinance unless such holder shall have given to the Trustee written notice of the Event of Default or breach of duty on account of which such proceeding is to be taken, and unless the holders of not less than 20% in principal amount of the Bonds or Junior Lien Bonds then Outstanding have made written request of the Trustee after the right to exercise such right of action has occurred, and have afforded the Trustee a reasonable opportunity either to exercise the powers granted to it under the Master Bond Ordinance or to institute such proceedings in its name and unless, also, there has been offered to the Trustee reasonable security and indemnity against fees, costs, expenses and liabilities, and the Trustee has refused or neglected to comply with such request within a reasonable time. No provision in the Master Bond Ordinance on defaults and remedies shall affect or impair the right of any Bondholder to enforce the payment of the principal of and interest on his or her Bonds or Junior Lien Bonds, or the obligation of the Authority to pay the same. Application of Revenues and Other Moneys After Default During the continuance of an Event of Default, the Trustee, except as otherwise provided in the provisions of the Master Bond Ordinance relating to remedies, shall apply moneys, securities, funds and Revenues and the investment income thereon in the Funds and Accounts as follows and in the following order: (i) to the payment of the reasonable fees, charges, costs, expenses and liabilities of the Trustee and the Airport Consultant or any Consulting Architect or Engineer selected by the Authority pursuant to the Master Bond Ordinance; (ii) to the payment of the amounts required for reasonable and necessary Operation and Maintenance Expenses; and for the reasonable renewals, repairs and replacements of the Airport necessary to prevent loss of Revenues, as certified to the Trustee by the Airport Consultant. For this purpose the books of records and accounts of the Authority relating to the Airport shall at all times be subject to the inspection of the Airport Consultant during the continuance of such Event of Default; (iii) to the payment of the interest and principal or Redemption Price then due on the Bonds or Junior Lien Bonds, as follows: A-14

74 FIRST: To the payment to the persons entitled thereto of all installments of interest on Bonds then due in order of the maturity of such installments, and, if the amount available shall not be sufficient to pay in full any installment, then to the payment thereof ratably, according to the amounts due on such installment, to the persons entitled thereto, without any discrimination or preference; and SECOND: To the payment to the persons entitled thereto of the unpaid principal or Redemption Price of any Bonds which shall have become due, whether at maturity or by call for redemption, in the order of their due dates and, if the amounts available shall not be sufficient to pay in full all the Bonds due on any date, then to the payment thereof ratably, according to the amounts of principal or Redemption Price due on such date, to the persons entitled thereto, without any discrimination or preference. THIRD: To the payment to the persons entitled thereto of all installments of interest on Junior Lien Bonds, including payments in the nature of interest payable to a Swap Provider under a Swap Agreement, then due in order of the maturity of such installments, and, if the amount available shall not be sufficient to pay in full any installment, then to the payment thereof ratably, according to the amounts due on such installment, to the persons entitled thereto, without any discrimination or preference; and FOURTH: To the payment to the persons entitled thereto of the unpaid principal or Redemption Price of any Junior Lien Bonds which shall have become due, whether at maturity or by call for redemption, in the order of their due dates and, if the amounts available shall not be sufficient to pay in full all the Junior Lien Bonds due on any date, then to the payment thereof ratably, according to the amounts of principal or Redemption Price due on such date, to the persons entitled thereto, without any discrimination or preference. FIFTH: To the payment to any Swap Provider of any termination payment due and payable under a Swap Agreement, and if the amounts available shall not be sufficient to pay in full all termination payments due under the Swap Agreements then to the payment thereof ratably according to the amounts of termination payments due on such date to the persons entitled thereto without any discrimination or preference. If and whenever all overdue installments of interest on all Bonds and Junior Lien Bonds, together with the reasonable fees, charges, costs, expenses and liabilities of the Trustee, and all other sums payable by the Authority to the Trustee under the Master Bond Ordinance, including the principal and Redemption Price of and accrued unpaid interest on the Bonds and Junior Lien Bonds which shall then be payable, shall either be paid by or for the account of the Authority, or provision satisfactory to the Trustee shall be made for such payment, and all defaults under the Master Bond Ordinance or the Bonds or Junior Lien Bonds shall be made good or secured to the satisfaction of the Trustee or provision deemed by the Trustee to be adequate shall be made therefor, the Trustee shall pay over to the Authority all moneys, securities, funds and Revenues then remaining unexpended in the hands of the Trustee (except moneys, securities, funds or Revenues deposited or pledged, or required by the terms of the Master Bond Ordinance to be deposited or pledged, with the Trustee), and thereupon the Authority and the Trustee shall be restored, respectively to their former positions and rights under the Master Bond Ordinance, and all Revenues shall thereafter be applied as provided in the provisions of the Master Bond Ordinance governing the establishment and use of Funds and Accounts. No such payment over to the Authority by the Trustee or resumption of the application of Revenues as so provided shall extend to or affect any subsequent default under the Master Bond Ordinance or impair any right consequent thereon. A-15

75 No Waiver of Default No delay or omission of the Trustee or of any Holder of the Bonds and Junior Lien Bonds to exercise any right or power accruing upon any default shall impair any such right or power or shall be construed to be a waiver of any such default or any acquiescence therein; and every power and remedy given by the Master Bond Ordinance to the Trustee and the Holders of the Bonds and Junior Lien Bonds, respectively, may be exercised from time to time and as often as may be deemed expedient. Notice of Event of Default The Trustee shall promptly give to the holders of Bonds and Junior Lien Bonds notice (i) of each Event of Default of which it has actual notice under Section 902(h) of the Master Bond Ordinance, unless such Event of Default shall have been remedied or cured before the giving of such notice; provided that, except in the case of an Event of Default specified in clause (a), (b) or (d) of the definition thereof, the Trustee shall be protected in withholding such notice if and so long as the board of directors, the executive committee of the board of directors, or a trust committee of directors or responsible officers of the Trustee in good faith determines that the withholding of such notice is in the best interests of the holders of Bonds and Junior Lien Bonds, and (ii) of any failure of the Authority to comply with its covenant under the Master Bond Ordinance to charge sufficient rates and charges of which the Trustee has actual notice as set forth in Section 902(h) of the Master Bond Ordinance. Each such notice required shall be given by the Trustee by mailing written notice thereof to all owners of Bonds and Junior Lien Bonds, at the registered addresses of such Holders shown upon the registration books of the Authority held by the Trustee. Tax Exempt Status; Non-Arbitrage Covenant The Authority covenants not to take or to permit to be taken by its agents or assigns any action which, or fail to take any reasonable action the omission of which, would (i) impair the exemption of interest on the Bonds or Junior Lien Bonds from federal income taxation, or (ii) affect the validity of the Bonds or Junior Lien Bonds. The Authority shall use the proceeds of all Series of Bonds and Junior Lien Bonds in a manner that will comply with the requirements of Section 103 of the Code. The Authority shall not make any use, and the Trustee is directed to make no use, of the proceeds of the Bonds and Junior Lien Bonds which could cause the Bonds or Junior Lien Bonds to be arbitrage bonds within the meaning of Section 148 of the Code and applicable regulations thereunder. The Authority shall further comply with the requirements and regulations of such section throughout the term of the Bonds and the Junior Lien Bonds, including the rebate requirements of the Master Bond Ordinance. Supplemental Ordinances The Authority may, without the consent of the Bondholders, but with the consent of the Trustee and where required by a Credit Entity, the Credit Entity, adopt at any time or from time to time Series Ordinances or Supplemental Ordinances for any one or more of following purposes, and any Supplemental Ordinance shall become effective in accordance with its terms upon the filing with the Trustee of a copy thereof certified by the Authorized Officer: (1) To provide for the issuance of a Series of Bonds or Junior Lien Bonds and to prescribe the terms and conditions pursuant to which such Bonds or Junior Lien Bonds may be issued, paid or redeemed; A-16

76 (2) To add additional covenants and agreements of the Authority for the purpose of further securing the payment of the Bonds or Junior Lien Bonds, provided such additional covenants and agreements are not contrary to or inconsistent with the covenants and agreements of the Authority contained in the Master Bond Ordinance. (3) To prescribe further limitations and restrictions upon the issuance of Bonds or Junior Lien Bonds and the incurring of indebtedness by the Authority which are not contrary to or inconsistent with the limitations and restrictions thereon theretofore in effect; (4) To surrender any right, power or privilege reserved to or conferred upon the Authority by terms of the Master Bond Ordinance; (5) To confirm as further assurance any security created under and subject to any lien or claim created or to be created by the provisions of the Master Bond Ordinance; (6) To modify the provisions of the Master Bond Ordinance or any previously adopted Series Ordinance to permit compliance with changes in federal tax law which is required to maintain the tax exempt status of the Bonds or Junior Lien Bonds; or (7) With the consent of the Trustee in reliance upon an opinion of Bond Counsel, to cure any ambiguity or defect or inconsistent provision in the Master Bond Ordinance or to insert such provisions clarifying matters or questions arising under the Master Bond Ordinance as are necessary or desirable in the event any such modifications are not contrary to or inconsistent with the Master Bond Ordinance as theretofore in effect; or (8) To comply with the Trust Indenture Act of Notice of the adoption and delivery of any Supplemental Ordinance or resolution and a copy thereof shall be filed by the Trustee with the Rating Agency at the time of such adoption and delivery. Supplemental Ordinances Requiring Consent of Bondholders Exclusive of Supplemental Ordinances covered by Section 1002 of the Master Bond Ordinance, the Holders of at least 50% of the principal amount of outstanding Bonds and Junior Lien Bonds affected by the proposed Supplemental Ordinance and when required by the provider of a Credit Facility, the related Credit Entity, shall have the right to consent to and approve the adoption by the Authority of other Supplemental Ordinances; provided, however, that nothing in the Master Bond Ordinance shall permit (i) an extension of the maturity of the principal of or the interest on any Bond or Junior Lien Bond issued under the Master Bond Ordinance, (ii) a reduction in the principal amount of any Bond or Junior Lien Bond, (iii) modification of the privilege or priority of any Bond or Bonds over any other Bonds, except upon the written consent of the Holders of 100% of the principal amount of Bonds Outstanding or (iv) modification of the privilege or priority of any Junior Lien Bond or Junior Lien Bonds over any other Junior Lien Bonds. For the purposes of consents pursuant to Section 1003 of the Master Bond Ordinance a Credit Entity shall be deemed to be the Holder of Bonds or Junior Lien Bonds pledged by the Authority to the Credit Entity or owned by the Credit Entity or Bonds or Junior Lien Bonds secured by a Credit Facility except to the extent the Credit Entity has not honored a draw on its Credit Facility which draw complies with the requirements of the Credit Facility. The Trustee shall give written notice of the proposed adoption of a Supplemental Ordinance by mail to the registered addresses of Holders of the Outstanding Bonds and Junior Lien Bonds and to the Credit Entity. Such notice shall briefly set forth the nature of the proposed Supplemental Ordinance and shall state that copies thereof are on file at the designated trust office of the Trustee for inspection by holders of Bonds and Junior Lien Bonds. If, within 60 days or such longer period as shall be prescribed by the Trustee following the mailing of such notice, the Holders of not less than the required percent of the principal amount of the Bonds and Junior Lien Bonds Outstanding by instruments filed with the Trustee shall have consented to the adoption thereof and any other prerequisites such as the approval of A-17

77 any Credit Entity having such right, such Supplemental Ordinance may be adopted and the Master Bond Ordinance shall be deemed to be modified and amended in accordance therewith. Anything in the Master Bond Ordinance to the contrary notwithstanding, a Supplemental Ordinance under Article X of the Master Bond Ordinance which affects the rights, duties and obligations of the Trustee shall not become effective unless and until the Trustee shall have consented in writing in the case of the Trustee, to the adoption of such Supplemental Ordinance and unless the Authority has first obtained the approval of the Michigan Department of Treasury if such approval is required. If a Series of Bonds or Junior Lien Bonds will be unaffected by the terms of the Supplemental Ordinance, such Bonds or Junior Lien Bonds shall not be deemed to be Outstanding for purposes of any required consent. A Series shall be deemed to be affected by a modification or amendment of the Master Bond Ordinance if the same adversely affects or diminishes the rights of the Holders of Bonds or Junior Lien Bonds of such Series. The Trustee may in its discretion determine whether or not in accordance with the foregoing provisions Bonds or Junior Lien Bonds of any particular Series or maturity would be affected by any modification or amendment of the Master Bond Ordinance and any such determination shall be binding and conclusive on the Authority and all Holders of Bonds or Junior Lien Bonds. The Trustee may receive an opinion of Bond Counsel as conclusive evidence as to whether Bonds or Junior Lien Bonds of any particular Series or maturity would be so affected by any such modification or amendment of the Master Bond Ordinance. Notwithstanding anything in Section 1003 of the Master Bond Ordinance to the contrary, so long as any Bonds or Junior Lien Bonds are Outstanding as Variable Rate Bonds, the payment of principal of and interest upon which Variable Rate Bonds is secured by a Credit Facility, the Holders of such Variable Rate Bonds so secured shall not have any right to consent to any Supplemental Ordinance with respect to which the consent of Holders of such Variable Rate Bonds would otherwise have to be obtained, the automatic and irrevocable consent of such Holders of such Variable Rate Bonds to be conclusively presumed by virtue of such Holder s acceptance thereof; and the Trustee shall not be required to seek such Holders consent as set forth in Section 1003 of the Master Bond Ordinance, provided that all such Holders shall be entitled to receive notice of the proposed Supplemental Ordinance from the Trustee or from the remarketing agent with respect to such Variable Rate Bonds and shall have the opportunity to tender such Variable Rate Bonds for repurchase prior to the effectiveness of any such Supplemental Ordinance. So long any Bonds or Junior Lien Bonds are Outstanding as Variable Rate Bonds, the payment of principal of and interest upon which Variable Rate Bonds is secured by a Credit Facility, the Credit Entity which issued such Credit Facility shall be deemed the Holder of such Variable Rate Bonds so secured and shall have the right to consent to any Supplemental Ordinance with respect to which the consent of Holders of such Variable Rate Bonds would otherwise have to be obtained; provided, however, that the right of such Credit Entity to provide such consent shall be suspended if such Credit Entity shall have wrongfully dishonored a payment obligation under such Credit Facility or if the Credit Facility is for any reason unavailable to the Trustee for the benefit of the Holders of such Variable Rate Bonds other than by expiration in accordance with its terms. General Provisions Relating to Series Ordinances and Supplemental Ordinances The Master Bond Ordinance shall not be modified or amended in any respect except in accordance with and subject to the provisions of Article X of the Master Bond Ordinance. Nothing contained in Article X of the Master Bond Ordinance shall affect or limit the right or obligation of the A-18

78 Authority to execute or deliver to the Trustee any instrument pursuant to elsewhere in the Master Bond Ordinance provided or permitted to be delivered to the Trustee. A copy of every Supplemental Ordinance adopted by the Authority when filed with the Trustee shall be accompanied by an opinion of Bond Counsel satisfactory to the Trustee stating that such Supplemental Ordinance has been duly and lawfully adopted in accordance with the provisions of the Master Bond Ordinance, is authorized or permitted by the Master Bond Ordinance and is valid and binding upon the Authority and enforceable in accordance with its terms. The Trustee is authorized to accept delivery of a certified copy of any Series Ordinance or Supplemental Ordinance permitted or authorized pursuant to the provisions of the Master Bond Ordinance and to make all further agreements and stipulations which may be contained therein, and, in taking such action, the Trustee shall be fully protected in relying on an opinion of Bond Counsel that such Supplemental Ordinance is authorized or permitted by the provisions of the Master Bond Ordinance. SERIES 2005 ORDINANCE The Authority has adopted the Series 2005 Ordinance which together with the Sale Order authorizes the issuance and sale of the Series 2005 Bonds, and which amends and supplements the Master Bond Ordinance. Selected Definitions Sale Order means, with respect to the Series 2005 Bonds, the written order of the Chief Executive Officer and Chief Financial Officer of the Authority approving the sale a series of the Series 2005 Bonds and making certain determinations regarding the final terms thereof within the parameters of the Series 2005 Ordinance and the Master Bond Ordinance Projects means the portion of the Capital Improvement Program to be financed with the proceeds of the Series 2005 Bonds, as the same may be reduced in scope by the Sale Order. Application of Series 2005 Bond Proceeds The net proceeds of the Series 2005 Bonds shall be applied as follows, as finally determined in the Sale Order: (a) An amount equal to the accrued interest on the Series 2005 Bonds to the date of delivery thereof shall be deposited in the general account of the Bond Fund. (b) An amount equal to the amount of interest estimated to be capitalized on the Series 2005 Bonds, after giving effect to the estimated schedule on which various components of the related 2005 Projects will become available for use at the Airport and net of anticipated investment earnings on the amount of proceeds deposited in the subaccount established in the Capitalized Interest Account for the Series 2005 Bonds, shall be deposited in such subaccount. (c) An amount or other provision necessary to satisfy the Reserve Requirement shall be deposited in or credited to the Bond Reserve Account. (d) The balance of the proceeds of such Series 2005 Bonds shall be deposited into one or more separate accounts within the 2005 Construction Fund which shall be established for the Series 2005 Bonds. If more than one series of Series 2005 Bonds is issued, the costs of the 2005 Projects may be allocated among the series as provided in the related Sale Order. A-19

79 Series 2005 Accounts Pursuant to Sections 501B and 507 of the Master Bond Ordinance, the Authority established with the Trustee for the Series 2005 Bonds within the Bond Fund, as separate accounts, a 2005 Debt Service Account, a 2005 Capitalized Interest Account and a 2005 Bond Reserve Account, with an appropriate series designation for the Series 2005 Bonds issued under the Series 2005 Ordinance. The Trustee shall maintain the accounts established under Section 501 of the Series 2005 Ordinance as follows: (a) Moneys in the 2005 Debt Service Account of the Bond Fund shall be deposited in accordance with 501B of the Master Bond Ordinance and shall be used for the payment when due of principal of, premium, if any, an interest on the Series 2005 Bonds. (b) There shall be deposited in the 2005 Bond Reserve Account an amount necessary to satisfy the Reserve Requirement in accordance with the terms of the Sale Order. (c) There shall be deposited in the 2005 Capitalized Interest Account an amount necessary to pay capitalized interest on the Series 2005 Bonds in accordance with the terms of the Sale Order. Tax Covenant The Authority covenants and represents that, to the extent permitted by law, it shall take all actions, or refrain from taking actions, within its control necessary to maintain the exclusion of the interest on the Series 2005 Bonds from gross income for general federal income tax purposes under the Internal Revenue Code of 1986, as amended, including but not limited to actions relating to the rebate of arbitrage earnings, if applicable, and the expenditure and investment of Series 2005 Bond proceeds and moneys deemed to be Series 2005 Bond proceeds. A-20

80 APPENDIX B REPORT OF THE AIRPORT CONSULTANT

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82 REPORT OF THE AIRPORT CONSULTANT on the proposed issuance of DETROIT METROPOLITAN WAYNE COUNTY AIRPORT AIRPORT REVENUE BONDS Series 2005 Prepared For Wayne County Airport Authority Detroit, Michigan Prepared By Reed & Associates, LLC San Francisco, California March 22, 2005

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84 REED & ASSOCIATES, LLC 1980 Washington Street Suite 707 San Francisco, CA Tel: (415) Fax: (415) March 22, 2005 Mr. Lester W. Robinson Chief Executive Officer Wayne County Airport Authority L.C. Smith Terminal, Mezzanine Level Detroit, Michigan Re: Report of the Airport Consultant, Wayne County Airport Authority, Airport Revenue Bonds, Detroit Metropolitan Wayne County Airport, Series 2005; $524,455,000 Dear Mr. Robinson: We are pleased to submit this Report of the Airport Consultant (the Report) on the proposed issuance of Wayne County Airport Authority, Airport Revenue Bonds, Series 2005 (the Series 2005 Bonds). Our report addresses the requirements related to the issuance of the Series 2005 Bonds. Attached to this Report are certain background information, assumptions, and rationale for the financial forecasts included in the Report and selected financial projections which present sensitivity analyses related to the financial forecasts (the Attachment). The Wayne County Airport Authority (the Authority) operates two airports in southeastern Michigan, with title to both airports held by the Charter County of Wayne, Michigan (the County). The airports are Detroit Metropolitan Wayne County Airport (the Airport), the principal air carrier facility serving the Detroit metropolitan area, and the Willow Run Airport, a reliever airport. The Airport together with Willow Run Airport are referred to in this Report as the Airport System. The Authority is engaged in an ongoing Capital Improvement Program (CIP) for the Airport. The current five-year CIP is estimated to cost approximately $1.1 billion, and includes, among other projects, the projects to be financed in part with proceeds from the sale of the Series 2005 Bonds (collectively, the 2005 Projects). The current CIP relates to enhanced safety and B-1

85 Mr. Lester W. Robinson March 22, 2005 Page 2 of 8 security at the Airport, terminal improvements, and improvements and rehabilitation of the existing airfield facilities to ensure continued airfield efficiency. The 2005 Projects listed on Exhibit B of the Attachment are more fully described in the Attachment. The cost of the 2005 Projects includes, but is not limited to, costs associated with engineering and design, construction management, and program contingency. The total costs of these projects are anticipated to be paid for from various sources, including Passenger Facility Charges (PFCs), federal grants-in-aid, proceeds from the prior sales of Airport Revenue Bonds, and proceeds from the sale of the Series 2005 Bonds. The debt service costs associated with bonds issued for the 2005 Projects will be paid from PFCs (leveraged PFCs), federal grant funds, and Net Revenues. The Series 2005 Bonds will be issued on a tax-exempt basis. The Series 2005 Bonds are considered private activity bonds and Bond Counsel will opine that the interest thereon is subject to the alternative minimum tax (AMT). In addition to paying project costs, the Series 2005 Bonds provide for capitalized interest related to the 2005 Projects, funding Debt Service Reserve Fund requirements, and paying costs of issuance. The total principal amount of the Series 2005 Bonds to be issued is estimated to be $524,455,000. The Series 2005 Bonds will be issued on parity with outstanding Senior Lien Bonds. After issuance of the Series 2005 Bonds the total principal amount outstanding of Senior Lien Bonds will be approximately $2,189,305,000. The Series 2005 Bonds will be issued under the terms of a Master Airport Revenue Bond Ordinance (the Master Bond Ordinance), adopted September 26, 2003, and the Series Ordinance, adopted by the Authority on January 27, 2005 (the Series 2005 Ordinance, and collectively with the Master Bond Ordinance, the Ordinance). Certain capitalized terms used in this Report are as defined in the Ordinance. Compliance with the Additional Bonds Test as defined below and contained in the Master Bond Ordinance is demonstrated in Exhibit H of the Attachment. The provision referred to as the Rate Covenant in the Master Bond Ordinance requires the Authority to fix, charge and collect rates, fees, rentals and charges for the use and operation of the Airport as may be necessary or appropriate to produce Revenues in each Operating Year (OY) 1 which will be at least sufficient to provide for (i) the payment of Operation and Maintenance Expenses for such Operating Year, (ii) together with PFC proceeds deposited with the Trustee under the Ordinance with respect to such Operating Year, the 1 The Authority s operating year begins October 1 st and ends September 30 th of the following year. B-2

86 Mr. Lester W. Robinson March 22, 2005 Page 3 of 8 amount needed to make the deposits required under the Ordinance for such Operation Year to the Bond Fund; and (iii) together with Other Available Moneys deposited with the Trustee with respect to such Operating Year (to the extent not needed to make deposits required under the Ordinance for such Operation Year to the Bond Fund) and any unencumbered cash balance held in the Revenue Fund on the last day of the Operating Year preceding the Operating Year for which the calculation is made not then required to be deposited in any Fund or Account, (A) the amounts needed to make the deposits required under the Ordinance for such Operating Year to the Junior Lien Bond Fund, the Operation and Maintenance Reserve Fund, the Renewal and Replacement Fund, the Discretionary Fund and the Airport Development Fund, and (B) an amount not less than 25% of the Debt Service due and payable on Bonds during such Operating Year. Further, the Ordinance requires that, as a condition of issuing a Series of Bonds for the purposes of financing the cost of construction and installation of any part of the CIP, the Authority must provide a Report of the Airport Consultant that includes projections, for the first three full Operating Years after completion of the projects to be funded in part from the proposed Series of Bonds, of Net Revenues and Revenue Fund balances, taking into account Other Available Moneys and any amounts estimated to be available to pay capitalized interest sufficient to satisfy the Rate Covenant, and taking into account the Series of Bonds to be issued (herein referred to as the Additional Bonds Test). The Authority has use and lease agreements with most of the scheduled airlines serving the Airport (the Signatory Airlines) related to the use of the Airport and the establishment of airline rates, fees, and charges (the Airline Agreements). The Airline Agreements with Northwest Airlines (Northwest), Mesaba Airlines and Pinnacle Airlines expire on December 31, The Airline Agreements with the other Signatory Airlines expire January 1, Through the Weighted Majority approval process (discussed below) the Signatory Airlines have approved the terms and conditions incorporated in the Airline Agreements executed by Northwest, Mesaba Airlines and Pinnacle Airlines. The Authority is preparing an amended Airline Agreement for Northwest incorporating a revised methodology for establishing terminal rentals starting in Operating Year The Authority also will prepare new Airline Agreements for the other Signatory Airlines substantially the same as the amended agreement for Northwest, including the December 31, 2032 expiration date. The Authority anticipates having signed Airline Agreements from these other Signatory Airlines after the North Terminal is designed and leased premises identified, prior to the date of beneficial occupancy of the North Terminal. B-3

87 Mr. Lester W. Robinson March 22, 2005 Page 4 of 8 The Authority has obtained Weighted Majority approval of the Signatory Airlines for the 2005 Projects. Accordingly, the Authority will include (after taking into account Other Available Moneys and Revenue Fund balances) an amount equal to 125% of the Debt Service due on the Series 2005 Bonds as an element of cost in the calculations of future airline Activity Fees and Terminal Rentals through the term of the Airline Agreements, and has provided for deposits to maintain an unrestricted fund balance in the Revenue Fund equal to 25% of Debt Service on Outstanding Bonds (not including Junior Lien Bonds). Activity Fee rates are based on landed weights of aircraft and are calculated according to a total Airport residual-cost formula. Terminal rental rates currently are fixed by agreement with a new rate making methodology to become effective beginning in OY The terminal rental rates for each of the McNamara Terminal and North Terminal will be established on the basis of separate cost centers, including Operating and Maintenance expenses and Debt Service net of PFC-paid Debt Service, and International Facilities Use Fees collected for the use of the Federal Inspection Services (FIS) Facilities in each terminal. * * * * * In preparing this Report, we evaluated the ability of the Airport to generate Airport Revenues sufficient to meet the funding requirements established by the Master Bond Ordinance and the Additional Bonds Test during the forecast period OY 2005 to OY 2011 and analyzed, among other factors, the following: Future airline traffic demand at the Airport, giving consideration to the demographic and economic characteristics of the region served; historical trends in airline traffic and key factors that will affect future traffic, including impacts from the September 11, 2001 terrorist attacks. The current economic condition of the U.S. as it relates to the demand for air travel. The current state of the airline industry as it relates to air service provided by the Airport. The Airport s continuing role as one of the major connecting passenger hubs in the route system of Northwest and its commuter/regional operators, and as a code share connecting passenger hub in the route system of Delta Air Lines (Delta) and Continental Airlines (Continental). Estimated costs of the 2005 Projects and certain additional CIP projects approved by a Weighted Majority, described in the Attachment. The Authority provided estimates of the costs of the projects and project schedule, except with respect to the McNamara Terminal Phase II B-4

88 Mr. Lester W. Robinson March 22, 2005 Page 5 of 8 Project, the McNamara EDS In-line Project and the Northwest Cargo Facility project, which were provided by Northwest and the Spirit Airlines Hangar Upgrade which were provided by Spirit. Estimated sources and uses of funds for the 2005 Projects and certain additional CIP projects approved by a Weighted Majority, and the associated estimated annual Debt Service requirements as provided by the Authority s investment bankers. Historical relationships among Revenues, Operation and Maintenance Expenses, and airline traffic at the Airport, and other factors that may affect future Revenues and Operation and Maintenance Expenses. The Airport s historical financial performance in terms of Revenues and Operation and Maintenance Expenses. The Authority s policies and contractual agreements related to the use and occupancy of Airport facilities, including the calculation of rentals, rates, fees, and charges; the operation of concession privileges; and the leasing of buildings and grounds. The Airport s financial results for OY 2002 through 2004 (actual), and OY 2005 (budgeted). In preparing this Report, we did not analyze the impacts on the Airport of possible future terrorist attacks or additional military action by the United States or others, and any associated global economic effect. We also did not analyze the potential disruption to the airline industry as a result of possible future terrorist attacks or of the continuing implementation of the security mandates included in the Aviation and Transportation Security Act. Any one or any combination of the above could materially affect the forecasts. We also identified key factors upon which the future financial results of the Airport may depend, and formulated assumptions about those factors. On the basis of those assumptions, we assembled the financial forecasts presented in the Attachment. The forecasts of Net Revenues, total Net Debt Service requirements, and debt service coverage are summarized below. As presented, Net Revenues, Revenue Fund Balances, and Other Available Moneys are forecast to be at least 1.25 times the amount of Bonds Debt Service associated with the 2005 Projects and certain additional CIP projects approved by a Weighted Majority in each year of the forecast period, and the requirements of the Additional Bonds Test are satisfied. B-5

89 Mr. Lester W. Robinson March 22, 2005 Page 6 of 8 Operating Year Net Revenues, Revenue Fund Balances, and Other Available Moneys (In Thousands) [A] Total Debt Service Requirements (In Thousands) Bonds [B] Debt Service Coverage [A] [B] $ 155, , , , , , ,311 $ 104, , , , , , , Forecasts of revenues to be derived from airline landing fees, terminal building rentals, and other charges (airline costs) are often expressed on a perenplaned-passenger basis to compare airline costs at different airports. Forecast airline cost on a per-enplaned-passenger for the Airport is summarized in the table below. The airline cost per enplaned passenger at the Airport in each year is reasonable for the size and nature of operation at the Airport as compared to other large-hub connecting passenger airports in the U.S. Fiscal Year Total Airline Revenue Required (In Thousands) [A] Enplaned Passengers (In Thousands) [B] Airline Cost Per Enplaned Passenger [A] [B] $ 125, , , , , , ,054 17,700 18,266 18,851 19,454 20,077 20,719 21,382 $ * * * * * Future growth in airline passenger traffic will depend largely on the rate of the sustained growth in the economy, and the continuing effects of externalities (e.g. terrorism, wars, diseases, natural disasters) and their impacts on the nation's aviation system (i.e., interruption and/or diminution of service). B-6

90 Mr. Lester W. Robinson March 22, 2005 Page 7 of 8 The uncertainty surrounding future financial results is greater than it has been in the past because of the unique, combined set of circumstances faced in this period. Such risks and uncertainties include, among others, the future level of air travel demand, the airline industry s and in particular, Northwest's future load factors and yields, the general economic condition of the United States, the continuing expansion of low-fare air carriers, the impact of cost reductions achieved by air carriers in or near bankruptcy, the price and availability of jet fuel, the impact of wars, natural disasters, and the possibility of additional terrorist attacks or the fear of such attacks. To test the sensitivity of the financial forecasts to the demand for air travel and the level of passenger activity at the Airport, alternative financial projections were prepared based on alternative airline traffic scenarios and other assumptions, as described in the Attachment. These alternative financial projections were prepared to provide an analysis of hypothetical changes in passenger activity levels at the Airport and should not be considered a forecast of expected future results. * * * * * The financial forecasts included in this Report are based on assumptions that were discussed with Authority management. Airport management has represented to us that the assumptions underlying the financial forecasts are, in their view, reasonable and appropriate, and further, that the assumptions reflect conditions expected by Airport management and Airport management s expected course of action during the forecast period. These assumptions and the key factors that are significant to the forecasts are set forth in the Attachment to this Report. We believe that these assumptions are reasonable, and provide an appropriate basis for the financial forecasts. However, any financial forecast is subject to uncertainties. Inevitably, some assumptions used to develop the forecasts will not be realized, and unforeseeable events and circumstances may occur. The actual financial results achieved will vary from those forecasts, and the variations may be material, particularly as they relate to possible additional terrorist acts or acts of war. In preparing its findings and conclusions, Reed & Associates has relied upon the accuracy and completeness of financial and other data provided to it by the referenced sources, without independent verification. B-7

91 Mr. Lester W. Robinson March 22, 2005 Page 8 of 8 We have no responsibility to update this report for events or circumstances, including additional terrorist acts or acts of war, occurring after the date of this report. * * * * * We appreciate the opportunity to serve as the Authority s Airport Consultant on this proposed financing. Sincerely, REED & ASSOCIATES, LLC B-8

92 Attachment Report of the Airport Consultant, Wayne County Airport Authority, March 22, 2005 March 22, 2005 Attachment--Report of the Airport Consultant B-9 Wayne County Airport Authority Airport Revenue Bonds Detroit Metropolitan Wayne County Airport Series 2005 Bonds REED & ASSOCIATES, LLC

93 Attachment Report of the Airport Consultant, Wayne County Airport Authority, March 22, 2005 [Page Intentionally Left Blank] B-10

94 Attachment Report of the Airport Consultant, TABLE OF CONTENTS Wayne County Airport Authority, March 22, 2005 B-11 SECTION I: BACKGROUND Overview...13 The Airport Authority...13 The Airport...13 Airlines Serving The Airport...15 Airport Facilities...15 Capital Improvement Program...16 Financial Framework For Operation Of The Airport...20 Conclusion...23 SECTION II: AIRPORT SERVICE REGION Overview...25 The Airport And Its Service Region...25 Employment...27 Business And Industry...28 General Economic And Business Climate Factors...30 Conclusion...31 SECTION III: ACTIVITY AND AIR SERVICE Overview...32 Airline Passenger Traffic...32 Airline Market Share...34 Airline Aircraft Departures And Load Factors...35 Domestic Origin-Destination Patterns And Airline Service...36 Northwest Hubbing Activity...36 International Service...37 Air Cargo Service...38 Aircraft Operations And Landed Weight...38 Conclusion...38 SECTION IV: KEY FACTORS RELATED TO FORECAST Overview National/International Economic And Political Conditions Airfares Yields, And Load Factors Airline Economics Federal Governance And Oversight Airline Financial Performance Airline Competition Airline Service And Route Networks The Airport's Strategic Assets Conclusion SECTION V: AVIATION DEMAND FORECAST Assumptions Enplaned Passengers Cargo Aircraft Departures Aircraft Landing Weight Conclusion SECTION VI: FINANCIAL ANALYSIS Overview Project Cost Estimates Sources & Uses Of Funds Debt Service Requirements Airport System Operation & Maintenance Expenses Airport Revenues Signatory Activity Fees And Airline Cost Per Enplaned Passenger Other Available Moneys... 62

