LOS ANGELES INTERNATIONAL AIRPORT INVESTOR PRESENTATION

Transcription

1 LOS ANGELES INTERNATIONAL AIRPORT INVESTOR PRESENTATION October 2015

2 Disclaimer GENERAL This presentation you are about to view is provided as of October 27, If you are viewing this presentation after October 27, 2015, there may have been events that occurred subsequent to such date that would have a material adverse effect on the financial information that is presented herein, and the Department of Airports of the City of Los Angeles (the Department ) has not undertaken any obligation to update this presentation. The information provided in this presentation is not warranted as to completeness or accuracy and is subject to change without notice. All numbers contained in this presentation are approximate. ADDITIONAL INFORMATION For further information and a more complete description of the Department and the Department s securities, investors are referred to (i) the Official Statements of the Department related to the Department s securities and (ii) the Department s reports of annual financial information available on the Department s investor relations website at or all of which speak only as of their respective dates. This presentation is provided for your information and convenience only. Any investment decisions regarding the Department s securities should only be made after a careful review of the completed Official Statement of the Department related to such securities. NO OFFER OF SECURITIES This presentation does not constitute a recommendation or an offer or solicitation for the purchase or sale of any security or other financial instrument, including the Department s securities, or to adopt any investment strategy. Any offer or solicitation with respect to the Department s securities will be made solely by means of an Official Statement of the Department related to such securities, which describes the actual terms of the Department s securities. In no event shall the Department be liable for any use by any party of, for any decision made or action taken by any party in reliance upon, or for any inaccuracies or errors in, or omissions from, the information contained in this presentation and such information may not be relied upon by any party in evaluating the merits of participating in any transaction mentioned herein. Nothing in these materials constitutes a commitment by the Department to enter into any transaction. No assurance can be given that any transaction mentioned herein could in fact be executed. Past performance is not indicative of future returns, which will vary. Transactions involving the Department s securities may not be suitable for all investors. Each investor should consult with his, her or its own advisors as to the suitability of securities or other financial instruments for the investor s particular circumstances. FORWARD-LOOKING STATEMENTS Certain statements included in this presentation constitute forward looking statements. Such statements are generally identifiable by the terminology used, such as plan, expect, estimate, budget, or other similar words. The achievement of certain results or other expectations contained in such forward looking statements involves known and unknown risks, uncertainties and other factors which may cause actual results, performance or achievements described to be materially different from any future results, performance or achievements expressed or implied by such forward looking statements. The Department does not plan to issue any updates or revisions to those forward looking statements if or when the expectations, or events, conditions or circumstances on which such statements are based, occur. Statements contained in this presentation which involve estimates, forecasts or other matters of opinion, whether or not expressly so described in this presentation, are intended solely as such and are not to be construed as representations of fact. Further, expressions of opinion contained in this presentation are subject to change without notice and the delivery of this presentation will not, under any circumstances, create any implication that there has been no change in the affairs of the Department. By providing the information in this presentation, the Department does not imply or represent (a) that all information provided in this presentation is material to investors decisions regarding investment in the Department s securities, (b) the completeness or accuracy of any financial, operational or other information not included in this presentation, (c) that no changes, circumstances or events have occurred since the dated date of the information provided this presentation or (d) that no other information exists which may have a bearing on the Department s financial condition, the security for the Department s securities or an investor s decision to buy, sell or hold the Department s securities. RESTRICTIONS ON USE This presentation may not be reproduced, disseminated, quoted or referred to, in whole or in part. By accessing or otherwise accepting this presentation, you agree not to duplicate, copy, screen capture, electronically store or record this presentation, nor to produce, publish or distribute this presentation in any form whatsoever. NO RELIANCE ON THE DEPARTMENT The Department and the Underwriters make no representations as to the legal, tax, credit or accounting treatment of any transactions mentioned herein, or any other effects such transactions may have on you and your affiliates or any other parties to such transactions and their respective affiliates. You should consult with your own advisors as to such matters and the consequences of the purchase and ownership of securities or other financial instruments. The Department and the Underwriters do not provide tax advice. Any statements contained herein as to tax matters were neither written nor intended to be used and cannot be used by any taxpayer for the purpose of avoiding tax penalties that may be imposed on such taxpayer. Please note, all statistical references or rankings information was obtained from Securities Data Corporation ( SDC ) All information and opinions expressed in this document were obtained from sources believed to be reliable and in good faith but no representation or warranty faith, warranty, express or implied, is made as to its accuracy or completeness. All information and opinions as well as any prices indicated are currently only as of the date of this report, and are subject to change without notice. Any estimations or projections as to events that may occur in the future (including projections of market performance) are based upon the best judgment of Siebert Brandford Shank & Co., L.L.C. ("SBS") from publicly available information as of the date of this report. There is no guarantee that any of these estimates or projections will be achieved. SBS is providing the information contained in this document for discussion purposes only in anticipation of serving as underwriter to the Issuer. The primary role of SBS, as an underwriter, is to purchase securities, for resale to investors, in an arm s-length commercial transaction between the Issuer and SBS and that SBS has financial and other interests that differ from those of the Issuer. SBS is not acting as a municipal advisor, financial advisor or fiduciary to the Issuer or any other person or entity. The information provided is not intended to be and should not be construed as advice within the meaning of Section 15B of the Securities Exchange Act of The Issuer should consult with its own financial and/or municipal, legal, accounting, tax and other advisors, as applicable, to the extent it deems appropriate. If the Issuer would like a municipal advisor in this transaction that has legal fiduciary duties to the Issuer, then the Issuer is free to engage a municipal advisor to serve in that capacity. 2 Member FINRA and SIPC

