Thomas P. Glynn CEO Report to the Massport Board November 21, Welcome to the November meeting of the Massport Board of Directors.

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1 Thomas P. Glynn CEO Report to the Massport Board November 21, 2013 Welcome to the November meeting of the Massport Board of Directors. Thanksgiving Travel Next week begins the Thanksgiving travel week, traditionally the busiest time at Logan Airport. We hope to continue the momentum we achieved during a very successful summer, when passenger traffic rose 5% from the previous vacation season, putting the airport on pace in 2013 to surpass 30 million passengers for the first time in its history. To encourage more travelers to use mass transit over the holidays in order to ease excess demand for parking that is a growing challenge at Logan, Massport once again offered a special Logan Express parking rate of $22 for up to 14 days of parking for those travelers who entered one of our four Logan Express lots between November 13 and the end of the day tomorrow. That flat rate amounts to about $5.50 per day, or less than $2.00 per day to park. Logan has been forced to valet cars much earlier than expected this month as we head into the Thanksgiving rush. So, we will continue to strongly encourage any travelers who can to leave their car at home during this busy travel period when demand for on-airport parking will at its peak as business travelers schedule last minute trips before the holiday. In order to prevent anyone from missing a flight because parking lots are full, we re trying to make alternative options as attractive as we can. Logan has been rated as one of the most accessible and easiest airports to get to thanks to the wide number of options travelers have. Besides Logan Express, travelers also have the option of using water shuttles, subway service on the Blue Line and the MBTA Silver Line that provides service between South Station and Logan s terminals every 10 minutes and is free on outbound service to the South Boston Seaport District and South Station. 1

2 JetBlue at Worcester Long awaited commercial service returned to Worcester Regional Airport when JetBlue Airline s first flight from Florida touched down at the airport two weeks ago. Airport Director Andy Davis and his team did a great job over the past seven months getting the airport ready for JetBlue s arrival this month following the announcement last April by JetBlue CEO Dave Barger and Governor Patrick that Worcester would be JetBlue s 80 th destination city beginning earlier this month. JetBlue s first flight received the traditional water canon salute signifying Worcester Airport was welcoming a new carrier. It is the first commercial service in Worcester since Direct Air went bankrupt after pulling out of Worcester and 16 other markets a year and a half ago. JetBlue is now offering one flight daily nonstop between Worcester and Orlando and another daily flight to Ft. Lauderdale. The airline has started with 100-seat Embraer 190 aircraft but hopes to upgrade to the larger 150-seat Airbus 320 if the new service takes off as expected. Joining me at the inaugural ceremony were Mayor Joe Petty, City Manager Michael O Brien, and former Lt. Governor Tim Murray, now the President of the Worcester Regional Chamber of Commerce. All three were on the first departing flight to Fort Lauderdale to help market Central Massachusetts with Florida visitors. Representing JetBlue were Marty St. George, Senior Vice President of Marketing and Chief People Officer Joanna Geraghty. Also attending was Congressman James McGovern, who was able to deliver a $350,000 Small Community Air Service Development grant to the airport from the US Department of Transportation to help us market the airport throughout the Central Massachusetts region. I ve been meeting with local chambers of commerce and other groups to encourage businesses and residents in the region to support the new service. I ve also tried to impress upon them the importance of making JetBlue a success so as to jumpstart the airport as an economic engine for the entire region. 2

