Update to Airport Committee February 23, 2016 · 2016-02-25 · When KCI opened in 1972: Airlines operated 184 daily departures 4 1972 Service Levels at KCI Source: Published flight

Kansas City Aviation DepartmentUpdate to Airport Committee – February 23, 2016

1

When KCI opened in 1972: 13 airlines served Kansas City

Propeller Service Mixed Service Jet Service

Air Midwest Ozark (4%) Braniff (29%)

Allen Aviation Frontier (13%) Continental (8%)

Horizon North Central Delta (4%)

Skyway TWA (34%)

Trans MO Airlines United (6%)

2

1972 Service Levels at KCI

Source: Published flight schedules. Percentage represents airline seat share at MCI. Airlines with no percentage account for <1% of seat share

When KCI opened in 1972: 48 routes had nonstop service

3


400 mi

PropellerJetMixed

When KCI opened in 1972: Airlines operated 184 daily departures

4


Source: Published flight schedules. Percentage represents departure share at MCI.

1-25 Seats

13%

26-50

17%

51-100

33%

101-150

38%

151-200

0%

Prior to 1978: Government ControlCivil Aeronautics Board (CAB) had three primary functions

◦ Award routes to airlines

◦ Limit the entry of air carriers into new markets

◦ Set route-specific fares

After 1978: DeregulationAirlines allowed to implement new strategies

◦ Shift from point-to-point to hub-and-spoke network

◦ Fare stratification

◦ Competition between carriers

◦ Route additions / subtractions

◦ New airlines / consolidation

5

US Airline Deregulation – 1978

6

US Airline Consolidation

Source: Airlines for America

February 2016: 10 airlines serve Kansas City

Propeller Service Mixed Service Jet Service

(0%) United (9%) Southwest (52%) Delta (16%)American (16%) Spirit (3%)Frontier (2%) Allegiant (1%)Alaska (1%) Air CanadaAeromexico/Funjet

7


Source: Published flight schedules. Percentage represents airline seat share at MCI. Airlines with no percentage account for <1% of seat share

February 2016: 44 routes have nonstop service

8


400 mi

PropellerJetMixed

February 2016: Airlines operate 150 daily departures

9


Source: Published flight schedules. Percentage represents departure share at MCI.

1-25 Seats

0%

26-50

5%

51-100

23%

101-150

54%

151-200

19%

Program requirements include wide-body gates and international gates

10

Wide-body and International Jets

11

Airline Seat Capacity at KCI

Source: Published flight schedules.

199 206

243 220

190 184 180 170 165 160 150 149

107 105 97 98 101 103 104 105

109 112 118

125

-

20

40

60

80

100

120

140

-

50

100

150

200

250

300

350

400

450

500

AV

G S

eats

Per

Dep

artu

re

AV

G D

aily

Dep

artu

res

Daily Departures versus Seats per Departure

AVG Daily Departures

AVG Seats per Departure

12

Airline Load Factors at KCI

Source: US DOT T100 database via Diio Mi.

60%

82%

50%

55%

60%

65%

70%

75%

80%

85%

90%

95%

100%

Load

Fac

tor

KCI Airline Load Factor

Load Factor = Revenue Passenger Miles / Available Seat Miles

-

2,000,000

4,000,000

6,000,000

8,000,000

10,000,000

12,000,000

14,000,000

Annual Passengers at Kansas City International Airport

Total Annual Passengers

US Airline Deregulation

9/11 Terrorist Attacks

Gulf War

HubStatus

13

Passenger Levels at KCI

TWA hub

Eastern hub

Braniffhub

USAirhub

Vanguardhub

Midwest/Frontierhub

Source: Monthly airline traffic reports. US DOT O&D Survey..

-

2,000,000

4,000,000

6,000,000

8,000,000

10,000,000

12,000,000

14,000,000

Annual Passengers at Kansas City International Airport

Connecting Annual Passengers

O&D Annual Passsengers (Local)*Not available prior to 1990

HubStatus

14

Passenger Levels at KCI

TWA hub

Eastern hub

Braniffhub

USAirhub

Vanguardhub

Midwest/Frontierhub

Source: Monthly airline traffic reports. US DOT O&D Survey. O&D Data is not available prior to 1990.