3 Presentation Participants Ryan Yakubik Chief Financial Officer - Los Angeles World Airports David Thomson Senior Manager - Siebert Brandford Shank & Co., L.L.C. 3

4 Transaction Summary Issuer Department of Airports of the City of Los Angeles, California, Los Angeles International Airport Issue Description $276,085,000* Senior Revenue Bonds 2015 Series D (AMT) $28,060,000* Senior Revenue Bonds 2015 Series E (Non-AMT) Underlying Ratings Structure Purpose Series 2015DE Senior Bonds: Aa3/AA/AA (M/S/F) Fixed Rate Bonds Maturing in * Proceeds of the Series 2015DE Bonds will be used i) to pay or reimburse the Department for certain capital projects at Los Angeles International Airport; ii) to make a deposit to the Senior Reserve Fund; iii) to fund a portion of the interest accruing on the bonds, and iv) to pay costs of issuance Security The Series 2015DE Bonds are secured by a pledge of Net Pledged Revenues Syndicate Senior Manager: Siebert Brandford Shank & Co., L.L.C. Co-Managers: Citigroup Global Markets, J.P. Morgan Securities, Ramirez & Co., and Stifel, Nicolas & Co., Inc. *Preliminary; subject to change 4

5 Overview of LAX Stable and Experienced Management Team Experienced management team is successfully implementing the Capital Program that benefits stakeholders Strong Service Area Economy Dominant airport serving a region with extremely favorable demographics and a robust economic environment Diverse Air Service and Dynamic Traffic Growth Persistent growth of predominantly O&D traffic that is supported by a diverse base of carriers Premier International Gateway Premier international gateway serving many markets domestically and around the world Robust Financial Performance Strong financial metrics that are expected to persist through the Capital Program Healthy liquidity and robust debt service coverage that help mitigate investor risk 5

6 Strength of Management Recent accomplishments are part of a long-term strategy that has set the foundation for the future New rate-setting methodology and airline agreements Terminal acquisitions Tom Bradley International Terminal Support facilities CUP Baggage Handling Airfield improvements Experienced management with clear vision supports future growth at LAX Established CIP with a significant amount of terminal work delivered under tenant agreements/leases Capacity enhancement through additional gates (Midfield Terminal) 10-Year terminal rate agreement (through 2022) with airlines provides financial support for continued development Executed concession agreements with terms of 10 to 15 years Exploring options for landside improvements to facilitate passenger access and alleviate congestion 6