95 Attachment Report of the Airport Consultant, TABLE OF CONTENTS Wayne County Airport Authority, March 22, 2005 B-12 Application Of Revenues...63 Forecast Net Revenues And Bond Debt Service Coverage...63 Conclusion...63 SECTION VII: SCENARIOS Overview...64 Scenarios...64 Aviation Demand...64 Financial Performance...65 Conclusion...65 FINANCIAL EXHIBITS Exhibit A: Air Traffic... B-68 Exhibit B: Estimated Project Costs: 2005 Projects... B-69 Exhibit B-1: Plan of Finance: 2005 Projects... B-70 Exhibit C: Estimated Series 2005 and Additional Bonds Sources & Uses... B-71 Exhibit D: Bond Debt Service Requirements... B-72 Exhibit E: Operation and Maintenance Expenses... B-73 Exhibit F: Revenues... B-74 Exhibit F-1: Calculation of Terminal Rentals: New Rate Methodology... B-75 Exhibit F-2: Calculation of Forecast Signatory Airlines Activity Fees and Cost per Enplanement... B-76 Exhibit F-3: Other Available Moneys... B-77 Exhibit G: Application of Revenues... B-78 Exhibit H: Forecast Net Revenues and Debt Service Coverage... B-79 SUPPLEMENTAL TABLES Table 1: Population Distribution in the Airport Service Region... B-81 Table 2: Historical and Forecast Population... B-81 Table 3: Total and Per Capita Income... B-82 Table 4: Civilan Labor Force and Unemployment Rates... B-82 Table 5: Distribution of Wage and Salary Employment by Industry... B-83 Table 6: Largest Employers in the Airport Service Region... B-83 Table 7: Historical Aviation Activity-Enplanements... B-84 Table 8: Historical Aviation Activity-Origin & Destinations... B-84 Table 9: Historical Aviation Activty-Cargo Volumes... B-85 Table 10: Historical Aviation Activity-Operations... B-85 Table 11: Domestic and International Market Share... B-86 Table 12: Historical Operating Results... B-86 Table 13: Aviation Demand Forecast... B-87 INDEX... B-88

96 Attachment Report of the Airport Consultant, SECTION I: BACKGROUND Wayne County Airport Authority, March 22, 2005 B-13 OVERVIEW The Detroit Metropolitan Wayne County Airport (the Airport) is located in the north central area of the United States. The geographic location of the Airport allows for efficient domestic and international passenger traffic flow: domestic connections in both an east-west and north-south direction; and international travel from the eastern U.S. to Asia, and from the northern and central part of the U.S. to Europe. The Edward H. McNamara Terminal (the McNamara Terminal) complex, which opened in February 2002, is, from an airline perspective, one of the most cost-effective and efficient connecting passenger hub facilities in the U.S. The Airport's physical assets and operating capacity place it in a strong competitive position as compared to other connecting passenger hub airports serving network air carriers in the U.S. The Airport has six runways, including four parallel runways surrounding the passenger terminal complexes, a new 97-gate passenger terminal, enhanced highway access from both the north and south boundaries of the Airport, which connects to two interstate highways, and over 18,000 automobile parking spaces mostly in two multi-level parking structures. The plan to build a new terminal with up to 29 aircraft gates for all carriers not operating from the McNamara Terminal will complete the Airport s expansion and modernization of its passenger terminal facilities. This physical asset, coupled with a strong governance structure for the Airport, further enhances the Airport's competitive position. The Background section of this Attachment contains information on the following: the Airport Authority; the Airport; the Airlines Serving the Airport; Airport Facilities; the Capital Improvement Program; and the Financial Framework for Operation of the Airport. THE AIRPORT AUTHORITY Effective March 26, 2002, through an amendment to the Aeronautics Code of the State of Michigan (the amendment, titled the Public Airport Authority, or Act 90 Public Acts of Michigan, 2002), the State of Michigan created the Wayne County Airport Authority (the Authority) to operate the Airport and Willow Run Airport, a general aviation reliever and cargo airport. The two airports are collectively referred to as the Airport System. While the Charter County of Wayne, Michigan (the County) continues to hold title to the Airport, the Authority received operating certificates for the Airport and Willow Run from the Federal Aviation Administration (FAA) on August 9, The Authority is directed by a seven-member board (the Board), with Board members serving without compensation for staggered six (6) year terms with a two term limit. The Board is appointed as follows: Four appointments made by the Chief Executive Officer of the County; Two appointments by the Governor of the State of Michigan; and One appointment by the County s Board of Commissioners. The Authority Board appoints a Chief Executive Officer (CEO), an audit subcommittee and an independent public accountant to prepare an annual audit and review the financial condition, operation, and performance of the Authority. The CEO appoints the Chief Financial Officer (CFO) and other senior management positions of the Authority. THE AIRPORT Located in the City of Romulus, County of Wayne, Michigan about twenty miles southwest of the central business district (CBD) of the City of Detroit, the Airport serves the eighth (2000 Census) most populous metropolitan region in the U.S. the Detroit-Ann Arbor-Flint Consolidated Metropolitan Statistical Area (CMSA). The Airport Service Region (the Region) consists of the ten-county Detroit-Ann Arbor-Flint CMSA, which includes the counties of: Genesee, Lapeer, Lenawee, Livingston, Macomb, Monroe, Oakland, St. Clair, Washtenaw, and Wayne.

97 Attachment Report of the Airport Consultant, SECTION I: BACKGROUND Wayne County Airport Authority, March 22, 2005 B-14 In CY 2003, the Airport represented 2.6% of all U.S. enplanements. (The terms enplanement and enplaned passenger have the same meaning as used in this Attachment). CY 2004 data provided by the Department of Transportation (DOT) is not yet available for the U.S. The region served by the Airport is classified as a "large hub" community by the FAA. (A "large hub" is defined as a community that accounts for 1% or more of the total revenue passengers enplaned in all services and operations of U.S. certificated route carriers within the 50 states, the District of Columbia and other U.S. territorial possessions). The Airport enplaned 17.6 million passengers (16.2 million domestic and 1.4 million international) in CY According to Airports Council International, the Airport was the tenth busiest airport in terms of both passengers and operations in North America in CY (According to DOT data, the Airport ranked ninth in terms of total domestic passengers for CY 2004). The Airport is a large connecting passenger hub for Northwest Airlines (Northwest) and its regional affiliates, Mesaba Airlines (Mesaba) and Pinnacle Airlines (Pinnacle), collectively referred to as Northwest and its affiliates. In CY 2004, Northwest and its regional affiliates accounted for 79.1% of total enplaned passengers at the Airport. Domestic Origin-Destination (O&D) Traffic In CY 2003, the Region was the 20 th largest origin-destination market in the U.S. and the third largest origin and destination (O&D) market in the Midwest. CY 2004 data is not yet available. The O&D traffic segment accounted for 44.3% of total domestic enplaned passengers at the Airport in CY 2003, and 44.9% in the first nine months of CY Northwest and its affiliates share of total O&D passengers at the Airport declined slightly between CY 1994 and CY 2003, from 55.4% to 53.3%, respectively. Of the 53.3% in originating activity in CY 2003, 50.5% is represented by Northwest, and the remaining 2.8% is represented by Mesaba and Pinnacle. Non-hubbing carriers represented 46.7% of the Airport s O&D passenger base in CY Spirit Airlines and Southwest Airlines accounted for 10.9% and 6.8%, respectively, of total O&D enplaned passengers in CY Connecting Hub The Airport serves as a major connecting passenger hub in the route system of Northwest. Northwest maintains code-share relationships with Mesaba, Pinnacle, Continental Airlines and Delta Air Lines. In CY 2004, the Airport was the largest connecting passenger hub for Northwest and its affiliates in terms of systemwide departures. In CY 2004, operations of Northwest and its affiliates at the Airport accounted for 21.3% of total scheduled nonstop departures systemwide, comparable to 21.0% at Minneapolis/St. Paul International Airport (Minneapolis) (Minneapolis accounted for the largest share of Northwest and its affiliates total systemwide enplaned passengers in CY 2004.) In CY 2003, connecting passengers accounted for 55.7% of total domestic enplaned passengers at the Airport, with Northwest and its affiliates accounting for 96.7% of total Airport connecting traffic. For the first nine months of CY 2004, connecting passenger traffic continued to account for over half of total domestic enplaned passengers (55.1%) with Northwest and its affiliates maintaining a high percent share (97.1%). Northwest has increasingly utilized regional operators Mesaba and Pinnacle at the Airport, substituting smaller gauge aircraft (e.g., regional jets) for traditional mainline service. Mesaba and Pinnacle represented 16.3% of Northwest and its affiliates total enplanements at the Airport in CY 2004, an increase from 15.2% in CY Since beginning service in CY 2001, total enplanements by Pinnacle increased from 161,146 enplanements to 1,277,243 in CY 2004.

98 Attachment Report of the Airport Consultant, SECTION I: BACKGROUND Wayne County Airport Authority, March 22, 2005 B-15 International Air Service The Airport serves as a major international gateway, providing service to 28 international destinations in Asia, Europe, Mexico and Canada in CY In CY 2004, scheduled nonstop international departures from the Airport increased 12.2% over CY 2003 and grew at an average annual rate of 3.7% since CY In CY 2004, Canadian destinations represented 62.1% of total scheduled nonstop international departures served from the Airport. Scheduled nonstop departures to Europe increased at an average annual rate of 5.9% between CY 1995 and CY 2004, and represented 22.7% of total international departures in CY While representing a small share of total nonstop international destinations served from the Airport, the Caribbean market experienced the largest annual growth rates, 26.5% annually between CY 1995 and CY AIRLINES SERVING THE AIRPORT The Airport is also served by the following charter carriers: Champion Air; Ryan International; Trans Meridian; and USA AIRPORT FACILITIES The Airport, situated on approximately 6,700 acres, has four northsouth runways in the primary wind direction Runway 4R-22L (12,000 feet in length), Runway 4L-22R (10,000 feet in length), Runway 3L-21R (8,500 feet in length), and Runway 3R-21L (10,000 feet in length) and two east-west crosswind runways Runway 9L-27R (8,700 feet in length) and Runway 9R-27L (8,500 feet in length). Detroit Metropolitan Wayne County Airport As of January 2005, the Airport was served by the following passenger air carriers (including foreign flag carriers): Air Canada; Air Wisconsin (operating as United Express); America West Airlines; American Airlines; American Eagle; Atlantic Southeast (operating as Delta Connection); British Airways; Comair (operating as Delta Connection); CommutAir (operating as Continental Express); Continental Airlines; Delta Air Lines; ExpressJet (operating as Continental Express); Independence Air; Lufthansa Airlines; Mesa Airlines (operating as United Express/US Airways Express); Mesaba Airlines; MidAtlantic Airways (operating as US Airways Express); Northwest Airlines; Piedmont Airlines (operating as US Airways Express); Pinnacle Airlines; PSA Airlines (operating as US Airways Express); Royal Jordanian; SkyWest Airlines (operating as United Express); Spirit Airlines; Southwest Airlines; Trans State Airlines (operating as US Airways Express); United Airlines; and US Airways. The Airport is served by the following scheduled cargo carriers: United Parcel Service and Federal Express. The Airport now has a total of 12 runway approaches with seven equipped to CAT I or higher precision approach standard.

99 Attachment Report of the Airport Consultant, SECTION I: BACKGROUND Wayne County Airport Authority, March 22, 2005 B-16 The Airport currently provides passenger service from three buildings the McNamara Terminal, the L.C. Smith Terminal and the Berry International Terminal. The McNamara Terminal (which opened February 24, 2002) was originally designed to accommodate all scheduled international flight operations at the Airport and the domestic hub operations of Northwest and its code-share partners. The McNamara Terminal includes approximately 2.0 million square feet of terminal facilities with 97 gates 72 jet gates (62 for domestic operations and 10 for international operations) and 25 commuter gates. The McNamara terminal complex consists of an attached concourse (Concourse A) and satellite concourses (Concourses B and C), 106 ticket counter positions, four WorldClubs, an 10,500 space automobile parking garage, a hydrant fueling system, a tank farm upgrade, a central power plant, aprons and taxiways. The McNamara Terminal includes an automated people mover in the attached concourse and an underground tunnel that provides for the terminal s utility and baggage delivery systems as well as pedestrian traffic between Concourses A, B and C. A full service 404-room Westin hotel, completed in December 2002, is attached to Concourse A in the McNamara Terminal. Built over forty years ago, the L.C. Smith Terminal (the Smith Terminal) currently houses all scheduled domestic air carriers not located in the McNamara Terminal. The Smith Terminal consists of a central terminal building and three attached concourses. Located to the north of the Smith Terminal, the Berry International Terminal (the Berry Terminal) consists of four gates with sterile corridor access to a dedicated federal inspection services (FIS ) facility. The Berry Terminal currently provides service to Champion Air, USA 3000, Ryan International, Trans Meridian and other charter flights. The Airport s public automobile parking facilities currently have 18,235 parking spaces, consisting of approximately 5,716 in the North Terminal parking garage, 2,119 long-term spaces in surface lots and a 10,400-space parking garage in the McNamara Terminal complex. CAPITAL IMPROVEMENT PROGRAM The Authority maintains an ongoing Capital Improvement Program (the CIP) for the Airport System. The current five-year CIP is highlighted by the construction of a new North Terminal passenger complex and expansion of the B and C concourses and international gate areas at the McNamara Terminal. The Authority funds the CIP through a combination of airport revenue bonds, passenger facility charges (PFCs), federal grants-in-aid, State of Michigan grants and other Airport revenues. (see Financial Analysis Section for details). Current total estimated costs for the Authority s current five-year CIP total $1.1 billion of which $646.6 million is represented by the 2005 Projects. The current five-year CIP includes, in addition to the 2005 Projects, certain other projects, described below, approved by a Weighted Majority, which the Authority plans to fund and construct within the next several years. Bond debt service related to the issuance of Additional Bonds to fund a portion of these projects is included in the financial forecasts of the Report. Additionally, the five-year CIP includes other projects that already have been financed and currently are in progress, as well as projects that have not yet been approved by the Signatory Airlines. The Authority also is developing plans for additional capital projects to be added to the CIP in the future. Most of these projects will be associated with airfield rehabilitation and reconstruction, based on the recommendation of the Pavement Maintenance System funded in part with net proceeds of the 2005 Bonds. The total cost of these projects is not yet determined; however, preliminary indications are that the cost of the reconstruction of two of the parallel runways will be about $150 million. In addition to funding these projects with proceeds of Additional Bonds, it is anticipated that federal funding would be received for a substantial portion of these projects. Therefore, the issuance of Additional Bonds for these projects is anticipated to be limited to approximately $50 to $60 million.

100 Attachment Report of the Airport Consultant, SECTION I: BACKGROUND Wayne County Airport Authority, March 22, 2005 B-17 Bond Debt Service related to any future issuance of Additional Bonds, for the purpose of funding a portion of projects not yet approved by a Weighted Majority, is not included in the financial forecasts of this Report. The 2005 Projects The 2005 Projects are those projects in the five-year CIP to be funded in part by the proceeds of the Series 2005 Bonds and include the following projects: Terminal Projects North Terminal Redevelopment Project. The North Terminal Redevelopment Project will replace existing facilities in support of non-hubbing airline operations, reduce airside taxiing time, and conform to airfield safety requirements. The North Terminal Redevelopment Project currently is planned to include 27 jetaircraft gates, six of which will be controlled by the Authority; approximately 650,000 square feet of terminal space including a concessions area of approximately 50,000 square feet; related apron construction, including hydrant fueling, and the allowance for dual taxiways; ticket counters, airline offices and baggage handling facilities; hold-rooms, including finishes and furnishings; airline VIP lounges; loading bridges with 400Hz power and preconditioned air; and a second overhead pedestrian bridge connecting the terminal to the parking deck. This project also includes certain interim improvements to the Smith Terminal while the North Terminal is being redeveloped. This project scope includes the construction of an FIS facility and associated facilities of approximately 50,000 square feet as an integral part of the redeveloped North Terminal. Currently, it is expected that the FIS facility in the terminal will be used by Spirit Airlines, the charter airlines now using the Berry Terminal for international operations and all other airlines providing international service at the Airport other than Northwest Airlines and its alliance partners. The non- Northwest alliance partner airlines operating international service from the McNamara Terminal at completion of the North Terminal would relocate to the North Terminal (currently, British Airlines, Lufthansa Airlines and Royal Jordanian Airlines). The FIS facility component of this project will be financed at a later date. Current estimated cost: Not-to-exceed $443,000,000. McNamara Terminal Phase II Project. This project expands facilities at the McNamara Terminal to accommodate additional mainline jet activity and regional jets, and includes the following project components: (i) a 23-gate expansion of Concourse B/C (the west concourse of the McNamara Terminal) to a level fit and finish comparable to Concourse A, (ii) related apron expansion, including hydrant fueling, (iii) additional baggage handling capacity, (iv) additional loading bridges and gate systems, (v) additional passenger moving walkways, and (vi) conversion of two domestic gates to gates that can be used for either domestic or international flights. Element (iii) additional baggage handling capacity, will be financed at a later date. Current estimated cost: $190,000,000. Airfield Projects Perimeter Fencing and Other Security Enhancements. This project is to comply with FAA requirements and includes certain security enhancements to airport facilities, airport security checkpoints, and boundaries. Specifically, the project includes: blast analysis, fingerprint scanners, perimeter fence (approximately one mile along Eureka Road and the fence on the North and East perimeter of the Airport property), Checkpoints 2 and 3 relocation, security video update, computer security implementation, security dispatch, and security Closed Circuit Television (CCTV). Current estimated cost: $2,920,000. Preliminary Design of Runway 3R/21L Reconstruction and Pavement Management Study. This project involves the preliminary design of the reconstruction of Runway 3R/21L, and also includes a pavement management study. Current estimated cost: $1,700,000.

101 Attachment Report of the Airport Consultant, SECTION I: BACKGROUND Wayne County Airport Authority, March 22, 2005 B-18 Surface Movement Guidance Control System (SMGCS). This project involves the installation of a surface movement guidance control system in accordance with FAA standards. This plan facilitates the safe movement of aircraft and vehicles on the airfield in limited visibility conditions by establishing aircraft and vehicle control procedures and installing enhanced visual aids. Current estimated cost: $1,453,000. Runway 3L/21R Planning. This project is a component of the overall Runway 3L/21R Rehabilitation project (see Additional Airline Approved Projects). It includes planning costs for the rehabilitation of Runway 3L/21R, of which the complete project includes the design and construction of a 1,300 foot runway extension, extension of Taxiway G to Taxiway F, extension of Taxiway PP from Taxiway F to Taxiway P, extension of Taxiway S from Taxiway F to Taxiway T, extension of Taxiway U from Taxiway M to Runway 3L, centerline lighting rehabilitation, construction of a hold pad northeast of Runway 21R, and navigational aids of at least CAT I at both ends of the runway. Current estimated cost: $700,000. Other CIP Projects Part 150 Noise Study Update. This project will complete a FAR Part 150 Study for the Airport. The Part 150 Noise Study will analyze the aircraft noise associated with the operation of the Airport and recommend, based on federal guidelines, appropriate noise mitigation measures. Current estimated cost: $1,700,000. Automated Parking Revenue Management System. This project completes the automation of the automobile parking revenue collection, monitoring, and reporting system at the Airport. Current estimated cost: $5,100,000. Additional Airline Approved Projects Certain other projects in the five-year CIP have received Weighted Majority approval and will be funded in the future include. These projects are: CIP PROJECTS Plan of Finance The 2005 Projects (in 000 s) Estimated Project Cost Passenger Facility Charges Federal Grants Estimated Sources of Funding Prior Bond Series 2005 Future Bonds Proceeds [A] Bonds [B] [C] Total Bonds [A]+[B]+[C] 1. Terminal Projects a. North Terminal Redevelopment Project $ 443,000 $ 2,683 $ - $ 84,317 $ 341,000 $ 15,000 $ 440,317 b. McNamara Terminal Phase II Project 190, ,456 71,544 15, ,000 Total Terminal Projects $ 633,000 $ 2,683 $ - $ 187,773 $ 412,544 $ 30,000 $ 630, Airfield Related Projects a. Perimeter Fencing and Security Enhancements $ 2,920 $ - $ 2,210 $ - $ 710 $ - $ 710 b. Preliminary Design RW 3R/21L Reconstruction 1,700-1, c. Surface Movement Guidance System (SMCGS) 1,453 1, d. Runway 3L/21R Planning Total Airfield Related Projects $ 6,773 $ - $ 4,575 $ - $ 2,198 $ - $ 2, Other CIP Projects a. Part 150 Study Update $ 1,700 $ - $ 1,314 $ - $ 386 $ - $ 386 b. Automated Parking Revenue Management System 5, ,100-5,100 Total Other CIP Projects $ 6,800 $ - $ 1,314 $ - $ 5,486 $ - $ 5,486 TOTAL ALL PROJECTS $ 646,573 $ 2,683 $ 5,889 $ 187,773 $ 420,228 $ 30,000 $ 638,001 Source: Wayne County Airport Authority Note: Totals may not add due to rounding. Terminal Projects and Safety and Security Related Projects McNamara Terminal In-Line Explosive Detection System (EDS). This project would provide for an in-line (included in the outbound baggage system) Explosive Detection System (EDS) in the McNamara Terminal. Current estimated cost: $100,000,000 (anticipated Additional Bonds portion: $10,000,000). North Terminal In-Line Explosive Detection System (EDS). This project would provide for an in-line (included in the outbound baggage system) Explosive Detection System (EDS) in the North Terminal. Current estimated cost: $40,000,000 (anticipated Additional Bonds portion: $4,000,000). Smith Terminal Demolition. This project involves the demolition of the Smith Terminal following completion of the North Terminal Redevelopment Project. Current estimated cost: $7,000,000 (anticipated Additional Bonds portion $1,750,000). Berry Terminal Demolition. This project involves the permanent closure of the Berry Terminal following completion of the North

102 Attachment Report of the Airport Consultant, SECTION I: BACKGROUND Wayne County Airport Authority, March 22, 2005 B-19 Terminal Redevelopment Project. Current estimated cost: $7,000,000 (anticipated Additional Bonds portion: $1,750,000). North Terminal FIS Facility: The construction of an FIS facility and associated facilities of approximately 50,000 square feet is an integral element of the Weighted Majority approved North Terminal Redvelopment Project. Current estimated cost: $15,000,000 (anticipated Additional Bonds portion: $15,000,000). McNamara Terminal Phase II Baggage Enhancement: This project is an element of the Weighted Majority approved McNamara Phase II Project. This project scoope includes the design and construction of additional baggage handling capacity. Current estimated cost: $15,000,000 (anticipated Additional Bonds portion: $15,000,000). Airfield Related Projects Runway 3L/21R Rehabilitation. This project has several elements, including the design and construction of a 1,300 foot runway extension, extension of Taxiway G to Taxiway F, extension of Taxiway PP from Taxiway F to Taxiway P, extension of Taxiway S from Taxiway F to Taxiway T, extension of Taxiway U from Taxiway M to Runway 3L, centerline lighting rehabilitation, construction of a hold pad northeast of Runway 21R, and navigational aids of at least CAT I at both ends of the runway. This project will include drainage, lighting, shoulders, pavement markings and signage. Current estimated cost: $35,000,000 (anticipated Additional Bonds portion: $8,050,000). Infill Island at Taxiway Y-10. This project is associated with the SMGCS project, and includes the removal of a portion of the asphalt area adjoining Taxiway Y-10 in the area immediately east of Runway 4L/22R and replacement with standard concrete taxiway. This project will facilitate more efficient and safer aircraft movement to/from the runway. Current estimated cost: $1,500,000 (anticipated Additional Bonds portion: $375,000). Other Northwest Airlines Cargo Facility Expansion/Upgrade. This project includes the construction of a new 30,500 square foot Cargo Warehouse/Truck Dock addition to Building 536, plus renovations to the existing 49,500 square feet of Building 536 including the domestic and international warehouse areas, administrative offices, and staff support areas. In addition, significant quantities of Material Handling Equipment are to be included in this project. Necessary improvements to the existing site, including new truck wells, pavement, parking areas, Air Operations Area (AOA) fencing, and landscaping will also be included. This project includes all areas of general construction and structure, site improvements, mechanical, plumbing, fire protection, electrical, security systems, and material handling equipment and systems. Current estimated cost: $12,500,000 (anticipated Additional Bonds portion: $12,500,000). Spirit Airlines Hangar Upgrade. This project includes the reconstruction of an existing hangar for use by Spirit Airlines. This project includes all areas of general construction and structure, site improvements mechanical, plumbing, fire protection, electrical, security systems, and material handling equipment and systems. Current estimated cost: $2,500,000 (anticipated Additional Bonds portion: $2,500,000). Airport Master Plan Update. This project provides for an update to the current Master Plan which was completed in the late 1980s. Current estimated cost: $1,750,000 (anticipated Additional Bonds portion: $438,000). Senior Lien Bond Debt Service related to the issuance of Additional Bonds for the local share ($71,363,000) of these additional airline approved projects is included in the financial forecast of this Report.

103 Attachment Report of the Airport Consultant, SECTION I: BACKGROUND Wayne County Airport Authority, March 22, 2005 B-20 FINANCIAL FRAMEWORK FOR OPERATION OF THE AIRPORT The Ordinance The Series 2005 Bonds are being issued pursuant to the provisions of Act 327, Public Acts of Michigan, 1945, as amended, Act 94 Public Acts of Michigan, 1933, as amended (collectively the Act), and the Master Airport Revenue Bond Ordinance, and a Series Ordinance (collectively with the Master Airport Revenue Bond Ordinance referred to herein as the Ordinance) 1. The Series Ordinance was adopted by the Authority on January 27, 2005 authorizing the issuance of the Series 2005 Bonds. Pursuant to the Ordinance, the Authority irrevocably pledges Net Revenues for the payment of the Bonds (Net Revenues for any period means the excess of Revenues of the Airport remaining after deducting the Operation and Maintenance Expenses of the Airport for such period.) Pursuant to the Rate Covenant in the Ordinance, the Authority has covenanted to fix, charge and collect rates, fees, rentals and charges for the use and operation of the Airport as may be necessary or appropriate to produce Revenues in each Operating Year which will be at least sufficient to provide for: the payment of Operation and Maintenance Expenses for such Operating Year (OY) 2, together with PFC proceeds deposited with the Trustee with respect to such Operating Year, the amount needed to make the deposits required under the Ordinance for such Operating Year to the Bond Fund; and together with Other Available Moneys deposited with the Trustee with respect to such Operating Year (to the extent not needed to make deposits required under the Ordinance for such Operating Year to the Bond Fund) and any unencumbered cash balance held 1 Unless otherwise indicated, all capitalized terms in this Attachment are defined in the Ordinance. 2 The Authority s operating year begins October 1 and ends September 30 of the following year. in the Revenue Fund on the last day of the Operating Year preceding the Operating Year for which the calculation is made not then required to be deposited in any Fund or Account, (A) the amounts needed to make the deposits required under the Ordinance for such Operating Year to the Junior Lien Bond Fund, the Operation and Maintenance Reserve Fund, the Renewal and Replacement Fund, the Airport Discretionary Fund and the Airport Development Fund, and (B) an amount not less than 25% of the Debt Service due and payable on Bonds during such Operating Year. The Ordinance requires the Authority to adopt, prior to the commencement of each Operating Year, a budget sufficient to cover the Operation and Maintenance Expenses of the Airport for such Operating Year, the principal and interest payable during such Operating Year on the Bonds, and other financial requirements of the Ordinance and the Airport during such Operating Year. Under the Ordinance, the Authority is required to set aside and deposit all Revenues of the Airport into the Revenue Fund, and to apply all moneys on deposit therein at such times and in accordance with the priorities established in the Ordinance (see Flow of Funds as provided at the end of this Section). The Ordinance provides that all interest earned or profit realized on investments or deposits of money for the funds and accounts established under the Ordinance shall be credited and charged as shown in the flow of funds. Land and facilities comprising the Airport may not be pledged or mortgaged pursuant to the Ordinance nor may they be pledged to secure payment of the Series 2005 Bonds or any other Bonds. Outstanding Debt The County issued under the Prior Ordinance (as defined herein), in aggregate, $1,810,490,000 principal amount of Senior Lien Bonds of which $1,664,850,000 remained outstanding on February 1, The Authority is obligated to pay the debt service on all Senior Lien and Junior Lien Bonds issued by the County.

104 Attachment Report of the Airport Consultant, SECTION I: BACKGROUND Wayne County Airport Authority, March 22, 2005 B-21 The County issued $141,900,000 of Junior Lien Bonds, of which $89,180,000 in bonds were outstanding on February 1, The Authority intends to repay the remaining amount of Junior Lien Bonds from the federal grants to be received under a Letter of Intent from the FAA dated June 15, After issuance of the Series 2005 Bonds and Additional Bonds for projects already approved by Weighted Majority, the Authority is anticipated to have, in aggregate, approximately $2.28 billion principal amount of outstanding Senior Lien Bonds. The Airline Agreements Sixteen Signatory Airlines are parties to airport agreements relating to the use of the Airport (the Airline Agreements). The current Signatory Airlines are: America West Airlines, American Airlines, British Airways, Continental Airlines, Delta Air Lines, Federal Express, KLM-Royal Dutch Airlines, Lufthansa Airlines, Mesaba, Northwest, Pinnacle, Southwest Airlines, Spirit Airlines, United Airlines, United Parcel Service and US Airways. Northwest and its affiliates Airport Use and Lease Agreement (collectively, the Northwest Agreement) has a term ending September 30, The Authority is preparing an amended Airline Agreement for Northwest incorporating a revised methodology for establishing terminal rentals starting in OY Airline Agreements currently in effect with each of the Signatory Airlines (other than Northwest, Mesaba and Pinnacle) have terms ending January 1, Following the completion of the amended agreement for Northwest, the Authority will prepare new Airport Use and Lease Agreements for the other Signatory Airlines (other than Northwest, Mesaba and Pinnacle). The new Airport Use and Lease Agreements will be substantially the same as the amended Northwest Agreement and will be executed after the new North Terminal is designed and leased premises identified prior to the date of beneficial occupancy. The Airline Agreements include procedures for charging and payment of airline fees and charges including requirements of the Authority to: provide the Signatory Airlines with a projection of rentals and the Activity Fee rate for each OY at least 60 days prior to the beginning of the OY; revise the projection mid-year, based on actual data available for the OY; within 60 days after the end of each OY, provide the Signatory Airlines with a preliminary report of rentals and Activity Fees actually chargeable for the prior year, and pay 80% of any additional amounts owed by the Signatory Airlines to the Authority or any refunds the Authority may owe the Signatory Airlines as a result of an overpayment within 90 days after the end of such OY. The Authority has agreed to provide the Signatory Airlines with its annual audit for each OY within 180 days after the end of the year, and the balance of any amounts owed by the airlines, or to be refunded by the Authority, is due within 30 days thereafter. Airline Rates and Charges Pursuant to the Airline Agreements, the Signatory Airlines guarantee the breakeven financial performance of the Authority via an airport residual agreement. The Signatory Airlines pay rentals for the lease of premises at the Airport and activity fees for the common use of terminal and airfield facilities. Under these agreements the Authority shall include in the calculation of rates and charges payable by the Signatory Airlines the annual debt service requirements of, and other deposit requirements and coverage requirements for, bonds issued to pay the costs of capital projects approved by a Weighted Majority of the Signatory Airlines. Each Signatory Airline is obligated to pay in monthly installments (i) specified annual rental for space exclusively or preferentially leased to such Signatory Airline (the Rental Fee), and (ii) a facilities use fee per deplaned international passenger for the use of equipment, facilities and conveniences in the international facility in the McNamara Terminal and the Berry International Terminal (the Facilities Use Fee).

