LOS ANGELES INTERNATIONAL AIRPORT

Transcription

1 LOS ANGELES INTERNATIONAL AIRPORT INVESTOR PRESENTATION March 19, 2018

2 Disclaimer GENERAL This presentation you are about to view is provided as of March 12, 2018 in connection with the proposed issuance of the Department of Airports of the City of Los Angeles, Los Angeles International Airport, Senior Refunding Revenue Bonds, 2018 Series B (the Bonds ). If you are viewing this presentation after March 12, 2018 there may have been events that occurred subsequent to such date that would have a material adverse effect on the information that is presented in this presentation, and the Department of Airports of the City of Los Angeles (the Department ) does not undertake any obligation to update this presentation. The information provided in this presentation is not warranted as to completeness or accuracy and is subject to change without notice. All numbers contained in this presentation are approximate. ADDITIONAL INFORMATION For further information and a more complete description of the Department and the Bonds, investors are referred to the Preliminary Official Statement of the Department regarding the Bonds dated as of March 12, This presentation is provided for your information and convenience only. Any investment decisions regarding the Bonds should only be made after a careful review of an Official Statement of the Department related to the Bonds. The issuance of the Bonds, and the size and timing of any transaction are subject to, among other things, market conditions. The Department is under no obligation to pursue any transaction, or any particular structure and reserves the right to change or modify its plans as it deems appropriate. Capitalized terms not defined in this presentation have the meanings ascribed to them in the Preliminary Official Statement. NO OFFER OF SECURITIES This presentation does not constitute a recommendation or an offer or solicitation for the purchase or sale of any security or other financial instrument, including the Bonds or other Department securities, or to adopt any investment strategy. Any offer or solicitation with respect to the Bonds will be made solely by means of an Official Statement of the Department related to the Bonds, which describes, among other things the actual terms of the Bonds. In no event shall the Department be liable for any use by any party of, for any decision made or action taken by any party in reliance upon, or for any inaccuracies or errors in, or omissions from, the information contained in this presentation and such information may not be relied upon by any party in evaluating the merits of participating in any transaction mentioned in this presentation. Nothing in these materials constitutes a commitment by the Department to enter into any transaction. No assurance can be given that any transaction mentioned in this presentation could in fact be executed. Past performance is not indicative of future returns, which will vary. Transactions involving the Bonds may not be suitable for all investors. Each investor should consult with his, her or its own advisors as to the suitability of securities or other financial instruments for the investor s particular circumstances. FORWARD-LOOKING STATEMENTS Certain statements included in this presentation constitute forward-looking statements. Such statements are generally identifiable by the terminology used, such as plan, expect, estimate, budget, or other similar words. The achievement of certain results or other expectations contained in such forward-looking statements involves known and unknown risks, uncertainties and other factors which may cause actual results, performance or achievements described to be materially different from any future results, performance or achievements expressed or implied by such forward-looking statements. No assurance can be given that any future results discussed in this presentation will be achieved, and actual results may differ materially from the expectations and forecasts described in this presentation. All projections, forecasts, assumptions, expressions of opinion, estimates and other forward-looking statements are expressly qualified in their entirety by the cautionary statements set forth in this presentation. The Department does not plan to issue any updates or revisions to those forward-looking statements if or when the expectations, or events, conditions or circumstances on which such statements are based, occur. Statements contained in this presentation which involve estimates, forecasts, or other matters of opinion, whether or not expressly so described in this presentation, are intended solely as such and are not to be construed as representations of fact. Further, expressions of opinion, whether or not expressly so described in this presentation, are intended solely as such and are not to be construed as representations of fact. Further, expressions of opinion contained in this presentation are subject to change without notice and the delivery of this presentation will not, under any circumstances, create any implication that there has been no change in the affairs of the Department. By providing the information in this presentation, the Department does not imply or represent (a) that all information provided in this presentation is material to investors decisions regarding investment in the Bonds, (b) the completeness or accuracy of any financial, operational or other information not included in this presentation, (c) regarding any other financial, operating or other information about the Department, or its outstanding securities (including the Bonds), (d) that no changes, circumstances or events have occurred since the dated date of the information provided this presentation or (e) that no other circumstances or events have occurred or that no other information exists concerning the Department, its outstanding securities (including the Bonds) or the contemplated transactions which may have a bearing on Department financial condition, the security for Department securities (including the Bonds), or an investor s decision to buy, sell, or hold any of the Department s securities (including the Bonds). RESTRICTIONS ON USE This presentation may not be reproduced, disseminated, quoted or referred to, in whole or in part. By accessing or otherwise accepting this presentation, you agree not to duplicate, copy, screen capture, electronically store or record this presentation, nor to produce, publish or distribute this presentation in any form whatsoever. NO RELIANCE ON THE DEPARTMENT The Department and the Underwriters make no representations as to the legal, tax, credit or accounting treatment of any transactions mentioned in this presentation, or any other effects such transactions may have on you and your affiliates or any other parties to such transactions and their respective affiliates. You should consult with your own advisors as to such matters and the consequences of the purchase and ownership of securities or other financial instruments. The Department and the Underwriters do not provide tax advice. Any statements contained herein as to tax matters were neither written nor intended to be used and cannot be used by any taxpayer for the purpose of avoiding tax penalties that may be imposed on such taxpayer. SUMMARIES NOT COMPREHENSIVE OR DEFINITIVE This presentation may include brief descriptions of the Department, the Bonds and summaries of the Department s indentures and certain other documents. Such summaries do not purport to be comprehensive or definitive. All references in this presentation to such documents and to any other documents, statutes, reports or other instruments described in this presentation are qualified in their entirety by reference to each such document, statute, report or other instrument. 2

