LOS ANGELES INTERNATIONAL AIRPORT March 2016
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LAX Core Credit Factors LAX has strong financial metrics, stable and experienced management, diverse air service and dynamic passenger growth International gateway airport serving numerous markets around the world. Consistent growth of predominantly O&D traffic that is supported by a diverse base of carriers. LAX Core Credit Factors Core Credit Factors Large airport serving a region with favorable demographics and a robust economic environment. Experienced management team is successfully implementing the Capital Program that is expanding and modernizing LAX for the benefit of its stakeholders. Conservative financial management and strong financial metrics that are expected to persist through the capital program. Healthy liquidity and robust debt service coverage that help mitigate investor risk and preserve financial strength. 4
Prudent Management Vision Management s strategic vision has set the foundation for LAX s ability to meet traffic demand The Groundwork Accomplishments The Current Program Future Terminal leasehold acquisitions Critical rehabilitation and renewal projects Controlled measures to efficiently improve facilities Landside improvements to facilitate passenger access and alleviate congestion Adopted new ratesetting methodology and 10 year (through 2022) airline agreements to enable terminal redevelopment Reconstruction and expansion of Tom Bradley International Terminal Airline & concessionaire supported and managed terminal improvement projects Ongoing program of facility repair and maintenance New concessionaire agreements in all terminals Support facilities Central Utility Plant, utilities connections, airfield improvements Balance gate capacity with passenger demand (Midfield Terminal) Maintain efficient utilization of landside, terminal and airside facilities to meet demand 5
Operating, Financial, and Capital LAX has continued its strong operational and financial performance: Air Service Market In CY2015, LAX added service to 14 new destinations (6 domestic; 8 international) Additional service added in CY2016 Operational Results Over 36.1 million enplanements in FY2015 (76.5% O&D), 5.2% more than FY2014 Trend has continued into FY2016 Financial For FY2015: Senior Lien Debt Service Coverage = 3.82x; Total Debt Service Coverage = 2.54x Operating Income (before depreciation and amortization) was up 13.9% from FY2014 to over $400 million Capital Development 2nd Level Roadway work completed as scheduled Terminal 5 Improvements and Bradley West Interior Enhancements are substantially completed Design-Build contract for Midfield Satellite Concourse has been secured 6
Los Angeles Air Trade Area LAX serves the Los Angeles Metropolitan Combined Statistical Area (the Air Trade Area), a vast, diverse, and dynamic market Competitive Advantages of the Air Trade Area Population of 18.6 million (2014): Diverse culture Educated workforce with high personal income Diverse local economy Headquarters 19 Fortune 500 companies with global business presence Home to many prestigious higher education and research institutions Robust tourism industry Leader in Regional Air Traffic LAX accounted for 62% of all traffic in Southern California and 76% of all enplaned passengers in the Air Trade Area International Gateway As of FY2015, LAX is ranked #1 in the West by number of international enplanements, accounting for 93% of all international traffic in Southern California LAX serves a large base of international O&D passengers and is an international hub for the mainline carriers Markets include destinations in Central and South America, the Caribbean, Europe, Asia, Middle East, and the Pacific Non-stop service to 157 markets, including 68 international destinations Source: U.S. Department of Commerce, Bureau of the Census; Fortune Magazine, Fortune 500 Companies, 2015; Los Angeles Tourism & Convention Board; U.S. Department of Commerce, ITA, National Travel and Tourism Office; Non stop service statistics as of August 2015. 7