105 Attachment Report of the Airport Consultant, SECTION I: BACKGROUND Wayne County Airport Authority, March 22, 2005 B-22 Until OY 2009, the Rental Fee is subject to an adjustment (a maximum of 10% on any increase or decrease) every five years in the rates to be charged for the subsequent five-year period. The Signatory Airlines also are obligated under the Airline Agreements to pay an Activity Fee each Operating Year equal to each Signatory Airline's pro rata share (based on landed weight of aircraft) of the Revenue Requirement, which is calculated as the difference between (i) the sum of: (a) direct and indirect operation, maintenance and administration expenses of the Airport, (b) 125% of the amount of principal and interest payable on outstanding Airport Revenue Bonds, (c) required deposits into the Bond Reserve Account, the Operation and Maintenance Reserve Fund and the Renewal and Replacement Fund, (d) $350,000 for deposit into the Airport Discretionary Fund to be used at the Authority s discretion for Airport System purposes, and (e) $5 million (subject to escalation each year, commencing in Operating Year 2002, based on the Producer Price Index), to be deposited in the Authority s Airport Development Fund to be used by the Authority in its discretion for any lawful Airport System related capital expenditures, and (ii) all other Airport revenues for such Operating Year (including Activity Fees paid by non-signatory airlines, exclusive area and common area rentals, all concession revenues and all other non-airline revenues); provided that for each Operating Year, item (b) above shall be reduced by unencumbered amounts on deposit in the Revenue Fund on the last day of the Operating Year preceding such Operating Year. New Rates and Charges Methodology The following revised rates and charges methodology for the Airport has been agreed to by a Weighted Majority of Signatory Airlines and will be the subject of an amendment to the Northwest Agreement and will be incorporated in the new Airport Use and Lease Agreement for the other Signatory Airlines. Terminal Rental Rates before Occupancy of the North Terminal The terminal rental rates of all Signatory Airlines not located at the McNamara Terminal will remain at the rates currently in effect under their existing leases while the North Terminal Redevelopment Project is being completed (estimated completion date in 2008). During this same period, Northwest and the other Signatory Airlines that relocated to the McNamara Terminal are required to pay the highest rental rate payable annually by any other Signatory Airline under the existing lease agreements, which in Operating Year 2005 is $19.71 per square foot. Terminal Rental Rates Upon Occupancy of the North Terminal Commencing upon the later of October 1, 2008 and the date of beneficial occupancy of the North Terminal, the Authority will establish new terminal rental rates for airline leased space in the McNamara Terminal and the North Terminal. The Authority will create two terminal cost centers the South Terminal Cost Center (currently the McNamara Terminal) and the North Terminal Cost Center. The rental rates payable for each fiscal year by Signatory Airlines leasing space in each terminal will be calculated by allocating between the two terminal cost centers (i) the operation and maintenance expenses (O&M Expenses) for such fiscal year directly attributable to the operation and maintenance of the terminals (including all passenger loading bridges and connectors to parking garages as well as the immediate curbside, but not including the O&M Expenses for the terminal aprons), including but not limited to janitorial expenses; repair costs; operation and maintenance costs for all mechanical equipment (including conveyance systems and baggage handling systems) and building-wide services such as heating, cooling, lighting and electrical service; maintenance and repair costs for the interior and exterior floors, walls, ceilings and roof; insurance costs and all utility costs (including HVAC, water, sewage, electric, etc.), for such fiscal year, and (ii) all annual debt service for such fiscal year on GARBs issued post-1997 (pro rata in accordance with the use of GARB proceeds) to finance the McNamara Terminal Phase I and Phase II Projects and the North Terminal Redevelopment Project, as well as the

106 Attachment Report of the Airport Consultant, SECTION I: BACKGROUND Wayne County Airport Authority, March 22, 2005 B-23 demolition of the Smith Terminal and the demolition of the Berry Terminal but only if those demolition projects are financed as part of the North Terminal Redevelopment Project as set forth in this Weighted Majority request, net of debt service on such GARBs for that fiscal year to be paid by PFCs. The Authority will charge an international facility use fee (IFUF) per deplaned passenger for the use of the FIS facility in each of the South Terminal and the North Terminal. For each fiscal year the Authority also will charge fees for use of the airline space that it controls in each terminal. The use fee rate for a fiscal year will be set at a level estimated to be sufficient to cover the total cost of such airline space in such terminal for such fiscal year. The annual per square foot terminal rental rate for airline leased space in each terminal for each fiscal year will be an amount, rounded up to the nearest dollar, equal to (i) the total costs allocated to the terminal cost center for such fiscal year as set forth above, minus the total amount collected from the IFUF imposed in such terminal for such fiscal year, minus the total amount of use fees collected for the space controlled by the Authority in such terminal, divided by (ii) the total number of square feet of airline leased space in such terminal. Activity Fees Activity Fees for the Airport will continue to be calculated on an Airport residual basis, as required under the existing agreements. The Activity Fee calculation for each fiscal year beginning with OY 2009 will be based on all GARB debt service (net of debt service paid by PFCs and federal grant funds) and all O&M Expenses for such fiscal year, minus all non-airline revenue for such fiscal year (except $2.5 million of annual revenue from the automated vehicle identification ( AVI ) program at the Airport and except the net proceeds from the sale during such fiscal year of certain property on the west side of the airfield), all airline terminal charges for such fiscal year (excluding the total amount for such fiscal year of IFUFs, and the fees collected for use of terminal space controlled by the Authority). Accounting Principles The Authority accounts for its activities according to generally accepted accounting principles for governmental entities. Revenues and Operation and Maintenance Expenses are accounted for on an accrual basis. A Supplemental Table 12 as provided in the back of this Attachment presents the audited historical operating results of the Airport for OY 2003, OY 2004 (estimated) and OY 2005 (budgeted). CONCLUSION The Airport is well established in its role as a connecting passenger hub for a network air carrier (Northwest), with a strong underlying O&D passenger base providing a balanced operation. Adequate airspace and capacity are available for aircraft activity associated with hubbing operations, and airfield facilities are in place to support Airport activity. The Airline Agreements provide for the full cost recovery of Airport operations and the funding of discretionary funds to be used at the discretion of Airport management. The Airline Agreements also provide for the periodic adjustment of airline rates and charges to increase Airport revenues in a reduced traffic demand environment.

107 Attachment Report of the Airport Consultant, SECTION I: BACKGROUND Wayne County Airport Authority, March 22, 2005 FLOW OF FUNDS DEPOSIT ALL REVENUES OF THE AIRPORT Priority Under The Ordinance REVENUE FUND FUND Maintain Maintain Fund Fund Balance Balance Of Of Revenues As As Credit Credit Against Against Coverage Requirement-25% Of Of Debt Debt Service Service on on Outstanding Bonds Bonds 1 REBATE FUND FUND B-24 Earnings and profits in the: Earnings and profits in the: Bond Reserve Account- in the following Bond Reserve Account- in the following priority: (1) retained in the account until priority: (1) retained in the account until the Reserve Requirement is on deposit; the Reserve Requirement is on deposit; (2) prior to the Completion Date, credit to (2) prior to the Completion Date, credit to the Construction Fund based on the the Construction Fund based on the proportion of the projects completed to proportion of the projects completed to date, and then credit the balance (or the date, and then credit the balance (or the amount related to projects that have not amount related to projects that have not been completed) to the general account of been completed) to the general account of the Bond Fund; and, (3) on and after the the Bond Fund; and, (3) on and after the Completion Date credited to the general Completion Date credited to the general account of the Bond Fund. account of the Bond Fund. Capitalized Interest Account- are Capitalized Interest Account- are applied in the following priority: (1) applied in the following priority: (1) retained in the account until the account is retained in the account until the account is fully funded and, (2) after the account is fully funded and, (2) after the account is fully funded, credit to the Construction fully funded, credit to the Construction Fund. Fund. Earnings Earnings and and profits profits in in the: the: Operation Operation and and Maintenance Maintenance Reserve Reserve Fund- Fundare are applied applied in in the the following following priority: priority: (1) (1) retained retained in in the the account account until until the the Operating Operating Reserve Reserve Requirement Requirement is is on on deposit; deposit; and, and, (2) (2) after after the the account account is is fully fully funded, funded, credited credited to to the the Revenue Revenue Fund. Fund. Earnings Earnings and and profits profits in in the: the: Renewal and Replacement Fund- are Renewal and Replacement Fund- are applied in the following priority: (1) applied in the following priority: (1) retained in the account until the retained in the account until the Replacement Requirement is on deposit; Replacement Requirement is on deposit; and, (2) after the account is fully funded, and, (2) after the account is fully funded, credited to the Revenue Fund. credited to the Revenue Fund. OPERATION AND AND MAINTENANCE FUND FUND Pay Pay Operation And And Maintenance Expenses BOND BOND AND AND INTEREST REDEMPTION FUND FUND Pay Pay Principal, Redemption Price, Price, And And Interest On On The The Bonds Bonds And And Swaps Swaps Bond Reserve Account Replenish Reserve Reserve As As Required Capitalized Interest Interest Account Pay Pay Capitalized Interest Interest JUNIOR JUNIOR LIEN LIEN BOND BOND AND AND INTEREST REDEMPTION FUND FUND Pay Pay Principal, Redemption Price, Price, And And Interest Interest On On The The Junior Junior Lien Lien Bonds; Bonds; Pay Pay Any Any Amounts Amounts Due Due To To Any Any Post-1996 Swap Swap Provider Provider And And Due Due In In Connection with with Any Any Post- Post Swap Swap Agreement Junior Lien Junior Lien Capitalized Swap Swap Payment Bond Reserve Account Interest Account Account Pay Replenish Reserves As Pay Obligations Under Under Any Any As Pay Required Pay Capitalized Interest Interest Post-1996 Swap Swap Agreement OPERATION AND AND MAINTENANCE RESERVE FUND FUND Maintain One-Month O&M O&M Reserve To To Pay Pay For For O&M O&M Or Or Replenish Bond Bond Reserve Fund Fund RENEWAL AND AND REPLACEMENT FUND FUND Pay Pay For For Completing Or Or Replacing Capital Capital Improvements, Repairs, Repairs, Replacements, Or Or Renovations At At The The Airport, Airport, Replenish Bond Bond Reserve Reserve Account Account Or Or Operation Maintenance Reserve Reserve Fund Fund Pay Pay Funds Funds Pursuant To To Section Section 103(c) 103(c) (6) (6) Of Of The The Internal Internal Revenue Code Code 1 of of OTHER OTHER AVAILABLE MONEYS Monthly Transfer 2 of of Passenger Facility Facility Charge Charge (PFC) (PFC) proceeds, including interest interest thereon, and and federal federal LOI LOI funds funds to to the the Bond Bond Fund 3Fund DISCRETIONARY FUND FUND Pay Pay For For Any Any Lawful Lawful Purposes At At Any Any Airport Airport Owned Owned and and Operated By By The The County County on on January January 1, 1, AIRPORT DEVELOPMENT FUND FUND Pay Pay For For Capital Capital Costs Costs For For Any Any Lawful Lawful Purpose Purpose At At Any Any Airport Airport Owned Owned By By The The County County 8

108 Attachment Report of the Airport Consultant, SECTION II: AIRPORT SERVICE REGION Wayne County Airport Authority, March 22, 2005 OVERVIEW The Airport Service Region s large origin-destination passenger base provides a solid foundation for air travel demand at the Airport. The Detroit-Ann Arbor-Flint CMSA represents the eighth most populous region in the U.S. and ranks second in the Midwest. The Airport Service Region s historically strong air travel demand has been based on a manufacturing economic base, with continuing diversification into numerous supporting service industries (e.g. robotics). A historically sound business and economic climate with a low cost of living and relatively high personal income further supports growth in air traffic at the Airport. No other airport provides significant competition to the Airport in the Airport Service Region. ROAD MILES FROM DETROIT Cleveland TO: 173 Fort Wayne 160 Lansing 85 Toledo 60 Flint 55 AIRPORT SERVICE REGION Lake Michigan MICHIGAN Flint Lansing Fort Wayne INDIANA Lake Huron Detroit Toledo Lake Huron Cleveland OHIO Lake Erie CANADA B-25 THE AIRPORT AND ITS SERVICE REGION The Airport is located 20 miles southwest of downtown Detroit and is defined by the FAA as a large air traffic hub. The Airport Service Region (Region) includes a ten-county area consisting of Genesee, Lapeer, Lenawee, Livingston, Macomb, Monroe, Oakland, St. Clair, Washtenaw and Wayne counties, which contain more than 275 cities and townships. This ten-county Region coincides with the Detroit-Ann Arbor-Flint CMSA. Approximately 89% of the originating passengers at the Airport reside within the ten counties of the Region. The borders of the Region are influenced by the location of other metropolitan areas and their associated airport facilities. Located within an hour s driving distance from the Airport are Detroit City Airport (no passenger service available since CY 2000), Bishop International Airport (593,486 enplanements in CY 2004) and Toledo Express Airport (278,692 enplanements in CY 2003). Bishop Int l Airport GENESEE LIVINGSTON 23 WASHTENAW LENAWEE Flint OAKLAND Willow Run Airport 94 Ann Arbor County Boundary State/International Boundary Ypsilanti 23 LAPEER Pontiac WAYNE Dearborn MONROE OHIO Livonia N 75 MACOMB Sterling Heights Warren Detroit ST. CLAIR 94 Lake St. Clair Detroit City Airport Windsor Airport Windsor ONTARIO, CANADA Detroit Metropolitan Wayne County Airport Lake Erie 14 Willow Run Airport Port Huron ONTARIO, CANADA 275 Livonia WAYNE Westland Wayne 96 Dearborn Heights Romulus Taylor Detroit City Airport Dearborn Allen Park Detroit 94 Air Carrier Airport Commuter Airport/ General Aviation/Other Approximate Scale In Miles 94 Belleville Detroit Metropolitan Wayne County Airport 75

109 Attachment Report of the Airport Consultant, SECTION II: AIRPORT SERVICE REGION Wayne County Airport Authority, March 22, 2005 B-26 Population In CY 2004, an estimated 10.1 million people resided in Michigan, which accounted for 3.4% of all U.S. residents. Michigan remains the eighth most populous state, behind California, Texas, New York, Florida, Illinois, Pennsylvania and Ohio. The Region is the eighth (2000 Census) most populous metropolitan region in the nation with a population of approximately 5.5 million. The Region s population grew an average of 0.4% annually between CY 1994 and CY 2003, accounting for 54.7% of Michigan's population and 1.9% of the U.S. population in CY (In comparison, the population of the State of Michigan and the U.S. increased on average 0.6% and 1.0%, respectively, per year for the same period.) All counties within the Region, with the exception of Wayne County, experienced positive population growth between CY 1990 and CY The fastest growing counties within the Region between CY 1990 and CY 2003 were Livingston and Lapeer Counties with average annual increases of 3.1% and 1.5%, respectively. Population in the Region is expected to increase annually by 0.4% from CY 2003 to CY Personal Income Among U.S. states, Michigan had the 24th highest per capita income in CY 2003; among the five Great Lakes states, Michigan ranked third behind Indiana and Wisconsin in CY Per capita income in the Region has been consistently higher than State and national levels. In CY , the Region s per capita income was $31,956 compared to $29,817 and $30,604 for the State of Michigan and the U.S., respectively. In CY 2003, per capita income for the State and the U.S. was $30,439 and $31,944, respectively (no CY 2003 data available yet for the Region). Per capita income for the Region increased at an average annual rate of 3.7% between CY 1992 and CY 2002, while the State s and the nation s per capita income both increased at an average of 3.9% over the same period. The Region s median household income, another measure of personal income, continues to surpass State and U.S. levels. For CY 2003, the Region s median household income was $49,236 compared to $44,407 for the State and $43,564 for the U.S. Greater than 20% Between 10% and 20% Between 0% and 10% Less than 0% Population Change in the Airport Service Region ( ) Bishop Int l Airport GENESEE LIVINGSTON Willow Run Airport LENAWEE Flint LAPEER Pontiac OAKLAND MONROE OHIO MACOMB Sterling Heights ST. CLAIR Warren Lake St. Clair Detroit City Airport ONTARIO, CANADA Detroit Metropolitan Wayne County Airport Lake Huron Detroit WAYNE Windsor Airport Dearborn Windsor Ann Arbor Ypsilanti WASHTENAW County Boundary Port Huron ONTARIO, CANADA Lake Erie State/International Boundary N 3 Year of most recent data available at the local level Air Carrier Airport Commuter Airport/ General Aviation/Other Approximate Scale In Miles

110 Attachment Report of the Airport Consultant, SECTION II: AIRPORT SERVICE REGION Wayne County Airport Authority, March 22, 2005 B-27 The Region also ranked 10 th in the U.S. in CY 2003 for top effective buying income for metropolitan areas. EMPLOYMENT Since 1990, employment levels in the Region grew at an annual rate of 0.9% as the Region s economic base diversified in the 1990s. Between CY 2003 and CY 2004, employment levels declined 0.8% in the Region, comparable to the decline (-0.6%) at the State level. The U.S., however, experienced a 1.1% job growth over CY 2003 levels. Employment in the Region is forecast to increase 1.2% annually between CY 2004 and CY 2010 with most of the growth in the Professional and Business Services sector (2.4%), similar to State and national employment trends. Manufacturing employment is anticipated to decline by 0.4% in the Region and in the State, and 0.3% in the nation between CY 2004 and CY Labor Force The Region s civilian labor force (representing individuals over 16 who are available for work, both employed and unemployed) increased from 2,637,900 in CY 1995 to 2,699,450 in CY 2004, representing an annual compounded growth rate of 0.3%. In comparison, the State of Michigan s and the nation s civilian labor force increased on average 0.6% and 1.2%, respectively, for the same period. From CY 1995 to CY 2000, the Region s seasonally unadjusted unemployment rates remained below trends experienced in the U.S. Since CY 2000, while the Region s employment rate averaged lower then the State, it was slightly above national levels. The State and the Region s unemployment levels appear to be rebounding but at slower rates than the U.S. In CY 2004, the annual average jobless rate declined for the first time since CY 2000 with the Region s unemployment rate declining from 7.1% to 6.9%, while the State s unemployment rate declined from 7.3% to 6.8% and the U.S. from 6.0% to 5.5%. UNEMPLOYEMENT RATE Between CY 2000 and CY 2003, manufacturing sector employment in the State declined 18.9%. Professional and business services sector employment also decline 8.1% from CY 2000 levels. However, education and health services, and financial services sectors experienced a gain of 8.4% and 4.5%, respectively. Overall, employment declined 5.6% in the State to 4.4 million. 8.0% 7.5% 7.0% 6.5% 6.0% 5.5% 5.0% 4.5% 4.0% 3.5% 3.0% Unemployment Rates of the Region vs. State and the U.S. Michigan Note: Not seasonally adjusted Sources: U.S. Department of Labor, Bureau of Labor Statistics, Series ID LNU and LNU , Michigan Department of Career Development, Employment Service Agency, and Current Population Survey Airport Service Region The governor recently announced a $2 billion bond proposal that would finance research in life sciences, advanced automotive technology and alternative energy such as fuel cells, in an effort to boost Michigan's economy and create jobs. U.S.

111 Attachment Report of the Airport Consultant, SECTION II: AIRPORT SERVICE REGION Wayne County Airport Authority, March 22, 2005 B-28 Employment Distribution Among Industry Sectors In CY 2003, Michigan had a Gross State Product (GSP) of $365.3 billion (in current dollars), which represented 3.3% of total U.S. Gross Domestic Product (GDP). Although manufacturing accounted for 20.7% of the State s GSP in CY 2002 (year of most recent data by industry), the services sector is forecast to grow at an annual compounded rate of 4.7% between CY 2002 and CY 2010 compared to 0.3% for the manufacturing sector. However, an increasingly larger share of manufacturing employment is outsourced managerial and professional services, and is counted as non-manufacturing employment. 100% 90% 80% 70% 60% 50% 40% 30% 20% 10% 0% Employment Distribution of the Airport Service Region 20.3% 13.6% 24.2% 29.0% (forecast) Transportation, Warehousing, & Utilities Leisure & Hospitality Education Government Retail & Wholesale Trade Manufacturing Services* * Includes Professional & Business Services, Financial Activities, Information, and Other Services Source: Michigan Department of Career Development, Employment Services Agency, Office of Labor Market Information; Economy.com Construction and Mining & Resources Michigan s services sector employment accounted for 34.2% of total GSP in CY Government employment accounted for 10.3% of total GSP, and industries with less than a 10% individual share accounted for the remaining 55.5% of the State s GSP in CY Reflecting the diversification of its industrial base from manufacturing to the services sector, manufacturing sector employment in the Region decreased from 20.3% in CY 1990 to 15.0% of total employment in CY The manufacturing sector is projected to make up 13.6% of total employment in CY 2010, while the professional & business services sector is anticipated to constitute 18.3% of total non-farm employment in the Region (the highest share) followed by employment in the education and health services sectors (12.9%). BUSINESS AND INDUSTRY Automotive The Region s economic base is highly concentrated in the motor vehicle manufacturing industry. More than 200,000 designers work in more than 135 research and development, engineering and technical centers. The Region continues to manufacture more cars and trucks than any other state. Of the top 100 original equipment manufacturers in the U.S., 82 are headquartered or have a presence in the Region. Total U.S. vehicle production in CY 2004 declined 1.0% to 11.9 million units from 12.1 million units in CY 2003, while Michigan production declined 7.1% year over year. Between CY 1995 and CY 2004, Michigan vehicle production declined 2.0% annually. Analysts estimate that Michigan should have a net gain in production in 2005 if industry demand stays at least flat with CY 2004, although total output still will be well below capacity. Although Michigan's share of U.S. vehicle production has declined over the past 10 years, due in part to more foreign competition, the Region continues to have the highest concentration of automotive assembly plants in the nation. In CY 2004, the State of Michigan produced 21.6% of total U.S. vehicles, down from 25.9% in CY The Big Three automotive manufacturers (General Motors, Ford Motor Co. and DaimlerChrysler) represented 69.3% of total U.S. vehicle production in CY The Big Three automotive manufacturers were the Region s largest private employers in CY 2003, accounting for more than 155,018 employees or 6.2% of the Region s overall employment. The Big Three s employment share of the top 20 employers in the Region declined from 59.1% in CY 1996 to 48.6% of total workers in CY 2003.

112 Attachment Report of the Airport Consultant, SECTION II: AIRPORT SERVICE REGION Wayne County Airport Authority, March 22, 2005 US Vehicle Production B-29 14,000,000 12,000,000 10,000,000 8,000,000 6,000,000 4,000,000 2,000,000 0 US Vehicle Production Michigan Share of US US Vehicle Production Michigan Share of US Calendar Year 30% 25% 20% 15% 10% 5% 0% Ford Motor Remaining Top 20 Employers Next Three Largest Employers General Motors and Ford maintain their world headquarters in the Region while DaimlerChrysler, AutoAlliance International, Inc. (formerly Mazda Motor Manufacturing) and Volkswagen of America each maintains its U.S. headquarters in the Region. Toyota Motor Corp has recently proposed a $195 million, 400,000- square-foot expansion in Washtenaw County that would add 514 jobs to an existing 820 jobs at the technical center s Ann Arbor research and development campus. This development would boost efforts to attract high-tech automotive operations to Michigan to help offset a steady decline in manufacturing jobs. Hino Motors Sales U.S.A. Inc., which is 51% owned by Toyota Motor Corporation, recently announced the relocation of its headquarters from New York to Oakland County. The company is moving to the Detroit area to be closer to suppliers, customers and a workforce familiar with commercial vehicle sales and service. Michigan s Share of US Vehicle Production General Motors 1996 Chrysler Big Three Comprises 59.1% General Motors Ford Motor Daimler Chrysler 2003 Next Three Largest Employers Big Three Comprises 48.6% Remaining Top 20 Employers Education The Airport Service Region is home to 19 universities and colleges, with an enrollment over 133,000 students; and 18 community colleges with over 100,000 students. The largest of the universities is the University of Michigan with enrollment of 54,352 students at various campuses throughout the Airport Service Region in Fall The University of Michigan-Ann Arbor was named among the top 15 business schools and the top 50 schools for doctoral programs in US News and World Report s 2004 academic rankings. Gaming Three casino operators, MGM Grand Detroit Casino, owned by MGM Grand Detroit, LLC; MotorCity Casino, owned by Detroit Entertainment, LLC; and Greektown Casino, owned by Greektown Casino, LLC, are licensed and regulated to operate three gaming casinos in Detroit. In CY 2004, the three casinos combined realized a gross receipt of $1.2 billion. International Trade Michigan s export sales accounted for 4.6% of total U.S. exports in CY In CY 2003, Michigan generated $32.4 billion in export sales, with 60.1% going to Canada and 12.2% to Mexico. Michigan was the fifth largest exporter to the world in terms of dollar value. The City of Detroit is the largest Foreign Trade Zone (FTZ) in the United States in terms of the value of goods leaving the zone and the number of sub-zones and general-purpose zones. The City of Detroit currently has 23 approved sub-zones in manufacturing facilities and 18 general-purpose zones to serve a diverse range of companies. In recent years, local firms have annually shipped more than $34 billion in goods from Greater Detroit Foreign Trade Zone facilities. These goods have typically included automobiles, trucks and auto

113 Attachment Report of the Airport Consultant, SECTION II: AIRPORT SERVICE REGION Wayne County Airport Authority, March 22, 2005 parts. At the same time, more than $2 billion in goods have been exported annually from the zone. Health Care Fortune Magazine (March 2004) recognized that 24 of the nation s largest public companies (Fortune 500) are headquartered in Michigan, 17 of which are located in the Region (three in the city of Detroit). B-30 Eight of the top twenty employers in the Region in CY 2003 were health care-related organizations, employing approximately 81,000 employees. According to Detroit Regional Chamber, the Region is home to 62 hospitals with more than 11,000 physicians working in 80 specialty and sub-specialty areas, including two teaching and research centers: The Detroit Medical Center in Detroit and The University of Michigan Medical Center in Ann Arbor. In 2004, the US News and World Report recognized the University of Michigan Medical Center (Ann Arbor), Henry Ford Hospital (Detroit), Harper University Hospital (Detroit), Rehabilitation Institute of Michigan (Detroit) and William Beaumont Hospital (Royal Oak) among the best hospitals in the nation. The University of Michigan Medical Center ranked among one of only 14 hospitals in a category reserved for centers with very high rankings in at least six specialties. The medical school of the University of Michigan was further recognized among the top ten medical schools in the nation in research. The school's research facility receives more than $100 million in grants each year, and graduates 200 physicians annually. GENERAL ECONOMIC AND BUSINESS CLIMATE FACTORS According to the American Chamber of Commerce Researchers Association (ACCRA), the Region provides a relatively competitive cost of living compared to other top O&D markets in CY Michigan ranked first in CY 2004 in an information-technology survey of state governments by the Center for Digital Government and the Progress and Freedom Foundation, the sixth year in a row that Michigan has achieved a top tier ranking. Fortune 500, 2003 List of Companies Headquartered in the Region Headquarters Industry Type General Motors Detroit Automotive Manufacturer Ford Motor Dearborn Automotive Manufacturer Kmart Troy General Merchandiser Delphi Automotive Troy Automotive Parts Supplier Visteon Dearborn Automotive Engineering & Design Lear Southfield Automotive Parts Supplier Masco Taylor Materials and Construction Federal-Mogul 4 Southfield Automotive Parts Supplier DTE Energy Detroit Electric Utility ArvinMeritor Troy Automotive Parts Supplier United Auto Group Bloomfield Hills Automotive Dealers & Distributors Kelly Services Troy Human Resources Services Collins & Aikman Troy Automotive Parts Supplier Pulte Bloomfield Hills Residential Construction American Axle & Manufacturing Detroit Automotive Engineering & Design Comerica Detroit Banking, Financial services Borders Group Ann Arbor Specialty retailer 4 Operating under bankruptcy proceeding.

114 Attachment Report of the Airport Consultant, SECTION II: AIRPORT SERVICE REGION Wayne County Airport Authority, March 22, 2005 CONCLUSION Air travel demand in the Region is supported by a high concentration of Fortune 500 companies and historically strong per capita and median household income. The Airport s O&D passenger base is anticipated to increase as population levels of the Region are forecast to grow over the next 10 years. Despite the mixed unemployment situation, the Region s economic base continues to diversify into various services industries and other non-manufacturing sectors. B-31

115 Attachment Report of the Airport Consultant, SECTION III: ACTIVITY AND AIR SERVICE Wayne County Airport Authority, March 22, 2005 OVERVIEW After the U.S. airline industry was deregulated in 1978, most major airlines developed hub-and-spoke route networks as a means of increasing their service frequencies and passenger volumes. The largescale development of the Airport as a major connecting passenger hub was initiated by Republic Airlines in When Northwest acquired Republic in 1986, it continued to use the Airport as a transfer point for many of its passengers and has continued to expand the connecting passenger hub since Connecting passengers represented 55.7% of total domestic enplaned passengers at the Airport in CY 2003, and 55.1% in the first nine months of CY Pre-September 11, 2001 increases in total passenger enplanement activity were the result of both a strong local origin-destination market, and expanded connecting activity at the Airport by Northwest and its affiliates. The Airport also benefited from the increased number of international routes being served by Northwest and foreign-flag air carriers. Total enplaned passengers increased 6.4% in OY 2004, with domestic and international enplaned passengers increasing 6.7% and 3.1%, respectively. The domestic segment accounted for 92.0% of total enplaned passengers in OY B-32 The underlying strength of the originating passenger traffic in the Region, accounting for 44.3% of total enplaned passengers in CY 2003 (and 44.9% in the first nine months of CY 2004), provides a significant passenger base that would still support Airport operations in the absence of connecting traffic. As an O&D airport, the Airport would rank (in terms of total passengers) in the top 30 of airports in the U.S. Northwest and its affiliates accounted for 53.3% of total O&D passengers at the Airport in CY 2003 (and 54.2% in the first nine months of CY 2004). Over the last two years, traffic has rebounded faster at the Airport than in the nation as a whole, led by a connecting traffic segment that has returned to pre- September 11, 2001 passenger levels. Total Enplaned Passengers (000s) 18,000 16,000 14,000 12,000 10,000 8,000 6,000 4,000 Airport Enplaned Passengers OY 1995 to OY 2004 Domestic International AIRLINE PASSENGER TRAFFIC 2,000 Enplaned passengers at the Airport increased at an annual average rate of 4.7% between OY 1995 and OY 2000, and 2.3% between OY 1995 and OY While total enplaned passengers declined 8.7% and 3.7% in OY 2002 and OY 2001, respectively, enplaned passengers increased 6.4% in OY 2004 over OY 2003 results. The Airport's strong enplaned passenger activity continued in the first three months of OY 2005, increasing 7.1% over the same time period for OY OY 2005 is forecast to be a record setting Operating Year for total Airport enplaned passenger levels. 0 Source: Wayne County Airport Authority records Operating Year Total Enplaned Passengers: Although year-over-year total enplanements declined 3.7% in OY 2001 and 8.7% in OY 2002, total enplanment activity increased 2.3% annually between OY 1995 and OY The Airport continues to trend higher than national service recovery levels. In CY 2004, total passenger enplanements increased 7.6% over

116 Attachment Report of the Airport Consultant, SECTION III: ACTIVITY AND AIR SERVICE Wayne County Airport Authority, March 22, 2005 B-33 CY 2003 at the Airport while total enplanements increased 5.7% for the U.S. % CHANGE FROM PRECEEDING 12 MONTHS 10.0% 5.0% 0.0% -5.0% -10.0% -15.0% -20.0% Percent Change in Enplaned Passengers: Airport vs. U.S. (12 month Rolling Average) Jan Apr Jul Oct Jan Apr Jul Oct Jan Apr Jul Oct Jan Apr Jul Oct Airport Sources: Wayne County Airport Authority records, Air Transport Association Enplaned Passengers: Passenger activity at the Airport continues to trend higher than the U.S. Domestic Passenger Traffic Annual domestic enplanement activity growth at the Airport averaged 2.5% from OY 1995 to OY Since OY 2002, domestic enplanement activity averaged a 5.4% annual increase. OY 2004 domestic enplanements increased 6.7%, well above the 4.1% increase in OY OY 2004 domestic enplanements surpassed OY 2000 levels by 0.5%, setting an Airport record for domestic activity. (Prior to OY 2004, OY 2000 registered the highest level of domestic enplanements in the history of the Airport). U.S. Originating and Connecting Passengers In CY 2003, the Airport generated 6.3 million domestic originating passengers, accounting for 44.3% of total domestic passengers at the Airport. Similarly, this segment accounted for 5.1 million or 44.9% of total domestic passengers in the first nine months of CY After several years of decline, CY 2004 O&D enplaned passengers are forecast to reach 7.0 million, surpassing CY 2001 levels by 3.3%. From OY 2002 to OY 2004, O&D enplaned passenger activity averaged a 4.9% annual increase. From CY 1993 to CY 2003, O&D and connecting passengers averaged annual increases of 2.3% and 3.9%, respectively. Prior to CY 2001 and the impacts following the events of September 11, 2001, O&D and connecting passengers averaged annual increases of 6.3% and 5.1%, respectively (from CY 1993 to CY 2000). The percentage share of domestic passengers connecting at the Airport continued to increase from 50.6% in CY 1994 to 55.7% in CY 2003, driven by Northwest s increased commuter/regional service and more recently a decline in O&D passenger levels. Connecting passengers represented 55.1% of total domestic passengers in the first nine months of CY The Airport s connecting passenger segment did not experience the same percentage decline as the O&D market in recent years. Connecting passenger levels increased on average 1.1% per year between CY 2000 and CY 2003 versus a 6.3% decline in originating traffic for the same period. Between OY 2002 and OY 2004, annual connecting passenger activity increased 5.7% on average. On the national level, the Airport increased its share of total connecting passenger activity in the U.S. between CY 2000 and CY 2004 (see Northwest Hubbing Activity on page B-36). International Passenger Traffic Since OY 1995, the number of international passenger enplanements at the Airport increased every year except OY 1998, OY 2001 and

117 Attachment Report of the Airport Consultant, SECTION III: ACTIVITY AND AIR SERVICE Wayne County Airport Authority, March 22, 2005 B-34 Enplaned Passengers (000s) Share of O&D Enplaned Passengers 16,000 14,000 12,000 10,000 8,000 6,000 4,000 2, % 90% 80% 70% 60% 50% 40% 30% 20% 10% 0% Airport O&D and Connecting Enplaned Passengers E Calendar Year O&D Passengers Connecting Passengers Share of O&D Enplaned Passengers E Calendar Year Other Airlines Northwest & Affiliates Note: 2004E estimated based on three quarters of data Source: U.S. Department of Transportation Origin & Destination Passenger Ticket Survey, 29c Commuter Data, and Airport Activity Statistics of Certificated Route Air Carriers, Form 41, Schedule T100 OY 2002 from 1,308,600 in OY 1995 to 1,388,152 in OY 2004 an average rate of 0.7% per year. From OY 1995 to OY 2000, international enplaned passengers increased 7.6% on average per year. International enplaned passengers represented 10.6% of total enplaned passengers in OY 2000, the highest percentage share registered over the last ten operating years. In OY 1998, international passengers decreased by 8.3%, or 128,800 passengers, to 1,431,158 due primarily to the Asian financial crisis that affected traffic to Asian destinations, and a strike by Northwest pilots. The 4.8% decline in international traffic in OY 2001 and the 30.6% decline international traffic in OY 2002 were due to a combination of factors stemming from events of September 11, 2001, the economic recession, conflicts in the Middle East, concerns over Severe Acute Respiratory Syndrome (SARS) and concerns over possible future terrorist attacks. International enplaned passenger levels are recovering, increasing by 7.8% in OY 2003, and accounting for 8.3% of total enplanements at the Airport. In OY 2004, the international passenger segment increased an additional 3.2% over the prior operating year and accounted for 8.0% of total enplanements. International enplaned passenger activity averaged a 5.5% annual increase over the last two operating years (OY 2002 to OY 2004). International passengers are expected to continue to account for an increasing share of the total enplanements, largely because of the increasing use of the Airport by Northwest as a gateway for its international service. Based on the schedules in the OAG, international scheduled departures from the Airport are estimated to increase 12.4% in CY 2005 over the prior year. AIRLINE MARKET SHARE Northwest and its affiliates total market share at the Airport has increased from 75.1% in OY 1995 to 78.9% in OY 2004.