3 Transaction Summary Par Amount* $230,465,000* Senior Refunding Revenue Bonds 2018 Series B (AMT) Structure* Fixed rate bonds, generally level debt service, maturing from 2024 to 2034* Tax Status** Use of Proceeds Security Call Provisions AMT (i) Fund an escrow to refund and defease $265,045,000 Series 2008 A Senior Bonds, and (ii) pay costs of issuance of the Bonds Payable solely from and secured by a pledge of Net Pledged Revenues and certain funds and accounts held by the Senior Trustee To be determined at pricing Ratings Moody s: Aa3 / S&P: AA / Fitch: AA Outlook: Stable Pricing Date* March 21, 2018 Closing Date* April 4, 2018 Senior Manager Ramirez & Co., Inc. Co-Managers Citigroup; The Williams Capital Group, L.P. *Preliminary, subject to change ** The 2018 Series B Bonds will be exempt from California State income tax 3

4 Strong Credit Fundamentals LAX has continued its strong operational and financial performance in FY2017 Premier Domestic & International Gateway Operational Results Largest Origin & Destination (O&D) passenger airport in the U.S. Serves 2 nd largest Combined Statistical Area (CSA) by population, number of households with income >$100,000 and gross regional product 2 nd busiest international gateway airport in the U.S. and the busiest international gateway on the West Coast 41.6 million enplanements, 6.8% more than FY2016 No one carrier accounted for more than 20% of total passenger traffic Financial Results Operating Revenues grew 10.1% from FY2016, led by 10.8% growth in concession revenues Senior Lien Debt Service Coverage = 4.71x Total Debt Service Coverage = 2.90x Capital Development Midfield Satellite Concourse North will provide 12 new gates $2.9 billion of tenant-managed terminal improvement projects underway Updated FY Capital Program of $9.6 billion includes Automated People Mover (APM) System project Applies to the rest of the presentation: - Traffic means passenger enplanements -All percentages and numbers in millions are approximated by rounding 4

5 Large, Wealthy and Diverse Population LAX s Air Trade Area is the Los Angeles CSA the 2 nd largest in the U.S. by population and number of households with income > $100,000 5 Largest Metropolitan Regions (2016) (Amounts in millions) Rank Metropolitan region Population # of Households Income > $100k 1 New York-Newark CSA Los Angeles CSA Chicago-Naperville CSA Washington-Baltimore- Arlington CSA San Jose-San Francisco- Oakland CSA CSA: Combined Statistical Area as defined by Office of Management and Budget. LA CSA: Counties of Los Angeles, Orange, Riverside, San Bernardino, and Ventura Los Angeles CSA accounts for 48% of California s population Region is economic anchor for Southern California Competitive Advantages of the Air Trade Area Large and growing population Wealthy: 1.9 million households in CSA with income in excess of $100,000 Diverse: 30.3% of population is foreignborn, driving strong international travel demand Leading global tourist destination 31.1 million overnight visitors (2016, up 3% from prior year) 7.1 million international visitors (up 6%) Home to world-class attractions, museums and sporting events Sources: U.S. Department of Commerce, Bureau of the Census; Fortune Magazine, Los Angeles Tourism & Convention Board; U.S. Department of Commerce, ITA, National Travel and Tourism Office 5