18% of all passengers connecting

5% of all passengers connecting

15

US Airline Profitability

Source: Data – US DOT, Graph – USA Today. Headline – Atlanta Journal Constitution

Salaries, Wages, and Benefits

41%

Maintenance Materials and Repairs

7%

Aircraft Rentals 2%

Depreciation and Amortization

6%

Acquisition and Integration

0%

Other Operating Expenses14%

Landing Fees and Other Rentals

7%

Fuel and Oil23%

16

Airline Operating Expenses

Source: Southwest Airlines 2015 Annual Report

17

Jet Fuel Trends

Source: US Energy Information Administration. U.S. Gulf Coast Kerosene-Type Jet Fuel Spot Price FOB, US$ per gallon

$0.97

$2.40

$3.89

$1.37

$3.27 $2.92

$1.08

$0.00

$0.50

$1.00

$1.50

$2.00

$2.50

$3.00

$3.50

$4.00

$4.50

$U

SD/g

al

Jet Fuel Price - $USD per Gallon

Jet Fuel $USD/gal

18

Average Fare vs. Jet Fuel

$0.00

$0.50

$1.00

$1.50

$2.00

$2.50

$3.00

$3.50

$4.00

$4.50

$0

$50

$100

$150

$200

$250

$U

SD/g

al

Ave

rage

Far

e

Jet Fuel $USD/gal

Domestic AVG Fare

Source: US Energy Information Administration. U.S. Gulf Coast Kerosene-Type Jet Fuel Spot Price FOB, US$ per gallon. US DOT O&D Survey.

19

Peer Comparison – San Jose

$0

$2

$4

$6

$8

$10

$12

$14

$16

$18

$20

$0

$50

$100

$150

$200

$250

Co

st p

er E

np

lan

ed P

asse

nge

r

Ave

rage

Far

e

Average Fare vs. CPE

Cost per Enplaned Passenger (CPE)

Domestic AVG Fare

SJC Domestic AVG Fare

Source: US DOT O&D Survey and airport annual reports

New SJC terminal opened

20

Peer Comparison – Indianapolis

$0

$2

$4

$6

$8

$10

$12

$14

$16

$18

$20

$0

$50

$100

$150

$200

$250

Co

st p

er E

np

lan

ed P

asse

nge

r

Ave

rage

Far

e



Domestic AVG Fare

IND Domestic AVG FareNew IND terminal opened


21

Peer Comparison – Sacramento

$0

$2

$4

$6

$8

$10

$12

$14

$16

$18

$20

$0

$50

$100

$150

$200

$250

Co

st p

er E

np

lan

ed P

asse

nge

r

Ave

rage

Far

e



Domestic AVG Fare

SMF Domestic AVG Fare

New SMF terminal opened


22

Kansas City Fares vs. CPE

$0

$2

$4

$6

$8

$10

$12

$14

$16

$18

$20

$0

$50

$100

$150

$200

$250

Co

st p

er E

np

lan

ed P

asse

nge

r

Ave

rage

Far

e



Domestic AVG Fare

MCI Domestic AVG Fare


23

Passenger Demand Trend

0

2,000,000

4,000,000

6,000,000

8,000,000

10,000,000

12,000,000

O&

D D

om

esti

c A

nn

ual

Pas

sen

gers

O&D Passenger Trend for Peer Airports

MCI

Peer Group Average

Source: US DOT O&D Survey

24

Passenger Demand Trend

0

100,000,000

200,000,000

300,000,000

400,000,000

500,000,000

600,000,000

700,000,000

800,000,000

900,000,000

1,000,000,000

0

2,000,000

4,000,000

6,000,000

8,000,000

10,000,000

12,000,000

O&

D D

om

esti

c A

nn

ual

Pas

sen

gers

O&D Passenger Trend for Peer Airports

IND

MCI

SJC

SMF

Peer Group Average

Domestic US Total

Source: US DOT O&D Survey

25

Missouri’s Two Largest Airports

Source: FEB16 published flight schedules. US DOT O&D Database YE3Q15. Airport annual reports.