118 Attachment Report of the Airport Consultant, SECTION III: ACTIVITY AND AIR SERVICE Wayne County Airport Authority, March 22, 2005 B-35 Table 11 in the Supplemental Tables section provides a detailed domestic and international airline market share summary for the Airport. Spirit Airlines maintains the second largest market share at the Airport, accounting for 4.9% of total enplaned passengers in OY 2004, followed by Southwest with 2.6%. In CY 2004, the Airport served 155 nonstop destinations worldwide with Northwest and its affiliates offering services to 150 nonstop destinations from the Airport. Domestic Market Share Domestic traffic accounted for 92.0% of total enplaned passengers in OY Northwest and its affiliates represented 78.7% of the domestic market at the Airport in OY 2004; Spirit Airlines accounted for the second largest share of domestic enplanements at the Airport with a 5.4% share, followed by Southwest Airlines with a 2.8% share. Commuter and regional airlines have comprised the fastest growing segment of the domestic market, with enplanements increasing by an average of 15.7% per year from OY 1995 to OY Mesaba and Pinnacle have rapidly expanded service at the Airport, with the majority of their passengers connecting to Northwest mainline flights. Pinnacle s share of domestic enplaned passengers increased from 0.6% in OY 2001 to 7.5% in OY Pinnacle was the leading commuter and regional airline, accounting for 7.5% of domestic enplaned passengers at the Airport in OY Mesaba accounted for 6.1% of domestic enplanements in OY Several charter airlines provided service at the Airport in OY 2004, accounting for a total of 0.6% of domestic enplaned passengers, with USA 3000 and Champion Air accounting for 65,294 enplanements or 69.7% of the charter service. International Market Share The share of total enplanements accounted for by international passengers increased from 9.3% in OY 1995 to a high of 10.6% in CY 2000, down to 8.0% in OY Northwest and its affiliates are the principal carriers in this segment and accounted for 80.9% of international enplanements in OY Lufthansa was the second largest international air carrier accounting for 5.4% of total international traffic at the Airport in OY 2004, while British Airways was the third largest with 4.3%. In CY 2004, international enplanements at the Airport increased 8.8% from 1,307,901 in CY 2003 to 1,423,209, while international traffic at the national level increased 14.9% for the same period. AIRLINE AIRCRAFT DEPARTURES AND LOAD FACTORS Domestic airline aircraft departures at the Airport have generally followed the trend in passenger enplanements from CY 1995 to the present. From CY 1995 to CY 2004, scheduled nonstop departures at the Airport have grown at a rate of 2.0% per year, as Northwest and its affiliates increased service from the Airport at an annual rate of 2.3%. Scheduled nonstop departures by regional aircraft increased 52.1% annually between CY 1995 and CY 2004, while scheduled nonstop departures by mainline jet aircraft declined 0.5% for the same time period. Northwest and its affiliates share of scheduled nonstop departure at the Airport increased from 78.1% in CY 1995 to 80.3% in CY Domestic load factors at the Airport increased from 60.5% in CY 1994 to 66.9% in CY 2003 while Northwest increased its load factor from 60.4% to 68.6% for the same period. Domestic load factors for the Airport and Northwest increased in the first ten months of CY 2004 to 68.6% and 70.2%, respectively. Domestic load factors are not yet available for CY 2004.

119 Attachment Report of the Airport Consultant, SECTION III: ACTIVITY AND AIR SERVICE Wayne County Airport Authority, March 22, 2005 B-36 Top O&D Markets in CY 2003 DOMESTIC PASSENGER ORIGIN-DESTINATION PATTERNS AND CURRENT AIRLINE SERVICE Detroit Metropolitan Wayne County Airport, CY 2003 Rank O & D Between Detroit Air Miles from Detroit Percentage of Schedule Airline Passengers Primary Carrier % Market Share Secondary Carrier % Market Share 1 New York (a) % Northwest Airlines 67.0% Spirit Airlines 16.0% 2 Chicago/ IL (b) % Northwest Airlines 42.3% Southwest Airlines 23.9% 3 Los Angeles, CA (c) 1, % Northwest Airlines 51.0% Spirit Airlines 18.4% 4 Las Vegas, NV 1, % Northwest Airlines 47.3% Spirit Airlines 27.1% 5 Orlando, FL % Northwest Airlines 51.9% Spirit Airlines 34.4% 6 Florida South (d) 1, % Northwest Airlines 38.7% Spirit Airlines 38.6% 7 Atlanta, GA % Northwest Airlines 50.3% Delta Air Lines 45.7% 8 Tampa, FL % Northwest Airlines 45.4% Spirit Airlines 41.7% 9 Phoenix, AZ 1, % Northwest Airlines 47.4% America West Airlines 29.2% 10 San Francisco, CA (e) 2, % Northwest Airlines 50.4% United Airlines 16.1% 11 Denver, CO 1, % Northwest Airlines 37.8% United Airlines 29.9% 12 St. Louis, MO % Northwest Airlines 39.0% Southwest Airlines 32.2% 13 Fort Myers, FL 1, % Spirit Airlines 55.0% Northwest Airlines 37.9% 14 Washington, D.C % Northwest Airlines 92.9% Mixed Carriers 3.6% 15 Nashville, TN % Northwest Airlines 67.8% Southwest Airlines 28.3% 16 Dallas, TX (f) % American Airlines 50.0% Northwest Airlines 36.3% 17 Philadelphia, PA % Northwest Airlines 63.5% Mesaba Aviations 17.2% 18 Minneapolis, St. Paul, MN % Northwest Airlines 86.7% United Airlines 5.1% 19 Houston, TX (g) 1, % Continental Airlines 45.2% Northwest Airlines 29.1% 20 Boston, MA % Northwest Airlines 84.9% Mixed Carriers 8.4% Total for Cities Listed 66.6% Other Cities 33.4% All Cities 100.0% (a) Includes John F. Kennedy (JFK), LaGuardia (LGA), and Newark, NJ (EWR) Airports. (b) Includes Chicago O'Hare (ORD) and Midway (MDW) Airports (c) Includes Los Angeles International (LAX), Burbank (BUR), Ontario International (ONT), Santa Anna-Wayne (SNA), and Long Beach Municipal (LGB) Airports. Notes: (1) Totals may not add due to rounding. (2) Mixed Carriers reflect routes where more than one carrier is involved. (3) Boxed primary and secondary carriers indicate lower cost carriers Source: Department of Transportation, Orign & Destination Passenger Ticket Survey (d) Fort Lauderdale (FLL) Airport, and Miami International Airport (MIA) (e) Includes San Francisco International (SFO), Oakland International (OAK) and San Jose International (SJC) Airports. (f) Includes Dallas-Ft. Worth Airport (DFW) and Dallas Love Field (DAL). (g) Includes Houston Intercontinental (IAH) and Houston Hobby (HOU) DOMESTIC ORIGIN-DESTINATION PATTERNS AND AIRLINE SERVICE The table above presents the origins and destinations of domestic passenger markets accounting for at least 1.5% of total passengers in the period for the Airport in CY The top five markets New York, Chicago, Los Angeles, Las Vegas, and Orlando accounted for 29.9% of the Airport s passenger origins and destinations during CY The majority of the markets listed are medium- and long-haul destinations; 15 of the 20 markets are located more than 500 air miles from the Airport. The top 20 O&D markets represented 66.6% of total O&D domestic enplaned passengers at the Airport in CY The Airport benefits from significant low-fare air carrier presence, with 11 out of the top 15 O&D markets being served by such air carriers. With the addition of Frontier Airlines service from the Airport to Denver beginning May 8, 2005, 12 out of the top 15 O&D markets will be served by low-fare air carriers. NORTHWEST HUBBING ACTIVITY Northwest continues to develop the Airport as one of its connecting hubs. Since CY 1995, the Airport has retained the highest share of Northwest and its affiliates total scheduled systemwide nonstop departures with the Airport accounting for 21.3% of its systemwide departures in CY Northwest and its affiliates accounted for 80.3% of total Airport scheduled nonstop departures in CY The Airport, and Northwest in particular, have benefited from a connecting activity market share shift over the last four years which included the dehubbing of St. Louis and Pittsburgh airports. The Airport has gained over 600,000 in annual connecting enplaned passengers that were previously served from other hub airports. The market share shift is a combination of the dehubbing of certain airports and the effectiveness of Northwest s connecting operation at the McNamara Terminal. (See chart next page). Mesaba and Pinnacle expanded service at the Airport between CY 1995 and CY 2004, with nonstop departures increasing 8.7% annually. Since beginning service in CY 2001, Pinnacle has increased its scheduled nonstop departures at the Airport over 600%, from 5,762 to 48,823 in CY In CY 2004, the Airport represents the highest share of

120 Attachment Report of the Airport Consultant, SECTION III: ACTIVITY AND AIR SERVICE Wayne County Airport Authority, March 22, 2005 Pinnacle s systemwide scheduled nonstop departures (20.2%). As of March 1, 2005, Mesaba and Pinnacle served 88 non-stop destinations from the Airport. Destinations served by Mesaba and Pinnacle at the Airport have not only increased in number but also in reach. In CY 1995, the farthest destination served (by Mesaba) was 245 miles from the Airport (Ottawa, Canada); in CY 2004, the reach was expanded to 1,007 miles, a long-haul flight (by Pinnacle) from the Airport (Halifax, NS, Canada). The increasing reach of Northwest s affiliate operation extends the connecting activity catchment area of the Airport. (See chart below). Increased Commuter Reach Extends Connecting Activity Catchment Area 1995 Within 600 Miles of the Airport 43% of Total US Population 44% of Total US Households 49% of Total US Employment 45% of US Effective Buying Income B-37 Market Share Shift --US Connecting Traffic 3.00% 2.00% 1.00% 0.00% -1.00% -2.00% -5.00% -3.00% Hub Airport Market Share Shift: US Connecting Traffic (Q1-Q3/2000 to Q1-Q3/2004) Gaining Share ORD ATL DEN MSP DTW CLT PHX DFW CVG PHL MEM DTW Benefit = 616,000 Enplanements Note: No share change: SFO. Source: U.S. Department of Transportation, Origin & Destination Passenger Ticket Survey Losing Share SLC MIA PIT STL % of Fortune 500 US Headquarters 600 Mile Radius from Airport Maximum Reach Commuter Destinations INTERNATIONAL SERVICE As of January 1, 2005, two U.S. certificated airlines (Northwest and Mesaba) and three foreign flag airlines (British Airways, Lufthansa and Royal Jordanian) provide scheduled nonstop international passenger service at the Airport. Scheduled nonstop international service at the Airport in CY 2004 included nonstop flights between Detroit and seven cities in Europe, three cities in the Pacific Rim, ten cities in Canada and seven cities in Mexico/Central America/Caribbean. In CY 2004, the airlines serving the Airport scheduled an estimated 14,499 nonstop departures to international destinations, an average of 279 per week 1.5 times the number of international departures performed in CY 1995 when there were 10,478 international departures.

121 Attachment Report of the Airport Consultant, SECTION III: ACTIVITY AND AIR SERVICE Wayne County Airport Authority, March 22, 2005 B-38 AIR CARGO SERVICE Currently, two all-cargo airlines, Federal Express and United Parcel Service, provide regular service at the Airport. The total volume of cargo, which includes belly cargo carried by passenger airlines, decreased from 174,367 tons in OY 1995 to 102,405 tons in OY 2004 as the federal government imposed restrictions on air cargo transport over concerns of security and possible terrorist acts. Volume of cargo reached a peak of 177,174 tons in OY 1996 but has since averaged a 5.7% annual decline. The share of cargo that is freight and express (as opposed to mail cargo) has increased from 68.0% of cargo volume in OY 1995 to 95.8% in OY From OY 1996 to OY 2004, freight and express and mail cargo decreased at an average annual rate of 2.7% and 27.2% per year, respectively. AIRCRAFT OPERATIONS AND LANDED WEIGHT Aircraft Operations Total aircraft operations have increased from 505,939 in OY 1995 to 514,660 in OY 2004, and despite declines in OY 1998, 2001 and 2002, total operations (air carrier, air taxi and commuter, general aviation, and military) at the Airport have increased an average of 0.2% per year between OY 1995 and OY Air carrier operations declined at an average of 0.2% per year, from 335,000 in OY 1995 to 327,682 in OY Commuter operations increased from 96,293 in OY 1995 to an annual high of 167,661 in OY 2001, an average increase of 9.7% per year. General aviation operations declined from 73,164 in OY 1995 to 15,526 in OY 2004, an average decrease of 15.8% per year. Military aircraft operations ranging from 184 to 1,612 annually declined 20.7% annually between OY 1995 and OY Aircraft Landed Weight Total aircraft landed weight increased 3.3% in OY 2004 over OY 2003 levels. In OY 2004, U.S. passenger airlines accounted for 96.0% of the total aircraft landed weight at the Airport; foreign-flag airlines (both signatory and non-signatory) accounted for 1.3%; and the all-cargo airlines accounted for the remaining 2.7%. In OY 1995, U.S. passenger airlines represented 95.7% of the total aircraft landed weight; foreign-flag carriers and all-cargo carriers, represented 2.0% and 2.3%, respectively. Total landed weight at the Airport increased 3.6% in the first three months of OY 2005 when compared to the same period in OY Northwest and its affiliates experienced an increase of 5.9% in landed weight compared to the same period in OY CONCLUSION Recently, passenger traffic at the Airport has rebounded faster than the U.S. as a whole, led by a strong recovery in the connecting passenger segment. The underlying strength of the O&D passenger traffic provides a significant base for the continued operation of the Airport absent any connecting traffic segment. The O&D passenger segment rebounded over the last two Operating Years, and is forecast to surpass pre- September 11, 2001 levels in OY The more rapid growth in connecting passenger activity has made the O&D passenger trends appear to be decreases, while, in fact, certain O&D carriers, such as Spirit have shown significant growth in the past two years. The faster growth in connecting passenger activity was expected as Northwest was able to make better use of the McNamara Terminal as a connecting passenger hub in Northwest's network. While Northwest and its affiliates served 78.9% of total enplaned passengers at the Airport in OY 2004, significant low-fare air carrier

122 Attachment Report of the Airport Consultant, SECTION III: ACTIVITY AND AIR SERVICE Wayne County Airport Authority, March 22, 2005 presence exists. Low-fare air carriers represented 9.3% of total domestic enplaned passengers in OY Spirit was the leading low-fare air carrier serving the Airport with presence in seven of the top twenty O&D markets (New York, Orlando, Las Vegas, Los Angeles, South Florida, Ft. Meyers and Tampa). B-39

123 Attachment Report of the Airport Consultant, SECTION IV: KEY FACTORS RELATED TO THE FORECAST Wayne County Airport Authority, March 22, 2005 B-40 OVERVIEW Airline passenger traffic both globally and nationwide has historically been correlated with prevailing economic conditions such as Gross Domestic Product (GDP) growth and increases in real disposable income levels. Global events and a stagnant economy over the past few years negatively affected the demand for air travel. The relatively strong position of the existing network air carrier (Northwest) as compared to other network air carriers and Northwest's commitment to the Airport, demonstrated by its long term agreement and continued expansion, will position the Airport favorably as the demand for air traffic rebounds. The Airport and Northwest also are positioned to respond to the current trend of "down-gauging" aircraft, to permit more frequent operations with smaller aircraft to more distant markets to serve the network. The Airport has a significant presence of low cost/low fare carriers which provide service in 11 out of the top 20 O&D markets. Competitive air service is also provided by other network air carriers primarily through their respective hubs. The new planned passenger terminal (the North Terminal) will provide facilities for all these carriers comparable to Northwest's passenger terminal facilities (the McNamara Terminal). The McNamara Terminal is one of the most cost effective and efficient (from an airline operations perspective), and convenient (from a passenger s perspective) for domestic to international flight connections, which further positions the Airport to achieve an increasing market share of international passenger traffic. International gateways are moving from traditional, coastal locations (e.g. New York-Kennedy, San Francisco, etc.) as more of an individual airline s respective hubs serve that role (e.g. the Airport, Atlanta, etc.). Previously, in the Airport Service Region section, one of the Key Factors (the population and economy of the Region) was discussed. The Key Factors section which follows contains information on the following: national/international economic and political conditions; global events (e.g. wars, terrorism, health concerns); airfares, yields, and load factors; airline economics; airline financial performance; airline competition, airline service and route networks; the Airport's strategic assets; and air travel security. NATIONAL/INTERNATIONAL ECONOMIC AND POLITICAL CONDITIONS Global Events In recent years, international economics, currency exchange rates, trade balances, political relationships and conflicts within and among foreign countries have become increasingly important influences on passenger traffic at major U.S. airports. Economic downturns in some foreign countries contributed to the slowing of growth in international air travel in the early 1990s, particularly on transatlantic routes and those routes impacted by the Persian Gulf War. The Asian financial crisis of CY 1997/1998 also highlights the global nature of the airline industry and the impact it can have on the Airport, as international traffic was affected by the crisis. A similar pattern of slowdown in international travel to the Asia/Pacfic region was experienced in CY due to economic recession and concerns over health issues (i.e., SARS). As witnessed in CY 1998 and over the last two years, the Airport is exposed to potential fluctuations in international passenger levels due to local and national socio-international economic events. In OY 2004, international enplaned passengers represented 8.0% of total enplaned passengers at the Airport, down from an 8.3% share in OY The Airport s primary hubbing carrier, Northwest, operates approximately 40% of its systemwide capacity on international routes, with the Airport representing one of Northwest s largest international gateways. The majority of international routes served from the Airport are to points in Canada, the Asia/Pacific region and to Europe. National Events In early CY 2001, the U.S. economy entered a recessionary period, as measured by declines in employment, business spending and production, slowing down demand for air travel even before the events of September 11, For the most part, early CY 2001 consumer spending kept the economy growing, counteracting a slowdown in the manufacturing sector and business spending. Responding to the economic downturn that began in late CY 2000, the September 11, 2001 terrorist attacks and a series of corporate governance scandals, the Federal Reserve reduced the federal funds

124 Attachment Report of the Airport Consultant, SECTION IV: KEY FACTORS RELATED TO THE FORECAST Wayne County Airport Authority, March 22, 2005 B-41 US Enplaned Passengers (000s) rate twelve times from 6.0% (January 2001) to 1.0% (June 2003), a 46- year low, with a focus on stimulating economic growth. As the economy begins to recover, the Federal Reserve is raising the federal funds rate (which as of March 1, 2005 is 2.50%). Despite the uncertainty relating to the continuing conflict in Iraq and high energy costs, real GDP is expected to increase by about 3.5% in CY In the third quarter of CY 2004, real GDP increased at an annual rate of 4.0%, following a second quarter increase of 3.3%. While economists believe that the economy is continuing on a more gradual pace of economic growth, the latest report showed less strength in the labor market. The seasonally adjusted unemployment rate remained unchanged at 5.4% in December Real consumer spending which accounts for over two-thirds of the U.S. economy increased 1.2% in December 2004, up 8.7% from December Total sales for the year increased 8.0% over CY , , , , , , , ,000 0 U.S. Economic Output and Enplaned Passenger Activity Enplaned Passengers Real GDP Output $12,000 $10,000 $8,000 $6,000 $4,000 $2,000 $0 U.S. Real GDP Impacts to the Airline Industry While air travel has rebounded since the September 11, 2001 terrorist attacks, the lingering threat of further attacks combined with increasing fuel prices, a soft economy and the rise of discount airlines created new challenges for the legacy airlines, which lost $21 billion between CY 2001 and CY 2003, inclusive. US Airways 5 filed for its second Chapter 11 bankruptcy in two years. United Airlines is also in bankruptcy. Other airlines (such as National) have shut down and liquidated operations. Airlines continue to seek concessions from employees, lenders and suppliers. Airports were significantly affected by the events of September 11, 2001 with increased security costs as well as a decline in passenger traffic. While the federal government reimbursed some security costs, airport operators raised fees for airlines, rental-car companies and other tenants, and at the same time reduced costs by refinancing debt to take advantage of prevailing low interest rates. Initial court petitions of three airlines now operating in bankruptcy protection United Airlines, US Airways and ATA Airlines showed airports among their top creditors; these airlines collectively owed more than $51 million to airport operators, mostly for landing fees and space rental. However, even airports with a large percentage of United and US Airways flights (such as Pittsburgh International and San Francisco International) maintain adequate financial margins and remain current on debt payments 6. Across the industry, the only large carrier making money consistently is Southwest Airlines, which recorded a $442 million profit in CY In comparison, Northwest reported a loss of $848 million; Continental Airlines reported a loss of $363 million; American Airlines reported a loss of $761 million; Delta Air Lines reported a loss of $5.2 billion for CY 2004; United Airlines reported a loss of $1.6 billion; and US Airways $611 million. Note: Estimated 2004 enplaned passenger data. Source: U.S. Department of Commerce, Air Transport Association Impacts of economy on aviation activity. Total U.S. airport enplaned passenger activity has tracked closely to GDP output. To improve their financial situation, many airlines cut costs by reducing labor expenditures and by decreasing capacity, using smaller aircraft, or eliminating services to some communities. In CY 2004, the 5 US Airways emerged from bankruptcy on March 31, 2003 but re-entered into bankruptcy proceeding on September 12, Fitch IBCA as reported in USA Today, December 6, 2004.

125 Attachment Report of the Airport Consultant, SECTION IV: KEY FACTORS RELATED TO THE FORECAST Wayne County Airport Authority, March 22, 2005 industry operated at capacity (as measured by available seat miles) 5.3% below pre-september 11, 2001 levels. The aviation industry historically has shown long-term historical growth of air travel (annual average increase of 3.6% over the last 30 years between CY 1975 and CY 2004), as measured by revenue enplanements, albeit with periods of decline caused in part by external events. In CY 2004, total revenue enplanements in the industry increased 5.7% year-over-year. However, according to the Air Transport Association, total revenue enplanements in CY 2004 were still 8.9% below record high CY 2000 levels. aircraft seat capacity, fare discounting (primarily for the leisure travel market) to maintain or gain passenger market share, and the growth in low cost carriers have all contributed to a wide range of airfares being available in various markets and a significant downward pressure on average airfares. The internet and the increasing use of this medium by passengers to search for discounted fares. This has resulted in airlines reducing channel distribution costs (i.e., commissions paid to travel agents), and increasing availability of lower airfares. Airline Yield B-42 AIRFARES YIELDS, AND LOAD FACTORS Airfares The price elasticity of demand for air travel the reaction of consumers to changes in prices is directly related to the type of travel being considered. In general, business travelers are much less price sensitive compared to leisure travelers, creating a critical factor for airlines in setting airfares, which consequently impacts yields and load factors. Airlines began reducing airfares in an effort to increase passenger traffic as travel declined in response to the economic slowdown and the external events affecting the industry. However, reduced airfares have reduced yields and, in part, have kept airlines unprofitable during the post September 11, 2001 aviation environment. Airfares are influenced by many factors, including the following: Airline operating economics including operating costs, debt burden, capacity, yield management and service levels. Airline passenger demand, particularly for relatively short trips where automobile or other travel modes are potentially attractive alternatives. This is especially true for price-sensitive discretionary vacation travel. Competition among airlines since the deregulation of the airline industry in This structural change has led to pressure on the airlines to reduce operating costs. Airlines since developed "hub-andspoke" route networks as a means of increasing service frequencies, passenger volume and profitability. These factors, as well as more sophisticated techniques of matching passenger demand to available Airline Yield (Cents Per Revenue Passenger Mile) One of the most common measures of performance trends in airline operating economics is airline yield, which represents passenger revenue per revenue-passenger-mile (RPM) (expressed in cents per mile). Large air carriers use sophisticated yield management systems to monitor ticket sales, and use this information to adjust availability of various fare classes on flights as required to maximize yield, and hence maximize revenues Average Airline Yield: Airport vs U.S Note: 2004 data through October. Source: DOT T100 data, Reed & Associates analysis Airport US Airline Yield (Cents Per Revenue Passenger Mile) Average Airline Yield: NW at Airport vs NW Systemwide NW at Airport NW Systemwide

126 Attachment Report of the Airport Consultant, SECTION IV: KEY FACTORS RELATED TO THE FORECAST Wayne County Airport Authority, March 22, 2005 B-43 Although business (first-class and full-fare coach) and leisure traffic improved since the September 11, 2001 terrorist attacks, both remained consistently low in CY Reduced airfares have reduced airline yields in the last few years due to the competitive pricing environment. Yield for the industry in CY 2003 and for the first nine months of CY 2004 was 13.6 cents per mile. Yield at the Airport and Minneapolis was 16.7, and 18.5 cents per mile, respectively. With the exception of CY 2000 and CY 2001, Northwest s yield at Minneapolis was consistently higher than its yield at the Airport. In CY 2003, the airline s yield at Minneapolis was 21.1 cents per mile, compared to 19.7 cents per mile at the Airport. Northwest s average annual yield at the Airport over the last ten years continues to surpass its systemwide yield for the same period. Load Factors Load factor is another measure of airline performance the ratio of flown revenue seat miles to total available seat miles (ASM). Although service cuts have helped increase passenger load factors, the break even load factor has risen, due in part to declining airfares and higher fuel costs. Recent industry load factors trended higher in CY 2004 with systemwide load factor for U.S. airlines reaching 76.3%, which represents an increase of 2.1 points over CY Northwest s systemwide load factor for December 2004 was 78.2%, 0.1 point above December 2003, on 6.2 billion revenue passenger miles. Since CY 1994, Northwest's load factors at the Airport have been higher than the Airport average; in CY 2003 the load factor for Northwest was 68.9% while it was 67.0% for the Airport. Northwest s load factor at Minneapolis was 69.5%, slightly higher than at the Airport (Northwest systemwide load factor was 68.8%). Full year 2004 data is not yet available. AIRLINE ECONOMICS Operating costs have become a focus of the airline industry, with continuing efforts to reduce all types of operating costs and to try different "business models" to make the delivery of air travel services more efficient. The most significant operating costs for airlines are labor and fuel. Other operating costs include: fleet, maintenance, passenger food, commissions, airport rentals and landing fees, communication, insurance and advertising (the major costs are discussed below). Other airline costs include federal taxes and financing of aircraft acquisitions. Labor Costs Employee salaries, wages, and benefits represent an airline's most significant cost, averaging about one-third of total operating expenses. In CY 2003, labor cost accounted for 41.9% of total operating expenses for Northwest; the industry average for CY 2003 was 34.2% In some cases, labor unions at certain airlines have agreed to concessions on work rules and wages, sometimes in exchange for equity positions and future guarantees, in order to help the airlines cope with rising costs. On November 5, 2004 Northwest ratified a two-year contract with its pilots (the Air Line Pilot Association (ALPA)).The agreement includes $300 million in annual labor cost savings from the pilots and salaried workers, with pilots contributing $265 million in annual wage, benefit and other contract changes, and salaried and management employees taking $35 million in annual salary and benefit reductions. ALPA is in talks with Northwest regarding the freezing of the airline s existing defined benefit pension plan and starting a new companyfunded defined contribution plan, as well as a company-funded disability plan. If the airline agrees, it could help Northwest reach its goal of cutting annual labor costs by $950 million. Northwest in the past has advocated freezing under funded defined benefit plans and replacing them with defined contribution plans. At the end of CY 2003, Northwest's pension plans were under funded by $3.8 billion. The airline has yet to file its CY 2004 annual report. Northwest is in contract talks with three unions that represent flight attendants, mechanics and ground workers. In general, labor relations will continue to be a key factor affecting the operating costs and competitiveness of individual airlines (see Airline Financial Performance section).

127 Attachment Report of the Airport Consultant, SECTION IV: KEY FACTORS RELATED TO THE FORECAST Wayne County Airport Authority, March 22, 2005 B-44 Aviation Fuel Availability and Price The price of fuel is a major driver of airline operating costs, profitability and fares. In CY 2004, fuel expense comprised 18.7% of Northwest's operating costs (compared to 11.2% in CY 2003). The Organization of Petroleum Exporting Countries (OPEC), which produces 40% of the world's crude oil and controls 75% of the reserves, has historically had significant influence on oil prices. OPEC's influence depends on the individual needs of its member states, their willingness to limit production, sources of non-opec energy and the level of economic activity in consuming countries. These factors vary, in sometimes unpredictable ways, making the price of aviation fuel a source of industry volatility. In CY 2004, the average price of crude oil increased 33.1% to $41.44 per barrel. Fuel prices increased 35.1% year-over-year to $1.15 per gallon in CY 2004, a record high for the past two decades. Citing rising fuel costs as a contributing factor, ATA Airlines (a low cost carrier and the nation s tenth largest carrier), filed for bankruptcy protection on October 18, In CY 2004, U.S. carriers spent $6.2 billion more for jet fuel, an increase of 41.1% over CY Several major airlines have increased fares by as much as $20 each way to offset the soaring cost of jet fuel. The latest (March 11, 2005) fare increase was initiated by Northwest and was matched by many of its competitors, including American, America West, Continental, Delta Air Lines and Air Canada. Northwest raised most domestic fares and airfares to Canada by $5 each way for flights shorter than 1,000 miles, and by $10 each way for longer flights. Citing high fuel costs, Southwest Airlines also raised its fares by $1 to $3 one-way in most markets. Fleet While the number of flight operations in the U.S. continues to recover to pre-september 11, 2001 levels, the average size of aircraft being flown declined due to the rapid introduction of regional jets and the retirement of larger aircraft a trend that is expected to continue. Northwest has plans to acquire 52 new aircraft including the Airbus A , and Airbus A319 over the next five years. Most of these new aircraft deliveries are replacements for older and less efficient aircraft and will provide favorable economics upon entry into service. According to Northwest, 129 new regional jets will be added to the fleet by 2005, improving traffic feed from smaller cities in Northwest's system to its three domestic hubs. Many of these smaller regional jets will be operating from expanded Concourses B and C in the McNamara Terminal, one of the 2005 Projects. Northwest announced on March 16, 2005 plans to reduce its fleet by parking 30 planes, mostly DC-9s, and closing a heavy maintenance line in Minneapolis that services these older planes. The DC-9s have an average age of 33.8 years old. Because most DC-9s are owned, Northwest indicated it can realize a net savings by removing these aircraft from unprofitable routes. While mainline capacity will be flat this year compared to 2004, Northwest projects capacity for regional carriers will increase by 32% to 34%. Northwest is taking delivery of 22 regional jets in CY 2005 for Pinnacle and by September 2005, Pinnacle will have 139 Canadair Regional Jets in its fleet. FEDERAL GOVERNANCE AND OVERSIGHT Federal Taxes and Aviation Legislation Since 1941, airlines have been charged a tax on all tickets by the Federal government with the revenues from the Federal ticket tax being used to support and maintain the FAA and fund the Airport Improvement Program (AIP). Domestic airfares are currently charged a $3.00 per segment fee and a flat 7.5% tax on the price of the ticket. These fees are in addition to the security surcharge (see next section) and up to $4.50 in PFCs that an airport operator may impose. (The Authority currently collects a PFC at the $4.50 level.) Airlines also pay federal tax on aviation fuel currently about 4.3 cents per gallon (not deposited into the Trust Fund) authorized periodically by the U.S. Congress. Vision 100-The Century of Aviaton Reauthorization (H.R. 2115) signed into law on December 13, 2003, includes approximately $60 billion for safety, security and other aviation improvements over a four-year period. The FAA reauthorization bill includes $3.4 billion for the Airport Improvement Program in fiscal year 2004 to $3.7 billion by

128 Attachment Report of the Airport Consultant, SECTION IV: KEY FACTORS RELATED TO THE FORECAST Wayne County Airport Authority, March 22, 2005 B-45 fiscal year The legislation reimburses airports for their increased security costs by including funding to install Explosive Detection Systems (EDS). It authorizes a total of $500 million a year to pay for EDS installation and other capital security projects at airports and reduces the local match that large airports are required to pay from 25% to 10%. Security On November 19, 2001 the President signed into law the Aviation and Transportation Security Act, which among other things established a new Transportation Security Administration (TSA) within the Department of Transportation (DOT). (The TSA was subsequently moved to the Department of Homeland Security, created by the Homeland Security Act of 2002 signed into law on November 25, 2002.) TSA has been collecting a passenger security service fee from the traveling public at $2.50 per departure or connection, not to exceed $5.00 per one-way trip. Recently, the Bush administration s fiscal year 2006 budget proposed a $3 increase in the per-segment security fee, raising it to $5.50, with a cap of $8. This change is estimated to raise an additional $1.5 billion and is awaiting approval by Congress. According to Northwest, this proposal to increase security fees on airline tickets could cost the airline up to $150 million a year. On October 18, 2004, the President signed the Department of Homeland Security funding legislation for fiscal year 2005, which includes $295 million for EDS installation. Overall budget constraints forced lawmakers to scale back the federal match at existing LOI airports from 90% as is required by current law at large and medium hub airports to 75%. The measure includes $180 million for EDS/ETD purchases, $30 million of which is for next generation EDS. The bill also includes a permanent general provision requiring TSA to pay for space in airports outside of necessary security checkpoints. The bill provides $123.5 million for the reconfiguration of airport checkpoints to expedite the flow of travelers; purchase, installation, and maintenance of checkpoint equipment; and electronic surveillance of checkpoints. The security checkpoint requirements and the impact of the Homeland Security Advisory System on airport operations significantly increase the inconvenience and delays at many airports, including the Airport. The Authority plans to deploy in-line EDS machines in the McNamara Terminal once the Authority s share of federal funding is provided. For the new North Terminal, in-line EDS machines will be incorporated into the facility design to maximize efficiency and to provide for the least amount of disruption to passengers. Until such systems are implemented, the Authority will remain compliant with TSA baggage screening requirements through its current operation of manual screening of checked baggage. In both the McNamara Terminal and Smith Terminal, EDS machines have been located behind airline ticketing counters to facilitate screening operations and minimize disruption to public circulation areas. Air Traffic Control and Airport Systems The current capacity benchmark at the Airport is flights per hour in optimum Visual Flight Rule (VFR) conditions and falls to flights (or fewer) per hour in adverse Instrument Flight Rule (IFR) conditions, which may include poor visibility, unfavorable winds, or heavy precipitation. When weather (low ceilings and/or reduced visibility) requires the use of IFR as opposed to VFR, where the pilots may assist in their separation from other aircraft an airport's capacity may be reduced because of the increases in required separation between aircraft. When weather requires IFR, aircraft may be unable to use certain runways due to the lack of instrument landing systems or inadequate spacing from other runways. An individual airport's capacity may be stretched when one or more airlines choose to operate a hub from an airfield as large numbers of aircraft are scheduled to either land or takeoff at virtually the same time the existing weather conditions and the runways available then determine the capacity of a hub airport at a given moment. Arrivals are scheduled in "banks" which allows more runways to be dedicated to either arrivals or departures depending on the airline's