6 Large, Diverse and Robust Economy A center for international trade, the Los Angeles CSA is also the nation s 2 nd largest by gross regional product The Los Angeles CSA is the second largest CSA in the U.S. with gross regional product of $1.1 trillion (38% larger than next largest, San Francisco) Headquarters to 15 Fortune 500 companies with global business presence and industry diversification The Port of LA, together with the Port of Long Beach, is the busiest U.S. port complex Home to many prestigious higher education and research institutions The CSA accounts for 48.0% of the non-farm employment in California 2016 Gross Regional Product by CSA (billions of dollars) Source: U.S. Department of Commerce, Fortune Magazine, Los Angeles Consular Corps. 6

7 Highly Diversified Air Carrier Mix LAX is served by 19 domestic and 56 foreign flag carriers, with no single airline accounting for more than 20% of enplanements 1 Enplanements by Carrier in FY2017 2,3 Share of Passengers Carried By Largest Airline at Top 10 U.S. Airports 4 received a single FAA certificate and (iii) have completed operational integration, only the surviving entity is presented and the activity for the airlines that are now a part of the surviving airline are included in the information presented (including in years prior to the such merger or acquisition). Due to its date of publication, certain of the information contained in this table is more current than certain of the information contained in the Annual Financial Report of Los Angeles World Airports (Department of Airports of the City of Los Angeles, California) Los Angeles International Airport for the Fiscal Years ended June 30, 2017 and Does not include unscheduled service. 2. For those airlines that (i) were party to a completed merger or acquisition, (ii) have CLT = Charlotte Douglas International Airport DFW = Dallas/Fort Worth International Airport ATL = Hartsfield-Jackson International Airport SEA = Seattle-Tacoma International Airport ORD = Chicago O Hare International Airport SFO = San Francisco International Airport DEN = Denver International Airport LAS = McCarran International Airport JFK = John F. Kennedy International Airport LAX = Los Angeles International Airport 3. Virgin America was acquired by Alaska Airlines in December 2016; however, data for the respective airlines is being presented separately until Fiscal Year 2018 data is available. 4. Top 10 airports based on total enplaned passengers as of the 12 months ending May 2017, airline name represents largest airline at that airport. Source: Los Angeles International Airport records; Airport Consultant 7

8 LAX is an International Gateway LAX is the busiest international gateway on the West Coast, with a balanced mix of enplanements by region LAX was #2 in the U.S. (after JFK) and #1 among West Coast airports for international enplanements during the 12 month period ended May 2017 During this period, LAX served 11.6 million international enplaned passengers and accounted for over 95% of the region s international enplaned passengers By comparison, SFO served 6.3 million of international passengers during this period International Enplanements by Region Top 10 International O&D Market % of Int l O&D Passengers Number of Airlines (Dec. 2017) Average Daily Nonstop Departures (Dec. 2017) London 4.5% 10 6 Tokyo 3.7% 9 6 Mexico City 3.5% 16 7 Guadalajara 3.4% 9 5 Vancouver 3.3% 12 5 Seoul 3.2% 5 3 Shanghai 3.2% 5 4 Taipei 3.1% 5 2 Cancun 2.7% 6 5 Toronto 2.7% 7 3 Source: T100 International, IATA Pax IS; OAG Schedules *For the 12 month period ended May2017 Note: O&D data through December 2017 (latest available) 8

9 LAX Growth in Enplanements FY2017 enplanements of 41.6 million, an increase of 6.8% from FY2016 O&D passengers represented 79.4% of total traffic 70.9% were domestic enplanements, while 29.1% were international enplanements Enplanements grew at a 5-year compound annual growth rate (CAGR) ( ) of 5.7%, outpacing overall U.S. growth of 2.6% Enplanements are projected to grow at a CAGR of 2.6% between FY2017 and FY2024 Actual & Projected Total Enplaned Passengers (FY) Millions Total EPAX 5-Year CAGR ( ): 5.7% Total CAGR ( ): 2.6% 30 Domestic CAGR ( ): 2.3% International CAGR ( ): 3.5% Domestic International Total 9 Source: Los Angeles International Airport records and Airport Consultant

