FY 2018 Adopted Budget

Transcription

1 FY 2018 Adopted Budget Finance Department P.O. Box DFW Airport, Texas

2 FY 2018 Adopted Budget Introduction Table of Contents Introduction DFW s Vision Statement and Board of Directors DFW Infrastructure... 4 Strategic Plan... 6 DFW's Airline Use Rate Agreement Model... 8 DFW Fund Structure FY 2018 Budget Comparisons to Other Periods Budget Schedule Executive Summary FY 2018 Key Performance Indicators FY 2018 Budget Comparisons and Walkforward FY 2018 Revenue and Expense Budget Exposures Passenger Airline Cost per Enplanement (CPE) DFW Cost Center Net Revenues Capital Programs and Debt Financing Airline Cost Centers Airfield Cost Center Terminal Cost Center Transfers - Joint Capital Account Transfer Transfers - DFW Terminal Contribution Cost Per Enplanement (CPE) Calculation DFW Cost Center DFW Cost Center Revenues and Expenses Parking Business Unit Concessions Business Unit Rental Car Center (RAC) Business Unit Commercial Development Business Unit Other DFW Revenues and Expenses Operating Expenses FY 2018 Expense Budget by Major Cost Driver Operating Budget by Category Contingency Outside of Rate Base Net Debt Service Budget Positions Departments Department Overview and Walkforwards Capital Budget Projected Capital - Uses of Cash by Capital Account DFW Capital Account Joint Capital Account Capital Project Sources of Cash DFW International Airport

3 FY 2018 Adopted Budget Introduction Board of Directors Sam Coats Board Chair Dallas William Meadows Vice Chair Fort Worth Regina Montoya Secretary Dallas Mayor Betsy Price Fort Worth Mayor Mike Rawlings Dallas Lillie M. Biggins Fort Worth Henry Borbolla III Fort Worth Bridget M. Lopez Dallas Matrice Ellis-Kirk Dallas Eddie Reeves Dallas Amir Rupani Dallas Mayor Karen Hunt Coppell DFW Vision Statement Travel. Transformed. DFW Mission Statement We provide an exceptional Airport experience for our customers and connect our community to the world. 2

4 FY 2018 Adopted Budget Introduction Airport Background The Dallas/Fort Worth International Airport (the Airport or DFW ) was created by a Contract and Agreement between the cities of Dallas, Texas, and Fort Worth, Texas ( the Cities ) on April 15, 1968 for the purpose of developing and operating an airport as a joint venture between the Cities. Although owned by Dallas and Fort Worth, DFW is located within the boundaries of the Cities of Grapevine, Coppell, Irving, Euless and Fort Worth; and within Dallas and Tarrant Counties. Source: DFW Airport Information Technology Services 3 DFW International Airport

5 FY 2018 Adopted Budget Introduction DFW is located within a four-hour flight time of 98% of the U.S. population, and currently ranks third among the world s busiest airports in terms of operations and tenth in terms of passengers. Its central location is the focal point of one of the nation s largest intermodal hubs, connecting air, rail, and interstate highway systems. DFW currently operates daily passenger flights to 233 destinations worldwide, including 167 nonstop domestic destinations and 56 nonstop international destinations. There are 27 passenger carriers and 23 cargo carriers serving DFW. The Airport is the economic engine for North Texas. According to a recent study, DFW drives $37 billion in annual economic activity, supporting approximately 60,000 on-airport employees, 228,000 local jobs, and an annual payroll of $12.5 billion. DFW Infrastructure Terminals DFW has 5 terminals (A, B, C, D, and E) totaling 6.3 million square feet of building space, including 165 aircraft boarding gates, 373 ticketing positions with 96 supporting self-service kiosks, and 15 security checkpoints. As of June 1, 2017, 14 of the gates were closed for renovation as part of the Terminal Renewal and Improvement Program (TRIP). Collectively, the airlines averaged 6.7 turns per active gate per day for the first six months of FY DFW Terminal Complex American Airlines ( AA ) operates domestic service and international departures in Terminals A C, and D. Envoy Aviation Group dba American Eagle ( Envoy ), Mesa Airlines, and ExpressJet operate AA s regional domestic and international service in Terminals B, D, and E. All other domestic flights and certain Canadian pre-cleared flights operate from Terminal E. All international flights requiring U. S. Customs and Immigration clearance operate from DFW s Terminals D and B (with the exception of some Spirit Airlines international flights that arrive at Terminal E, and their passengers are bussed to Terminal D for customs clearance). All terminal gate leases expire September 30, 2020 per the terms of the Airline Lease and Use Agreement (Use Agreement) which became effective on October 1, DFW s Federal Inspection Service (FIS) facilities are located in Terminal D. The Airport s FIS facility is approximately 406,000 square feet with 36 inspection booths, 54 automated passport control kiosks, and 8 baggage carousels. 4 DFW International Airport