129 Attachment Report of the Airport Consultant, SECTION IV: KEY FACTORS RELATED TO THE FORECAST Wayne County Airport Authority, March 22, 2005 schedule (Local airport environmental restrictions can play a major part in capacity using this approach.) Accurate prediction of severe weather (wind shear, microbursts and aircraft produced wake vortices) that may influence airport closures is also a high priority to increasing capacity with extensive research currently underway in these areas. The FAA is currently implementing a far-reaching Capital Investment Plan intended to automate and enhance the computer, radar, and communications equipment of the Air Traffic Control (ATC) system and provide needed additional capacity. several other legacy carriers have been negotiating concession packages with their labor groups to stay competitive. AIRLINE COMPETITION Airfares, and the related impact on travel demand, are often determined by price and service competition among airlines attempting to stimulate passenger traffic or increase their share of traffic in particular O&D markets. Competition has increased with airline consolidation, global airline alliances, international aviation liberalization and the increased service offerings by low-fare carriers. B-46 AIRLINE FINANCIAL PERFORMANCE Due to their strong market positions, airport operators have demonstrated financial stability even when the airline industry has performed poorly. Despite the large number of airline bankruptcies and mounting losses in the airline industry, airport owners have not defaulted on payments on bonds issued and secured by revenues generated from airport operations. However, as witnessed recently at several airports around the country the financial strength of an airport s dominant or hubbing air carrier is becoming increasingly important in assessing the financial and operating risk of the airport owner. Delta Air Lines announced changes to its fare structure in January 2005, cutting its domestic fares by up to 50%, prompting possible industry-wide fare reductions which could cost airlines $3 billion annually 7 in lost revenue. Delta Air Lines is capping one-way domestic economy fares at $499 and one-way first-class fares at $599 in an effort to compete with low-cost carriers. US Airways and Northwest have matched Delta's reduced fares in some markets. Of all the traditional legacy carriers serving the Airport, Northwest ranked first in passenger share in 17 of the Airport s top 20 domestic O&D city-pairs in CY The airline industry s losses in CY 2001 and CY 2002 alone exceeded the entire cumulative net profit of the industry as measured from In CY 2004, American Airlines, Continental Airlines, Delta Air Lines, Northwest, United Airlines, and US Airways collectively lost $9.4 billion. United Airlines third and final application for a government loan guarantee totaling $1.1 billion (down from $1.6 billion as requested in its second application) under the Transportation Safety and System Stabilization Act was rejected by the federal board in June Southwest Airlines has been the only major carrier to remain profitable, reporting a net income of $511.1 million in CY 2001, $240.9 million in CY 2002, $442 million in CY 2003, and $442 million in CY Larger airlines have been restructuring to cut costs. US Airways, United Airlines and ATA Holdings Corp. are in bankruptcy, while Airline Consolidation Between the 1978 economic deregulation of the airline industry and 1986, the number of major and national passenger airlines operating in the U. S. increased from 17 to 31. Since 1986, the number of these airlines has decreased to 21 (in CY 2004) as a result of mergers and business failures. For example, American s acquisition of TWA has increased the airline s share of total ASMs by 1%, making the combined airline the largest in terms of revenue passengers and seat capacity. Though mergers can foster competition, the merger between United Airlines and US Airways proposed in CY 2000 was abandoned on July 27, 2001, after the Justice Department announced that it would not approve the acquisition. 7 Source: Merrill Lynch as reported through Reuters January 5, 2005

130 Attachment Report of the Airport Consultant, SECTION IV: KEY FACTORS RELATED TO THE FORECAST Wayne County Airport Authority, March 22, 2005 B-47 Northwest s share of total U.S. domestic ASMs has remained consistent since CY 1994, averaging about 6.3% of total domestic ASMs in the U.S. Northwest announced on March 14, 2005 that it is eliminating a planned increase in domestic ASMs for CY 2005, citing high fuel costs, fare competition and a general oversupply of seats. Northwest expects domestic capacity to be flat with CY 2004 levels. Global Airline Alliances In addition to consolidation within the U.S. airline industry, the last decade has seen a number of major U.S. airlines entering into commercial alliances with both domestic and foreign flag airlines in order to create global air transportation networks. Alliances involve various commercial links between the carriers, including code sharing, cooperative scheduling at gateway airports, joint fares, and integrated frequent flyer programs. These alliances offer passengers a seamless travel experience while attracting them to specific airports within the alliance network. Many major U.S. airlines have also formed alliances to improve the number of total connections available at their hub airport, expanding the network of available flights without significant investment requirements. For example, the alliance between Northwest and Continental has increased the number of domestic flights arriving in time to connect to Northwest's international departures at the Airport. Northwest and Continental have agreed to an extension of their marketing agreement through In January 2003, the agreement was expanded to include Delta Air Lines. The marketing agreement between Northwest, Continental, and Delta allows the airlines to sell seats on each other s planes, which would allow the airlines to extend their market catchment without having to make capital investments. In September 15, 2004, Northwest, Continental, and KLM joined the SkyTeam alliance. SkyTeam serves 341 million passengers with 14,320 daily departures to 658 global destinations in more than 130 countries. Air France, a member of the SkyTeam alliance, will begin daily nonstop departures from the Airport to Paris, France on June 13, This new service is anticipated to offer opportunities for increased cooperation between Air France and Northwest, which also serves Paris. Northwest, Air France and seven other SkyTeam members filed for joint antitrust immunity with the U.S. DOT in September The application is still pending. By increasing the number and frequency of domestic flights, airlines can get passengers to international connections with less layover time thereby decreasing total elapsed travel time. As global alliances are becoming the rule rather than the exception, many major airlines are increasing their alliance memberships in aims of establishing a network that covers all major destinations worldwide. Since receiving DOT approval in 1993, the Northwest/KLM alliance has been crucial in the development of the Airport as a hub for Northwest's international traffic, by boosting the U.S.-Europe traffic out of the Airport. Not only does the alliance help Northwest operationally at the Airport, it also can create a competitive advantage for the Airport by attracting passengers with more convenient flights and reduced total travel time. In addition to providing service to Europe, the Airport is currently one of the major U.S. international gateways to the Pacific region. Scheduled nonstop departures to Asia/Pacific destinations represented 9.4% of total international nonstop departures from the Airport in CY In November 2000, DOT granted antitrust immunity to the alliance between Malaysia Airlines and Northwest Airlines, the first alliance between an U.S. and Asian carrier to enjoy antitrust immunity. Malaysia Airlines is a leading carrier serving Southeast Asia. International Aviation Liberalization Multinational alliances are providing improved and more competitive services in thousands of markets as international traffic is influenced by bilateral and Open Skies agreements. Air services between countries are governed primarily by governmentto-government bilateral agreements with most of these agreements imposing significant restrictions on airline operations by limiting the destinations airlines can serve, the services they can provide and the prices they can charge.

131 Attachment Report of the Airport Consultant, SECTION IV: KEY FACTORS RELATED TO THE FORECAST Wayne County Airport Authority, March 22, 2005 B-48 Unlike bilateral agreements, Open Skies agreements are central to the future of global competition because they replace government bilateral regulations with market-based aviation regimes. Open Skies agreements undo all of the restrictions imposed by bilateral agreements by permitting unrestricted air service by the airlines of both countries between and beyond the other's territory, eliminating rules on how often carriers can fly, the kind of aircraft they use and the prices they can charge. Open Skies agreements now cover one-third of all passengers traveling between the U.S. and foreign destinations as the U.S. has negotiated 65 Open Skies agreements with partners in Africa, Asia and the Pacific, Europe, Latin America and the Caribbean and the Middle East. Overall, the proliferation of bilateral and Open Skies agreements has led to a broad international service offering from the Airport with the most prominent service being to major hubs in another geographical region (London, Frankfurt, or Amsterdam), although there has been an increase in point-to-point service lately, especially to leisure destinations in Mexico, Central America and the Caribbean. Specifically, the "open-skies" bilateral aviation treaty signed between the U.S. and the Netherlands in September 1992, authorized the airlines of each country to provide international air transportation between any U.S.-Netherlands city pair and to operate connecting service to destinations in other countries, which consequently resulted in the DOT granting Northwest and KLM certain antitrust immunity in January The U.S.-Canada Aviation Agreement signed in February 1995 and the 1998 amendment to the U.S.-Japan aviation agreement have had a positive effect for the Airport as well. Scheduled non-stop flights to destinations in Canada represented 62.1% of total scheduled nonstop international departures from the Airport in CY The U.S.-Japan aviation agreement is also important to the Airport, since it increases Northwest's flexibility and freedom to expand service to Asia, but also potentially increases the competition in this sector. The modified U.S.-Japan bilateral aviation agreement signed on March 14, 1998, which removed all restrictions on U.S.-Japan services provided by "incumbent" carriers (Northwest, United, and Federal Express), and allows them to operate beyond Japan (so called Fifth Freedom rights) to other Asian destinations, made it possible for Northwest to link two of its primary international hubs the Airport and Osaka with flights beyond Japan to destinations in Philippines, Korea, Taiwan, Thailand, Singapore, Malaysia, Northern Mariana Islands, and China, including Hong Kong. Emergence of Low-Cost Airline Competition Since 1990, numerous new airlines have begun scheduled low fare operations in the U.S., some of which have been successful while others have since ceased operating and/or been acquired by larger carriers. In certain markets, the expansion of service by these airlines has resulted in fare competition and lower fares, which has proved beneficial to the traveling public. As airline traffic growth slowed during the late 1980s and early 1990s, the major airlines experienced increasing competition from low-cost airlines, including established airlines such as Southwest and America West, new entrant airlines operating large jet aircraft (e.g. AirTran and JetBlue), and regional airlines operating smaller turboprop aircraft (and more recently, regional jets). Other major airlines have recently created "airlines within airlines", such as Delta Air Lines' "Song, and United Airlines Ted. In recent years, many major carriers have significantly reduced ticket prices (and increased capacity) in their local hub markets following the entry of low-cost air carrier services in certain hub markets. Concerned about unfair competitive practices, the DOT responded by proposing an enforcement policy, whereby sanctions would be imposed on major carriers who might defend their hubs against new low fare carriers by lowering their fares and/or increasing capacity in those markets significantly. DOT required (under the recently expired Air-21 bill) certain airports applying for PFCs to submit a Competition Plan, which addresses among other things the issue of low fare carrier presence at the airport. The FAA approved the Airport's initial Competition Plan, and updates in 2001 and The Authority is not required to file additional updates to its Competition Plan unless the Authority revises its Airline Agreements, which the Authority is in the process of doing and, therefore, will submit an updated Competition Plan.

132 Attachment Report of the Airport Consultant, SECTION IV: KEY FACTORS RELATED TO THE FORECAST Wayne County Airport Authority, March 22, 2005 Current Low-Fare Air Carrier Service from the Airport 100% 90% 80% Airline Market Share at the Airport 7.4% 9.3% 15.9% 11.8% Low-Fare Carriers Other Airlines B-49 Los Angeles Note: As of January 2005 Source: Official Airline Guide Las Vegas Phoenix Airlines Destinations America West Las Vegas, Phoenix Southwest Chicago Midway, Nashville, St. Louis, Phoenix Spirit Atlantic City, Ft. Lauderdale, Ft. Myers, LaGuardia, Las Vegas, Los Angeles, Orlando, Providence, Tampa, Washington DC-Reagan, West Palm Beach Independence Washington-Dulles Air America West Las Vegas, Phoenix Southwest Chicago Midway, Nashville, St. Louis, Phoenix Spirit Atlantic City, Ft. Lauderdale, Ft. Myers, LaGuardia, Las Vegas, Los Angeles, Orlando, Providence, Tampa, Washington DC-Reagan, West Palm Beach Independence Washington-Dulles Air St. Louis Chicago Midway Detroit (DTW) Nashville Tampa Ft. Myers La Guardia Orlando Washington DC Atlantic City West Palm Beach Ft. Lauderdale Despite this difficult environment, several of the low-fare carriers have succeeded, and now offer passengers at the Airport a variety of service options. With the exception of Atlantic City, Northwest provides service to all destinations served by the low-fare air carriers at the Airport. Current destinations offered by low-fare carriers at the Airport are shown in the map above. Low-fare air carriers represented 9.3% of total enplaned passengers at the Airport in OY 2004, an increase from 7.4% in OY In OY 2004, total enplanements at the Airport by Northwest and its affiliates and low-fare carriers increased 8.7% and 2.6%, respectively over the prior year, while passenger traffic by other airlines declined 4.2%. Rhode Island % Change in Enplaned Passengers (OY 2004 vs. OY 2003) 70% 60% 50% 40% 30% 20% 10% 0% 10.0% 8.0% 6.0% 4.0% 2.0% 0.0% -2.0% -4.0% -6.0% 76.7% 78.9% % Northwest (a) Operating Year OY 2004 Enplanement % Increases at the Airport 2.6% Low-Fare Carriers -4.2% Other Airlines 6.4% Total Airport Northwest (a) (a) Includes Mesaba and Pinnacle. Source: Wayne County Airport Authority records

133 Attachment Report of the Airport Consultant, SECTION IV: KEY FACTORS RELATED TO THE FORECAST Wayne County Airport Authority, March 22, 2005 B-50 Calendar Year Competition of travel Mode: Short Haul Market Trends The time associated with increased security screening processes at airports, fears of further terrorist attacks on the nation s aviation system and combined weakness of the economy have led some travelers to seek out modes of transportation other than air travel. Demand for air travel in the short haul market (500 miles or less) has decreased disproportionately against demand levels in longer haul markets. Concurrently, ridership on the nation s passenger train network and the number of vehicle miles driven increased in the years following the events of September 11, Consistent with national trends, the Airport experienced a greater decline in passengers in shorter haul markets. Markets less than 250 miles served from the Airport experienced the greatest decline (42.1%) in CY Overall, the CY 2003 short haul market declined 26.9% below CY 2000 levels. Origin-Destination Market Segment by Stage Length (1) ,000 2,000 3,000 4,000 5,000 6,000 7,000 8,000 O&D Enplanements (in 000s) Short-haul Medium-haul Long-haul Long-haul Medium-haul Short-haul (1) Short Haul = up to 500 miles; Medium Haul = 501 miles to 1,000; Long Haul = 1,001 miles and above Source: Department of Transportation, Origin & Destination Passenger Ticket Survey Percent Change (2003 vs. 2000) -30% -25% -20% -15% -10% -5% 0% As mentioned in Section III, O&D passenger levels rebounded over the last two operating years and are forecast to surpass pre-september 11, 2001 levels in OY AIRLINE SERVICE AND ROUTE NETWORKS Although the population and economy of an airport service region are the most significant influences on air traffic, the overall level of airline service and the number of passengers using an airport also depend to some extent on the route networks of the airlines serving that airport. Restructuring of Major Airline Service Since deregulation, many airlines have emphasized the development of hub-and-spoke route networks as a means of increasing their service frequencies, passenger volume and profitability. Recently, several major airlines have initiated a restructuring of, or announced plans to restructure, their airline service on routes they have determined to be unprofitable. The form of restructuring varies, such as: (1) using smaller aircraft or reducing flight frequency or unprofitable routes; (2) providing the service with regional airline service; and (3) eliminating the service completely. Some airlines have also looked to restructure their hub operations to increase aircraft utilization and operating efficiency by depeaking departure and arrival banks. In CY 1997, Northwest signed a ten-year agreement with Mesaba to operate as a Northwest Airlink affiliate under code-sharing agreements. Mesaba provides service to approximately 100 U.S. and Canadian destinations from Northwest s three major hubs in Detroit, Minneapolis and Memphis. Regional jets have enabled Northwest's commuter affiliates to provide service between the Airport and new destinations as new aircraft have allowed the carriers to initiate service to more distant and smaller communities, such as Burlington, Vermont, Greenville/Spartanburg South Carolina and Springfield, Missouri. The number of scheduled seats on regional jets at the Airport has increased 23.7% annually since CY 2000, to 3.5 million seats in CY Scheduled seats on mainline jets decreased 2.4% annually, to 18.9 million seats in CY 2004.

134 Attachment Report of the Airport Consultant, SECTION IV: KEY FACTORS RELATED TO THE FORECAST Wayne County Airport Authority, March 22, 2005 B-51 Role of Connecting Hubs and Network Air Carriers Because most major airlines operate hub-and-spoke route networks, many passengers have a choice of airlines (and connecting hubs) for their travels, and hubbing airlines must compete for these passengers. For example, Northwest competes at the Airport for connecting passengers with, among others, American and United (Chicago), US Airways (Pittsburgh), Continental (Cleveland) and Delta (Cincinnati). The number of passengers enplaning at the Airport depends to some extent on the ability of Northwest to attract connecting passengers that might otherwise use competing hubbing airlines. The level of connecting activity at the Airport may also be influenced by Northwest's own routing network and schedule. Northwest focuses its operations around three domestic hubs: the Airport, Minneapolis and Memphis. As such, Northwest has the ability to route passenger traffic and aircraft through the Airport, Minneapolis and to a lesser degree, Memphis. Despite the proximity of the Airport and Minneapolis, both complement each other s Northwest hub operation. Northwest s operations at these two hubs are generally similar in terms of departures, seat capacity and O&D traffic base. The airline tends to enplane more domestic passengers at Minneapolis, while it typically enplanes more international passengers at the Airport. Northwest also enjoys two of the highest yield premiums in the industry out of the Airport and Minneapolis for the Airport, this is explained to a large extent by a larger mix of business travelers (as compared to the industry average) in the passenger base. Completion of the McNamara Terminal and the fourth parallel runway significantly increased the Airport's landside and airside capacity with the McNamara Terminal currently providing 97 gates (72 jet gates, 25 commuter bridge-served gates) for Northwest and other scheduled international air carriers (compared to Northwest s operation at Minneapolis with 54 jet gates). A three-phase $860 million airport expansion plan (called the 20/20 Vision ) that includes 46 new aircraft gates and a 400-room hotel at Minneapolis was announced in September This plan is awaiting approval by the MAC board, the airport s authority. Share of Northwest/Affiliates System-wide Departures 25.00% 20.00% 15.00% 10.00% 5.00% 0.00% Source: Official Airline Guide Share of Northwest System-wide Departures Airport Share Minneapolis Share Memphis Share Since the opening of the McNamara Terminal, Northwest s connecting traffic share (to total Northwest enplanements) at the Airport has increased 3.7 points from 62.0% in CY 2000 to 65.6% in CY Similarly, Northwest connecting traffic share to total Northwest enplanements at Minneapolis increased 4.3 points to 66.7%. (Please see Northwest Hubbing Activity in Section III for more discussion on connecting activity trends for hub airports over the last several years.) Role of Point-to-Point and Low-Cost Air Carriers In certain markets, the expansion of low cost/low fare air carrier service resulted in fare competition and lower fares, as well as the reduction in or withdrawal of service by major air carriers. The additional service provided by low-fare carriers increases the Airport s carrier base and increases domestic traffic from the Airport by stimulating latent pricesensitive demand. Low-fare alternatives to the traditional major air carriers provide effective regional competition for the Airport by emphasizing point-to-point service, bypassing connecting hubs altogether.

135 Attachment Report of the Airport Consultant, SECTION IV: KEY FACTORS RELATED TO THE FORECAST Wayne County Airport Authority, March 22, 2005 B-52 Spirit Airlines is currently the second largest air carrier (in terms of enplanements) at the Airport behind Northwest and its affiliates, accounting for 5.4% of total domestic enplaned passengers in OY Currently, Spirit Airlines offers service from the Airport to Atlantic City, Fort Myers, Ft. Lauderdale, Las Vegas, Los Angeles, New York La Guardia, Orlando, Providence, Tampa, Washington DC Reagan, and West Palm Beach. Northwest also provides service to all of these cities except Atlantic City. Spirit was recently approved by the U.S. Department of Transportation to operate air service from the Airport to Cancun, Mexico beginning in March Southwest Airlines, the other primary low cost carrier, had a 2.8% share of the Airport s total domestic enplanements in OY Southwest Airlines now represents the nation's largest air carrier in terms of domestic passenger boardings, and currently serves 59 cities in 29 states. Currently, Southwest serves St. Louis, Nashville, and Chicago-Midway, and Phoenix from the Airport. Northwest also provides service to these markets from the Airport. Frontier Airlines recently announced daily service from the Airport to Denver beginning May 8, Frontier Airlines will offer two daily flights on its 132-seat Airbus 319 aircraft. Low fare air service at the Airport has offered price pressure on competed routes with Northwest. The result has been an increase in passenger load factors on these routes and more importantly, an increase in enplanement activity for the Airport. The increase in enplanement activity for these routes has been higher than other noncompeted routes. For the first three months of OY 2005, low-fare air carrier enplanement activity at the Airport increased 9.4% as compared to the same period for OY Other Airports in the Region Besides the well-established midwestern hub airports located in Chicago, Cleveland, Cincinnati, and St. Louis in which the Airport competes in some degree for connecting passengers, the Bishop International Airport (Bishop) located about 55 miles away in Flint, Michigan provides regional competition for the Airport s O&D passenger base. Current destinations served by scheduled daily air carrier service from Bishop include the Airport (Northwest), Atlanta (Delta Connection and AirTran), Chicago-Midway (American Trans Air), Cincinnati (Delta Connection), Cleveland (Continental Express), Milwaukee (Midwest Connect), Minneapolis (Northwest), Orlando (Northwest and AirTran) and Tampa (Northwest). Of the 38 daily nonstop departures offered at Bishop, 12 are on Northwest, with eight of these connecting to the Airport. Bishop enplaned 593,486 passengers in CY Enplaned passenger levels at Bishop have averaged an annual increase of 31.5% from CY 1994 to CY Seven passenger airlines currently operate out of Bishop, the largest of which is Northwest with 12 daily flights. While low-fare air carrier service at Bishop does provide a basis for regional competition with the Airport, future competitive service opportunities at Bishop (and other local airports) may be limited as 11 of the top 20 O&D markets served from the Region already have a lowfare air carrier presence. The top 20 O&D markets represented 66.6% of total domestic O&D enplaned passengers at the Airport in CY THE AIRPORT'S STRATEGIC ASSETS Airfield Capacity The Airport completed a fourth parallel runway (4L/22R) in December 2001 which improves the Airport's operational capacity by 25% (to flights per hour) in good weather and by 17% (to flights per hour) in adverse weather, assuming that airspace, ground infrastructure, and environmental constraints allow full use of the runway. According to the FAA, the Airport offers the fourth highest operational airfield capacity in the U.S. under Visual Flight Rules. The Airport has adequate airfield capacity to handle the projected 25% increase in demand over the next seven years. According to the FAA, the Airport recorded one of the highest on-time performances (arrivals and departures) for major U.S. airports in

136 Attachment Report of the Airport Consultant, SECTION IV: KEY FACTORS RELATED TO THE FORECAST Wayne County Airport Authority, March 22, Airfield Capacity (Top 10 Airports) CY Increased operational performance contributes to better aircraft utilization and the overall efficiency of the hubbing operation. B-53 Visual Flight Rules (IFR) Flights per hour DFW DEN ORD DTW ATL MEM MCO PIT PHX LAX Airports Note: Based on optimum Visual Flight Rules (VFR) capacity for each airport. Source: FAA, Airport Capacity Benchmark Report 2004, September 2004 On-Time Arrival Performance 84.00% 82.00% 80.00% 78.00% 76.00% 74.00% 72.00% 70.00% ORD PHL 68.00% 72.00% 74.00% 76.00% 78.00% 80.00% 82.00% 84.00% 86.00% 88.00% Source: DOT, BTS, Reed & Associates analysis Airport Operational Performance (2004) Better On-Time Arrival Performance ATL MDW LAS Worse On-Time Overall Performance PHX MIA BWI SEA JFK EWR DFW CVG MCO BOS FLL LGA On-Time Departure Performance CLT DTW STL TPA PIT Better On-Time Overall Performance SAN DEN LAX MSP PDX SFO SLC DCA Better On-Time Departure Performance IAH Landside Capacity The Airport currently has 114 jet gates and 25 commuter jet gates. After the completion of the North Terminal Redevelopment Project, the Airport will have 156 gates, six of which will be controlled by the Authority. Jet Gates at the Airport Gate Type Jet Gates Commuter Jet Gates (Served by Jet Bridges) Authority Controlled Jet Gates Prior to Feb 2002 (1) Current Sept 2008 (2) TOTAL GATES Note: Figures exclude ramp parking positions and other gates served without jet bridges. (1)Opening of the McNamara Terminal (2)After opening of North Terminal Geographic Positioning The Airport s northern midwest location provides a competitive advantage for efficient domestic connecting activity as well as international operations to European and Asian-Pacific destinations. The Airport is located within 600 miles of approximately 43% of the total population in the U.S. The extended reach of regional jet aircraft enlarges the Airport s traditional catchment area, resulting in increased connecting opportunities for passengers. As stated earlier, the connecting traffic segment of the Airport has rebounded faster than the O&D traffic segment over the last three years, in part a function of the new McNamara Terminal, and Northwest s use of the facility as a primary connecting point in their systemwide network.

137 Attachment Report of the Airport Consultant, SECTION IV: KEY FACTORS RELATED TO THE FORECAST Wayne County Airport Authority, March 22, 2005 B-54 CONCLUSION Like the rest of the aviation industry, the Airport continues to be affected by the stagnant economic conditions with the outlook improving, but the timing and strength of the economic recovery, and its positive effect on air travel demand, are still unclear. Northwest s marketing agreement with KLM, Delta and Continental will allow more passenger connection possibilities for the Airport, especially to an expanded number of international destinations. The low cost/low fare air carriers (both existing and emerging) will continue to provide competition on point-to-point short-haul domestic air service and continued competition on the long-haul markets served by other network carriers (e.g. Northwest) and others through their respective hubs. Security continues to affect air travel, with the future impacts difficult to estimate as further changes are made to passenger screening and inline EDS machines are installed for baggage screening. However, the Airport has adequately addressed its screening operations in the existing terminals and will incorporate in-line baggage screening into the new North Terminal facility design. Overall, the capital improvements currently being constructed at the Airport allow the Airport the opportunity to capture market share of future traffic growth in both the domestic connecting and expanding international sectors. Enhanced capacity fosters competition by making the Airport and the airlines that serve the Airport an attractive choice for passengers, thereby encouraging them to continue to use the Airport.

138 Attachment Report of the Airport Consultant, SECTION V: AVIATION DEMAND FORECAST Wayne County Airport Authority, March 22, 2005 OVERVIEW The following section summarizes the aviation demand forecast for the Airport for the period OY 2005 through OY Supplemental Table 13 presents historical and forecast enplaned passengers, enplaned cargo, aircraft departures, aircraft operations by type and aircraft landed weight at the Airport. The role of the Airport will not change for its tenant airlines. Specifically, it shall remain as one of the major domestic hubs for Northwest. No other carriers will establish a hub at the Airport. The underlying strength of the local traffic demand, which is increasingly being served by carriers other than Northwest, will remain steady. B-55 ASSUMPTIONS The forecast was based on conservative assumptions regarding the growth in the general economy of the Region and the U.S. Accordingly, the forecast was based on the analyses of historical and forecast population and economic indicators for the Region, historical airline traffic at the Airport and an analysis of Airport hubbing activity. In addition, the forecast focuses on key trends experienced at the Airport after OY 2000: At the macro level, overall sluggishness of economic recovery impacted by global and U.S. economic, political, war, and health concerns resulting in a reduced travel demand environment. In general, it was assumed that future growth in airline traffic at the Airport will not be constrained by the availability of aviation fuel, limitations in airline service at the Airport, limitations in the capacity of the air traffic control system or landside terminal areas, or government policies or actions that restrict growth. The Region will continue to be a significant center for automotive manufacturing and technology in the U.S. with research and development of advanced technologies contributing to the expansion of new growth industries and international trade and investment in the Region. Despite, the current higher unemployment levels, the economy of the Region is forecast to continue its diversification with growth in the service sectors. In latter years, the global and U.S. economic factors are assumed to have reversed and growth within the economy is expected to positively affect the Airport s traffic. ENPLANED PASSENGERS The total number of passengers enplaned at the Airport is forecast to increase from 17.7 million in OY 2005 to 21.4 million in OY 2011, representing an annual average increase of 3.2%. (As a comparison of the conservative nature of the enplaned passenger forecast, the FAA forecasts total U.S. passenger activity increases to average 3.7% for the same period (March 2005). The latest (March 2003) FAA Terminal Area Forecast (TAF) for the Airport identified a 4.3% annual increase for the same period.) Domestic enplaned passengers at the Airport are forecast to increase at an annual average rate of 3.1% from 16.2 million in OY 2005 to 19.5 million in OY The number of domestic originating and connecting passengers are forecast to increase 3.1% and 3.0% per year, respectively, from OY 2005 to OY International enplaned passengers are forecast to increase from 1.5 million in OY 2005 to 1.9 million in OY 2011, representing an annual average increase of 4.6%. The share of international enplaned passengers to total Airport enplaned passengers are estimated to grow from 8.3% in OY 2005 to 9.0% in OY CARGO Total enplaned cargo at the Airport is forecast to increase at an average rate of 2.7% per year from OY 2005 to OY The 99,035 tons of freight and express cargo enplaned in OY 2005 is forecast to grow to 116,882 tons by OY 2011 while mail cargo is forecast to grow from 4,447 tons in OY 2005 to 4,748 tons in OY 2011.

139 Attachment Report of the Airport Consultant, SECTION V: AVIATION DEMAND FORECAST Wayne County Airport Authority, March 22, 2005 AIRCRAFT DEPARTURES B-56 Enplaned Passengers Enplaned Domestic Passengers 25,000 20,000 15,000 10,000 5, ,000 18,000 16,000 14,000 12,000 10,000 8,000 6,000 4,000 2,000 Historical/Forecast Total Enplaned Passengers HISTORICAL Domestic International Operating Year Source: Historical: WCAA, Forecast: Reed & Associates analysis FORECAST Historical/Forecast O&D and Connecting Enplaned Passengers HISTORICAL O&D Connecting FORECAST Airport Annual Growth Rates Period Forecast FAA U.S DTW TAF DOM INTL TOTAL 6.2% 0.5% 5.4% 3.2% 3.7% 4.3% Airport Annual Growth Rates Period Forecast O&D Connecting % % % % Passenger aircraft departures are forecast to increase from a total of 248,586 in OY 2005 to 306,451 in OY 2011, an average increase of 3.5% per year. International departures, which represented approximately 5.4% of all departures in OY 2005, are forecast to increase at an annual rate of 3.1% from 13,355 in OY 2005 to 16,037 and will account for 5.2% of all departures in OY AIRCRAFT LANDING WEIGHT Total signatory landed weight at the Airport is forecast to increase from 26,081 thousand-pound units in OY 2005 to 29,841 units by OY 2011 an average of 2.3% per year. Landed weight for the U.S. air carriers is forecast to increase from 25,683 thousand-pound units in OY 2005 to 29,343 units in OY All-cargo aircraft landed weight is forecast to increase at the rate of 2.3% per year from 690 thousand-pound units in OY 2005 to 792 thousand-pound units in OY CONCLUSION Total enplaned passengers are forecast to increase at an average annual rate of 3.2% during the forecast period, with a slightly slower growth for domestic enplaned passengers than international passengers, which represents historical growth patterns and trends. The forecast represents a conservative and gradual increase in the Airport s enplanement activity over the forecast period, given the available capacity (airfield and passenger terminal) at reasonable costs to airlines Operating Year Source: Historical: WCAA, DOT OD1A, Forecast: Reed & Associates analysis

140 Attachment Report of the Airport Consultant, SECTION VI: FINANCIAL ANALYSIS Wayne County Airport Authority, March 22, 2005 OVERVIEW The following section provides an analysis of the estimated financial impacts associated with the issuance of the Series 2005 Bonds and Additional Bonds. Financial projections are presented through OY 2011 (the forecast period) in accordance with the Ordinance and provisions of the Airline Agreements. The Airport accounts for its activities according to generally accepted accounting principles for governmental entities. All Airport Revenues and Operation and Maintenance Expenses are accounted for on an accrual basis. Section I: Financial Framework For Operation of the Airport provided detail on those provisions of the Ordinance and Airline Agreements that impact the Airport s financial structure and projections, as included herein. Global Markets, Inc., the representative for the underwriters of the Series 2005 Bonds. The par amount of the Series 2005 Bonds is estimated to be $524.5 million. The par amount of the Additional Bonds is estimated to be $88.6 million. DEBT SERVICE REQUIREMENTS Exhibit D presents historical and estimated Debt Service requirements for OY 2003 through OY 2011 as provided by the Authority and Citigroup Global Markets Inc. Debt Service requirements during the forecast period include Additional Bonds to be issued to finance a portion of the Airport s future CIP (as discussed in Section I). B-57 PROJECT COST ESTIMATES The Series 2005 Bonds are being issued to finance the costs associated with construction and implementation of 1) a portion of the North Terminal Redevelopment Project, 2) the McNamara Terminal Phase II Project and 3) other CIP Projects; and also to pay related issuance costs including capitalized interest. Exhibit B presents estimates of the project costs to be financed in part from the proceeds from the sale of the Series 2005 Bonds. Total project costs for the 2005 Projects are estimated to be $646.6 million, with $638.0 million to be funded through the issuance of Airport Revenue Bonds. The Series 2005 Bonds are funding approximately $420.2 million of estimated project costs for the 2005 Projects. Exhibit B-1 presents the estimated plan of finance for the 2005 Projects, including the amounts to be funded with proceeds from the issuance of the Series 2005 Bonds. SOURCES & USES OF FUNDS Exhibit C summarizes the estimated sources and uses of funds for the Series 2005 Bonds and Additional Bonds as provided by Citigroup Total Senior Lien Bond Debt Service is estimated to increase from $104.3 million in OY 2005 to $168.4 million in OY Total Senior Lien Bond Debt Service per enplaned passenger is estimated to increase from $5.90 in OY 2005 to $ 7.87 in OY Pursuant to the Rate Covenant provision of the Ordinance, the Authority includes an amount not less than 25% of the Senior Lien Bond Debt Service due and payable on Bonds during such Operating Year. Total outstanding principal of Senior Lien Bonds after delivery of the Series 2005 Bonds is assumed to be $2.189 billion. In 2001, the County also issued $141,900,000 of Junior Lien Bonds, of which $89,180,000 in bonds were outstanding on February 1, The principal on the Junior Lien Bonds is to be repaid from the federal grants to be received under a Letter of Intent (LOI) from the FAA dated June 15, LOI funds are considered Other Available Moneys which are used to offset Debt Service. The Series 2001 Junior Lien Bonds, which were issued on a variable rate basis, are assumed to accrue interest at 4.00%. No assurance can be made that the FAA will award the additional federal grants that the Authority expects to obtain under the LOI, or that, if awarded, the federal grant funds will be received. If the grants are not awarded or received, in whole or in part, the debt service on the applicable amount of Series 2001 Junior Liens Bonds would be included in airline fees and charges.

