Transcript Slide 1

Concession Redevelopment
Los Angeles International Airport
Board of Airport Commissioners
August 9, 2010
Terminals 1, 2, 3, 6, Bradley and Encounter
Updates presented to the Board of Airport Commissioners
– December 21
– February 16
– May 17
– August 9 (today)
2
Why Use Terminal Commercial Manager Model?
Consistent Findings:
1. LAX concessions underperform relative to other airports, and have been
losing ground
2. Underperformance will cost LAWA revenue in the future and the
revenue is needed given our future debt service obligations
3. Concession development can be used to improve the condition of
terminals
4. Major concession agreements expire on December 31, 2010, excluding
TBIT and duty free
5. Bradley West opening requires that new concession operators
participate in design and construction processes
6. Terminal Commercial Manager is the best solution for LAWA
1. Sales and LAWA Revenue
2. Expanding concessions footprint and improving terminal areas
3. ACDBE opportunities
4. Concepts valued by passengers
5. Revitalizing concessions over the duration of long-term agreements
3
Historical Context - Change since 1998
•
LAX lags other large airports in growth in spend rate over the last decade
•
Without a modified course of action LAX will likely continue to fall behind
Change in Spend per Enplaned Passenger
1998-2008
164%
145%
112%
90%
64%
66%
MCO
ATL
72%
74%
LAX
DEN
96%
97%
JFK
CLT
102%
122%
124%
IAH
DFW
112% 114%
106%
79%
PHX
BWI
IAD
SEA
BOS
PHL
ORD
EWR
MSP
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Future Potential – Improve Passenger Satisfaction and Revenue
Potential Sales Increase to LAWA from
Food & Beverage and Retail Concessions
-- Excludes Duty Free Sales --
• Passenger Satisfaction Higher sales/passenger is the
best available metric
• Sales Potential –
Potential increase from program
improvements
Current sales (including inflation for
2014)
Operating at the higher end of
airport industry scale, LAX
should (x-duty free sales):
$108,009,240
$54,004,620
– Realize $54m-$108m in
additional annual sales
– Results in $500m-$1.0b of
additional sales over the life
of the concession
agreements
• LAWA Net Revenue -
$342,029,259
$342,029,259
$342,029,259
$278,101,087
Improving concession fee
structures will determine how
much of the potential upside
LAWA would receive
2008
2014 (CPI only)
2014 Low Range
Note: No increase in passenger enplanements assumed in figures.
2014 High Range
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Changes Since Last Update
1. Uncertainties regarding Terminals 4, 5, 7, and 8
1. Phasing plans
2. Construction schedule
3. Alternative implementation plans undecided at this time
2. Schedule for other terminals
1. LAWA closed on the Terminal 2 transaction on June 30
2. Expiration date for current concession agreements (December 31, 2010). New
operators in Terminals 1, 2, 3, and 6 not expected to be in place before expiration.
3. Window for coordinating with Bradley West design team is closing
4. Risk of affecting Bradley West opening date has increased
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Current Bradley West Schedule Assessment
• Waiting for resolution
of 4, 5, 7, and 8 causes
delays on remaining
program
• Approval process
schedule needs to be
considered and
lengthened
• Running fewer parallel
processes helps
schedule
Bradley West Concession
Development
Base
Case
Duration
(in
weeks)
Revised
Duration
(in
weeks)
Weeks
Gained or
Lost from
Revisions
Draft RFQ Issued for comment
3
1
2
Comments considered
4
2
2
Final RFQ Issued
1
1
0
Responses developed by proposers
8
4
4
10
3
7
Certification of qualified list
6
4
2
RFP Issued to qualified list
1
1
0
16
12
4
8
16
-8
TCM designates subtenants
12
12
0
TCM design
20
16
4
LAWA approval of design
8
4
4
Plan check/bid
1
1
0
Final permits
1
1
0
Total Weeks
99
78
21
Weeks (until April 2012)
77
77
Schedule deficit
-22
-1
Task
Evaluation by LAWA
Responses developed proposers
Award
7
Revised Competitive Process – Three Shorter Phases
1. Qualify
•
Use one RFQ to create a qualified list for all available terminals –
Eliminate concept of RFQs based on specified terminal grouping
•
Focus would be on experience with TCM models elsewhere – Not about ideas for LAX
•
Evaluation committee would score responses to create qualified list
2. Propose
•
Facility groupings determined at RFP stage (rather than the earlier RFQ)
•
All qualified prospers would be invited to propose on any LAWA-defined terminal group
•
Proposals would require LAX-specific conceptual design, marketing plan, ACDBE program,
transition plan, financial proposals, etc.
•
Degree of design development would be reduced from previous plans to accelerate schedule
•
Evaluation committee would score and ranked responses
3. Award
•
Board award would be in the form of a “Management and Development Agreement” which
would automatically convert to a “Concession and Lease Agreement” upon satisfactory
completion of a “Definitive Improvement Plan”
•
#2 ranked firm would be on stand-by for each opportunity if the “Definitive Improvement Plan”
fails to materialize
•
Each TCM would manage incumbent concessionaires in assigned terminals while “Definitive
Improvement Plan” is in development
•
TCM would select subtenant operators of areas in terminals after award
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Proposed TCM Scope and Services - No Changes
•
Required and Optional
–
Design and construction of terminal improvements, including concession shell space
–
Funding improvements
–
Developing phasing and transition plans
–
Managing initial and recurring subtenant leasing process
–
Managing construction by subtenants
–
Developing opportunities for subtenants providing the following services
•
•
Food & beverage, retail, free wifi, vending, ATM, currency exchange, business
services, per-use and common-use lounges
Excluded
–
Advertising/media
–
Self-operating concession areas
–
Subleasing to duty free operations and other airport-wide concessions (e.g., pay
phones, luggage carts)
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Next Steps
•
Issue draft RFQ for comment
•
Receive comments and issue one RFQ for all terminals
•
Finalize terminal groups and prepare RFP
Above scheduled for completion before September 20
•
Receive RFQ responses and finalize list of qualified firms
•
Issue RFPs
Total duration of tasks listed above is about four months
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