1. ACI-NA 2013 (FY12) Benchmarking Survey Contact: Economic Affairs and Research Tel: 202-293-8500 Email: EconomicAffairs@aci-na.orgEconomicAffairs@aci-na.org www.aci-na.org October 17, 2013

2. 2 Who Are We? Airports Council International – North America (ACI-NA) represents local, regional and state governing bodies that own and operate commercial airports in the United States and Canada. ACI-NA’s 194 airport members enplane more than 95 percent of the domestic and virtually all the international airline passenger and cargo traffic in North America. The mission of ACI-NA is to advocate policies and provide services that strengthen the ability of commercial airports to serve their passengers, customers and communities. ACI-NA is the largest of the five worldwide regions of Airports Council International (ACI).

3. 3 I. Airline Trends Affecting the Airport Environment

4. 4 “If you want to be a millionaire, start with a billion dollars and launch a new airline.” - Sir Richard Branson, Virgin Atlantic Airways founder and CEO “The worst sort of business is one that grows rapidly, requires significant capital to engender the growth, and then earns little or no money. Think airlines.” - Warren Buffet, Berkshire-Hathaway CEO To start... Source: Wikiquotes

5. 5 Labor and fuel costs make up a majority of airline operating expenses for both legacy and low-cost carriers Sources: 2012 Southwest Airlines Annual Report, United Continental SEC Form 10-K for year ending 12/31/2012 66% Total 54% Total Landing Fees & Other Rent: 6% 5%

6. 6 Fuel prices are stable the last 2 years but remain at high overall historical levels pressuring airline cost structure Source: U.S. Energy Information Administration

7. 7 Labor expenses continue to rise (CAGR=3.2%) Source: US DOT Form 41 via BTS, Schedule T2 & P6 Note:(1) Data for the following airlines: American, Continental, Delta, Northwest, United, US Airways, America West, Southwest, JetBlue, AirTran, Frontier, Virgin America, Alaska, Hawaiian, and Allegiant

8. 8 Fares are recovering from the “Great Recession” but fallen in constant $ over the past 15 years Source: Bureau of Transportation Statistics, National Bureau of Economic Research Note:(1) In 1995 dollars (2) Not controlled for “unbundling” of services (3) For U.S. airlines Contributing Factor Highlights Low-cost carriers Less differentiation in domestic market Distribution channels / fare transparency

9. 9 Relative Rate Comparison – 1) International growing faster than domestic 2) Seat Mile growth driven by International 3) Load factor steadily increasing Source: Bureau of Transportation Statistics, Airlines 4 America See Appendix for Chart Data Note:(1) Load factor includes U.S. airline domestic and international travel

10. 10 Airlines are improving their margins through additional passenger charges Source: DOT Form 41, Diio Mi, MIT Global Airline Industry Program * Excludes Fuel and Transport Related Activity

11. 11 II. Key Airport Trends

12. 12 To continue the journey... Source: Wikiquotes

13. 13 Medians are reported in time-series data to better represent the skewed data distributions in Part II  94 airports responded to the 2013 (FY12) benchmarking survey, and all results are included in the analysis in Part II  Preliminary data cleansing has been completed  Outlier assessments  Missing Values  Almost all ACI-NA survey data is skewed, which fails most normal tests and requires different statistics  Distribution-free or “non-parametric” statistics (quartiles)  See Appendix C

14. 14 Large hub airports are the only US hub size to be showing an upward trend in enplanements

15. 15 Traffic growth at US airports has slowed as compared to FY2011

16. 16 Airline revenue per enplanement (CPE) has stabilized in US airports Estimated

17. 17 Operating expenses per enplanement have stabilized in US and Canadian airports

18. 18 Personnel and service contracts account for 78% of airport operating expenses in fiscal year 2012 Note:(1) Service contracts includes the cost of services paid to commercial enterprises and government agencies excluding amounts paid to third parties for repair and maintenance costs and marketing, advertising and promotions.

19. 19 Personnel compensation and benefits per enplanement continue to trend up, and account for almost 50% of CPE

20. 20 Service contracts per enplanement, which account for 35% CPE, rose in 2012 at US large hub airports Estimated

21. 21 North American airports are continuing to invest at about the same levels over the past 5 years

22. 22 Median Non-aeronautical passenger related revenues continue to rise across all US and Canadian hub sizes

23. 23 Public parking and ground transportation account for 50% of non-airline passenger related revenue Note:(1) Concessions represents revenues to the airport from concessions located in the terminals and at the airsides. This represents income to the airport from concessionaires. This section does not include out-of-terminal concessions revenues. Includes food, beverage, retail, duty free, telecommunications, advertising, etc.