141 Attachment Report of the Airport Consultant, SECTION VI: FINANCIAL ANALYSIS Wayne County Airport Authority, March 22, 2005 B-58 Assumptions used by Citigroup Global Markets, Inc. in preparing the estimated Debt Service requirements for the Series 2005 Bonds and Additional Bonds are as follows: Series %; Additional Bonds 5.48%. AIRPORT SYSTEM OPERATION & MAINTENANCE EXPENSES Exhibit E presents historical and forecast Airport System Operation & Maintenance (O&M) Expenses for OY 2003 through OY OY 2004 and OY 2005 O&M Expenses represent estimated expenditure levels, respectively, as provided by Airport management. Total O&M expenses are anticipated to increase from $177.2 million in OY 2005 to $216.1 million in OY 2011, representing an annual average increase of 3.4%. (The forecast O&M expense growth rate is comparable to the annual real cost growth experienced at the Airport over the last five years.) Growth rates are based on historical real growth trends and relationships in the Airport s O&M Expenses, provisions of the McNamara Terminal Master Operation & Maintenance contract and Airport management s estimate of future expenses. The Authority has modified certain allocations of O&M Expenses to specific line items from those presented in years when the Airport was operated by the County. Descriptions of major line items and explanations of material changes in line item amounts are discussed below: Salaries & Wages and Employee Benefits The OY 2005 budget includes an increase in budgeted salaried positions and overtime costs, resulting in approximately $3.7 million increase in salaries and wages. Salaries, wages and employee benefits are forecast to increase by an average of 3.8% per year during the forecast period. Employee benefits are forecast to remain at approximately 31.7% of total salaries and wages (historical average). Parking Management Effective April 1, 2005, Motor City Central Parking (MCCP) will be managing all of the Authority s parking facilities. The terms of the contract with MCCP are more favorable for the Authority and will result in lower parking management fees for the administration of the Authority s parking facilities. MCCP will be compensated on a fixed management fee. The forecast assumes similar terms as that contained in the contract with MCCP will continue during the forecast period. Costs associated with parking management operations are forecast to increase 4.1% annually during the forecast period. Employee Shuttle Bus Shuttle bus services are provided for both passengers and employees working at the Airport to access parking areas, terminal buildings and other facilities located on Airport property. Costs associated with the shuttle bus operation are forecast to increase 4.0% annually during the forecast period. Prior to OY 2004, a portion of the employee shuttle bus cost was included in the parking management line item as AMPCO provided shuttle services under their parking management contract. Janitorial Services Janitorial services are outsourced by the Authority and are provided for areas in the Smith Terminal and concourses. Janitorial services in the McNamara Terminal are provided for under the Master Operations and Maintenance contract (see below). Janitorial services are forecast to increase with overall enplanement activity and changes in facility size (square footage). Security Expenses Security expenses are are anticipated to increase 3.0% annually during the forecast period to $3.9 million in OY 2011.

142 Attachment Report of the Airport Consultant, SECTION VI: FINANCIAL ANALYSIS Wayne County Airport Authority, March 22, 2005 Other Contractual/Professional Services Other contractual services includes among other items, contract costs associated with snow removal, landscaping, computer and systems, legal and other professional consulting services. Increases in OY 2004 represent the reallocation of costs contained in other line items when the Airport was operated by the County. Other contractual services are forecast to annually increase by 3.0% during the forecast period. Materials and Supplies Materials and Supplies expenses are anticipated to increase an average of 4.0% annually during the forecast period. Capital Acquisitions Capital outlay expense is anticipated to increase over 22% in OY 2005 reflecting the procurement of Authority-owned computer equipment/software and the need to replace existing vehicles and equipment. Capital Acquisition expenses are anticipated to increase an average of 3.2% annually during the forecast period. AIRPORT REVENUES Exhibit F presents historical and forecast Revenues for OY 2003 through OY OY 2004 and OY 2005 Revenues represent estimated airline and non-airline revenues, as provided by Airport management. B-59 Utilities Utilities expense is anticipated to increase an average of 6.3% annually during the forecast period, primarily reflecting the opening of the North Terminal facility in CY McNamara Terminal O&M Expenses The McNamara Terminal is operated and maintained by Johnson Controls under a Master Operation and Maintenance contract. This line item also includes estimated utilities costs associated with the operation of the McNamara Terminal. Under the terms of the Northwest Agreement, costs associated with the Master Operation and Maintenance contract are reimbursed to Northwest and, thereby, included in the Authority s rate base Non-operating Expenses Non-operating expenses represent paying agent fees, remarketing costs and other financial support costs related to the Authority s debt management program. The line item also includes costs associated with an Installment Purchase Contract entered into in August 2001 to pay for energy conservation improvements at the Airport. Total Revenues are anticipated to increase from $232.4 million in OY 2005 to $278.2 million in OY Airline revenues are expected to average approximately 53% of total Revenues during the forecast period and represent a decrease from OY 2003 levels (57.2%). Airline Revenues The Airport currently operates under an airport-wide residual rate making methodology with terminal rental rates increasing 10% every five years until OY Given the relatively low terminal rental rates, the majority of airline rates and charges have historically been accounted for by Activity Fees. The new terminal rental rate-making methodology that will be implemented upon completion of the new North Terminal will be based upon allocations of O&M Expenses, and Debt Service to the North Terminal and South Terminal (McNamara Terminal) cost centers. Certain PFC revenues and International Facility Use Fee revenues will be credited to the cost centers. The effect of the new ratemaking methodology will be to shift a larger portion of the Authority s operating cost into calculation of terminal rentals as opposed to the Activity Fees. (For more detail, see Airline Rates and Charges in

143 Attachment Report of the Airport Consultant, SECTION VI: FINANCIAL ANALYSIS Wayne County Airport Authority, March 22, 2005 B-60 Section I.) Exhibit F-1 presents forecast airline rental payments under the new rental rate methodology beginning in OY Airline revenues are forecast to increase from $125.6 million in CY 2005 to $146.1 million in OY Activity Fees are forecast to represent only 45.6% of airline revenues in OY 2011, as compared to 75.47% in OY Non-airline Revenues Non-airline revenues are anticipated to increase with enplaned passenger segments (total, O&D and international), increased retail capacity, pricing practices of concessionaires and enhanced yield or sales per passenger levels. The Airport s public automobile parking facilities consist of approximately 5,716 spaces in the North Terminal parking garage, 2,119 long-term spaces in surface lots, and an 10,400-space parking garage in the McNamara Terminal. The daily maximum rate for long-term parking at the McNamara Terminal garage is currently $12, and $10 at the North Terminal garage. No additional increases in parking rates and/or changes in parking capacity are assumed during the forecast period. Automobile parking revenues are forecast to increase with changes in the Airport s O&D enplaned passenger levels. The Airport is currently served by seven rental car companies, with six located on Airport property. All rental car companies serve the Airport with dedicated shuttle bus services provided from the terminals to individual rental car facilities. The rental car companies operate under the terms of concession agreements which, among other items, require the payment of 10.0% (on-site) to 9.5% (off-site) of gross revenues to the Airport. Contracts with all of the rental car companies are set to expire on December 31, Rental car revenues are forecast to increase primarily with changes in the Airport s O&D enplaned passenger levels and pricing practices of the rental car companies. With the opening of the McNamara Terminal in February 2002, the addition of several new terminal concession locations to date, the Airport now contains approximately 145,000 square feet of revenue producing retail space. The McNamara Terminal contains approximately 45,000 square feet of food and beverage concessions and approximately 45,500 square feet of news/gift, specialty retail and space for services (ATM, foreign exchange, vending, carts, phones, etc). The Smith and Berry Terminals combined have approximately 20,000 square feet of food and beverage concessions and approximately 10,000 square feet of news/gift, specialty retail and space for services. The airport is adding 5,000 square feet of new concession space at the McNamara Terminal, Concourse C in conjunction with Northwest s redevelopment and expansion project. This project will be completed Fall 2005 and will add four food and beverage locations and one retail space. In addition, one new food and beverage concession will be added to the main concourse and one in the baggage claim area at the McNamara Terminal. Two additional retail concessions will be added by Spring 2005 on Concourse A at the McNamara Terminal. The airport is also currently in the process of re-concepting several of its concession spaces in the McNamara Terminal to capitalize on additional sales potential from emerging restaurant/retail trends. 30 min or less 30 min to 1 hour hours hours 2-24 hours (Daily Max) Each additional hour * As of January Short- Term Long- Term $3.00 $5.00 $6.00 $7.00 $ McNamara Terminal Long- Term $3.00 $5.00 $6.00 $7.00 $25.00 $3.00 Parking Rate Structure* Valet $10.00 $28.00 $3.00 North Terminal Short- Term $3.00 $5.00 $6.00 $7.00 $ Economy $ Daily (Flat) $ Surface Lots $3.00 $5.00 $6.00 $7.00 $25.00 $3.00

144 Attachment Report of the Airport Consultant, SECTION VI: FINANCIAL ANALYSIS Wayne County Airport Authority, March 22, 2005 B-61 The Authority supervises the Airport s concessions program under somewhat different operating models for the Smith Terminal and McNamara Terminal. Michigan Host, Inc. manages all the food and beverage concessions in the Smith Terminal, and Paradies Metro Ventures operates all news and gift and specialty retail outlets in the Smith Terminal. Contracts with these concessionaires are for three years with a one year renewal option. Contract expiration dates are coterminous with the anticipated closing date of the Smith Terminal. New concessions agreements for the North Terminal complex will be bid and prepared prior to the opening of the new terminal building. In the McNamara Terminal, the Authority has entered into concessions agreements with multiple concessionaries based on type of outlet, location within the terminal and revenue producing capability. Seven year agreement terms exist for food and beverage and duty free operators while all news and gift/specialty retail outlets are under five year agreements. Contract terms include the payment of either MAGs or percentage of gross revenues (indicated in the table below) to the Authority. MAGs for most concessionaires are reset each year based on the greater of the current MAG or 80% of the prior year s payment to the Authority. News & Gift: 10.0% Food & Beverage: 11.0%-17.0% Specialty Retail: 10.0%-15.5% Advertising: 50.0% Duty Free: 24.0%-40.0% Vending: 26.0% Food and beverage and retail revenues are forecast to increase with enplaned passenger levels at the Airport and increasing sales yield (spending) per enplanement. Upon completion in 2008, the new North Terminal complex is anticipated to further increase the Airport s total concessions/retail revenue producing space by approximately 20%. Connected to the McNamara Terminal, the 404-room Westin Hotel is a full service hotel offering convenient lodging, dining and convention facilities. The Westin Hotel is operated and managed by Starwood Resorts, Inc under the terms of a Qualified Management Agreement. Under terms of this agreement, the Authority will receive a net Gross Sales Per Enplaned Passenger contribution from the hotel operation only after associated debt service payments, operating costs and deposits to certain operating reserve funds are made. Bonds issued to fund the construction of the Westin are not secured by the Net Revenues pledge of the Authority. While the financial performance of the hotel is improving, no net revenue contribution is anticipated during the forecast period. The employee shuttle bus revenue line item represents fees earned from airline and other employees working at the Airport who utilize dedicated employee parking lots at the Airport. Fees are assessed on a per employee basis and reflect changes in employment levels at the Airport. Non-airline revenues are forecast to increase from $106.8 in OY 2005 to $132.2 million in OY 2011, representing an annual average increase of 3.6%. Gross Concession Sales: McNamara Terminal $9.00 $8.00 $7.00 $6.00 $5.00 $4.00 $3.00 $2.00 $1.00 $0.00 McNamara Terminal Opens Feb 2002 Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Note: Excludes Duty Free revenues. March 2002 first full month of McNamara Terminal operation. Source: Wayne County Airport Authority

145 Attachment Report of the Airport Consultant, SECTION VI: FINANCIAL ANALYSIS Wayne County Airport Authority, March 22, 2005 B-62 SIGNATORY ACTIVITY FEES AND AIRLINE COST PER ENPLANED PASSENGER Exhibit F-2 presents historical and estimated Signatory Airline Activity Fees and airline cost per enplaned passenger for OY 2003 through OY Signatory Activity Fees are forecast to decrease from $3.51 per 1,000-lb unit in OY 2005 to $2.16 per 1,000-lb unit in OY The Airport s cost per enplaned passenger, which measures the cost an airline pays to operate at an airport based upon the number of enplaned passengers, is forecast to have one of the lowest airline cost per enplaned passenger ratios ($7.22) for leading large hub airports in CY While the forecast airline cost per enplaned passenger at the Airport is anticipated to peak by CY 2008, other airports will continue to experience further cost increases. Airline cost per enplaned passenger is forecast to decrease from $7.10 in OY 2005 to $6.83 in OY OTHER AVAILABLE MONEYS Exhibit F-3 presents forecast Other Available Moneys to be applied to reduce Bond Debt Service during the forecast period. Other Available Moneys consist of PFCs and federal LOI funds used to offset certain Debt Service requirements in each operating year. PFC revenues do not constitute Revenues as defined in the Ordinance and are not pledged until the PFC revenues are specifically transferred to the Bond Fund and defined as Other Available Moneys. Estimated PFC balances during the forecast period are presented in Exhibit F-3. PFC balances are forecast to be adequate to reduce estimated PFC eligible portions of Bond Debt Service during the forecast period. The Authority received a PFC approval in 2004 to pay PFC eligible Bond Debt Service associated with about $30 million of the 2005 Projects. Bond Debt Service will be repaid through Airport Revenues, which include airline rates and charges. Airline Cost Per Enplaned Passenger $30.00 $25.00 $20.00 $15.00 $10.00 $5.00 $0.00 $4.70 $5.43 Forecast Airline Cost Per Enplaned Passenger (2008) $6.34 $7.22 $8.64 $12.82 $12.87 $11.49 $11.64 Note: Figures represent published airline cost per enplaned passenger forecast for Source: Wayne County Airport Authority; respective airports Airline Cost Per Enplaned Passenger $35 $30 $25 $20 $15 $10 $5 $0 $4.80 $16.21 $15.03 $18.00 $19.12 CVG ATL MSP DTW DFW IAH STL ORD CLE DEN IAD SFO SEA MIA $5.93 $6.37 $7.22 $8.64 $11.64 $11.99 $13.27 $14.04 Airport Peak Forecast Airline Cost Per Enplaned Passenger* $15.53 $20.01 $21.72 $24.70 $30.04 CVG ATL MSP DTW DFW STL IAH ORD CLE DEN SFO IAD SEA MIA Airport * Represents highest published airline cost per enplaned passenger between 2003 and Source: Wayne County Airport Authority; respective airports Airport SFO IAH MSP DTW STL CLE DFW ATL ORD DEN IAD SEA MIA CVG $26.07 Year of Highest Cost per Enplaned Passenger

146 Attachment Report of the Airport Consultant, SECTION VI: FINANCIAL ANALYSIS Wayne County Airport Authority, March 22, 2005 APPLICATION OF REVENUES Exhibit G presents historical and forecast Application of Revenues for OY 2003 through OY 2011, in accordance with the priorities established by the Ordinance, after delivery of the Series 2005 Bonds. FORECAST NET REVENUES AND BOND DEBT SERVICE COVERAGE Exhibit H presents the calculation of Net Revenues, Debt Service coverage and Additional Bonds Test as provided in the Ordinance for OY 2003 through OY For the purpose of calculating Debt Service Coverage, the assumed interest rate is higher than the market interest rate, which results in a bond size of $524,455,000 (compared to the estimated $511,000,000.) Airport management has been proactive in implementing cost reductions and renegotiating concessions contracts to increase nonairline revenue to the Airport. As such, the percentage of Airport Revenues attributable to airline rates and charges is anticipated to decline during the forecast period. The Airport s cost structure remains about the same throughout the forecast period while it is anticipated that other hub airports, currently finishing or about to start expansion and modernization programs, will incur significant new costs. B-63 The significant increases in Net Revenues, Revenue Fund Balances and Other Available Moneys in OY 2008 and OY 2009 are primarily a result of transfers of Other Available Moneys (PFCs) into the Senior Lien Bond Fund to pay Debt Service at the end of the deferred principal payments period. It is also a result of the transfer of the Debt Service Reserve Fund for the final payment of Debt Service on the Junior Lien Bonds. As indicated in Exhibit H, Net Revenues, Revenue Fund balances and Other Available Moneys are forecast to be sufficient to meet the requirements of the Additional Bonds Test established by the Ordinance in each year of the forecast period. Debt Service coverage levels are forecast to remain above the 1.25x debt service requirement throughout the forecast period. CONCLUSION The Additional Bonds Test is met during the forecast period. Major elements of the Airport s capital program have already been implemented and the costs associated with the improvements in service today are reflected in the financial analysis with minimal future capital investment anticipated.

147 Attachment Report of the Airport Consultant, SECTION Vll: SCENARIOS Wayne County Airport Authority, March 22, 2005 B-64 OVERVIEW As documented in this Attachment, the forecasts reflect past and current events; however, due to the increased uncertainty about future events that will affect air travel demand, two alternative scenarios were prepared. These scenarios reflect conditions worse than forecast, in which decreased levels of activities are explored. These projections, based on each scenario, were prepared to provide an analysis of hypothetical reductions in passengers and aircraft activity at the Airport and should not be considered a forecast of expected future results. Scenario I reflects a 20% reduction in overall passenger traffic. It should be noted that other hub airports might be similarly affected if the cause of the reduction was primarily economic or aviation industry based (e.g. a reduction in network carriers use of hub airports); therefore, it would be anticipated that relative costs would increase at all connecting passenger hub airports. Scenario II explores the loss of all connecting traffic at the Airport through the forecast period. If the connecting passenger traffic at the Airport was diverted to another hub airport, then the Airport would be relatively worse off than other connecting passenger hub airports. The conclusion of the analysis related to each scenario is that the Airport would continue to comply with the Rate Covenant and the resulting airline costs per enplaned passenger, while reaching the higher end based on extreme decline in travel demand compared to forecast, are all within a reasonable range for comparable large hub airports. Reduced demand for air travel would adversely affect revenues of the Airport such as rental car, concession and parking revenues. Revenues from the collection of PFCs would also continue to be adversely affected by reduced demand for air travel. Although the Series 2005 Bonds are not directly secured by PFCs, it is intended that PFC revenues will be used to pay a portion of the Debt Service related to the Series 2005 Bonds. SCENARIOS Uncertainty in the air travel industry makes even choosing a series of specific assumptions (e.g. economic variables, travel interruptions, airline failures) less valuable than trying to "bracket" the potential effects of the possible effects (singular or combined). The possibility that some or all assumed actions/events could or would happen seems unlikely. These scenarios reflect a number of possible events, not specifically identified, nor necessarily related, which may occur separately or together. Events affecting air travel demand could also occur with variable impacts and at various times throughout the forecast period. Debt service requirements remain the same for all scenarios. Operation and Maintenance (O&M) expenses remain the same as the forecast under Scenario I; for Scenario II an approximate 10% reduction in O&M expenses in OY 2006 is assumed with forecast growth thereafter. The assumed O&M reduction reflects the greatly reduced usage of landside facilities and resulting ability to reduce personnel and related expenses. The implementation of the 2005 Projects and Additional Airline Approved Projects is assumed to continue under both scenarios, with no changes in the resulting Bond Debt Service as discussed in Section VI. AVIATION DEMAND The two alternative aviation demand scenarios are presented below: Scenario I: Overall Traffic Reduction of 20%: This scenario assumes a reduction of 20% in total enplaned passenger traffic at the Airport in OY The growth factor included in the forecast is assumed to return for the remaining years but enplanements would still be below forecast in OY 2011 by 4.8 million. Scenario II: Loss of Connecting Traffic: This scenario assumes a loss of connecting passenger traffic phased over two years with the Airport

148 Attachment Report of the Airport Consultant, SECTION Vll: SCENARIOS Wayne County Airport Authority, March 22, 2005 B-65 becoming a pure O&D airport by the beginning of OY This results in total enplanements declining by approximately 9.5% annually between OY 2005 and OY In OY 2011, total enplaned passengers would be approximately 11.6 million enplanements below forecast. FINANCIAL PERFORMANCE Scenario I: Overall Traffic Reduction of 20%: Projections based on this scenario result in an airline cost per enplaned passenger in the $10 to $12 range for the forecast period. Scenario II: Loss of Connecting Traffic: Under this scenario, PFCs are insufficient to pay debt service related to all eligible project costs and beginning, in this Scenario, in OY 2009 it is projected that certain debt service, previously funded by PFCs, will be paid from rates and charges. Under this scenario, the airline cost per enplaned passenger, is projected to increase from $8.97 in OY 2006 to $21.74 in OY CONCLUSION While the airline cost per enplaned passenger projected in these scenarios increases significantly, the Airport continues to comply with the Rate Covenant, and the Additional Bonds Test is met due to the residual rate-making methodology. The highest cost per enplanement under Scenario I while in the high range, by comparison today to other connecting passenger hub airports, would be reflective of a serious downturn in the entire industry, with all airports being affected. Scenario II: Loss of Connecting Traffic indicates that the Airport, while increasing airline cost of enplaned passenger to the $22 range, continues to provide opportunity for existing or new air carriers to serve the O&D traffic within a reasonable, but high, range of airline costs. Enplaned Passengers (in 000s) Airline Cost Per Enplaned Passenger Enplaned Passengers 25,000 Forecast 20,000 Scenario I 15,000 10,000 Scenario II 5, Operating Year Source: Reed & Associates, LLC. Airline Cost Per Enplaned Passenger $25.00 $23.00 Scenario II $21.00 $19.00 $17.00 $15.00 $13.00 Scenario I $11.00 $9.00 $7.00 Forecast $ Operating Year Source: Reed & Associates, LLC.

149 Attachment Report of the Airport Consultant, FINANCIAL EXHIBITS Wayne County Airport Authority, March 22, 2005 B-66 [Page Intentionally Left Blank]

150 Attachment Report of the Airport Consultant, FINANCIAL EXHIBITS Wayne County Airport Authority, March 22, 2005 B-67 Financial Exhibits A to H

151 Exhibit A AIR TRAFFIC Detroit Metropolitan Wayne County Airport For Operating Years Ending September 30 (In thousands, except as noted) This exhibit is based on information from the sources indicated and assumptions provided by, or reviewed with and adopted by, Airport management, as described in the accompanying text. Inevitably, some 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 Enplaned Passengers OY 2003 OY 2004 OY 2005 OY 2006 OY 2007 OY 2008 OY 2009 OY 2010 OY 2011 Domestic Scheduled Originating 6,710 7,097 7,271 7,486 7,698 7,953 8,198 8,461 8,732 Connecting 8,185 8,760 8,887 9,149 9,427 9,681 9,980 10,299 10,629 Subtotal--Scheduled 14,895 15,857 16,158 16,635 17,125 17,634 18,178 18,760 19,360 Charter Subtotal-- Domestic 14,932 15,929 16,231 16,714 17,211 17,723 18,270 18,854 19,458 B-68 International Scheduled U.S. airlines 1,076 1,125 1,192 1,263 1,339 1,414 1,475 1,517 1,558 Foreign-flag Subtotal--Scheduled 1,281 1,259 1,334 1,413 1,494 1,576 1,645 1,695 1,745 Charter Subtotal--International 1,345 1,389 1,469 1,553 1,640 1,731 1,807 1,865 1,924 Total Enplaned Passengers 16,278 17,317 17,700 18,266 18,851 19,454 20,077 20,719 21,382 Landed Weight (1,000 -lb units) Landed Weight U.S. Airlines 23,461 24,898 25,683 26,260 26,850 27,452 28,068 28,698 29,343 Foreign Flag Cargo Total Landed Weight 24,526 25,985 26,794 27,397 28,013 28,643 29,288 29,947 30,621 Signatory Landed Weight 24,590 25,259 26,081 26,673 27,279 27,898 28,531 29,179 29,841 Non-Signatory Landed Weight Total Landed Weight 25,162 25,985 26,794 27,397 28,013 28,643 29,288 29,947 30,621 Source: Historical: Detroit Metropolitan Wayne County Airport records, U.S. Department of Transportation T100 and Commuter (298c) data, and the Origin & Destination Passenger Ticket Survey. Projection (2005 to 2011): Reed & Associates LLC, March 2005.

152 Exhibit B ESTIMATED PROJECT COSTS: 2005 PROJECTS Detroit Metropolitan Wayne County Airport (in thousands of dollars, except as noted) Project Estimated Project Cost 1. Terminal Projects a. North Terminal Redevelopment Project (1) $ 443,000 b. McNamara Terminal Phase II Project (2) 190,000 Total Terminal Projects $ 633, Airfield Related Projects a. Perimeter Fencing and Security Enhancements $ 2,920 b. Preliminary Design RW 3R/21L Reconstruction 1,700 c. Surface Movement Guidance System (SMCGS) 1,453 d. Runway 3L/21R Planning 700 Total Airfield Related Projects $ 6,773 B Other CIP Projects a. Part 150 Study Update $ 1,700 b. Automated Parking Revenue Management System 5,100 Total Other CIP Projects $ 6,800 TOTAL ALL PROJECTS $ 646,573 Source: Wayne County Airport Authority and Northwest Airlines (Midifeld Terminal Phase II Project). (1) $15 million of the cost of the North Terminal Redevelopment Project will not be financed by the Series 2005 Bonds (2) $15 million of the cost of the McNamara Terminal Phase II Project will not be financed by the Series 2005 Bonds Note: Totals may not add due to rounding.

153 Exhibit B-1 PLAN OF FINANCE: 2005 PROJECTS Detroit Metropolitan Wayne County Airport (in thousands of dollars, except as noted) Estimated Sources of Funding CIP PROJECTS Estimated Project Cost Passenger Facility Charges Federal Grants Prior Bond Proceeds [A] Series 2005 Bonds [B] Future Bonds [C] Total Bonds [A]+[B]+[C] 1. Terminal Projects a. North Terminal Redevelopment Project $ 443,000 $ 2,683 $ - $ 84,317 $ 341,000 $ 15,000 $ 440,317 b. McNamara Terminal Phase II Project 190, ,456 71,544 15, ,000 Total Terminal Projects $ 633,000 $ 2,683 $ - $ 187,773 $ 412,544 $ 30,000 $ 630,317 B Airfield Related Projects a. Perimeter Fencing and Security Enhancements $ 2,920 $ - $ 2,210 $ - $ 710 $ - $ 710 b. Preliminary Design RW 3R/21L Reconstruction 1,700-1, c. Surface Movement Guidance System (SMCGS) 1,453 1, d. Runway 3L/21R Planning Total Airfield Related Projects $ 6,773 $ - $ 4,575 $ - $ 2,198 $ - $ 2, Other CIP Projects a. Part 150 Study Update $ 1,700 $ - $ 1,314 $ - $ 386 $ - $ 386 b. Automated Parking Revenue Management System 5, ,100-5,100 Total Other CIP Projects $ 6,800 $ - $ 1,314 $ - $ 5,486 $ - $ 5,486 TOTAL ALL PROJECTS $ 646,573 $ 2,683 $ 5,889 $ 187,773 $ 420,228 $ 30,000 $ 638,001 Source: Wayne County Airport Authority Note: Totals may not add due to rounding.

154 Exhibit C ESTIMATED SERIES 2005 AND ADDITIONAL BONDS SOURCES & USES Detroit Metropolitan Wayne County Airport (in thousands of dollars, except as noted) Series 2005 Bonds Additional Bonds 1 Total Bonds SOURCES OF FUNDS Par Amount Revenue Bonds $ 524,455 $ 88,575 $ 613,030 Net Premium 10,875-10,875 Total Sources of Funds $ 535,330 $ 88,575 $ 623,905 B-71 USES OF FUNDS Net Deposit to Construction Fund $ 401,615 $ 70,328 $ 471,943 Net Deposit to Capitalized Interest Fund 84,476 8,352 92,827 Deposit to Debt Service Reserve Fund 38,393 6,376 44,769 Bond Insurance 7,058 1,747 8,805 Cost of Issuance 2 3,784 1,772 5,555 Additional Proceeds Total Uses of Funds $ 535,330 $ 88,575 $ 623,905 Source: Citigroup Global Markets, Inc. (3/18/05) 1 Includes bond portion of projects which have received Weighted Majority approval from the Signatory Airlines but yet to be issued. 2 Includes underwriter's discount and other costs of issuance. Note: Totals may not add due to rounding.

155 Exhibit D BOND DEBT SERVICE REQUIREMENTS Detroit Metropolitan Wayne County Airport For Operating Years Ending September 30 (In thousands of dollars, except as noted) This exhibit is based on information from the sources indicated and assumptions provided by, or reviewed with and adopted by, Airport management, as described in the accompanying text. Inevitably, some 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 Senior Lien Bonds debt service OY 2003 OY 2004 OY 2005 OY 2006 OY 2007 OY 2008 OY 2009 OY 2010 OY 2011 Outstanding Senior Lien Bonds 1 [A] $ 99,645 $ 95,554 $ 104,345 $ 110,873 $ 113,833 $ 121,194 $ 122,297 $ 123,611 $ 123,611 Series 2005 Bonds 2 Principal & Interest Portion $ - $ - $ 10 $ 238 $ 1,801 $ 7,751 $ 34,179 $ 38,390 $ 38,383 Total Series 2005 Bonds [B] $ - $ - $ 10 $ 238 $ 1,801 $ 7,751 $ 34,179 $ 38,390 $ 38,383 Additional Bonds 2 B-72 Principal & Interest Portion $ - $ - $ - $ - $ - $ - $ 5,304 $ 6,367 $ 6,361 Total Additional Bonds [C] $ - $ - $ - $ - $ - $ - $ 5,304 $ 6,367 $ 6,361 Total Senior Lien Bonds debt service [D]=SUM[A:C] $ 99,645 $ 95,554 $ 104,354 $ 111,111 $ 115,634 $ 128,945 $ 161,780 $ 168,368 $ 168,355 Coverage requirement Senior Lien Bonds debt service [D] $ 99,645 $ 95,554 $ 104,354 $ 111,111 $ 115,634 $ 128,945 $ 161,780 $ 168,368 $ 168,355 25% of Senior Lien Bonds debt service [E]=0.25x[D] $ 24,911 $ 23,889 $ 26,089 $ 27,778 $ 28,909 $ 32,236 $ 40,445 $ 42,092 $ 42,089 Junior Lien Bonds debt service Series 2001 Junior Lien Bonds 3 Principal & Interest Portion 4 $ 21,970 $ 19,690 $ 22,100 $ 21,598 $ 21,096 $ 21,553 $ 31,308 $ - $ - Total Junior Lien Bonds debt service $ 21,970 $ 19,690 $ 22,100 $ 21,598 $ 21,096 $ 21,553 $ 31,308 $ - $ - Source: Wayne County Airport Authority and Citigroup Global Markets, Inc. 1 Net of capitalized interest. Debt service requirements for the Series 2002A Bonds, which were issued on a variable rate basis, are stated using an interest rate of 3.00%. Debt service requirements for the Series 1996 Bonds are stated using an interest rate of 5.25%. Net of the Series 1993 Bonds refunded by the Series 2003 Bonds. Debt service requirements for the Series 2003A, B and C Bonds are stated using an interest rate of 4.00%. 2 Debt service requirements for the Series 2005 Bonds and Additional Bonds provided by Citigroup Global Markets, Inc. (3/18/05). 3 Debt service requirements for the Junior Lien Bonds, which were issued in 2001 on a variable rate basis, are stated using an interest rate of 4.00%. 4 Principal amortization based on anticipated schedule of LOI reimbursement (FAA Letter of Intent No. AGL-90-01, Amendment No. 9, June 15, 2001). Net of capitalized interest. Note: Totals may not add due to rounding.

156 Exhibit E OPERATION AND MAINTENANCE EXPENSES Detroit Metropolitan Wayne County Airport For Operating Years Ending September 30 (In thousands of dollars, except as noted) This exhibit is based on information from the sources indicated and assumptions provided by, or reviewed with and adopted by, Airport management, as described in the accompanying text. Inevitably, some 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 Description OY 2003 OY 2004 OY 2005 OY 2006 OY 2007 OY 2008 OY 2009 OY 2010 OY 2011 Salaries & Wages Salaries and wages $ 40,890 $ 40,335 $ 42,400 $ 44,011 $ 45,684 $ 47,420 $ 49,222 $ 51,092 $ 53,033 Employee benefits 17,689 17,706 20,500 21,279 22,088 22,927 23,798 24,702 25,641 Total Salaries & Wages $ 58,579 $ 58,041 $ 62,900 $ 65,290 $ 67,771 $ 70,347 $ 73,020 $ 75,794 $ 78,675 B-73 Contractual Services Parking management $ 15,758 $ 9,726 $ 11,500 $ 11,944 $ 12,290 $ 12,820 $ 13,729 $ 14,168 $ 14,622 Employee Shuttle bus 8,364 10,019 10,200 10,608 11,032 11,474 11,933 12,410 12,906 Janitorial services 5,467 3,419 2,200 2,266 2,334 2,404 2,476 2,550 2,627 Security expenses 3,771 3,324 3,300 3,399 3,501 3,606 3,714 3,826 3,940 Other contractual/professional services 10,421 9,549 13,400 13,802 14,216 14,643 15,082 15,534 16,000 Total Contractual Services $ 43,780 $ 36,037 $ 40,600 $ 42,019 $ 43,373 $ 44,946 $ 46,933 $ 48,488 $ 50,095 Operating Expenses Materials and supplies $ 3,334 $ 3,719 $ 4,700 $ 4,888 $ 5,084 $ 5,287 $ 5,498 $ 5,718 $ 5,947 Insurance 3,507 4,248 3,600 3,744 3,894 4,050 4,211 4,380 4,555 Utilities 9,500 9,982 10,563 10,880 11,206 11,991 13,789 14,479 15,203 Building maintenance 4,034 4,473 4,300 4,472 4,651 4,837 5,030 5,232 5,441 Equipment repair 7,805 8,190 8,300 8,632 8,977 9,336 9,710 10,098 10,502 McNamara Terminal O&M expenses 1 28,841 27,825 31,237 31,862 32,499 33,149 33,812 34,488 35,178 Other operating expenses 1,673 3,923 3,400 3,502 3,607 3,715 3,827 3,942 4,060 Total Operating Expenses $ 58,694 $ 62,360 $ 66,100 $ 67,980 $ 69,918 $ 72,365 $ 75,878 $ 78,337 $ 80,886 Non-Operating Expenses 2 $ 3,560 $ 3,707 $ 3,400 $ 1,781 $ 1,781 $ 1,782 $ 1,782 $ 1,766 $ 1,766 Capital acquisitions 942 3,427 4,200 3,990 4,118 4,249 4,385 4,526 4,671 Total Operation and Maintenance Expenses $ 165,556 $ 163,572 $ 177,200 $ 181,060 $ 186,961 $ 193,689 $ 201,999 $ 208,911 $ 216,093 Source: Wayne County Airport Authority and Reed & Associates, LLC. 1 Represents expenses associated with the Master Operation and Maintenance contract for the McNamara Terminal with projections by Northwest Airlines. 2 Represents expenses associated with the Siemens installment purchase contract, remarketing fees and other financing charges. Note: Totals may not add due to rounding.

