LOS ANGELES INTERNATIONAL AIRPORT INVESTOR PRESENTATION May 15, 2018
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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 2,3 100% 90% Share of Passengers Carried By Largest Airline at Top 10 U.S. Airports 4 Other 29.7% American Airlines 19.2% 80% 70% 60% Virgin America 4.1% Alaska Airlines 4.3% Southwest Airlines 11.6% United Airlines 14.6% Delta Air Lines 16.4% 50% 40% 30% 20% 10% 0% CLT DFW ATL SEA ORD SFO DEN LAS JFK LAX 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 2016. 1. 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; third party information provided by LAWA rates and charges consultant 3
LAX is an International Gateway LAX is the busiest international gateway on the West Coast, with a balanced mix of enplanements by global region International enplanements at LAX are well diversified among global regions (Asia/Pacific, Americas, Europe) Top 10 international markets are served by multiple airlines with multiple daily non-stop departures from LAX 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 approximately11.6 million international enplaned passengers, slightly less than double the next largest on the west coast, and accounted for over 95% of the southern California region s international enplaned passengers 4
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) (2012-2017) of 5.7%, outpacing overall U.S. growth of 2.6% Actual & Projected Total Enplaned Passengers (FY) Millions 50 40 Total EPAX 5-Year CAGR (2012-2017): 5.7% Total CAGR (2017-2024): 2.6% 30 20 Domestic CAGR (2017-2024): 2.3% 10 International CAGR (2017-2024): 3.5% 0 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 Source: Los Angeles International Airport records and WJ Advisors LLC Report dated 2/21/18 Domestic International Total 5
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 6
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 7
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 Terminal 1 Major terminal improvements under way or under consideration Terminal Manager Total Amount 1 Southwest $514 million Terminal 6 MSC/Bradley West Baggage Optimization TBITEC $185 million 2/3* Delta $1.8 billion 6/7/8 United $545 million 4 American Airlines $1.5 billion** 6 Alaska Airlines $184.5 million** * Also referred to as the North Terminal Improvement Program ** Expected to be submitted to the Board for consideration in the near future 8
Automated People Mover (APM) System LAWA entered into a DBFOM contract for the APM System The DBFOM delivery method for the APM system is designed to drive innovation and create life cycle cost certainty for the 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 The Department has entered into a DBFOM contract with the lowest ultimate cost provider, 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 Future milestone and AP-capital payments are unsecured contractual obligations of LAWA LAWA and LINXS expect to reach financial close in June of 2018 The APM System is scheduled to be operational in FY2023 9
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 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 funded from a combination of airline rates and charges, passenger facility charges (PFCs), Customer Facility Charges (CFCs), additional rental car payments, and non-airline revenues 10
FY2017 Financial Results Operating Revenues grew 10.1% in FY2017, led by 10.8% growth in concession revenues Transportation Network Companies (TNCs) contributed $33.7mm of non-aeronautical revenue in FY2017 Net Operating Income (before depreciation and amortization) grew by 8.0% to $586.2 million Total debt service coverage remained 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 $859,952 7.0% Concession revenue 398,692 441,623 10.8% Airport sales and services 2,838 3,241 14.2% Other operating revenue* 1,158 23,783* -- * Total Operating Revenues $1,206,612 $1,328,689 10.1% EXPENSES (000's) FY2016 FY2017 % Change Salaries and benefits $387,595 $438,153** 13.0% Contractual services 182,659 203,277 11.3% Materials and supplies 46,062 43,830 (4.8%) Utilities 36,181 36,043 (0.4%) Other operating expenses 20,738 25,782 24.3% Allocated administrative charges (9,356) (4,585) (50.9%) Total Operating Expenses $663,879 $742,500 11.8% NET OPERATING INCOME Before Depreciation and Amortization $542,733 $586,189 8.0% 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 * 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 FY2014-2017. 11
Debt Profile LAX has $5.6 billion of long-term bonds outstanding which are 100% traditional fixed rate with a final maturity of 2048 1 Outstanding Debt 2 CP, $60,602,000 1% Subordinate $2,243,555,000 39% Senior $3,391,960,000 60% 1. As of May 16, 2018; does not include subordinate commercial paper 2. Includes outstanding Commercial Paper as of May 16, 2018; the Commercial Paper Program has a total capacity of $500 million Source: Department of Airports of the City of Los Angeles 12
Capital Program Update Capital program cost forecast estimated at $11.8 billion and includes LAWA share of APM System costs Additional projects totaling approximately $2.3 billion have been added to the capital program forecast 32% of total capital program costs are expected to be funded by $3.7 billion of Department cash Anticipated Capital Program Funding Sources* Federal Grants $211.8 PAYGO PFC $261.5 Future Bonds $5,758.6 LAWA Funds $3,740.5 Prior Bonds $1,734.0 Other Funds $138.6 Millions 13
Updated Impacts to Projected Financial Metrics Updated capital program financing plan is expected to include funding through, among other things, up to an additional $1.5 billion in bond proceeds and $0.8 billion in LAWA funds Total LAX Master Senior Indenture debt service coverage in FY2024 is forecast to remain above 3.4x Total LAX debt service coverage (under Master Senior and Subordinate Indentures) in FY2024 is forecast to be in the 1.8x-1.9x range Airline cost per enplaned passenger (CPE) in 2024 is forecast to increase to approximately $27-28 per enplanement LAX debt per enplaned passenger (DPE) in 2024 is forecast to increase to approximately $230 per enplanement CPE is forecast to rise, but reflects strong airline support for capital development at LAX and are reasonable in light of high demand, strong O&D base, and LAX s role as an international gateway 14
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 15
LOS ANGELES INTERNATIONAL AIRPORT INVESTOR PRESENTATION May 15, 2018