6 FY 2018 Adopted Budget Introduction DFW is responsible for all of the janitorial and facility maintenance in Terminals B, D and E, and baggage maintenance in Terminals B and E. Most of the maintenance and janitorial functions are contracted out to third parties. Costs associated with maintenance of these facilities are included in DFW s operating budget. AA is responsible for the majority of the facilities maintenance, custodial services, and the jet-bridge and baggage system maintenance in Terminals A and C. In Terminal D, AA maintains its preferentially leased jet-bridges and the entire baggage system for the terminal. The maintenance cost is paid directly by AA and not included in DFW s budget or financial statements. AA receives a maintenance credit in the terminal rates and charges calculation. Airfield DFW has seven runways with significant airfield capacity. Five runways are configured as north/south parallels with two diagonals. Four of DFW s runways are 13,400 feet in length. DFW s infrastructure is capable of supporting next generation aircraft such as the Airbus A380 and the Boeing 747-8F. Per FAA benchmark studies, the Airport s designated hourly capacity arrival/departure flow is approximately 170 aircraft operations per hour under reduced instrument flight rule (IFR) weather conditions and approximately aircraft operations per hour under optimum visual flight rule (VFR) weather conditions, a condition that prevails approximately 82% of the time. Airport Operations Center/Emergency Operations Center The Airport Operations Center/ Emergency Operations Center (AOC/EOC) and DPS 911 Dispatch Center serves as a single point of contact to centralize communications for DFW s passengers, guests, tenants, employees, and contractors, with an emphasis on Communication, Collaboration and Coordination (C3). This includes the call management of police, fire and emergency medical response teams and non-emergency services. The AOC/EOC facility is the fusion and coordination center that provides Executive Management and aviation stakeholders with the situational awareness needed to efficiently and quickly manage airport resources and partner with aviation stakeholders when responding not only to routine/daily infrastructure deficiencies, but also irregular operations and emergency incidents. The combined facility handles approximately 44,000 calls per month and generates approximately 4,800 work orders per month. Transit System DFW s people mover system (Skylink) transports passengers and employees between terminals on the secure side. DFW operates 16 to 24 fully automated cars on Skylink during normal operations. Skylink cars circle the five terminals in two directions, and trains arrive on an average of every two minutes at each terminal. There are two Skylink stations in each terminal. The average customer ride is about five minutes. DFW uses buses to transport passengers and employees between terminals on the non-secure side, the Grand Hyatt Hotel, parking lots and the Rental Car Center (RAC). DFW uses 29 buses to shuttle passengers between the terminals and Grand Hyatt (Terminal Link); 62 buses between remote and express parking lots and the terminals; 5 buses for various DFW activities and service between the Trinity Railway Express CenterPoint station and the terminals; 32 buses between employee parking lots and the terminals; and 54 buses between the terminals and the RAC. DFW has a Dallas Area Rapid Transit (DART) rail station at the north end of Terminal A that connects DFW to downtown Dallas. A new TexRail station is being designed at the north end of Terminal B that will connect DFW to downtown Fort Worth. This station is planned to be in operation by the end of DFW International Airport