10 Capital Program FY Capital Program totals $9.6 billion and includes APM System costs 31% of total Capital Program costs are expected to be funded by $2.9 billion of Department cash Capital Program by Cost Center (millions) Capital Program Funding Sources (millions) Federal Grants $211.8 PAYGO PFC $261.5 Future Bonds* $4,359.7 LAWA Funds $2,940.5 Series 2018A Subordinate Bonds** $426.5 Prior Bonds $1,283.5 Other Funds $138.6 * Excludes Series 2018A Subordinate Bonds ** Series 2018A Subordinate Bonds are scheduled closed on March 15,

11 Active Construction and Risk Management LAX continues to employ various strategies to design, build, operate, maintain and finance multiple facilities at one time while managing risk Airport Managed Projects Combination of design-bid-build and design-build Provides greater control to the Department for projects with multiple airline tenants Tenant Managed Projects Employed in Airlines/Concessionaires controlled areas to manage business impacts Effective means of managing scope, cost, and schedule Public-Private Partnerships Use Design, Build, Finance, Operate, and Maintain (DBFOM) model to transfer significant risks associated with cost, schedule adherence and operational performance to a developer Balances upfront investment costs with long-term lifecycle investment costs 11

12 Midfield Satellite Concourse North MSC North is designed to improve terminal operations, concessions, and overall passenger experience 12 new gates capable of both domestic and international operations Connection via underground tunnel to TBIT/Bradley West incorporating expanded and efficient baggage processing A total of 800,000 s.f. Designed to reduce reliance on West Remote Gates Status Ground Breaking: February 2017 Expected Completion: Fiscal Year 2020 North Concourse: North Apron: Total Cost: $1.55 billion 0.19 billion $1.74 billion 12

13 Airline Managed Projects Several terminal improvement projects are being managed by the airlines, expanding LAWA s delivery capacity Airline tenants initially finance, control design and construction, and focus on improving efficiencies and enhancing the passenger experience LAWA purchases improvements at an agreed upon price when project components are completed Construction and delivery risk is transferred to the airlines Major Terminal Improvements Under Way Terminal Manager Total Amount 1 Southwest $514 million Terminal 1 Terminal 6 TBIT Baggage Optimization TBITEC $260 million 2/3* Delta $1.8 billion 6/7/8 United $545 million * Also referred to as the North Terminal Improvement Program 13

14 Automated People Mover (APM) System LAWA expects to enter into a DBFOM contract for the APM System The APM System is expected to provide 24-hour access to the Central Terminal Area (CTA), transporting passengers between the CTA and other Airport facilities, including a new consolidated rental car facility (CONRAC), a light rail station, and new public parking facilities In January 2018, LAWA received three responses to a competitive solicitation to select the APM Developer The Department has entered into an early works agreement with LAX Integrated Express Solutions (LINXS): Equity Members ACS Infrastructure Development, Inc. Balfour Beatty Investments, Inc. Bombardier Transportation (Holdings) USA Inc. Fluor Enterprises, Inc. HOCHTIEF PPP Solutions GmbH The APM System is scheduled to be operational in FY

15 LAWA s APM Financial Obligations LAWA expects to contribute to design and construction costs and, after Date of Beneficial Operation (DBO), to make annual availability payments to the APM Developer LAWA will make a series of milestone payments to the APM Developer during construction of the APM system and just after APM DBO These milestone payments and other costs related to the project are expected to be paid from Department funds and net proceeds of future bonds Availability Payments (AP) will have two components and are expected to total approximately $97 million during the first full year of operation APs for maintenance and operation (M&O) expenses APs for capital expenses This does not include debt service on future bonds that the Department may issue to fund its share of APM System project costs APM System capital and operating costs are expected to be paid from a combination of airline rates and charges, passenger facility charges (PFCs), Customer Facility Charges (CFCs), additional rental car payments, and non-airline revenues 15