3 Massport recently retained a research firm to calculate the potential economic impact of the new JetBlue service. Frasca & Associates looked at Worcester s track record which, at its peak, served more than 340,000 passengers in They took note of the fact that Worcester is New England s second largest city and Worcester County is second fastest growing in Massachusetts. The firm also surveyed 14 other medium-sized airports located near large hubs that were similar to Worcester -- such as Toledo, Atlantic City, Colorado Springs, Manchester, and Providence and looked at the typical increases in service and passenger levels experienced by these airports whenever JetBlue started new service. The firm finally concluded that the number of passengers using Worcester Airport could reach 500,000 by 2023 as the airport supported seven daily nonstop flights a day with a potential economic benefit to the region approaching $370 million a year. That would mean Massport would realize a 3 to 1 return on its capital and operating cost investment, while helping to add nearly 340 jobs at the airport, in concessions, in construction and in the visitor industry throughout the region. International Service Advertisements Logan Airport s ability to expand New England s global reach has been impressive of late. Over the past 17 months, Massport has been able to open up three previously unserved regions of the world with new nonstop service. First is to Tokyo and Asia on Japan Airlines. Second is to Panama City and Latin America on Copa Airlines. And last, beginning next Spring, is the Middle East with both Turkish Airlines service to Istanbul and Emirates service to Dubai. All four new destinations qualify for marketing assistance from Massport under the Board s incentive program for new service to targeted international markets. 3

4 And to inform the public about these new offerings, as well as all 35 international nonstop destinations Logan Airport now offers to business and leisure travelers, Massport took out full page advertisements on Wednesday, November 6 in the Boston Globe, Boston Herald, Boston Business Journal and Boston Metro. We selected November 6 to run the ads because it was the day after the Boston mayoral election and we knew readership for the four publications would be higher than usual that day. Another round of full page advertisements in these publications is being scheduled before the end of the year. FY 14 Operating Budget The continued strong passenger traffic this summer and through the holidays translates into more good news for the Board s FY14 Budget as business activity exceeded budgeted volume and revenue targets in several categories. The latest numbers we have show the total number of passengers at Logan up 8.8% this October over last October 2012 and 3.2% for the year. Those numbers need to be qualified somewhat by the impact of Hurricane Sandy last October that closed traffic along the East Coast temporarily. International traffic was up 4.6% while domestic travel rose 9.5% for October. In October, parking revenue were $11.7 million or 4.9% ahead of budget as well as 4.9% above last October. Even with the reduction of 322 spaces in Terminal B due to the curbside enhancement program, parking exits for October were 3.9% ahead of last year at this time. On the airfield, landed weights for the month were 6.3% higher than budget and 9.5% higher than October 2012 as airlines added routes and used larger aircraft to serve their customers. In Maritime, 15 ships called at Conley Container Terminal handling 10,389 boxes which was nearly 2,000 more than projected and 18% higher than last year. Yearto-date, container activity at Conley is running 2.4% above last year and nearly 9% higher than originally projected. 4

5 Boston Chamber Dashboard Passenger traffic at Logan Airport is among eight metrics now being used by the Greater Boston Chamber of Commerce in a new interactive Growth Tracker Economic Dashboard the Chamber is offering free of charge to businesses, government leaders and others to keep them abreast in real-time with trends in the regional economy. Specifically, the latest data on the Chamber s website tells readers that passenger traffic at Logan is on the rise; that in the past 12 months through September, 29.8 million passengers flew into or out of Logan, which is an increase of 524,000 passengers over the previous twelve months. The Chamber also reminds its readers that it is working with Massport to expand the number of nonstop international destinations that can be reached through Logan in order to fuel additional trade and business opportunities. Besides airport passengers, the Chamber s Growth Tracker also charts job growth, the unemployment rate, state tax collections and tax ranking, the housing market, the number of degree holders in the workforce, as well as patents and other indicators of innovation. In addition to regional data, the dashboard also provides comparable national data as well information on how New England compares with other regions. New Cruise Record Cruiseport Boston completed its 2013 season with a record-breaking 382,885 cruise vacationers, surpassing last year s total by nearly 3,000 and bringing in 20,000 more passengers than originally projected. Also, 116 ships docked at the terminal, one less than 2012, with 68 starting and/or ending their cruise in Boston with another 48 making calls on the Port of Boston. Growth in the cruise industry has an important impact on the local and regional economy since ports of call provide a steady source of customers for local restaurants, shops and other businesses while also creating a population of return customers among cruise passengers who will stay in local hotels after deciding they d like to come back to the region and stay longer. 5