7 FY 2018 Adopted Budget Introduction DFW Controlling Documents In addition to the Contract and Agreement between the Cities, DFW is governed by several other key documents, including the Master Bond Ordinance and the Use Agreements between DFW and the Signatory Airlines. Collectively, these agreements are called the Controlling Documents. The Controlling Documents define how DFW manages its business affairs. DFW does not collect any local tax revenue to fund its operations. The Controlling Documents require that Gross Revenues of the Airport be deposited into the Revenue and Expense Fund. Gross Revenues are defined as all Airport revenues and receipts except: bond proceeds; Passenger Facility Charge (PFC) proceeds used to fund capital projects (rather than for debt service); interest earned on unspent bonds; proceeds in the Capital Accounts; grant proceeds used to fund capital projects; and sale of land or mineral rights, including natural gas royalties. Strategic Plan DFW s executive team rolled out the organization s new Strategic Plan in the first quarter of FY The structure of the plan is shown in the next page. The new Vision statement is Travel. Transformed. The new Plan expands the number of key results, beginning with the overarching key result of Customer Experience. The supporting key results are Business Performance, Employee Engagement, Operational Excellence, and Community Engagement, with the foundational key result of Safe and Secure. Customer Experience has been elevated to emphasize its importance to DFW s ongoing success. Tools that include a Customer Engagement Management technology platform will allow DFW to establish personal relationships with its customers. Business Performance addresses how DFW will remain financially strong and cost competitive by generating higher net revenues. This key result also addresses DFW s core business of growing air passenger and cargo services and to position DFW as a prime gateway between Asia and Latin America for passenger and air cargo service. Employee Engagement is one of the keys to achieving the Airport s goals and objectives. Engagement measures an employee s willingness to give discretionary effort and demonstrate commitment to the organization resulting in personal and organizational success. Operational Excellence defines how DFW will improve operational efficiencies, incorporate sustainability best practices, and leverage technology. DFW will also embark on a new capital program to ensure future growth for the Airport for the next years. Community Engagement leverages the Airport s commitment to the regional community. DFW will continue to positively impact the community by generating economic benefits and employing responsible business practices that help all parts of the region grow and prosper. Safe and Secure has been added as a key result to demonstrate its critical nature. Investments in training and technology will provide both physical and cyber security. A copy of DFW s Strategic Plan is available at 6 DFW International Airport

8 FY 2018 Adopted Budget Introduction 7 DFW International Airport

9 FY 2018 Adopted Budget Introduction Airline Use Agreement Rate Model The Airline Use Agreement is a hybrid model, whereby the Signatory Airlines pay landing fees and terminal rentals based on the net cost to provide those services, and DFW retains a portion of the net revenues from non-airline business units (e.g., parking) in the DFW Cost Center (DFWCC). The following chart summarizes the Airline Use Agreement rate model. Airfield Expenses Direct Costs DPS and Overhead Allocations Debt Service (net of PFCs) Operating Revenue and Expense Fund (the "102 Fund") Airline Cost Centers Terminal Expenses Direct Costs DPS and Overhead Allocations Debt Service (net of PFCs) Less: Misc Airfield Revenues General Aviation Fueling Facility Lease +/- Transfers/Adjustments - Lower Threshold Adjustment + Upper Threshold Adjustment +/- True-Up Adjustment Net Cost = Landing Fees (KPI) Less: Misc. Terminal Rentals Federal Inspection Fees Turn Fees; TSA Rentals Concessions Reimbursements +/- Transfers/Adjustments + DFW Terminal Contribution + Annual Capital Transfer +/- True-Up Adjustment Net Cost = Terminal Rentals (KPI) Airline Cost & Airline Cost per Enplanement (KPI) - Airline Cost Centers The Airline Cost Centers are cost recovery in nature, such that the amount charged to the airlines equals the cost to provide services, after certain adjustments. Landing fees and terminal rental rates are based on the net cost to operate and maintain the airfield and terminals, respectively. DFW charges the direct operating and maintenance costs for the airfield and terminals, plus allocated Department of Public Safety and overhead costs, plus debt service net of Passenger Facility Charges (PFCs), to each cost center; then, subtracts ancillary revenues generated in these cost centers; and credits or charges certain transfers and/or adjustments (see True-Up Adjustments below). The budgeted landing fee rate is determined by dividing the net cost of the airfield by projected landed weights. The budgeted average terminal rental rate is determined by dividing the net cost of the terminal cost center 8 DFW International Airport