Kansas City (MCI) St. Louis (STL)

Airlines 10 10

Daily Departures 138 215

Daily Seats 17,258 21,874

Seats per Departure 125 102

Airline Costs (CPE) $6.70 $13.89

AVG Fare – San Francisco $233.59 $208.06

AVG Fare – Orlando $147.95 $154.00

AVG Fare – Minneapolis $188.05 $174.55

AVG Fare – Dallas $109.28 $152.25

New Routes – 2015 7 8

Strong local traffic

60/40 Point of origin

Limited air service at competing airports in catchment area

26

How Airlines View KCI

$0.00

$0.10

$0.20

$0.30

$0.40

$0.50

$0.60

$0.70

0 200 400 600 800 1,000 1,200 1,400

Rev

enu

e p

er A

vaila

ble

Sea

t M

ile

Stage Length

Undisclosed Carrier - YE3Q15 RASM Curve

Source: US DOT O&D Database, Airline Performance Report YE3Q15 via Diio Mi.

3 new airlines in last four years

8 route additions in the pipeline for 2016

Southwest has added 9 new routes over 5 years

27

Airlines are Growing at KCI

Deregulation of the US airline industry in 1978 forced evolution

Airplanes at KCI are larger than ever before and will continue to grow

Airplanes at KCI are more full than ever before

Airport costs are a small part of airline operating costs

History does not show a direct relationship between air fares and operating costs, which include airport costs

History does not show a direct relationship between passenger demand and terminal facilities

Kansas City is a strong market and airlines continue to expand at KCI

28

Conclusions

Kansas City Aviation DepartmentFinancial Analysis - Terminal Modernization Program FundingFebruary 23, 2016

29

Determine Airport’s Current Funding Capacity

Key Program Assumptions

Changes to Revenues & Operating Expenses Based on those Assumptions

Project Funding Projections

Projected Airport Funding Capacity, Estimated Airline Commitment & Resulting CPE

30

Agenda

31

FY15 Operating StatementFiscal Year 2015 Operating Statement Fiscal Year 2015 Revenues & Expenses

Operating Revenues

Terminal Buildings & Aprons 18,316,372$

Airfield & Runways 19,756,885

Parking 49,938,478

Rental Car 11,315,762

Transportation Facility Charges 5,274,163

Concessions 4,018,871

Property Rental 14,940,107

Other Operating Revenue 1,867,175

Total Operating Revenues 125,427,813

Operating Expenses

Salaries, Wages & Benefits (30,253,844)

Contractual Services (48,296,934)

Commodities (5,147,628)

Total Operating Expenses (83,698,406)

41,729,407

Non-Cash Expenses

Depreciation (53,107,267)

Amortization (27,308)

Total Non-Cash Expenses (53,134,575)

Total Operating Loss (11,405,168)

Non-Operating Revenues

Interest Income 2,248,184

Passenger Facility Charges 20,191,101

Customer Facility Charges 6,704,444

Operating Grant Revenue 306,075

Other Non-Operating Revenue 5,277,607

Total Non-Operating Revenue 34,727,411

Non-Operating Expenses

Interest Expense (8,731,546)

Other Non-Operating Expenses (3,009,659)

Total Non-Operating Expenses (11,741,205)

Total Non-Operating Revenue, Net 22,986,206

Income (Loss) Before Capital Contributuions 11,581,038

Capital Contributions (Federal Grants) 11,832,670

Change in Net Assets 23,413,708$

Operating Income Before Non-Cash Expenses

32

FY15 Operating Statement TransitionFiscal Year 2015 Operating Statement Fiscal Year 2015 Revenues & Expenses