6 Already for 2014, Cruiseport Boston is predicting 60 ships from four different cruise lines embarking passengers from Boston and another 60 ships from 15 cruise lines calling on the Port of Boston with between 350,000 and 400,000 passengers next season. LAX Shooting The entire Logan and Massport community was shocked and saddened by the tragic shooting death of 39 year-old TSA Officer Gerardo Hernandez, father of two, at Los Angeles International Airport on November 1. Two other TSA officers were wounded in the attack when an assailant entered Terminal 3, allegedly targeting TSA personnel specifically, and opened fire at a security checkpoint with an M-16 type assault weapon. Hernandez was fatally wounded and is the first TSA agent to be killed in the line of duty. We offer our condolences to Officer Hernandez s two children and entire family as well as his TSA colleagues at LAX. State Police increased their presence at Logan following the shooting, which again shows the need for the active shooter training Massport provides to our own employees and our transportation partners. Earlier this year, Massport, in conjunction with our State Police and TSA partners, conducted an Operation Laser exercise in one of Logan s terminals after passengers had left for the night that gamed out a scenario similar to the real life incident at LAX. Terminal 3 had conducted a similar active shooter exercise just a month before the attack, which may be one reason why authorities were able to respond and subdue the assailant as quickly as they did. TSA Exit Lanes Logan Airport has been in the forefront of efforts to persuade the Transportation Security Administration to reconsider its decision to pull its agents from the exit lanes at airports across the country. Airport executives across the country are opposed to TSA plans to save about $88 million a year by turning responsibility for staffing of these exit lanes and other access points into sterile areas over to the airports themselves. 6

7 The TSA has been responsible for policing the flow of passengers between the public and secure areas of airports ever since the agency was created in the Aviation and Transportation Security Act passed in the weeks following 9/11. Massport has urged the TSA to reconsider and has worked directly with the Massachusetts congressional delegation to express the Commonwealth s concern with the agency s decision to limit its responsibilities in this way. Letters signed by every member of the delegation were sent last week to TSA Administrator John Pistole and to US Attorney General Eric Holder voicing the delegation s concerns about the impact of the proposed change on the security of the flying public, airport employees and airline crewmembers both in Massachusetts and across the country. Part 139 FAA Inspection Earlier this month, Logan Airport received a clean bill of health from the FAA in its annual Part 139 inspection. Part 139 inspections are intensive reviews the FAA conducts every year before issuing our airport operating certificate. Logan received high praise from the two FAA inspectors conducting this year s Part 139 review, who issued no letters of correction after spending about two weeks scrutinizing every aspect of Logan s airfield operations. Foreign Object and Debris Last weekend, the Boston Globe featured Logan s Xsight Foreign Object and Debris detection system operating on Runway 9/27. As the paper noted, Logan is the first airport in the country to have a so-called FOD detection system to automatically scan for potentially hazardous debris along the entire length of a runway. Boeing estimates runway debris costs the aviation industry about $4 billion in damaged engines and aircraft. FOD was also cited as the cause of the 2000 crash of an Air France Concorde shortly after takeoff at Charles de Gaulle Airport in Paris that killed 113. Massport and the FAA evenly split the $1.7 million cost of the automated detection system on Runway 9/27, which we hope to install on Logan s other runways in the future. 7

8 Dennis Treece And finally, Dennis Treece, who has been a central figure for more than 11 years overseeing Massport s security and emergency preparedness program as our Chief Security Officer, has announced his intention to retire effective January 1, Dennis was hired in the wake of the September 11, 2001 terrorist attacks and in partnering with Massport s Aviation and Maritime security units, as well as our partners at the State Police, TSA, FBI, Homeland security and other security and emergency organizations, Dennis has successfully helped give Massport and Logan Airport a national reputation as a leader in aviation and transportation security. I know I join the entire Board and staff at Massport in thanking Dennis for his many contributions and we wish him well in his retirement. 8