10 FY 2018 Adopted Budget Introduction divided by leasable square footage. The Use Agreement requires the Airport to charge an equalized terminal rental rate for all five terminals. The amount paid by the airlines for landing fees and terminal rent fees less airline incentive payments for new service equals airline cost, which is an airport industry Key Performance Indicator (KPI). Another common industry KPI is passenger airline cost per enplaned passenger or CPE. This KPI for passenger airlines is calculated by dividing the amount paid by passenger airlines for landing fees and terminal rent fees less airline new service incentive payments (i.e., collectively, airline cost) by the number of enplanements. DFW Cost Center All non-airline business units, plus interest income, are included in the DFW Cost Center. The DFW Cost Center also pays all costs associated with the Skylink people mover system. The net revenues from this cost center are transferred to the DFW Capital Account and currently equal the upper threshold plus 25%. One of DFW s most important Key Performance Indicators (KPIs) is DFW Cost Center Net Revenue. This KPI measures the profitability (i.e., net revenues) generated by the Airport s non-airline business units, after adjusting for the cost of Skylink and drives the contribution of discretionary capital to the DFW Capital Account. Joint Capital Account Funds in the Joint Capital Account (JCA) require DFW and airline approval before money can be spent. The JCA is funded from the proceeds from natural gas royalties and the sale of land, plus interest income on the account. Supplemental funding for projects paid from the JCA comes from grants and the issuance of debt. Coverage Account The Airport established the Coverage Account as part of the new Use Agreement in order to implement rolling coverage. Each year, the Coverage Account is rolled into the 102 Fund as a source of revenue, and then transferred back into the Coverage Account as excess revenue at the end of the year. The Coverage Account must equal 25% of aggregate debt service each year. If new debt is issued, rates are established to generate the incremental coverage required to fund 25% of the new debt service. DFW Capital Account This is DFW s discretionary account and is funded primarily from the DFWCC Net Revenues, plus interest income. Supplemental funding for projects paid from the DFW Capital Account comes from grants and the issuance of debt. Funds in this account may be used for any legal purpose without airline approval. Threshold Adjustments The Use Agreement established Lower and Upper Thresholds for DFWCC Net Revenues. If DFWCC Net Revenues are budgeted to be less than the Lower Threshold ($44.4 million in FY 2018), an incremental charge (i.e., a Lower Threshold Adjustment) is collected through landing fees in an amount sufficient to achieve the Lower Threshold amount. Although clearly not needed given current levels of net revenues, the theoretical benefit of the Lower Threshold Adjustment guarantees that DFW will have a minimum level of cash to transfer to the DFW Capital Account to replace assets on a timely basis. If DFWCC Net Revenues are budgeted to be greater than the Upper Threshold ($66.4 million in FY 2018), then 75% of the excess is credited to the Airfield Cost Center as an Upper Threshold Adjustment. This reduces budgeted landing fees. The remaining 25% is transferred to the DFW Capital Account at the end of the fiscal year. Sharing net revenues over the Upper Threshold sharing provides sufficient funds for capital replacement but also provides funds to lower landing fees. The Threshold Amounts are adjusted annually for inflation. 9 DFW International Airport