Operating Revenues



Parking 49,938,478







Operating Expenses

Salaries, Wages & Benefits (30,253,844)

Contractual Services (48,296,934)

Commodities (5,147,628)


41,729,407

Non-Cash Expenses

Depreciation (53,107,267)

Amortization (27,308)

Total Non-Cash Expenses (53,134,575)

Total Operating Loss (11,405,168)




Customer Facility Charges 6,704,444


Other Non-Operating Revenue 5,277,607


Non-Operating Expenses

Interest Expense (8,731,546)

Other Non-Operating Expenses (3,009,659)

Total Non-Operating Expenses (11,741,205)

Total Non-Operating Revenue, Net 22,986,206

Income (Loss) Before Capital Contributuions 11,581,038

Capital Contributions (Federal Grants) 11,832,670

Change in Net Assets 23,413,708$

Operating Income Before Non-Cash Expenses

Fiscal Year 2015 Revenues & Expenses Fiscal Year 2015 Revenues & Expenses

Operating Revenues



Parking 49,938,478











Total Non-Operating Revenues 22,745,360

Operating Expenses

Base Operational Expenses (83,698,406)


Net Revenues before Capital &

Debt Service 64,474,767$

33

FY15 Airport Funding CapacityFiscal Year 2015 Revenues & Expenses Fiscal Year 2015 Revenues & Expenses

Operating Revenues

Other Aviation Revenues 3,672,000$

Parking 49,938,478











Total Non-Operating Revenues 22,745,360

Operating Expenses

Base Operational Expenses (83,698,406)


Net Revenues before Capital,

Debt Service & Passenger Airline Commitment 30,073,509$

Passenger Airline Commitment 34,401,257

Enplanements 5,137,881

Cost per Enplaned Passenger (CPE) 6.70$

Rate Making Methodology Residual

Target Cost per Enplanement in $2015 $9.00

Date of Beneficial Occupancy FY2022

Assumed Inflation Rate 3.0%

Assumed Interest Rate on Debt 5.50% First Issue

5.75% Second Issue

Assumed Term on Bonds 35 Years

Assumed Rate of Passenger Growth 1.9%

34

Program Assumptions

FY2015 FY2022

Other Aviation Revenues $ 3,672,000 $ 4,516,000

◦ Rate of Inflation 3.0%

Transportation Facility Revenue 5,274,000 6,487,000


Passenger Facility Charge Revenue 20,191,000 22,997,000

◦ Rate of Passenger Growth 1.9%

Rental Car Revenue 11,316,000 15,817,000



Other Operating Revenue 1,867,000 2,002,000

◦ Fixed 1.0% Annual Growth 1.0%

◦ Property Rental Revenue

◦ Fixed 1.0% Annual Growth 1.0% 14,940,000 16,379,000

◦ One-time Contractual Increase at Maintenance Facility $0.35M

Beginning in FY2019

Parking Revenue 49,938,000 62,699,000


◦ Parking Garage Rate (Daily) 22.00 25.00

Concession Revenue 4,019,000 8,426,000



◦ Post Security Concession Enhancement 50.0%

35

Revenue Growth Assumptions

36

Concession Revenue

Revenue

per

EPAX

Source: FAA Form 127 for Fiscal Years 2014

$0.00

$0.50

$1.00

$1.50

$2.00

$2.50

$3.00

$3.50

$4.00

SJU

MEM S

JC

SN

A

BU

F

AN

C

SA

T

IND

STL

PV

D

AU

S

SM

F

HO

U

PIT

BU

R

MK

E

PD

X

JA

X

RSW

AB

Q

PB

I

BN

A

CLE

BD

L

MSY

RD

U

OA

K

CV

G

ON

T

CM

H

OG

G

DA

L

OM

A

MC

I 20

22

MC

I

FY2015 FY2022

Base Operating Expenses $83,698,000 $102,662,000


2016 Operating Expenses Adjusted to 2016 Budgetary Amount

37

Operating Expense Growth Assumptions

38

Project Funding

Terminal Modernization Program $970M(millions of dollars)