Diverse Carrier Mix and Distribution LAX has a diverse air carrier mix with 21 domestic and 45 foreign flag carriers* Enplanement Carrier Mix as of FY2015 (1) Delta 16.7% American 18.8% Southwest 11.7% United 17.2% Alaska 4.6% Other 26.7% Virgin America 4.2% Air Carriers Serving LAX* Scheduled U.S. Carriers (21) Foreign Flag Carriers (45) Alaska Airlines Aeroflot Eva Airw ays Allegiant Air AeroMexico Iberia American Airlines Avianca/TACA Japan Airlines Compass Air Berlin KLM Royal Dutch Delta Air Lines Air Canada Korean Airlines Dynamic Airw ays Air China LATAM Express Jet Air France Lan Peru Frontier Airlines Update with Air New Table Zealand 6 from OS LACSA Great Lakes Aviation Air Pacific (Fiji Airw ays) Lufthansa German Haw aiian Airlines Air Tahiti Nui Norw egian Air Shuttle JetBlue Airw ays Alitalia OJSC Transaero Airlines Mesa Airlines All Nippon Philippine Airlines MN Airlines (Sun Country) Asiana Qantas Republic British Airw ays Saudi Arabian Airlines SkyWest Airlines Cathay Pacific Singapore Airlines Southw est Airlines China Airlines SWISS Spirit Airlines China Eastern Thai Airw ays Ultimate Jetcharters China Southern Turkish Airlines United Airlines Copa Virgin Atlantic Airw ays US Airw ays El Al Israel Virgin Australia Virgin America Emirates Volaris Etihad Airw ays Westjet Ethiopian Airlines *As of August 1, 2015 (1) Passengers reported by regional code-sharing affiliates have been grouped with their respective code-sharing partners. American Airline includes US Airways Source: Los Angeles International Airport records; LeighFisher 8
Airline Alliance Network Prevalence and diversity of airline alliances support LAX s role as a competitive international gateway FY2015 Airline Alliance Mix* Other/ Non-Affiliated 32% 24% 23% 21% *Percentages are of enplanements. Source: OAG Aviation Worldwide Ltd, OAG Analyser database, accessed October 2015. 9
Millions Traffic Growth 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 In FY2015, LAX continued to experience strong traffic growth and a healthy passenger mix (76.5% O&D) There were 36.1 million enplaned passengers (EPAX) in FY2015, an increase of 5.2% over FY2014 45 40 35 30 25 20 15 10 5 Historical Enplanements (FY2000-2015) Total EPAX 5-Year CAGR (2010-2015): 4.5% Enplanements for FY2014 & FY2015 Enplaned Passengers FY2014 FY2015 % Change Domestic 25,016,409 26,237,839 4.88% International 9,316,116 9,883,929 6.09% Total 34,332,525 36,121,768 5.21% 0 Domestic International Total CAGR: Compound Annual Growth Rate Source: Los Angeles International Airport records. 10
Midfield Satellite Concourse North MSC - North will improve terminal operations, add concessions facilities, and enhance overall passenger experience at LAX Current Plans: 12 new gates 2 for ADG-VI aircraft and 10 for ADG-V aircraft All gates capable of both domestic and international operations Connection via underground tunnel to TBIT/Bradley West Approximately 760,000 ft 2 Site Plan # of New ADG V Aircraft Boeing 777/787; Airbus 330 Aircraft Type Gates Categorization ADG V1 Boeing 747-8; Airbus 380 Boeing 777/787; 10 ADG V Airbus 330 2 ADG V1 Proposed Facility Boeing 747-8; Airbus 380 ADG: Aircraft Design Group 11
Tenant Managed Projects Many of the Terminal Improvement Projects are being managed by the Airlines and Concessionaires Terminal 1 The terminal improvement projects will be managed and financed by the airlines Tenants control design and construction and are focused on improving efficiencies and enhancing the passenger experience The Department will purchase the improvements at an agreed upon price in phases when they are complete Certain public area improvements will be funded and managed by Westfield Concessions Management, LLC and purchased by the Department when they are complete. The total cost of these projects is estimated at $145 million Terminal Improvements in the Capital Plan Terminal 7 Terminal Manager Total Amount 1 Southwest $526 million 2 LAWA $216 million TBIT/1/2/3/6 Westfield $145 million 4 American $220 million 5 Delta $201 million 6/7/8 United $538 million 12
CONRAC, APM and Associated Facilities The Landside Access Modernization Program (LAMP) seeks to address LAX s challenge of being the busiest O&D airport in the world by relieving traffic congestion and improving passenger experience LAMP is part of the Department s long-term strategic plan and will be managed through the same meticulous, conservative process Initial estimates of total costs are in the range of $4.5 billion to $5.5 billion, which includes approximately $1 billion for the Consolidated Rent-A-Car project (CONRAC).* The CONRAC project and portions of the Automated People Mover may be funded through CFC Revenues and CFC Revenue Bonds. Status: Timing: In February, 2016, LAWA held an Industry Forum for various stakeholder groups including potential investors and contractors Projects expected to be completed after Fiscal Year 2021** **Subject to environmental and other approvals. Construction of some components could begin prior to June 30, 2021 *Scopes, costs, and timing of implementation are subject to substantial revision as project planning and preliminary design proceed. 13