11 FY 2018 Adopted Budget Introduction True-Up Adjustments At the end of each fiscal year, DFW performs a reconciliation or trueup, such that revenues collected equal the actual net cost to operate and maintain the airfield and terminals. Any difference becomes a True-Up Adjustment and is either charged or credited to the appropriate cost center in the next fiscal year beginning in January. Annual Capital Transfer The Use Agreement included an annual transfer from the Joint Capital Account to the Terminal Cost Center to reduce the terminal rents. This transfer, originally $28 million in FY 2011, was reduced $4 million each year and was phased out completely in FY DFW Terminal Contribution Per the terms of the Use Agreement, an annual transfer is made from the DFW Cost Center to the Terminal Cost Center to pay for DFW s share of common use and leasable, but unleased space, in Terminals D and E. This amount is $3.1 million in FY DFW s Fund Structure Although DFW uses the word fund to describe the designation of the source and prospective use of proceeds, DFW is an Enterprise Fund and does not utilize traditional fund accounting commonly used by government organizations. The table below summarizes the primary funds used by DFW: Number Fund Description Fixed Assets and Long Term Debt Operating Revenues and Expenses 252 Passenger Facility Charges (PFC) 320s/330s Joint Capital Account and Bond Funds 340s DFW Capital Accounts and Bond Funds s Debt Service and Sinking Funds 907/910/914 Public Facility Improvement Corporation (PFIC) Primary Use Capital Assets/Bonds Operations Collections/Debt Service Capital/Bond Proceeds Capital/Bond Proceeds Principal and Interest Rental Car Facility/Grand Hyatt and Hyatt Place Hotels DFW s financial statements are issued in conformance with Generally Accepted Accounting Principles (GAAP) and include all of DFW s funds, whereas the Annual Budget focuses on revenues and expenses included in the 102 Fund. DFW manages its day-to-day operations primarily through the 102 Fund in accordance with the Controlling Documents. Passenger Facility Improvement Corporation (PFIC) DFW has a PFIC which owns and operates the Grand Hyatt Hotel in Terminal D and the Hyatt Place Hotel in Southgate Plaza, as well as the Rental Car Facility and rental car bus transportation services. Revenues, expenses, and capital projects of the PFIC are not included in this budget. These businesses are specifically excluded from the airline rate base per the Use Agreement. DFW has issued bonds to finance the construction of the Grand Hyatt Hotel and Rental Car Facility. Each business transfers funds in an amount equal to the debt service so that there is no impact on the airline rate base. 10 DFW International Airport Basis of Budgeting The Operating Revenue and Expense Fund budget is commonly called the Operating Budget, but contains elements that are not expenses under GAAP such as debt service, reserve requirements, and certain expenditures that may be capitalized under GAAP.

12 FY 2018 Adopted Budget Introduction Capital expenditures are funded through Joint Revenue Bonds, grants, PFCs, or cash in the DFW or Joint Capital Accounts. From a process standpoint, the Board of Directors approves the Operating Budget. The Board reviews the capital budget as part of the Annual Budget process and the Financial Plan process. The Board approves contracts associated with capital projects. FY 2018 Budget Comparisons to Other Periods FY 2017 Budget During FY 2017, the Board approved the use of $5.1 million of contingency budgeted outside of the rate base. The FY 2017 Budget as adjusted by contingency is summarized in the following table. Any reference to the FY 2017 Budget in this budget document relates to the FY 2017 Budget, as adjusted for the use of approved contingency. Millions FY 2017 Approved Budget $ Approved Changes (and dates) Legal Exposures (Skylink/Inet) (March 9, 2017 adjusted June 29, 2017) 1.8 DPS Security Technology Consultant (March 9, 2017) 0.1 DPS Security Initiative-Project COBRA (March 9, 2017) 0.9 Skylink Payment for AA's re-banking schedule (June 29, 2017) 0.8 CNG Fuel Credit (March 9, 2017) 0.5 Ops Reserve (March 9, 2017) 1.0 FY2017 Budget with approved contingency $ FY 2017 Outlook DFW employs continuous forecasting techniques to project revenues and expenses for the full 12 months of the fiscal year (called the Outlook). Most of the tables and charts in this budget document include FY 2017 Outlook comparisons to provide the best basis for comparison (rather than comparing to the FY 2017 Budget). The detailed Outlook in this Budget Book was developed in a bottoms-up process such that every account was reforecast. This was completed in March Presentation of Amounts and Prior Years Actuals The FY 2018 Budget is presented in tables and charts that are rounded to millions and thousands. Some columns and charts may not appear to add-up or foot due to rounding differences. Certain prior year amounts have been reclassified to reflect the FY 2018 presentation. Budget Schedule DFW s fiscal year begins October 1. The FY 2018 Expense Budget was compiled by the various DFW departments in May and then reviewed and modified by management in May and June. Presentations were made to representatives of the Signatory Airlines on May 19, 2017, with follow up information provided. A preview of the FY 2018 Budget was presented to the Finance Committee on June 27, The final recommended Budget was presented to and approved by the Board on June 29, The FY 2018 Budget must be submitted to the City Managers of Dallas and Fort Worth by August 15, 2017, with approval of the two City Councils by September 30, DFW International Airport