Funding in 2015 dollars

Funding Net of Debt Service Reserve Requirements and Capitalized Interest

Annual Debt Service Requirements $85.8M

GARBs, $603

PFC-Backed Bonds, $241

PFC Pay-as-you-go,

$78

AIP Grants, $49

39

Outstanding Annual Debt Service - MCI

$-

$5,000

$10,000

$15,000

$20,000

$25,000

$30,000

$35,000

$40,000

2016 2017 2018 2019 2020 2021 2022 2023 2024 2025 2026 2027 2028 2029

(000's)

ExistingSenior Lien

ExistingSub. Lien

ExistingPFC Bonds

40

Projected Airport CapacityBase Model New Terminal

FYE 2022

Operating Revenues

Other Aviation Revenues 4,516,000$

Parking 62,699,000


Transportation Fac ility Charge 6,487,000







Passenger Fac ility Charges 22,997,000

Customer Fac ility Charges -


Other Non-Operating Revenue -


Operating Expenses

Base Operating Expenses (102,662,000)


Net Revenue Before Capital,

Debt Service & Passenger Airline Commitment 40,293,000

41

Capital & Debt Service RequirementsMajor Renovation

FYE 2022

Operating Revenues 116,326,000

Non-Operating Revenues 26,629,000

Operating Expenses (102,662,000)



Capital Equipment (2,985,000)

Capital Maintenance (10,149,000)

O&M Reserve Requirement (748,000)

Airport Discretionary Cash (4,000,000)

Debt Service (85,849,000)

Total Capital & Debt Service (103,731,000)

Net Position Before Airline Commitment (63,438,000)

42

Estimated Airline CommitmentMajor Renovation

FYE 2022

Operating Revenues 116,326,000

Non-Operating Revenues 26,629,000

Operating Expenses (102,662,000)



Capital Equipment (2,985,000)

Capital Maintenance (10,149,000)

O&M Reserve Requirement (748,000)

Airport Discretionary Cash (4,000,000)

Debt Service (85,849,000)

Total Capital & Debt Service (103,731,000)

Net Position Before Airline Commitment (63,438,000)

Passenger Airline Commitment 63,438,000

Enplaned Passengers 5,861,000

Cost Per Enplanement in FY2022 Dollars $10.82

Cost per Enplanement in FY2015 Dollars $8.80

43

Rates & ChargesComparison of Cost Per Enplanement

Source: FAA Form 127 for Fiscal Years 2014, except for KCI which is for FY2015

$- $2.00 $4.00 $6.00 $8.00 $10.00 $12.00 $14.00 $16.00 $18.00 $20.00 $22.00

BurbankHoustonOmahaRaleigh

Kansas City (2015)Maui

JacksonSan AntonioPalm Beach

NashvilleFort Meyers

DallasNew Orleans

AustinColumbus

KC NT (2015$)Albuquerque

CincinnatiHartford

BuffaloIndianapolis

Santa AnaMilwaukeeAnchorage

San JoseOntario

PortlandProvidence

OaklandMemphisSan JuanSt. Louis

SacramentoPittsburghCleveland

US Medium Hub Airline Cost Per Enplanement

25th Percentile ($7.51)

50th Percentile ($9.01)

75th Percentile $11.18)

Form of agreement with airlines would be residual. Transferring the financial

risk of program financing to the airlines.

The revenue generating capacity at the airport does not change with the

cost of the program

Airlines pay 100% of the incremental cost of the program

Fiscal Year 2015 Cost per Enplanement (CPE) $6.70

Estimated Program Cost per Enplanement (CPE) in 2015 Dollars is $8.80

44

Summary

Questions?

45

Kansas City Aviation DepartmentUpdate to Airport Committee – February 23, 2016

46

Documents

Update to Airport Committee February 23, 2016 · 2016-02-25 · When KCI opened in 1972: Airlines operated 184 daily departures 4 1972 Service Levels at KCI Source: Published flight