24. 24 Parking and ground transportation revenue is on the rise at US and Canadian medium hub airports

25. 25 Rental car revenue is on the rise in medium and small US hubs, where fewer mass transit options may exist

26. 26 Concession revenue continues its steady upward trend and is significantly higher at Canadian airports

27. 27 Operating revenue has been positively impacted by growth in non-airline revenue

28. Expenses continue outpacing revenues in US small and medium hubs and Canadian airports 28 Note:(1) Average annual growth rate used for Medium hub and All airport categories as a result of the compound annual growth rate being not measurable

29. 29 The operating environment for North American airports continues to be challenging  Growth in US Enplanements has slowed, as compared to FY2011  Passenger Airline Revenue per Enplanement (CPE) has stabilized in US Airports  Growth in Operating Revenue has been most impacted by growth trends in passenger related non-airline revenue  Growth in operating expenses appears to be outpacing growth in operating revenues at airports of all hub sizes  Debt levels are on the rise at US large hub and Canadian airports, however continue to decline at medium and small US airports

30. 30 III. BNA Benchmarking

31. 31 BNA FY12 Non-Airline Passenger Related Revenue per Enplanement

32. 32 BNA FY12 Operating Expense per Enplanement

33. 33 BNA FY12 Aircraft Operations

34. 34 Appendix A Methodology

35. 35 Airport Hub Classification  U.S. Airport Hub Classification per FAA Definition  Large Hub = >1% of U.S. annual enplanements  Medium Hub = 0.25% - 0.99% of U.S. annual enplanements  Small Hub = 0.05% - 0.25% of U.S. annual enplanements  Non-Hub = <0.05% of U.S. annual enplanements  Canadian Airport Hub Classification per participation distribution  Large Hub = > 3,000,000 annual enplanements  Medium Hub = 300,000 – 3,000,000 annual enplanements  Small Hub = < 300,000 annual enplanements Source: FAA

36. 36 Survey Sample Hub Category 05 AIM Survey 06 AIM Survey 2007200820092010201120122013 Industry Total* Large 16192327**25 26 30 Medium 161723212427 252836 Small 11162120212229 2772 Non 367468653328 Canadian 2561071110-- Total 465876778292959894-- *2012 – Industry Total based on FAA 2012 127 Report *2012 analysis dropped 3 large airports as their 2008 data needs to be validated – count is 24

37. 37 94 airports that responded to each of the 2013 (FY12) benchmarking survey were included in the analysis in Part II

38. 38 ACI-NA Benchmarking Survey Definitions Operating Expenses Personnel Compensation and Benefits – Salaries and wages of personnel directly employed by the airport and include benefits such as health insurance, life insurance, and employee pensions. If an agency or department of the local government operates the airport, only the personnel expenses for employees assigned to the department or agency who operates the airport is included. Service Contracts – Includes the cost of services paid to commercial enterprises and government agencies excluding amounts paid to third parties for repair and maintenance costs and marketing, advertising and promotions. Non-Aeronautical Revenue Public Parking & Ground Transportation – Represents gross revenue from parking operations (prior to deductions for management and other expenses netted to revenues) within or outside the terminal and from ground transportation services (e.g., taxis, limos, shuttles). Employee and tenant parking is excluded. Rental Car Facility – Includes revenues from rental car activities located on-airport including ground rentals, percentage rents (concession fee), and other miscellaneous charges on this line. Also includes revenues from rental car activities located off airport. Excludes customer facility charges. Concessions – Represents revenues to the airport from concessions located in the terminals and at the airsides. This represents income to the airport from concessionaires. This section does not include out-of-terminal concessions revenues. Includes food, beverage, retail, duty free, telecommunications, advertising, etc. Excludes hotel. Hotel – income from hotel operations under concessions or management arrangement and revenues from airport owned hotels

39. Contacts: ACI-NA Economic Affairs and Research Tel: 202-293-8500 Email: EconomicAffairs@aci-na.org www.aci-na.orgEconomicAffairs@aci-na.orgwww.aci-na.org Metropolitan Nashville Airport Authority www.flynashville.com www.flynashville.com Walt Matwijec, AVP Continuous Improvement Email: walt_matwijec@nashintl.com@nashintl.com Lisa Lankford, Project Manager Continuous Improvement Email: lisa_lankford@nashintl.com@nashintl.com ACI-NA Airport Performance Benchmarking Survey September 2013

40. Airport Survey Participation by Year 40

41. 41 Appendix B Supporting Statistics

42. 42 FY12 Passenger Airline Revenue Per Enplanement - CPE

43. 43 FY12 Total Non-Aeronautical Passenger Related Revenue per Enplanement

44. 44 FY12 Total Non-Aeronautical Passenger Related Revenue per Enplanement

45. 45 FY12 Operating Revenue per Enplanement

46. 46 Percent of FY12 Operating Revenue Paid by Passenger Airlines

47. 47 FY12 Operating Expense per Enplanement

48. 48 FY12 Operating Expense per Enplanement

49. 49 FY12 Concessions Revenue per Enplanement

50. 50 FY12 Public Parking & Ground Transportation Revenue per Enplanement

51. 51 FY12 Rental Car Facility Revenue per Enplanement

52. 52 FY12 Debt Outstanding per Enplanement

53. 53 FY12 Net Debt Outstanding per Enplanement

54. 54 FY12 Annual Debt Service per Enplanement

55. 55 Appendix C Supporting Analysis

56. Box and Whisker Plots (Boxplots) Why – nonparametric, does not require a distribution (like normal) to identify significant differences Box plots Statistics with Confidence - Stepney See this link for more …

57. Data for Seat Miles, International / Domestics and Load Factor 57

58. What is the best “statistic” to characterize ACI Survey variable distributions? 58 The distributions for the variables collected in the ACI Financial Survey are highly skewed - Fig. 1 The average is a poor statistic to use for highly positively skewed distributions - Fig 2 Best is to calculate the probability density curve for each variable - called MPV or Mode – done but not shown Median is used for Hub comparison charts – approx 50% less error than mean, Median used by rating agencies also Error distributions for the presentation variables (n=96) from the median and mean to MPV - mode are shown below Fig 3&4 1 2 3 4