Financial Performance $Million In FY2015: Total operating revenues increased by 8.7%; concession revenues increased by 6.9% Operating expenses increased by 5.8% Net operating income increased by 13.9% $1,200 Actual and Budgeted Financial Results $1,000 $800 $600 $400 Other Operating Revenue Concession revenue Aviation revenue Operating Expenses $200 $- FY2014 FY2015 FY2016 Budget Notes: Revenue include interest income, anticipated BABs subsidy on Series 2009C and 2010C, and Non-Operating TSA Revenue, which are part of Pledged Revenue Source: Department of Airports of the City of Los Angeles 14
Debt Service Coverage Debt service coverage has remained strong The Airline Agreements, Terminal Tariff and Airfield Operating Permits, along with robust nonaeronautical revenue ensure that debt service coverage will remain strong Historical Debt Service Coverage ($000 s) Amounts in thousands Actual (except for coverage ratios) FY2011 FY2012 FY2013 FY2014 FY2015 Net Pledged Revenues (1) $256,273 $277,237 $288,143 $375,936 $421,023 Senior Lien Aggregate Annual Debt Service (2) $ 60,095 $ 60,577 $ 45,486 $ 62,560 $110,237 Senior Lien Coverage 4.26x 4.58x 6.33x 6.01x 3.82x Subordinate Lien Debt Service (3) $ 40,649 $ 45,508 $ 49,904 $ 52,067 $ 55,439 Subordinate Lien Coverage 4.83x 4.76x 4.86x 6.02x 5.61x Total Debt Service Coverage 2.54x 2.61x 3.02x 3.28x 2.54x Notes: (1) As defined in Senior Indenture. Equals Pledged Revenues less LAX Maintenance and Operating Expenses (2) Net of approximately $19 million, approximately $25.2 million, approximately $34.4 million, approximately $96.5 million and approximately $91.0 million passenger facility charge reimbursements for Fiscal Years 2011, 2012, 2013, 2014 and 2015 debt service payments, respectively, pursuant to the Senior Indenture. Presentations of PFC reimbursements in this table differ from those in the audited financial statements of the Department due to differences in accounting practices. (3) Includes actual debt service on Subordinate Commercial Paper Notes Source: City of Los Angeles, Department of Airports 15
Liquidity, Cash on Hand, and DSRF Liquidity is strong, even during a major capital program LAX had approximately $729.0 million in available funds on hand to pay operating expenses at the end of FY2015, representing 412 days cash on hand LAX s $500 million Commercial Paper Program has a remaining capacity of $449.8 million with $50.2 million currently outstanding 1 LAX had approximately $507.7 million in PFC funds on hand at the end of FY2015 Debt Service Reserve Funds are fully cash funded The Operating Permits and Terminal Tariff/Airline Rate Agreements are designed to provide the Department with future funding and discretionary cash 1. As of December 1, 2015 Source: Department of Airports of the City of Los Angeles. Figures are preliminary, unaudited. 16
$Millions Debt Overview LAX has $4.43 billion of long-term bonds outstanding 1 100% fixed-rate, with final maturity in 2045 The average life of the bonds is 16.1 years 82% of long-term debt outstanding are on the Senior Lien In addition, LAX currently has $50.2 million 2 of Subordinate Lien Commercial Paper outstanding Long Term Bonds Debt Service 1 (FY) Current Ratings $500 $400 Subordinate Lien Debt Service Senior Lien Debt Service S&P Moody s Fitch Senior Lien AA Aa3 AA Subordinate Lien AA- A1 AA- $300 $200 $100 $- 1. As of December 1, 2015; does not include subordinate commercial paper; debt service schedule are net of capitalized interest 2. Outstanding Commercial Paper as of December 1, 2015; the Commercial Paper Program has a total capacity of $500 million Source: Financial Advisors 17
Calendar 2016 Planned Bond Issuances The Department is planning to issue Revenue Bonds in Spring and Fall of 2016 to fund capital projects* *Preliminary, subject to change Source: Department of Airports of the City of Los Angeles 18