7 Key Updates Continued strong operational and financial performance in FY2015 Traffic & Operations Selected Metrics FY2015 Enplanements 36.1 million % Growth from FY % Five Year CAGR 4.5% % O&D 76.5% Number of Non-Stop Markets Domestic 89 International 68 Number of Scheduled Carriers 72 Largest Carrier and Epax Share 2 American (18.8%) Financial Selected Metrics FY2015 Net Operating Income 3 $400 million % Growth from FY % Cost Per Enplanement (CPE) $14.19 Debt Service Coverage 4 Senior Lien 3.82x Combined Senior & Subordinate Lien 2.54x Liquidity (June 30, 2015) $729.0 million Days Cash on Hand 412 days Service Updates: In CY2015, LAX added service to 14 new destinations (6 domestic; 8 international) and ceased providing service to 9 destinations (6 domestic; 3 international) New Destinations Include: Eldorado Intl, Bogota, Colombia; Dublin International, Dublin, Ireland; Gunnison County, Gunnison, CO; Kansai International, Osaka-Kansai, Japan; Adams Field Regional, Little Rock, AR; Sangster Intl, Montego Bay, Jamaica; Augusto C Sandino, Managua, Nicaragua; Lukou International, Nanjing, China; Tulsa International, Tulsa, OK Source: Department of Airports of the City of Los Angeles; LeighFisher 1. As of August Data for merged airlines are reported together (American includes US Air) 3. Before depreciation and amortization; unaudited 4. Calculated pursuant to the Senior Indenture Epax: Enplaned passengers 7

8 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 size: 18.6 million Cultural diversity Educated, high earning work force Diverse local economy High personal incomes Extensive business network: 20 Fortune 500 list companies headquartered in Air Trade Area Several prominent research universities with a large enrollment base in the Air Trade Area Robust tourism industry with 29.4 million overnight visitors and visitor spend of $19.6 billion in 2014 Top Destination for Overseas Visitors (2014) Top U.S. Destination for Overseas Visitors (2014) Overseas Visitors (000 s) New York 9,741 Miami 4,853 Los Angeles 4,406 Orlando 4,130 San Francisco 3,132 Source: LeighFisher; U.S. Department of Commerce, Bureau of the Census; Fortune 500 Companies, 2015; Los Angeles Tourism & Convention Board; U.S. Department of Commerce, ITA, National Travel and Tourism Office 8

9 Diverse Carrier Mix and Distribution LAX has a diverse air carrier mix with non-stop service throughout the world Served by 27 domestic and 45 foreign flag airlines as of FY2015 FY2015 Enplanement Carrier Mix* * Data for merged airlines are reported together, i.e., American and US Airways, Southwest and AirTran, and United and Continental. Passengers reported by regional code-sharing affiliates have been grouped with their respective code-sharing partners. Source: Los Angeles International Airport records; LeighFisher 9

10 International Markets LAX serves a large base of international O&D passengers and is an international hub for the mainline carriers International markets include destinations in Mexico, Central and South America, the Caribbean, Europe, Asia, Middle East, and the Pacific As of FY2015, LAX is ranked #1 in the West and #3 in the U.S. by number of international enplanements and has 93% of all international traffic in Southern California International enplanements grew 6.1% in FY 2015 and have grown 17.6% from FY 2005 to FY 2015 Top 20 International O&D Market % of Int'l O&D Passengers in FY14 Average Daily Non-Stop Flights as of Aug 15' # of Airlines London 4.60% Guadalajara 4.40% 9 7 Tokyo 3.90% 8 5 Seoul 3.70% 5 6 Vancouver 3.30% 13 3 Mexico City 3.10% 9 6 Taipei 2.90% 5 4 Shanghai 2.70% 5 2 Toronto 2.40% 9 4 Manila 2.30% 2 2 San Jose del Cabo 2.20% 5 1 Cancun 2.10% 5 3 Paris 2.10% 4 3 Sydney 2.10% 5 2 Hong Kong 2.00% 4 4 Beijing 1.90% 3 1 San Salvador 1.50% 4 1 Guatemala 1.30% 2 2 Melbourne 1.30% 3 2 Calgary 1.20% 4 2 Source: LeighFisher; OAG Aviation Worldwide Ltd, OAG Analyzer database and OAG Traffic database, accessed August 2015 International Markets Served in August

11 Traffic Projections Millions The strength of the regional economy, health of the airline industry, and favorable business dynamics support a reasonable passenger growth forecast LAX has recently outperformed projected growth, but the Department continues to use conservative estimates for financial planning purposes Projected Total Enplaned Passengers Traffic is projected to grow 12.0% between FY2015 and FY2021, at a CAGR of 1.9% International traffic is projected to increase at a higher rate than domestic traffic LAX s facilities can accommodate a higher level of growth, and new projects will further increase capacity and operational efficiencies ACTUAL FORECAST Domestic International Total CAGR ( ): 1.9% CAGR ( ): 1.5% CAGR ( ): 3.0% CAGR: Compound Annual Growth Rate Source: Historical: Department of Airports of the City of Los Angeles Forecast: LeighFisher, September