16 FY2017 Financial Results Operating Revenues grew 10.1% in FY2017, led by 10.8% growth in concession revenues Net Operating Income (before depreciation and amortization) grew by 8.0% to $586.2 million Total debt service coverage remained very strong at 2.90x The DSRFs are fully cash funded Unrestricted cash totaled $791.5 million or 389 days cash on hand REVENUES (000's) FY2016 FY2017 % Change Aviation revenue $803,924 $859, % Concession revenue 398, , % Airport sales and services 2,838 3, % Other operating revenue* 1,158 23,783* -- * Total Operating Revenues $1,206,612 $1,328, % EXPENSES (000's) FY2016 FY2017 % Change Salaries and benefits $387,595 $438,153** 13.0% Contractual services 182, , % Materials and supplies 46,062 43,830 (4.8%) Utilities 36,181 36,043 (0.4%) Other operating expenses 20,738 25, % Allocated administrative charges (9,356) (4,585) (50.9%) Total Operating Expenses $663,879 $742, % NET OPERATING INCOME Before Depreciation and Amortization $542,733 $586, % KEY FINANCIAL METRICS FY2016 FY2017 Senior Bond Debt Service Coverage 6.23x 4.71x Total Debt Service Coverage 3.72x 2.90x Airline CPE $14.83 $15.02 Liquidity DCOH (excluding M&O Reserve) Liquidity DCOH (with M&O Reserve) * FY2017 Other Operating Revenues include $21.0 million of employee salary and overhead reimbursement ** FY2017 Salaries and Benefits includes $17.4 million related to the transfer of Ontario International Airport, and $17.2 million of GASB 68 accrued pension expenses FY2017 increase in Other Operating Expense was mainly due to the accrual and payment of $3.7 million property taxes for Park One parking lot pursuant to the lease covering FY

17 Concession Revenue Growth Management initiatives continue to support concession revenue growth Concession revenues increased from $304.1 million in FY2013 to $441.6 million in FY2017, representing a CAGR of 9.8% Transportation Network Companies (TNC) revenues totaled $33.7 million in FY2017 Landside concession revenue forecasts reflect conservative approach given uncertain long-term impact of TNCs Terminal Concession Revenues Landside Concession Revenues Actual Budget Projected Actual Budget Projected Totals may not add due to rounding Source: City of Los Angeles, Department of Airports for historical information; Airport Consultant for forecasts Other includes, telecommunications, luggage carts and ATM revenue 17

18 Debt and Forecast Debt Service Coverage Debt service coverage is forecast to remain solid LAX has $5.4 billion of long-term bonds outstanding which are 100% traditional fixed rate with a final maturity of While debt service is anticipated to increase over the forecast period, total debt service coverage is forecast to remain in excess of 1.90x in each year CP, $51,438,000 1% Outstanding Debt 2 Forecast Debt Service Coverage Subordinate $1,845,020,000 34% Senior $3,510,415,000 65% 1. As of February 1, 2018; does not include subordinate commercial paper 2. Includes outstanding Commercial Paper as of February 1, 2018; the Commercial Paper Program has a total capacity of $500 million; does not include $426.5 million Series 2018A Subordinate Bonds scheduled to close on March 15, 2018 or the impact of the Series 2018B Senior Bonds Source: Department of Airports of the City of Los Angeles 18

19 Cost per Enplaned Passenger CPE is forecast to rise, but reflects strong airline support for capital development at LAX Projected CPE reflects conservative financing and passenger growth assumptions Projected CPE levels are reasonable in light of high demand, strong O&D base, and LAX s role as an international gateway The current airline agreements, tenant managed projects, and requests for improved facilities by the airlines are evidence of their commitment to, and support for, the Capital Program Forecast Cost per Enplanement Actual Forecast Fiscal Year Source: City of Los Angeles, Department of Airports for budget information; Airport Consultant for forecasts 19

20 Core Credit Features Largest U.S. O&D Airport Solid Financial Metrics 2 nd Largest International Gateway Airport in the U.S. Premier Global Gateway Substantial Net Cash Flow Generation Diversified Air Carrier Base Capital Program Conservative Financial Forecasting Use of Capital Delivery Alternatives Selection of APM Developer Improves Cost Certainty Tenant Investment 20

21 Transaction Timeline and Contact Information The Department plans to issue approximately $230.5 million * of Series 2018B Senior Bonds payable from, and secured by, Net Pledged Revenues Series 2018B Senior Bonds Use of Proceeds Bond Proceeds ($mm) Defease 2008 Series A Bonds $265.0 Costs of Issuance $1.0 Preliminary Schedule Pricing March 21, 2018 Closing April 12, 2018 Total $266.0 Contact Information Los Angeles International Airport Ryan Yakubik (424) Public Resources Advisory Group Jo Mortensen (510) Frasca & Associates Ken Cushine (212) Ramirez & Co., Inc. Ted Sobel (212) *Preliminary, subject to change 21