157 Exhibit F REVENUES Detroit Metropolitan Wayne County Airport For Operating Years Ending September 30 (In thousands of dollars, except as noted) This exhibit is based on information from the sources indicated and assumptions provided by, or reviewed with and adopted by, Airport management, as described in the accompanying text. Inevitably, some 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 Description OY 2003 OY 2004 OY 2005 OY 2006 OY 2007 OY 2008 OY 2009 OY 2010 OY 2011 Airline Revenues Rental and Use Fees Terminal/building rentals and fees South (McNamara) Terminal $ 16,162 $ 16,162 $ 16,575 $ 17,888 $ 17,888 $ 18,188 $ 45,570 $ 46,401 $ 47,086 North Terminal 3,814 3,814 3,814 3,814 3,814 5,240 16,063 16,855 17,259 Hangars/Other Rentals/Utility service fees 1,579 1,600 1,600 1,600 1,600 1,600 1,954 3,052 3,052 Berry International Terminal rentals Subtotal $ 21,672 $ 21,705 $ 22,201 $ 23,514 $ 23,514 $ 25,240 $ 63,587 $ 66,308 $ 67,397 Common-use area rentals $ 300 $ 360 $ 360 $ 360 $ 360 $ - $ - $ - $ - Debt service direct payments 1,936 1,936 1,936 1,936 1,936 1,936 3,034 3,254 3,253 Facilities use fees 6,026 6,000 6,350 6,867 7,254 7,658 8,230 8,493 8,765 Total Rental and Use Fees $ 29,934 $ 30,001 $ 30,847 $ 32,677 $ 33,064 $ 34,834 $ 74,851 $ 78,056 $ 79,415 B-74 Activity Fees Signatory Airlines $ 86,396 $ 84,220 $ 91,636 $ 95,227 $ 97,057 $ 102,152 $ 60,464 $ 62,422 $ 64,532 Non-signatory airlines 2,514 3,749 3,131 3,230 3,267 3,413 2,005 2,054 2,107 Total Activity Fees $ 88,910 $ 87,969 $ 94,767 $ 98,457 $ 100,324 $ 105,565 $ 62,469 $ 64,476 $ 66,639 Total Airline Revenues $ 118,844 $ 117,970 $ 125,614 $ 131,134 $ 133,388 $ 140,399 $ 137,320 $ 142,532 $ 146,054 Non-Airline Revenues Automobile parking $ 32,806 $ 38,842 $ 44,600 $ 45,938 $ 47,270 $ 49,309 $ 52,803 $ 54,493 $ 56,237 Rental car 15,760 16,724 17,900 18,437 19,340 19,981 21,197 21,876 22,576 Concessions: Food and beverage 6,829 8,377 8,690 8,968 9,255 9,551 10,239 10,567 10,905 Retail, news and gift 7,484 7,317 7,625 7,869 8,278 8,874 9,513 9,818 10,132 Telecommunications 2,529 2,712 2,804 2,893 2,986 3,082 3,180 3,282 3,387 Duty Free/Other 5,849 5,095 5,494 5,806 6,133 6,475 6,757 6,974 7,197 In-flight catering 1,091 1, Hotel 1 1, Other Non-Airline Revenues: Employee Shuttle Bus 5,860 4,545 5,300 5,470 5,645 5,825 6,012 6,204 6,403 Ground Transportation - - 4,400 4,541 4,686 4,836 4,991 5,151 5,315 Utility service fees 2,872 2,215 2,200 2,270 2,343 2,418 2,495 2,575 2,658 Interest income Rental income 1,941 3,269 3,200 3,200 3,200 3,200 3,200 3,200 3,200 Other non-airline revenues 4,828 2,606 4,087 3,500 3,500 3,500 3,500 3,500 3,500 Total Non-Airline Revenues $ 89,038 $ 93,113 $ 106,800 $ 109,418 $ 113,188 $ 117,630 $ 124,496 $ 128,276 $ 132,178 Total Revenues $ 207,882 $ 211,084 $ 232,414 $ 240,552 $ 246,575 $ 258,029 $ 261,816 $ 270,808 $ 278,232 Source: Wayne County Airport Authority and Reed & Associates, LLC. 1 Represents revenues generated from the Marriott hotel which ceased operations in No revenues associated with the Westin hotel are anticipated to be generated through the forecast period. Note: Totals may not add due to rounding.

158 Exhibit F-1 CALCULATION OF TERMINAL RENTALS: NEW RATE METHODOLOGY Detroit Metropolitan Wayne County Airport For Operating Years Ending September 30 (In thousands of dollars, except as noted) This exhibit is based on information from the sources indicated and assumptions provided by, or reviewed with and adopted by, Airport management, as described in the accompanying text. Inevitably, some 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. Forecast OY 2009 OY 2010 OY 2011 North Terminal Allocated Costs Debt Service $ 36,256 $ 41,300 $ 41,292 O&M Expenses 14,850 15,296 15,754 Total Costs Allocated to North Terminal $ 51,106 $ 56,595 $ 57,046 Credits PFC Revenue $ 33,396 $ 38,041 $ 38,034 Use Fees from Authority Controlled Gates 1,965 2,673 2,722 Facility Use Fees 1,646 1,699 1,753 Total Credits Allocated to North Terminal $ 37,008 $ 42,413 $ 42,509 Net North Terminal Cost [A] $ 14,098 $ 14,182 $ 14,537 Airline Space-North Terminal (000s) 1 [B] B-75 Terminal Rental Rates Rental rate per square foot =[A]/[B] $ $ $ South (McNamara) Terminal Allocated Costs Debt Service $ 58,561 $ 59,978 $ 59,975 O&M Expenses 44,227 45,112 46,014 Total Costs Allocated to South Terminal $ 102,788 $ 105,090 $ 105,989 Credits PFC Revenue $ 50,634 $ 51,894 $ 51,891 Facility Use Fees 6,584 6,795 7,012 Total Credits Allocated to South Terminal $ 57,218 $ 58,689 $ 58,903 Net South Terminal Cost [C] $ 45,570 $ 46,401 $ 47,086 Airline Space-South Terminal (000s) 2 [D] Terminal Rental Rates Rental rate per square foot =[C]/[D] $ $ $ Terminal Rentals and Use Fees North Terminal $ 16,063 $ 16,855 $ 17,259 South Terminal 45,570 46,401 47,086 Total Terminal Rentals and Use Fees $ 61,633 $ 63,256 $ 64,345 Source: Reed & Associates, LLC 1 Excludes estimated Authority controlled gates and space in the North Terminal (33,000 square feet). 2 Includes Preferential Use Premises and Shared Use Premises. Note: Totals may not add due to rounding.

159 Exhibit F-2 CALCULATION OF FORECAST SIGNATORY AIRLINES ACTIVITY FEES AND COST PER ENPLANED PASSENGER Detroit Metropolitan Wayne County Airport For Operating Years Ending September 30 (In thousands of dollars, except as noted) This exhibit is based on information from the sources indicated and assumptions provided by, or reviewed with and adopted by, Airport management, as described in the accompanying text. Inevitably, some 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 OY 2004 OY 2005 OY 2006 OY 2007 OY 2008 OY 2009 OY 2010 OY 2011 Priority Airport Requirement 1 Operation and Maintenance expenses $ 163,572 $ 177,200 $ 181,060 $ 186,961 $ 193,689 $ 201,999 $ 208,911 $ 216,093 2 Bond Fund 95, , , , , , , ,355 3 Junior Lien Bond Fund 19,690 22,100 21,598 21,096 21,553 31, Operation and Maintenance Reserve Fund Renewal and Replacement Fund Authority Discretionary Fund Airport Development Fund 5,110 3,346 5,506 5,672 5,842 6,017 6,197 6,383 8 Other transfers to the Airport Development Fund ,012 1,045 1,078 1,113 1,148 1,185 Total Airport Requirement $ 285,216 $ 309,417 $ 321,459 $ 331,749 $ 352,518 $ 403,759 $ 386,051 $ 393,464 B-76 Credits Airline rental & use fees $ 30,001 $ 30,847 $ 32,677 $ 33,064 $ 34,834 $ 74,851 $ 78,056 $ 79,415 Non-airline revenues 93, , , , , , , ,178 Non-signatory airline activity fees 3,749 3,131 3,230 3,267 3,413 2,005 2,054 2,107 Other Available Moneys 2 68,642 70,279 74,610 78,788 87, , , ,586 Interest income generated in bond accounts 5,491 6,723 6,297 6,386 7,218 7,495 7,646 7,646 Total Credits $ 200,996 $ 217,781 $ 226,232 $ 234,692 $ 250,366 $ 343,295 $ 323,629 $ 328,932 Calculation of Signatory Airline Activity Fee Signatory Airline activity fee requirement $ 84,220 $ 91,636 $ 95,227 $ 97,057 $ 102,152 $ 60,464 $ 62,422 $ 64,532 Signatory Airline landed weight (1,000 pound units) 25,259 26,081 26,673 27,279 27,898 28,531 29,179 29,841 Signatory Airline activity fee rate (per 1,000 lb. unit) $ 3.33 $ 3.51 $ 3.57 $ 3.56 $ 3.66 $ 2.12 $ 2.14 $ 2.16 Average airline cost per enplaned passenger Airline rental & use fees $ 30,001 $ 30,847 $ 32,677 $ 33,064 $ 34,834 $ 74,851 $ 78,056 $ 79,415 Signatory Airline activity fees 84,220 91,636 95,227 97, ,152 60,464 62,422 64,532 Non-signatory airline activity fees 3,749 3,131 3,230 3,267 3,413 2,005 2,054 2,107 Total airline revenues payable to Authority $ 117,970 $ 125,614 $ 131,134 $ 133,388 $ 140,399 $ 137,320 $ 142,532 $ 146,054 Enplaned passengers (Exhibit A) 17,317 17,700 18,266 18,851 19,454 20,077 20,719 21,382 Average airline cost per enplaned passenger $ 6.81 $ 7.10 $ 7.18 $ 7.08 $ 7.22 $ 6.84 $ 6.88 $ 6.83 Source: Wayne County Airport Authority and Reed & Associates, LLC. 1 Represents revenues transferred from the Automated Vehicle Identification (AVI) system pursuant to the Airline Agreements. 2 Other Available Moneys include passenger facility charges and letter-of-intent reimbursement funds projected to be deposited in the Bond or Junior Lien Bond Funds. Note: Totals may not add due to rounding.

160 Exhibit F-3 OTHER AVAILABLE MONEYS Detroit Metropolitan Wayne County Airport For Operating Years Ending September 30 (In thousands of dollars, except as noted) This exhibit is based on information from the sources indicated and assumptions provided by, or reviewed with and adopted by, Airport management, as described in the accompanying text. Inevitably, some 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 OY 2004 OY 2005 OY 2006 OY 2007 OY 2008 OY 2009 OY 2010 OY 2011 Other Available Moneys Passenger Facility Charge (PFC) Revenues $ 51,342 $ 52,641 $ 55,820 $ 59,738 $ 66,951 $ 101,372 $ 107,597 $ 107,586 Letter of Intent (LOI) Funds 17,300 17,639 18,790 19,050 20,320 19, Other revenues , Total Other Available Moneys $ 68,642 $ 70,279 $ 74,610 $ 78,788 $ 87,271 $ 135,349 $ 107,597 $ 107,586 B-77 Passenger Facility Charges Collection Beginning Balance $ 53,135 $ 73,439 $ 93,093 $ 112,140 $ 129,907 $ 143,152 $ 124,680 $ 102,290 Add: Collection in Year 71,646 72,295 74,868 77,504 80,197 82,900 85,207 87,538 Less: Expenditures in Year 51,342 52,641 55,820 59,738 66, , , ,586 Ending Balance $ 73,439 $ 93,093 $ 112,140 $ 129,907 $ 143,152 $ 124,680 $ 102,290 $ 82,242 Source: Wayne County Airport Authority and Reed & Associates, LLC. 1 Represents release of 2001 Junior Lien Bond Debt Service Reserve Fund available to pay Series 2001 Junior Lien Bond Debt Service. Note: Totals may not add due to rounding.

161 Exhibit G APPLICATION OF REVENUES Detroit Metropolitan Wayne County Airport For Operating Years Ending September 30 (In thousands of dollars, except as noted) This exhibit is based on information from the sources indicated and assumptions provided by, or reviewed with and adopted by, Airport management, as described in the accompanying text. Inevitably, some 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 OY 2003 OY 2004 OY 2005 OY 2006 OY 2007 OY 2008 OY 2009 OY 2010 OY 2011 Revenues Airline revenues (Exhibit F) $ 118,844 $ 117,970 $ 125,614 $ 131,134 $ 133,388 $ 140,399 $ 137,320 $ 142,532 $ 146,054 Non-airline revenues (Exhibit F) 89,038 93, , , , , , , ,178 Other Available Moneys 1 77,953 68,642 70,279 74,610 78,788 87, , , ,586 Interest income 2 8,101 5,491 6,723 6,297 6,386 7,218 7,495 7,646 7,646 Total Revenues $ 293,937 $ 285,216 $ 309,417 $ 321,459 $ 331,749 $ 352,518 $ 403,759 $ 386,051 $ 393,464 B-78 Priority Application of Revenues 1 Operation and Maintenance Fund (Exhibit E) $ 165,556 $ 163,572 $ 177,200 $ 181,060 $ 186,961 $ 193,689 $ 201,999 $ 208,911 $ 216,093 2 Bond Fund (Exhibit D) 99,645 95, , , , , , , ,355 3 Junior Lien Bond Fund 21,970 19,690 22,100 21,598 21,096 21,553 31, Operation and Maintenance Reserve Fund Renewal and Replacement Fund Authority Discretionary Fund Airport Development Fund 5,019 5,110 3,346 5,506 5,672 5,842 6,017 6,197 6,383 8 Other transfers to the Airport Development Fund ,012 1,045 1,078 1,113 1,148 1,185 Total Application of Revenues $ 293,937 $ 285,216 $ 309,417 $ 321,459 $ 331,749 $ 352,518 $ 403,759 $ 386,051 $ 393,464 Source: Wayne County Airport Authority and Reed & Associates, LLC. 1 Includes Passenger Facility Charges and AIP letter-of-intent (LOI) reimbursement funds projected to be deposited in the Bond Fund and/or Junior Lien Bond Fund. 2 Generated in Bond Fund and Bond Reserve Account, and Junior Lien Bond Fund and Junior Lien Bond Reserve Account. 3 Represents revenues transferred from the Automated Vehicle Identification (AVI) system pursuant to the Airline Agreements.

162 Exhibit H FORECAST NET REVENUES AND DEBT SERVICE COVERAGE Detroit Metropolitan Wayne County Airport For Operating Years Ending September 30 (In thousands of dollars, except as noted) This exhibit is based on information from the sources indicated and assumptions provided by, or reviewed with and adopted by, Airport management, as described in the accompanying text. Inevitably, some 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 Debt Service Coverage Calculation OY 2003 OY 2004 OY 2005 OY 2006 OY 2007 OY 2008 OY 2009 OY 2010 OY 2011 Revenues Revenues (Exhibit F) $ 207,882 $ 211,084 $ 232,414 $ 240,552 $ 246,575 $ 258,029 $ 261,816 $ 270,808 $ 278,232 Revenue Fund Balance 1 27,682 28,281 28,909 32,237 40,446 42,093 42,514 42,939 42,939 Other Available Moneys 2 77,953 68,642 70,279 74,610 78,788 87, , , ,586 Interest income (Exhibit G) 8,101 5,491 6,723 6,297 6,386 7,218 7,495 7,646 7,646 Total Revenues and Other Available Moneys $ 321,619 $ 313,497 $ 338,326 $ 353,696 $ 372,196 $ 394,611 $ 446,273 $ 428,990 $ 436,403 Total Revenues and Other Available Moneysadjusted 3 [A] $ 315,136 $ 306,829 $ 332,420 $ 346,644 $ 364,893 $ 386,044 $ 440,384 $ 428,990 $ 436,403 Operation and Maintenance Expenses (Exhibit E) [B] 165, , , , , , , , ,093 Net Revenues [C]=[A-B] $ 149,580 $ 143,257 $ 155,220 $ 165,585 $ 177,932 $ 192,355 $ 238,385 $ 220,079 $ 220,311 Senior Lien Bonds debt service (Exhibit D) [D] $ 99,645 $ 95,554 $ 104,354 $ 111,111 $ 115,634 $ 128,945 $ 161,780 $ 168,368 $ 168,355 Senior Lien Bonds debt service coverage [C]/[D] B-79 Rate Covenant/Additional Bonds Test Revenues (Exhibit F) $ 207,882 $ 211,084 $ 232,414 $ 240,552 $ 246,575 $ 258,029 $ 261,816 $ 270,808 $ 278,232 Interest income (Exhibit G) 8,101 5,491 6,723 6,297 6,386 7,218 7,495 7,646 7,646 Subtotal Revenues $ 215,983 $ 216,574 $ 239,137 $ 246,849 $ 252,961 $ 265,247 $ 269,311 $ 278,455 $ 285,878 Less: Operation and Maintenance Expenses (Exhibit E) $ 165,556 $ 163,572 $ 177,200 $ 181,060 $ 186,961 $ 193,689 $ 201,999 $ 208,911 $ 216,093 Subtotal Revenues $ 50,427 $ 53,003 $ 61,937 $ 65,789 $ 66,000 $ 71,558 $ 67,312 $ 69,543 $ 69,786 PFCs to be deposited in Bond Fund $ 60,753 $ 51,342 $ 52,641 $ 55,820 $ 59,738 $ 66,951 $ 101,372 $ 107,597 $ 107,586 Total funds on deposit to pay Bond Debt Service $ 111,181 $ 104,344 $ 114,578 $ 121,609 $ 125,738 $ 138,509 $ 168,684 $ 177,140 $ 177,372 Less: Senior Lien Bonds debt service (Exhibit D) $ 99,645 $ 95,554 $ 104,354 $ 111,111 $ 115,634 $ 128,945 $ 161,780 $ 168,368 $ 168,355 Subtotal $ 11,536 $ 8,790 $ 10,224 $ 10,498 $ 10,104 $ 9,564 $ 6,904 $ 8,772 $ 9,017 Other Available Moneys 4 $ 17,200 $ 17,300 $ 17,639 $ 18,790 $ 19,050 $ 20,320 $ 33,076 $ - $ - Revenue Fund Balance 27,682 28,281 28,909 32,237 40,446 42,093 42,514 42,939 42,939 Subtotal funds on deposit to pay Junior Lien Bond Debt Service $ 56,418 $ 54,371 $ 56,772 $ 61,526 $ 69,601 $ 71,977 $ 82,494 $ 51,711 $ 51,956 and other required deposits to various other funds Less: Junior Lien Bonds debt service (Exhibit D) $ 21,970 $ 19,690 $ 22,100 $ 21,598 $ 21,096 $ 21,553 $ 31,308 $ - $ - Less: Operation and Maintenance Reserve Fund (Exhibit F-1) Less: Renewal and Replacement Fund (Exhibit F-1) Less: Authority Discretionary Fund (Exhibit F-1) Less: Airport Development Fund (Exhibit F-1) 5 5,019 5,550 4,327 6,519 6,716 6,920 7,130 7,346 7,568 Less: 25% Bonds debt service (Exhibit D) 24,911 23,889 26,089 27,778 28,909 32,236 40,445 42,092 42,089 Subtotal $ 53,647 $ 49,979 $ 53,951 $ 57,066 $ 58,063 $ 62,120 $ 80,425 $ 50,864 $ 51,106 Net Revenues remaining in Revenue Fund $ 2,771 $ 4,392 $ 2,820 $ 4,459 $ 11,538 $ 9,857 $ 2,069 $ 847 $ 850 Source: Wayne County Airport Authority and Reed & Associates, LLC. 1 Represents Revenue Fund Balance as of last day of prior Operating Year. 2 Includes Passenger Facility Charges and AIP letter-of-intent (LOI) reimbursement funds projected to be deposited in the Bond Fund and/or Junior Lien Bond Fund. 3 Includes only Revenues and Other Available Moneys available for deposit in the Bond Fund; excludes certain LOI reimbursement funds only available for deposit in the Junior Lien Bond Fund. 4 Includes LOI reimbursement funds and debt service reserve funds projected to be deposited in the Junior Lien Bond Fund. 5 Includes revenues deposited in the Airport Development Fund which are attributable to the Automated Vehicle Identification (AVI) system. Note: Totals may not add due to rounding.

163 Attachment Report of the Airport Consultant, SUPPLEMENTAL TABLES Wayne County Airport Authority, March 22, 2005 B-80 Supplemental Tables 1 to 13

164 Attachment Report of the Airport Consultant, SUPPLEMENTAL TABLES Wayne County Airport Authority, March 22, 2005 B-81 TABLE 1: POPULATION DISTRIBUTION IN THE AIRPORT SERVICE REGION Population Distribution (in thousands) Population Distribution (in thousands) Historical Projected Counties Genesee Lapeer Lenawee Livingston Macomb Monroe Oakland 1,084 1,194 1,202 1, ,225 1,254 1,282 1,299 St. Clair Washtenaw Wayne 2,112 2,061 2,053 2, ,047 2,033 2,024 2,013 Airport Service Region 5,188 5,456 5,490 5,510 5,516 5,576 5,684 5,791 5,886 State of Michigan 9,295 9,948 10,005 10,043 10,080 9,964 10,121 10,285 10,455 United States 248, , , , , , , , ,927 Note: Data for 1990 and 2000 are April 1st Census counts. Data for all other years are for July 1st. Totals may not add due to rounding. Sources: to 1999 State Population Estimates, Annual Time Series, US Census Bureau, compilied by Michigan Information Center -US Census Bureau Population Estimates Program, Population Division, County Population Estimates and Demographic Components of Population Change: Annual Time Series, April 1990-July 1999, compiled by the Michigan Information Center - US Census Bureau, County Population Estimates, April 1, 2000 to July 1, Population Projections for Lenawee and Lapeer County-Office of State Demographer, Michigan Information Center -Population Projections for Genesee- Genesee County Planner -Population Projections for Livingston, Macomb, Monroe, Oakland, St. Clair, Washtenaw and Wayne- Southeast Michigan Council of Governments (SEMCOG) Year TABLE 2: HISTORICAL AND FORECAST POPULATION Airport Service Region (a) Population (in thousands) State of Michigan United States Airport Service Region (a) State of Michigan United States Historical ,189 9, , % 0.5% 0.8% ,234 9, , % 1.1% 1.0% ,275 9, , % 0.8% 1.7% ,306 9, , % 0.6% 1.3% ,334 9, , % 0.6% 1.2% ,380 9, , % 0.8% 1.2% ,425 9, , % 0.8% 1.2% ,442 9, , % 0.5% 1.2% ,453 9, , % 0.4% 1.2% ,469 9, , % 0.4% 1.2% ,465 9, , % 0.9% 1.1% ,490 10, , % 0.6% 1.0% ,509 10, , % 0.4% 1.0% ,516 10, , % 0.4% 1.0% Forecast ,684 10, , ,791 10, , % 1.6% 4.3% ,886 10, , % 1.7% 8.7% Compounded Annual Growth Rate Historical % 0.8% 1.3% % 0.6% 1.2% % 0.6% 1.1% % 0.6% 1.2% Forecast % 0.1% 0.9% % 0.2% 0.9% Percent Increase (decrease) (a) The Airport Service Region consists of the Detroit-Ann Arbor-Flint Consolidated Metropolitan Statistical Area, which includes the counties of Genesee, Lapeer, Lenawee, Livingston, Macomb, Monroe, Oakland, St. Clair, Washtenaw, and Wayne. (b) Data for 1990, and 2000 are April census counts. All other years are intercensal estimates as of each July 1. Sources: United States: Monthly Estimates of the United States Population, U.S. Bureau of the Census. Forecast-- U.S. Census Bureau, 2004, "U.S. Interim Projections by Age, Sex, Race, and Hispanic Origin," < Internet release date: March 18, 2004 Airport Service Region and State of Michigan: U.S. Census Bureau, County Population Estimates, Released April 9, Populaton Projections for Lenawee and Lapeer Counties - Office of State Demographer, Michigan Information Center. Population Projections for Genesee County - Genesse County Planners. Populaton Projections for Livingston, Macomb, Monroe, Oakland, St. Clair, Washtenaw and Wayne, Southeast Michigan Council of Governments (SEMCOG) September 2003.

165 Attachment Report of the Airport Consultant, SUPPLEMENTAL TABLES Wayne County Airport Authority, March 22, 2005 B-82 TABLE 3: PER CAPITA PERSONAL INCOME United States State of Michigan Airport Service Region Year Dollars % Change Dollars % Change Dollars % Change 1970 $ 4,095 - $ 4,194 - $ 4, , % 4, % 4, % , % 4, % 5, % , % 5, % 6, % , % 5, % 6, % , % 6, % 6, % , % 7, % 7, % , % 7, % 8, % , % 8, % 9, % , % 9, % 10, % , % 10, % 11, % , % 11, % 12, % , % 11, % 12, % , % 12, % 13, % , % 13, % 14, % , % 14, % 16, % , % 15, % 17, % , % 16, % 17, % , % 17, % 19, % , % 18, % 20, % , % 19, % 21, % , % 19, % 21, % , % 20, % 22, % , % 21, % 23, % , % 22, % 25, % , % 23, % 26, % , % 24, % 26, % , % 25, % 28, % , % 26, % 29, % , % 27, % 31, % , % 29, % 31, % , % 29, % 31, % , % 29, % 31, % 2003 $ 31, % $ 30, % Notes: Preliminary state personal income estimates for 2003; 2003 not yet available at the local level Source: U.S. Department of Commerce, Economics and Statistics Administration, Bureau of Economics Analysis, Regional Economic Information System, U.S. Bureau of the Census, Population Estimates and Population Distribution Year Labor Force TABLE 4: CIVILIAN LABOR FORCE AND UNEMPLOYMENT RATES Airport Service Region State of Michigan United States Unemployment Rate Labor Force Unemployment Rate Labor Force Unemployment ,574, , % 4,598, , % 125,840,000 7,047, % ,557, , % 4,592, , % 126,346,000 8,628, % ,605, , % 4,690, , % 128,105,000 9,613, % ,624, , % 4,753, , % 129,200,000 8,940, % ,643, , % 4,823, , % 131,056,000 7,996, % ,637, , % 4,814, , % 132,304,000 7,404, % ,687, , % 4,897, , % 133,943,000 7,236, % ,714, , % 4,961, , % 136,297,000 6,739, % ,756,800 98, % 5,031, , % 137,673,000 6,210, % ,820,200 97, % 5,144, , % 139,368,000 5,880, % ,833,025 91, % 5,170, , % 142,583,000 5,692, % ,821, , % 5,157, , % 143,734,000 6,801, % ,722, , % 5,001, , % 144,863,000 8,378, % ,736, , % 5,042, , % 146,510,000 8,774, % ,699, , % 5,062, , % 147,401,000 8,149, % CAGR: ' % 3.8% 0.6% 3.2% 1.2% 1.1% Note: Data is not seasonally adjusted, and reflects average annual amounts. Sources: U.S. Department of Labor, Bureau of Labor Statistics, Series ID LNU and LNU Michigan Department of Career Development, Employment Service Agency, Office of Labor Market Information. Rate

166 Attachment Report of the Airport Consultant, SUPPLEMENTAL TABLES Wayne County Airport Authority, March 22, 2005 B-83 TABLE 5: DISTRIBUTION OF WAGE AND SALARY EMPLOYMENT BY INDUSTRY Detroit-Ann Arbor-Flint CMSA Employment (thousands) Historical Projected Natural Resources & Mining Construction Manufacturing Wholesale Trade Retail Trade Transportation, Warehousing, & Utilities Information Financial Activities Professional & Business Services Education & Health Services Leisure & Hospitality Other Services (except Public Administration) Government Totals Nonfarm Employment 2, , , , , , ,676.5 Percent Change 14.9% -1.9% -2.3% -1.5% -0.8% 7.5% Distribution (percent) Historical Projected Natural Resources & Mining 0.1% 0.1% 0.1% 0.1% 0.0% 0.1% 0.1% Construction 3.3% 4.3% 4.3% 4.2% 4.0% 4.0% 4.1% Manufacturing 20.3% 18.3% 16.7% 15.8% 15.4% 15.0% 13.6% Wholesale Trade 4.1% 4.2% 4.5% 4.4% 4.4% 4.4% 4.4% Retail Trade 12.4% 11.2% 11.4% 11.2% 11.0% 11.0% 10.6% Transportation, Warehousing, & Utilities 3.2% 3.0% 3.1% 3.1% 3.0% 3.0% 2.8% Information 1.9% 1.8% 1.9% 1.8% 1.8% 1.7% 1.7% Financial Activities 5.6% 4.9% 5.0% 5.2% 5.4% 5.4% 5.3% Professional & Business Services 13.0% 16.7% 16.8% 16.7% 16.7% 17.1% 18.3% Education & Health Services 10.8% 11.1% 11.1% 11.8% 12.1% 12.3% 12.9% Leisure & Hospitality 7.9% 8.2% 8.3% 8.5% 8.7% 8.9% 9.5% Other Services (except Public Administration) 3.7% 3.6% 3.6% 3.7% 3.7% 3.7% 3.7% Government 13.8% 12.6% 13.2% 13.4% 13.6% 13.5% 12.9% Totals Nonfarm Employment 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% TABLE 6: LARGEST EMPLOYERS IN THE AIRPORT SERVICE REGION Rank Company (a) Employees Share 1 Ford Motor Co 65, % 2 General Motors Corp 53, % 3 DaimlerChrysler Corp 36, % 4 University of Michigan 15, % 5 The Detroit Medical Center 13, % 6 Visteon Corp 13, % 7 Henry Ford Health System 13, % 8 Trinity Health 11, % 9 William Beaumont Hospital 10, % 10 State of Michigan 10, % 11 EDS Corp 10, % 12 St. John Health 10, % 13 SBC Communications 9, % 14 University of Michigan Health Centers 7, % 15 Blue Cross Blue Shieldof Michgian and Blue Care Network 7, % 16 Oakwood Healthcare Inc 6, % 17 Kmart Corp 6, % 18 DTE Energy 6, % 19 Comerica Inc 5, % 20 Wayne State University 5, % Total 319, % (a) The list covers only Livingston, Macomb, Oakland, Washtenaw, and Wayne Counties Note: Excludes government entities and school districts Source : Crain's Detroit Business, Crain's Book of Lists, Detroit, 2005 Edition Notes: Based on the new NAICS classification Source: Michigan Department of Labor & Economic Growth, Office of Labor Market Information; (forecast) Economy.com

167 Attachment Report of the Airport Consultant, SUPPLEMENTAL TABLES Wayne County Airport Authority, March 22, 2005 B-84 TABLE 7: HISTORICAL AVIATION ACTIVITY-ENPLANEMENTS Detroit Metropolitan Wayne County Airport OY 1995-OY 2004 For Operating Years Ended September 31 Percent increase/ Year Domestic International Total (decrease) ,782,646 1,308,600 14,091, ,288,325 1,546,492 14,834, % ,717,691 1,559,958 15,277, % ,842,081 1,431,158 15,273, % ,790,071 1,860,731 17,650, % ,844,935 1,887,432 17,732, % ,283,829 1,797,767 17,081, % ,345,141 1,247,416 15,592, % ,932,413 1,345,820 16,278, % ,928,628 1,388,152 17,316, % Compound annual growth rates % 7.6% 4.7% % 5.4% 3.3% % 0.7% 2.3% Note: OY1998 was a ten-month fiscal year. For comparative purpose, it has been adjusted to show 12 months ending September 30, 1998 Source: Wayne County Airport Authority records TABLE 8: HISTORICAL AVIATION ACTIVITY Domestic Originations & Connections Calendar Years E (Unaudited) Calendar Domestic Originations Domestic Connections Year Number % of Total Number % of Total ,983, % 5,383, % ,677, % 5,827, % ,050, % 6,301, % ,323, % 6,781, % ,567, % 7,029, % ,764, % 6,845, % ,229, % 7,848, % ,627, % 7,637, % ,736, % 7,323, % ,327, % 7,695, % ,266, % 7,893, % 2004E 6,958, % 8,589, % Source: U.S. Department of Transportation Origin & Destination Passenger Ticket Survey, 298c Commuter Data, and Airport Activity Statistics Note: 2004 Estimated based on nine months of data