12 Overview of Capital Program LAX has developed a strategically-focused Capital Program to deliver world-class facilities and keep costs competitive Capital Program Drivers Conform terminal complex to modern aeronautical standards Develop a long-term plan to improve passenger access to LAX Accommodate projected growth in passenger traffic Accommodate contemporary and future aircraft designs Overall Capital Program Series 2015DE Senior Bonds Projects ($2.1 billion) funded in part with Series 2015DE Senior Bond proceeds Other Committed and Planned Projects ($3.7 billion) future projects anticipated to be completed by FY2021 Preliminary Stage Projects ($4.5 billion - $5.5 billion) not included in forecast; scope, cost, implementation timing, & funding sources yet to be determined Source: Department of Airports of the City of Los Angeles 12

13 Overall LAX Capital Program LAX s Capital Program is supported by a broad base of funding sources Airfield and Apron 8% Other Projects 11% Projects Composition Estimated Project Costs: $5.7 billion Terminal Projects 81% PFC Pay-Go Funds 7% Series 2015DE Senior Bond Proceeds 5% Future Subordinate Bond Proceeds 6% Estimated Sources of Funds AIP Funds 3% Prior Bond Proceeds 13% TSA Funds 2% Other Funds 1% Department Funds 28% Future Senior Bond Proceeds 34% Source: Department of Airports of the City of Los Angeles Total may not sum due to rounding 13

14 2015DE Senior Bonds Projects and Funding The Series 2015DE Senior Bonds Projects primarily fund terminal improvements Estimated Sources of Funds Estimated Series 2015DE Projects Cost: $2.1 billion TSA Funds 4% AIP Funds 2% Future Senior Bond Proceeds 36% Department Funds 15% Other Funds 3% Series 2015DE Senior Bond Proceeds 15% Prior Bond Proceeds 24% Series 2015DE Senior Bonds Amount of project costs funded by Series 2015DE Senior Bonds: $313 million Project Bond Proceeds ($Million) Bradley West Interior Enhancements Project $36 Second Level Roadway and New Face of the CTA Project* Terminal 1 Improvement Project 58 Terminal 2 Improvement Project 32 Terminal 5 Improvement Project 76 Terminals 6/7/8 Improvement Project 5 Terminal Commercial Management Acquisitions 76 Total Series 2015DE Bond Proceeds $ *Non-AMT project Source: Department of Airports of the City of Los Angeles Total may not sum due to rounding Future Subordinate Bond Proceeds 1% 14

15 Actual and Budgeted Financial Results In FY : 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% REVENUES (000's) FY2014 Actual FY2015 Actual 1 FY2015 vs. FY2014 % Change FY2016 Budget 2 Aviation revenue Landing Fees 222, , % 245,200 Building Rentals 315, , % 449,900 Land Rentals 86,534 90, % 88,100 Other Aviation Revenue 3,620 4, % 8,600 Total Aviation Revenue 628, , % 791,800 Concession Revenue 331, , % 373,100 Other Operating Revenue 1,892 3, % 2,000 Total Operating Revenues 3 961,729 1,045, % 1,166,900 EXPENSES (000's) FY2014 Actual FY2015 Actual 1 FY2015 vs. FY2014 % Change FY2016 Budget 2 Salaries and Benefits 356, , % 395,700 Contractual Services 161, , % 200,000 Materials and Supplies 45,726 46, % 50,500 Utilities 39,089 38, % 46,600 Other Operating Expenses 16,093 21, % 28,600 Allocated Administrative Charges (9,378) (9,072) -3.26% -10,300 Total Operating Expenses 610, , % 711,100 NET OPERATING INCOME Before Depreciation and Amortization Notes: 1 Preliminary, unaudited. 2 Budget numbers rounded to nearest $100,000. R&C M&O and Adopted Budget do not match due to certain adjustments. 3 Does not include interest income, anticipated BABs subsidy on Series 2009C and 2010C, and Non-Operating TSA Revenue, which are part of Pledged Revenue Totals may not add due to rounding Source: Department of Airports of the City of Los Angeles 351, , % 455,800 15