168 Attachment Report of the Airport Consultant, SUPPLEMENTAL TABLES Wayne County Airport Authority, March 22, 2005 B-85 TABLE 9: HISTORICAL AVIATION ACTIVITY Detroit Metropolitan Wayne County Airport Cargo Volumes OY 1994-OY 2004 Cargo by Type (in Tons) Total Cargo Freight and Percent OY Express (a) Mail Tons Incr. (decr.) ,512 55, , % ,768 55, , % ,024 56, , % ,701 47, , % ,755 40, , % ,432 44, , % ,916 40, , % ,447 20, , % ,941 16, , % ,054 4, , % CAGR % -24.7% -5.7% % -4.5% -2.1% % -44.1% -10.1% (a) includes small packages Note: OY1998 was a ten-month fiscal year. For comparative purpose, it has been adjusted to show 12 months ending September 30, 1998 Source: Wayne County Airport Authority records Table 10: Historical Aviation Activity-Operations Detroit Metropolitan Wayne County Airport OY 1995-OY 2004 Operations by Class of Carrier Total Operations Percent Operating Air taxi and General increase Year Air Carrier commuter Aviation Military Number (decrease) ,000 96,293 73,164 1, , % , ,721 83,254 1, , % , ,481 81,298 1, , % , ,889 84,199 1, , % , ,807 71,688 1, , % , ,604 69,306 1, , % , ,661 52,211 1, , % , ,821 18, , % , ,783 16, , % , ,268 15, , % CAGR % 10.6% -1.1% 1.7% 2.1% % 1.8% -31.2% -41.9% -2.1% % 6.6% -15.8% -20.7% 0.2% Note: OY1998 was a ten-month fiscal year. For comparative purpose, it has been adjusted to show 12 months ending September 30, 1998 Source: Wayne County Airport Authority records

169 Attachment Report of the Airport Consultant, SUPPLEMENTAL TABLES Wayne County Airport Authority, March 22, 2005 B-86 TABLE 11: DOMESTIC AND INTERNATIONAL MARKET SHARE Detroit Metropolitan Wayne County Airport For Operating Year 1995 and OY 2004 Percent Percent Percent Percent Domestic OY 1995 of Total of Market OY 2004 of Total of Market America West - 0.0% 0.0% 215, % 1.4% American Airlines 457, % 3.6% 446, % 2.8% American Trans Air 133, % 1.0% 8, % 0.1% Continental Airlines 215, % 1.7% 234, % 1.5% Delta Air Lines 354, % 2.8% 286, % 1.8% Northwest Airlines 9,082, % 71.0% 10,367, % 65.1% Southwest Airlines 521, % 4.1% 449, % 2.8% Trans World Airlines 255, % 2.0% - 0.0% 0.0% United Airlines 401, % 3.1% 354, % 2.2% US Airways 289, % 2.3% 60, % 0.4% Atlantic Coast Airlines - 0.0% 0.0% 44, % 0.3% Atlantic S.E. Airlines - 0.0% 0.0% 4, % 0.0% Business Express 19, % 0.1% - 0.0% 0.0% Comair Airlines 42, % 0.3% 103, % 0.6% Continental Express 44, % 0.4% 63, % 0.4% Independence Air - 0.0% 0.0% 6, % 0.0% Mesaba Aviation 482, % 3.8% 973, % 6.1% Pinnacle Airlines - 0.0% 0.0% 1,201, % 7.5% Spirit Airlines 158, % 1.2% 854, % 5.4% Sun Country 72, % 0.6% - 0.0% 0.0% United Express 11, % 0.1% 6, % 0.0% US Airways Express 3, % 0.0% 133, % 0.8% ValuJet 51, % 0.4% - 0.0% 0.0% Others 34, % 0.3% 19, % 0.1% Charter 152, % 1.2% 93, % 0.6% Subtotal-Domestic 12,782, % 100.0% 15,928, % 100.0% International U.S. Flag American Trans Air 69, % 5.3% 1, % 0.1% Delta Air Lines 3, % 0.3% - 0.0% 0.0% Northwest Airlines 1,001, % 76.5% 1,100, % 79.3% Mesaba Aviation 15, % 1.1% 22, % 1.6% Sun Country 1, % 0.1% - 0.0% 0.0% US Airways % 0.0% - 0.0% 0.0% Foreign Flag British Airways 50, % 3.9% 59, % 4.3% KLM Royal Dutch 115, % 8.8% - 0.0% 0.0% Lufthansa Airlines - 0.0% 0.0% 74, % 5.4% Others 1, % 0.1% 10, % 0.8% Charter 50, % 3.9% 117, % 8.5% Subtotal-International 1,308, % 100.0% 1,388, % 100.0% TABLE 12:HISTORICAL OPERATING RESULTS Detroit Metropolitan Wayne County Airport For Operating Years Ended September 30 (in thousands of dollars) OY 2002 OY 2003 OY 2004 Operating revenues: Landing and related fees $ 81,045 $ 82,294 $ 88,446 Concession fees 36,158 41,654 42,570 Parking fees 29,858 32,806 38,842 Rental facilities 30,772 37,959 36,028 Expense recoveries and other 8,755 12,255 9,341 Total operating revenues 186, , ,228 Operating Expenses: Salaries, wages, and fringe benefits 60,310 60,729 60,239 Parking management expense 15,594 15,758 9,726 Janitorial services 5,336 5,467 3,419 Security 3,525 3,771 3,324 Utilities 12,950 18,829 19,331 Supplies, repairs, and other 59,390 68,157 87,233 Depreciation 60,703 93,586 95,070 Total operating expenses 217, , ,343 Operating income (loss) (31,222) (59,328) (63,115) Nonoperating revenues (expenses): Passenger facility charges 61,056 63,370 67,902 Federal and state grants 6,303 8,478 10,046 Interest income and other 8,270 6,197 7,001 Interest expense (61,199) (82,004) (77,030) Amortization of bond issuance costs (1,310) (1,251) (1,526) Total nonoperating revenue 13,121 (5,209) 6,393 Net loss before capital contributions and transfers (18,101) (64,537) (56,723) Capital contributions 38,341 23,249 57,961 Amortization of contributed capital Operating transfers - - (1,993) Changes in net assets 20,240 (41,288) (755) Net assets - beginning of year 735, , ,404 Net assets - end of year $ 755,692 $ 714,404 $ 713,650 Source: Audited Financial Statements of the Wayne County Airport Authority and Authority records Total Enplanements 14,091, % 17,316, % Source: Wayne County Airport Authority records

170 Attachment Report of the Airport Consultant, SUPPLEMENTAL TABLES Wayne County Airport Authority, March 22, 2005 Appendix 13: Aviation Demand Forecast Detroit Metropolitan Wayne County Airport OY 2005 through OY 2011 For Operating Years ending September 30 These forecasts have been prepared on the basis of the information and assumptions given in the text. The achievement of any forecast is dependent on the occurences of future events which cannot be assured. Therefore, the actual results may vary from the forecast. Historical Forecast Enplaned Passengers OY 2003 OY 2004 OY 2005 OY 2008 OY 2011 CAGR Domestic ( ) Scheduled Originating (a) 6,710 7,097 7,271 7,953 8, % Connecting (a) 8,185 8,760 8,887 9,681 10, % Subtotal--Scheduled 14,895 15,857 16,158 17,634 19,360 Charter Subtotal-- Domestic 14,932 15,929 16,231 17,723 19, % International Scheduled U.S. airlines 1,076 1,125 1,192 1,414 1, % Foreign-flag % Subtotal--Scheduled 1,281 1,259 1,334 1,576 1, % Charter % Subtotal--International 1,345 1,389 1,469 1,731 1, % B-87 Total Enplaned Passengers 16,278 17,317 17,700 19,454 21, % 6.4% 2.2% 3.2% 3.2% Landed Weight (1,000 -lb units) Signatory Landed Weight U.S. Airlines 23,461 24,898 25,683 27,452 29, % Foreign Flag % Cargo % Total Landed Weight 24,526 25,985 26,794 28,643 30, % Signatory Landed Weight 24,590 25,259 26,081 27,898 29, % Non-Signatory Landed Weight % Total Landed Weight 25,162 25,985 26,794 28,643 30,621 Enplaned Cargo (tons) Freight 92,941 98,054 99, , , % Mail 16,427 4,351 4,447 4,595 4, % Total Cargo 109, , , , , % Aircraft Departures Domestic 217, , , , , % International 13,307 13,587 13,355 15,056 16, % Total Departures 230, , , , , % Aircraft Operations Air carrier 330, , , , , % Air taxi and commuter 140, , , , , % General aviation 16,222 15,526 15,604 15,839 16, % Military % Total Operations 487, , , , , % (a) Originating & connecting activity statistics are estimated based on calendar year percentages. Sources: Historical: Wayne County Airport Authority records; U.S. Department of Transportation T100 and Commuter (298c) data, and the Origin & Destination Passenger Ticket Survey. Forecast: Reed & Associates, LLC., February 2005.

171 Attachment Report of the Airport Consultant, INDEX Wayne County Airport Authority, March 22, 2005 B-88 A Additional Airline Approved Projects, 18 Aircraft Operations, 38 Airfares Economics, 42 Price Elasticity, 42 Airfield Capacity, 52 Airline Agreements, 21 Airline Alliance, 47 Airline Consolidation, 46 Airline Industry Contribution to U.S. Gross Domestic Product, 41 Financial Losses, 46 Airport Authority Board Members, 13 Airport Service Region Automotive. See Automotive Industry Consolidated Metropolitan Statistical Area, 13, 25, 26 Fortune 500 Companies, 30 Other Airports, 25 Population, 26 Airport System, 13, 22 America West, 15, 21, 44, 48 American, 15, 21, 30, 41, 44, 46, 51, 52 Automotive Industry, 28 Big Three employment, 28 Production and Sales, 28 Aviation Legislation Aviation and Transportation Security Act, 45 Homeland Security Act of 2003, 45 Security, 45 Explosive Detection System at the Airport, 45 Homeland Security Advisory System, 45 Transportation Security Administration, 45 B Berry Terminal, 16, 17, 18, 23 Big Three Automotive Manufacturers. See Automotive Industry British Airways, 15, 21, 35, 37 Business and Industries Employment Distribution, 28 C Capital Improvement Program 2005 Projects, 16, 17 PFC Eligible, 62 Plan of Finance, 18, 57 Project Costs, 57 Scenarios, 64 Cargo Activity, 38 All-Cargo Airlines, 38 Competition Plan, 48 Connecting Traffic. See Passenger Traffic Continental Airlines Code Share Partners, 14 Signatory Airlines, 21 D Delta Air Lines Code Share Partners, 14 Connecting Traffic, 51 Signatory Airlines, 21 Song, 48 Departures Domestic, 35 International, 15, 37, 47, 48 Regional aircraft, 36 Regional Aircraft, 35 Deregulation Effects of, 42, 50 E Economy Real Consumer Spending, 41 Recession 2001, 40 Employment Civilian Labor Force, 27 Personal Income Airport Service Region, 26 Michigan, 28 Explosive Detection System (EDS), 45, 54 Exports. See International Trade F Fleet. See Northwest, Fleet Mix Forecast Aircraft Departures, 56 Cargo Activity, 55 Enplaned Passengers, 55 International Enplaned Passengers, 55 Landed Weight, 56 H Homeland Security Act of See Aviation Legislation Hotels Airport Westin, 16 I Instrument Flight Rules (IFR), 45 International Aviation Liberalization, 47 Open Skies Agreements, 48 International Trade Exports, 29 J Jet Fuel, 44 K KLM Royal Dutch Airlines Alliance, 47 Open Skies Agreements, 48

172 Attachment Report of the Airport Consultant, INDEX Wayne County Airport Authority, March 22, 2005 B-89 Signatory Airlines, 21 L Labor Costs, 43 Landed Weight Growth, 38 U.S. Airlines, 38 Load Factors, 35 Measure of, 43 Performance, 43 Low Cost Carriers, 48, 51 Destinations Served, 49 M Master Airport Revenue Bond Ordinance, 20 McNamara Terminal, 13, 22 Facility Description, 16 Opening Date, 16 Rates and Charges, 21, 22 Mesaba Aviation, 35 Agreement with Northwest, 50 Catchment Area, 37 Code Share Partners, 14 Destinations Served, 50 Growth in Nonstop Departures, 36 Signatory Airlines, 21 N North Terminal, 22, 57 Rates and Charges, 22 Northwest, 16, 22, 35 Agreement with Mesaba, 50 Alliance, 47 Available Seat Miles, 47 Aviation Demand Forecast, 55 Code Share Partners, 14 Connecting Hub, 14, 36 Connecting Passengers Share of Total, 14 Connecting Traffic, 51 Continental Alliance, 47 Departures Systemwide, 14 Destinations Served, 52 Domestic Market Share, 34, 35 Fleet Mix Acquisitions, 44 Hubs, 50 Impact of Low Cost Carriers, 52 International Gateway, 34 International Market Share, 35 Jet Fuel Cost, 44 Labor Costs 2003, 43 Landed Weight, 38 Load Factors, 43 December 2004, 43 Nonstop Departures, 35 Open Skies Agreements, 48 Origin-Destination Traffic, 33 Pilot Strike, 34 Regional Affiliates, 14, 21, 32, 34, 35, 36, 38, 49, 52 Regional Jets, 50 Regional Operators, 14 Republic Airlines, 32 Scheduled Seats, 35 Share of Enplanements, 14 Share of Origin-Destination Traffic, 14 Share of System-wide Departures, 36 Share Origin-Destination Traffic, 32 Signatory Airlines, 21 Top 20 City Pairs, 46 U.S.-Japan Aviation Agreements, 48 Use and Lease Agreement, 21 Yield, 51 O On-Time Performance, 52 Ordinance, 20 Origin-Destination Traffic Markets, 36 Top 20 O&D, 32, 36, 40, 52 Outstanding Debt, 20, 21, 57 P Parking Facilities, 16 Passenger Traffic Airports Council International, 14 Connecting Traffic, 14, 51 Domestic Activity, 33 Domestic Market Share Charter, 35 Domestic Market Share, 35 International Activity, 33 International Market Share, 35 Year-to-date Activity, 35 International Service, 15 Origin-Destination (O&D) Traffic Non-hubbing Share, 14 Origin-Destination (O&D) Traffic, 14 Pinnacle Airlines, 35 Catchment Area, 37 Code Share Partners, 14 Growth in Nonstop Departures, 36 Signatory Airlines, 21 Public Acts of Michigan, 20 R Rates and Charges, 21 Activity Fees, 22 Methodology, 22 Rate Covenant, 20, 57 Restructuring of Major Airline Service, 50 Role of Hubs, 51 S Security. See Aviation Legislation Series 2005 Bonds Ordinance, 20 Par Amount, 57 Project Costs, 57 Uses of, 57 Signatory Airlines, 21

173 Attachment Report of the Airport Consultant, INDEX Wayne County Airport Authority, March 22, 2005 Smith Terminal, 16, 17, 18, 23, 45, 58, 61 Southwest Airlines Market Share, 52 Net Income, 46 Signatory Airlines, 21 Spirit Airlines Destinations Served, 52 Domestic Market Share, 35 Domestic Markets Served, 39 Enplanements, 52 Signatory Airlines, 21 T Transporation Security Administration. See Aviation Legislation U United Airlines Proposed Merger with US Airways, 46 Signatory Airlines, 21 US Airways Connecting Traffic, 51 Proposed Merger with United Airlines, 46 Signatory Airlines, 21 V Visual Flight Rules (VFR), 45 W Weighted Majority, 21 CIP, 16, 17, 18, 22, 23 Willow Run, 13 Y Yield Measure of, 42 B-90

174 APPENDIX C BOOK-ENTRY SYSTEM

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176 BOOK-ENTRY SYSTEM The description which follows of the procedures and record keeping with respect to beneficial ownership interests in the Series 2005 Bonds; payment of interest and other payments on the Series 2005 Bonds to Participants, as defined below, or Beneficial Owners; confirmation and transfer of beneficial ownership interests in the Series 2005 Bonds; and other bond-related transactions by and between DTC, Participants and Beneficial Owners, is based solely on information furnished by DTC for use in this Official Statement, and the Authority does not take any responsibility for the accuracy or completeness. The Depository Trust Company, New York, New York ( DTC ), will act as securities depository for the Series 2005 Bonds. The Series 2005 Bonds will be issued as fullyregistered bonds registered in the name Cede & Co. (DTC s partnership nominee) or such other name as may be requested by an authorized representative of DTC. One fully-registered Series 2005 Bond certificate will be issued for each stated maturity of the Series 2005 Bonds, each in the aggregate principal amount of such maturity, and will be deposited with DTC. DTC, the world s largest 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 DTC holds and provides asset servicing for over 2 million issues of U.S. and non-u.s. equity issues, corporate and municipal debt issues and money market instruments from over 85 countries that DTC s participants ( Direct Participants ) deposit with DTC. DTC also facilitates the post-trade settlement among Direct Participants of sales and other securities transactions in deposited securities, through electronic computerized book-entry transfers and pledges between Direct Participants accounts. This eliminates the need for physical movement of securities certificates. Direct Participants include both U.S. and non-u.s. 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, in turn, is owned by a number of Direct Participants of DTC and Members of the National Securities Clearing Corporation, Government Securities Clearing Corporation, MBS Clearing Corporation and Emerging Markets Clearing Corporation (NSCC, GSCC, MBSCC and EMCC, also subsidiaries of DTCC), as well as by the New York Stock Exchange, Inc., the American Stock Exchange LLC and the National Association of Securities Dealers, Inc. Access to the DTC system is also available to others such as both U.S. and non-u.s. securities brokers and dealers, banks, trust companies, and clearing corporations 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 its Participants are on file with the Securities and Exchange Commission. More information about DTC can be found at Purchases of Series 2005 Bonds under the DTC system must be made by or through Direct Participants, which will receive a credit for the Series 2005 Bonds on DTC s records. The ownership interest of each actual purchaser of a Series 2005 Bond ( Beneficial Owner ) is in turn to be recorded on the Direct and Indirect Participants records. Beneficial C-1

177 Owners will not receive written confirmation from DTC of their purchases. 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 ownership interests in the Series 2005 Bonds are to be accomplished by entries made on the books of Direct and Indirect Participants acting on behalf of Beneficial Owners. Beneficial Owners will not receive certificates representing their ownership interests in Series 2005 Bonds, except in the event that use of the book-entry system for the Series 2005 Bonds is discontinued. To facilitate subsequent transfers, all Series 2005 Bonds deposited by Direct 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 2005 Bonds with DTC and their registration in the name of Cede & Co. or such other DTC nominee do not effect any change in beneficial ownership. DTC has no knowledge of the actual Beneficial Owners of the Series 2005 Bonds; DTC s records reflect only the identity of the Direct Participants to whose accounts such Series 2005 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. Redemption notices shall be sent to DTC. If less than all of the Series 2005 Bonds are being redeemed, DTC s practice is to determine by lot the amount of the interest of each Direct Participant in the Series 2005 Bonds to be redeemed. Neither DTC nor Cede & Co. (nor any other DTC nominee) will consent or vote with respect to Series 2005 Bonds unless authorized by a Direct Participant in accordance with DTC s Procedures. Under its usual procedures, DTC mails an Omnibus Proxy to the 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 Series 2005 Bonds are credited on the record date (identified in a listing attached to the Omnibus Proxy). Principal and interest payments on the Series 2005 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 Authority or the Trustee 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 (or its nominee), the Trustee or the Authority, subject to any statutory or regulatory requirements as may be in effect from time to time. Payment of principal and interest on the Series 2005 Bonds to Cede & Co. (or such other nominee as may be requested by an authorized representative of DTC) is the responsibility of the Authority or the Trustee, disbursement of such payments to Direct Participants will be the C-2

178 responsibility of DTC, and disbursement of such payments to the Beneficial Owners will be the responsibility of Direct and Indirect Participants. A Beneficial Owner shall give notice to elect to have its Series 2005 Bonds purchased or tendered, through its Participant, to the Remarketing Agent, and shall effect delivery of such Series 2005 Bonds by causing the Direct Participant to transfer the Participant s interest in the Series 2005 Bonds, on DTC s records, to the Remarketing Agent. The requirement for physical delivery of Series 2005 Bonds in connection with a demand for purchase or a mandatory purchase will be deemed satisfied when the ownership rights in the Series 2005 Bonds are transferred by Direct Participants on DTC s records and followed by a book-entry credit of tendered Series 2005 Bonds to the Remarketing Agent s DTC account. DTC may discontinue providing its services as securities depository with respect to the Series 2005 Bonds at any time giving reasonable notice to the Authority or the Trustee. Under such circumstances, in the event that a successor securities depository is not obtained, Series 2005 Bond certificates are required to be printed and delivered. The Authority may decide to discontinue use of the system of book-entry transfers through DTC (or a successor securities depository). In that event, Series 2005 Bond certificates will be printed and delivered. The Authority and the Trustee shall have no responsibility or obligation with respect to (i) the accuracy of the records of DTC, Cede & Co., or any DTC Participant with respect to any ownership interest in the Series 2005 Bonds, (ii) the delivery to any DTC Participant or any other person, other than a registered owner, of any notice with respect to the Series 2005 Bonds, including any notice of redemption, or (iii) the payment to any DTC Participant or any other person, other than a registered owner, or any amount with respect to principal of or interest on the Series 2005 Bonds. C-3

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180 APPENDIX D SUMMARY OF THE AIRLINE AGREEMENTS

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182 SUMMARY OF THE AIRLINE AGREEMENTS Signatory Airlines The following airlines (the Signatory Airlines ) currently are parties to substantially similar agreements relating to the use of the Airport, the payment of terminal rentals and the establishment of activity fees (the Airline Agreements ): American Airlines, America West Airlines, British Airways, Continental Airlines, Delta Air Lines, Federal Express, KLM Royal Dutch Airlines, Lufthansa German Airlines, Mesaba Airlines, Northwest Airlines, Pinnacle Airlines, Southwest Airlines, Spirit Airlines, United Airlines, United Parcel Service Co. and US Airways. Airline Agreements Term. The Airline Agreements executed by Northwest Airlines ( Northwest ), Mesaba Airlines ( Mesaba ) and Pinnacle Airlines ( Pinnacle ) have terms ending September 30, The Airline Agreements with the other Signatory Airlines have terms ending January 1, All of the Airline Agreements may be terminated, suspended or abated under certain conditions. Rentals. The Airline Agreements of those Signatory Airlines operating in the Smith Terminal obligate the Signatory Airlines to pay specified annual rentals for terminal space exclusively or preferentially leased. The rentals are fixed and not subject to change except pursuant to an adjustment clause contemplating an increase or decrease every five years in the rates to be charged for the ensuing five year period, subject to a ten (10%) percent limitation on any increase or decrease. The terminal rentals for the Signatory Airlines operating in the McNamara Terminal are described below under The Airport Use and Lease Agreements. Activity Fees. The Signatory Airlines are obligated under the Airline Agreements to pay an Activity Fee, which for each Operating Year represents each Signatory Airline s pro rata share for such Operating Year (based on landed weight of aircraft) of the Revenue Requirement, which is the difference between (i) the sum of: (a) direct and indirect operation, maintenance and administration expenses of the Airport for such Operating Year, (b) 125% of the amount of principal and interest payable on outstanding airport revenue bonds for such Operating Year, (c) required deposits into the Bond Reserve Account, the Operation and Maintenance Reserve Fund and the Renewal and Replacement Fund for such Operating Year, (d) $350,000 for deposit into the Authority Discretionary Fund to be used at the Authority s discretion for airport system purposes, and (e) $5 million (subject to escalation each year, commencing in Operating Year 2002, based on the Producer Price Index), to be deposited in the Authority s Airport Development Fund to be used by the Authority in its discretion for any lawful Airport-system related capital expenditures, and (ii) all Airport revenues for such Operating Year (including Activity Fees paid by nonsignatory airlines, all exclusive, preferential and common area rentals (including rentals paid by the Signatory Airlines), all international facilities use fees payable with respect to the use of the federal inspection service ( FIS ) facilities at the Airport, all concession revenues and all other nonairline revenues); provided that for each Operating Year, item (b) above shall be reduced by amounts on deposit in the Revenue Fund on the last day of the Operating Year preceding such Operating Year. Payment of Fees and Charges. The Airline Agreements include procedures for charging and payment of airline fees and charges that require the Authority to provide the Signatory Airlines with a projection of rentals and the Activity Fee rate for each Operating Year at least 60 days prior to the beginning of the Operating Year. The Authority also has agreed to revise the D-1

183 projection mid-year, based on actual data available for the Operating Year. Within 60 days after the end of each Operating Year, the Authority is to provide the Signatory Airlines with a preliminary report of rentals and Activity Fees actually chargeable for the prior year. 80% of any additional amounts owed by the Signatory Airlines to the Authority or any refunds the Authority may owe the Signatory Airlines as a result of an overpayment is to be paid within 90 days after the end of such Operating Year. The Authority has agreed to provide the Signatory Airlines with its annual audit for each Operating Year within 180 days after the end of the year, and the balance of any amounts owed by the Signatory Airlines, or to be refunded by the Authority, is due within 30 days thereafter. Certain Authority Covenants. The Airline Agreements obligate the Authority (i) to comply with the revenue retention requirements of the Airport and Airway Improvement Act of 1982, (ii) to use competitive bidding procedures for the award of all maintenance and operation and construction contracts for the Airport, (iii) that all senior appointed Airport officials shall have professional qualifications commensurate with their responsibilities and (iv) to operate Willow Run Airport only as a reliever Airport for the Airport with no scheduled air carrier or public charter passenger service. Weighted Majority Approval. The Airline Agreements provide that a Weighted Majority of the Signatory Airlines can approve additional capital projects for which airport revenue bonds may be issued to pay the costs. A Weighted Majority is defined as either Signatory Airlines which, in the aggregate, landed 85% or more of the landed weight of all Signatory Airlines for the preceding 12-month period for which records are available or all but one of the Signatory Airlines regardless of landed weight. New Airline Agreements. The Airline Agreements of the Signatory Airlines that will occupy the new North Terminal upon completion (America West Airlines, American Airlines, British Airways, Lufthansa German Airlines, Southwest Airlines, Spirit Airlines, United Airlines and US Airways) expire on January 1, Of these airlines, America West Airlines, American Airlines, Spirit Airlines and Southwest Airlines have agreed in writing, in connection with the Weighted Majority approval obtained in 2005 for certain capital projects, that prior to completion of the new North Terminal (currently estimated to be in summer 2008) they will enter into new Airport Use and Lease Agreements with the Authority that will have a term extending to September 30, 2032, will incorporate the methodology for calculating rentals, fees and charges described below under The Airport Use and Lease Agreements, will provide for the preferential lease of space in the new North Terminal upon completion, and otherwise will be substantially the same as the current Airline Agreements. The Authority does not expect that these agreements will be executed until substantially closer to the completion of the North Terminal Redevelopment Project, The Airport Use and Lease Agreements The Airline Agreements of each of Northwest, Mesaba, Pinnacle, British Airways and Lufthansa German Airlines are entitled Airport Use and Lease Agreements (hereinafter referred to the Use and Lease Agreements ). The Use and Lease Agreements provide for a lease of space in the McNamara Terminal. All of the space that Northwest occupies in the McNamara Terminal is leased to Northwest on a preferential use basis; however, space in the international portion of the facility, as well as space in the domestic bag claim area, is available on a shared use basis. In addition to using the shared use premises, Mesaba, Pinnacle, Continental Airlines, Delta Air Lines, British Airways and D-2

184 Lufthansa German Airlines also sublease and operate on some of Northwest s preferential use space. The Authority has the right to require Northwest to make a portion of its preferentially leased premises available to other air carriers, subject to certain rules and priorities. Until the later of the completion date of the new North Terminal or October 1, 2008 (the Rental Rate Change Date ), Northwest and the other Signatory Airlines operating in the McNamara Terminal will pay the rental rates prescribed in the Use and Lease Agreements. For Operating Year 2005 this rental rate is $19.71 per square foot (which is the highest rental rate payable by any other Signatory Airline under the Airline Agreements relating to the Smith Terminal and related concourses). The Use and Lease Agreements currently are being modified to incorporate the following revised methodology for calculating rentals, fees and charges for the use of the Airport and the lease of terminal space, which will begin to apply on the Rental Rate Change Date. This revised methodology has been approved by a Weighted Majority. The new Airport Use and Lease Agreements for the airlines that will occupy the new North Terminal will include the same methodology. Terminal Rental Rates. As of the Rental Rate Change Date, two terminal cost centers will be created the South Terminal Cost Center (includes the McNamara Terminal) and the North Terminal Cost Center. To establish the rental rate to be paid by the Signatory Airlines for each Operating Year, the Authority will allocate between the two terminal cost centers all annual terminal-related operation and maintenance expenses ( O&M Expenses ) and all annual Debt Service on Bonds issued post-1997 to finance the McNamara Terminal and the North Terminal (excluding apron and airfield costs), net of Debt Service to be paid by PFCs. The O&M Expenses for each terminal cost center will include all direct terminal costs and will relate to all space (airline, public, concession, etc.) in the facilities. The annual rental rate for each terminal will be calculated on the basis of dividing the costs allocated to the applicable terminal cost center, net of international facility use fees collected at that terminal and revenue collected for the use of airline space controlled by the Authority, by the total square footage of the space in the terminal leased to the Signatory Airlines. Activity Fees. Activity Fees payable by the Signatory Airlines will continue to be calculated on an Airport residual basis, as described above under Airline Agreements Activity Fees. The Activity Fee calculation for each Operating Year is based on all airport revenue bond Debt Service (net of Debt Service paid by PFCs and federal grant funds) and all O&M Expenses for such Operating Year, minus all non-airline revenue for such Operating Year, all airline rental payments for such Operating Year, all international facility use fees for such Operating Year and all payments for use of the Authority-controlled airline space, if any, in each terminal for such Operating Year. International Facility Use Fees. The Authority currently charges a $4.50 international facility use fee per deplaned international passenger at the McNamara Terminal and a $3.50 international facility use fee per deplaned international passenger at the Berry Terminal. These rates will remain in effect until the Rental Rate Change Date, at which time the Berry Terminal will be closed and the international facility use fee rate associated with the use of the FIS facilities in the McNamara Terminal and the new North Terminal will be identical, and will increase on a schedule set forth in the agreement. D-3

185 Passenger Facility Charges. The Authority is obligated under the Use and Lease Agreements to use PFCs to pay Debt Service on airport revenue bonds issued to pay the costs of certain PFC-eligible projects at the Airport. These projects include the construction of both the McNamara Terminal and the new North Terminal. The Use and Lease Agreements also set forth a required priority for the application of PFCs to pay Debt Service in the event there is insufficient PFC revenue available in any Operating Year to pay all PFC-eligible debt service. Operation and Maintenance of McNamara Terminal. Northwest serves as the Authority s agent for the performance of certain operation and maintenance functions for the McNamara Terminal. In this capacity, Northwest has agreed to operate and maintain all of its leased space in the McNamara Terminal, all common use and public use space in the terminal and all building-wide services (e.g., heating, lighting, and electrical) and to maintain and repair the interior and exterior floors, walls, ceilings and the roof. The Authority maintains responsibility for overseeing the gate allocation and utilization of the shared use space, including the FIS facilities in accordance with an agreed upon protocol, the selection of concessionaires and for police and building security functions in the McNamara Terminal. D-4

186 APPENDIX E SPECIMEN OF MUNICIPAL BOND INSURANCE POLICY

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188 FINANCIAL GUARANTY INSURANCE POLICY MBIA Insurance Corporation Armonk, New York Policy No. [NUMBER] MBIA Insurance Corporation (the "Insurer"), in consideration of the payment of the premium and subject to the terms of this policy, hereby unconditionally and irrevocably guarantees to any owner, as hereinafter defined, of the following described obligations, the full and complete payment required to be made by or on behalf of the Issuer to [PAYING AGENT/TRUSTEE] or its successor (the "Paying Agent") of an amount equal to (i) the principal of (either at the stated maturity or by any advancement of maturity pursuant to a mandatory sinking fund payment) and interest on, the Obligations (as that term is defined below) as such payments shall become due but shall not be so paid (except that in the event of any acceleration of the due date of such principal by reason of mandatory or optional redemption or acceleration resulting from default or otherwise, other than any advancement of maturity pursuant to a mandatory sinking fund payment, the payments guaranteed hereby shall be made in such amounts and at such times as such payments of principal would have been due had there not been any such acceleration); and (ii) the reimbursement of any such payment which is subsequently recovered from any owner pursuant to a final judgment by a court of competent jurisdiction that such payment constitutes an avoidable preference to such owner within the meaning of any applicable bankruptcy law. The amounts referred to in clauses (i) and (ii) of the preceding sentence shall be referred to herein collectively as the "Insured Amounts." "Obligations" shall mean: [PAR] [LEGAL NAME OF ISSUE] Upon receipt of telephonic or telegraphic notice, such notice subsequently confirmed in writing by registered or certified mail, or upon receipt of written notice by registered or certified mail, by the Insurer from the Paying Agent or any owner of an Obligation the payment of an Insured Amount for which is then due, that such required payment has not been made, the Insurer on the due date of such payment or within one business day after receipt of notice of such nonpayment, whichever is later, will make a deposit of funds, in an account with U.S. Bank Trust National Association, in New York, New York, or its successor, sufficient for the payment of any such Insured Amounts which are then due. Upon presentment and surrender of such Obligations or presentment of such other proof of ownership of the Obligations, together with any appropriate instruments of assignment to evidence the assignment of the Insured Amounts due on the Obligations as are paid by the Insurer, and appropriate instruments to effect the appointment of the Insurer as agent for such owners of the Obligations in any legal proceeding related to payment of Insured Amounts on the Obligations, such instruments being in a form satisfactory to U.S. Bank Trust National Association, U.S. Bank Trust National Association shall disburse to such owners, or the Paying Agent payment of the Insured Amounts due on such Obligations, less any amount held by the Paying Agent for the payment of such Insured Amounts and legally available therefor. This policy does not insure against loss of any prepayment premium which may at any time be payable with respect to any Obligation. As used herein, the term "owner" shall mean the registered owner of any Obligation as indicated in the books maintained by the Paying Agent, the Issuer, or any designee of the Issuer for such purpose. The term owner shall not include the Issuer or any party whose agreement with the Issuer constitutes the underlying security for the Obligations. Any service of process on the Insurer may be made to the Insurer at its offices located at 113 King Street, Armonk, New York and such service of process shall be valid and binding. This policy is non-cancellable for any reason. The premium on this policy is not refundable for any reason including the payment prior to maturity of the Obligations. IN WITNESS WHEREOF, the Insurer has caused this policy to be executed in facsimile on its behalf by its duly authorized officers, this [DAY] day of [MONTH, YEAR]. MBIA Insurance Corporation President Attest: Assistant Secretary STD-R-6 4/95 E-1

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190 APPENDIX F AUDITED FINANCIAL STATEMENTS OF THE AIRPORT

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192 WAYNE COUNTY AIRPORT AUTHORITY (A Discretely Presented Component Unit of the Charter County of Wayne, Michigan) COMPREHENSIVE ANNUAL FINANCIAL REPORT For the Year Ended September 30, 2004