16 Debt Overview LAX has $4.11 billion of long-term bonds outstanding 1 LAX s outstanding long-term debt is 100% fixed-rate The final maturity is 2045 The average life of the bonds is 15.8 years Non-AMT / Governmental Purpose 9.0% Tax Status Breakdown Taxable BABs 8.9% AMT 25.6% Subordinate Lien Bonds $797,275, % Lien Breakdown Subordinate Lien Commercial Paper (2) $50,169, % Total Non-AMT 65.4% Non-AMT / Private Activity 56.5% Senior Lien Bonds $3,309,685, % 1. As of October 1, 2015; does not include subordinate commercial paper 2. Outstanding Commercial Paper as of October 1, 2015; the Commercial Paper Program has a total capacity of $500 million Source: Financial Advisors 16

17 Liquidity Position Liquidity is strong, even during the 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 outstanding 1 LAX had approximately $507.7 million in PFC funds on hand at the end of FY2015 Debt Service Reserve Funds totaling approximately $239.1 million (Senior Lien) and $64.8 million (Subordinate Lien) are fully cash funded 2 The Operating Permits and Terminal Tariff/Airline Rate Agreements are designed to provide the Department with future funding and discretionary cash 1. As of October 1, Debt Service Reserve Fund balances as of June 30, 2015 Source: Department of Airports of the City of Los Angeles. Figures are preliminary, unaudited. 17

18 Cost per Enplaned Passenger CPE is projected to rise, but levels are commensurate with the Capital Program and other international gateway airports Projected CPE reflects conservative financing and passenger growth assumptions Projected CPE levels are reasonable in light of high demand, strong O&D base, high yields, and LAX s role as an international gateway $25 $20 $15 $10 Estimated Cost per Enplanement Airline agreements and tenant managed projects reflect stakeholder commitment to capital improvements $5 $0 Actual 1 Projected Fiscal Year CPE 1 FY2014 FY2015 FY2016 Passenger Airline Payments: Landing Fees (Passengers only) $197,361,928 $207,126,775 $220,107,000 Terminal Rentals 266,291, ,430, ,595,000 Total Passenger Airline Payments $463,652,960 $512,556,843 $599,702,000 Annual Enplanements 34,332,525 36,121,768 37,025,000 Passenger Airline Cost Per Enplanement $13.50 $14.19 $ CPE between FY2011 and FY2014 are actuals, CPE in FY2015 is estimated, and CPE in FY2016 is projected Source: City of Los Angeles, Department of Airports for budget information; LeighFisher for forecasts 18

19 Debt Service Coverage Debt service coverage is projected to remain strong While net debt service is anticipated to increase over the forecast period, total debt service coverage (1)(2) is projected to remain strong in excess of 2.0x in each year The Airline Agreements, Terminal Tariff, and Airfield Operating Agreements ensure that debt service coverage will remain strong Notes: Terms are as defined in the Senior Indenture (1) Pursuant to the Senior Indenture, Senior Aggregate Annual Debt Service is net of PFC Revenues committed to pay Senior Debt Service (2) No transfers were assumed for purposes of calculating projected debt service coverage ratios (3) Includes debt service on Commercial Paper FY2015 figures unaudited Source: City of Los Angeles, Department of Airports for budget information; LeighFisher for forecasts 19

20 Overview of Series 2015DE Bonds The Department is planning to issue $304.1 million* of Senior Revenue Bonds $ million 2015 Series D Senior Lien Revenue Bonds Subject to AMT Secured by Senior Reserve Fund $ million 2015 Series E Senior Lien Revenue Bonds Non-AMT Secured by Senior Reserve Fund *Preliminary; subject to change 20

21 Transaction Timetable and Contact Information Mail POS: October 27, 2015 Pricing: November 4, 2015 Closing: November 24, 2015 Contact Information: Los Angeles International Airport: Ryan Yakubik (424) Public Resources Advisory Group: Jo Mortensen (510) Public Financial Management: Brian Gallucci (415) Backstrom McCarley Berry & Co: Vincent McCarley (415) Siebert Brandford Shank: David Thomson (206)