13 FY 2018 Adopted Budget Executive Summary FY 2018 Key Performance Indicators The table below compares the Key Performance Indicators (KPIs) of the FY 2017 Outlook and the FY 2018 Budget. FY17 FY18 Increase (Decrease) Key Performance Indicators Outlook Budget Amount Percent Total Passengers (Ms) % Total Landed Weights (Bs) % Total 102 Expenditure Budget (Ms) $875.8 $954.2 $ % Airline Costs (Ms) $394.3 $479.3 $ % Airline Cost Per Enplanement (CPE) $11.57 $13.77 $ % DFW Cost Center Net Revenues (Ms) $128.4 $104.8 ($23.6) (18.4%) Amount to DFW Capital Account $80.8 $76.0 ($4.8) (6.0%) The majority of the changes in the FY 2018 Budget when compared to the FY 2017 Outlook can be summarized by the following six items: 1. Debt service increases from completion of capital projects The debt service increase of $21.4 million has been planned and is associated with the completion of the Terminal Renewal and Improvement Program (TRIP) and other capital projects. 2. FY 2016A Bonds The issuance of the 2016A Bonds included accelerated principal and coverage payments of $27.1million in total. There will be a similar increase in FY 2019, then it will level off. 3. Decline in Passenger Facility Charges (PFCs) In FY 2017, DFW established a PFC reserve policy of two months. This allowed the Airport to utilize $9 million of PFCs to pay for debt service. This was a one-time benefit. There is an additional $2 million impact in FY 2018 (for a total reduction of $11 million) to reestablish the PFC reserve to two months. 4. Operating expenses Total operating expenses are up 2.6% from FY 2017 Budget significantly lower than prior two years increase of approximately 7%. 5. Flat DFW Cost Center revenues Revenues are essentially flat, recoginizing the impact of Transportation Network Companies (TNCs) on parking and rental car revenues. This is occurring at all airports throughout the country 6. Strategic priorities funded The budget includes $5.4 million of funding for strategic priorities, specifically for the Key Results of Customer Experience and Safe and Secure. FY 2018 Budget Comparisons and Walkforward The table below compares the Expenditure Budget for the FY 2017 Budget, FY 2017 Outlook and the FY 2018 Budget. The Expenditure Budget consists of operating expenses and debt service. The FY 2018 Budget is $954.2 million, a $78.4 million (9.0%) increase over the FY 2017 Outlook and a $64.4 million (7.2%) increase over the FY 2017 Budget. The total budget request that will be approved by the Cities of Dallas and Fort Worth also includes $10 million of 12 DFW International Airport

14 FY 2018 Adopted Budget Executive Summary contingency outside of the rate base. This contingency may only be accessed with Board approval. The increase from Outlook results primarily from debt service associated with completed capital projects, increased debt service from the 2016A Bonds, which had expedited principal payments and an incremental $11.3 million of fixed budget increases. Excluding these items, the FY 2018 Budget increase is 1.6%. FY18B v FY17B FY18B v FY17OL FY17 FY17 FY18 Inc (Dec) Inc (Dec) Annual Budget (in Millions) Budget Outlook Budget Amount Percent Amount Percent Operating Expenses $459.3 $446.6 $471.1 $ % $ % Gross Debt Service % % Total 102 Expenditures Budget $889.7 $875.8 $954.2 $ % $ % Contingency O/S Rate Base 10.0 Total Budget w/contingency $964.2 The FY 2018 Operating Expense Budget is 2.6% higher than the FY 2017 Budget and 5.5% higher than the FY 2017 Outlook. During FY 2017, management reduced the FY 2017 Outlook by $12.7 million to offset lower DFW Cost Center net revenues. The reductions were made to employee bussing, technology contracts and maintenance, hiring, winter weather expenses and other areas. Historically, the Operating Expense Outlook is very close to the budget since management usually plans to spend the full budget. Therefore, the comparison to the FY 2017 Budget is meaningful when compared to increases from the last two budget cycles, which were appoximately 7%. Passengers and Landed Weights - Total passenger traffic is budgeted to be 67.3 million, a 0.9 million (1.3%) increase over the FY 2017 Outlook. This growth is in line with American Airlines announcement that they will be restraining capacity growth. DFW expects a 1.2%, 1.3% and 1.4% increase in originating, destination and connecting passengers, respectively, compared to the FY 2017 Outlook. International passengers are budgeted to increase to 8.7 million, 0.2 million (1.8%) over the FY 2017 Outlook. Landed weights increase 1.0% year over year primarily due to American Airlines replacing older, lighter MD80 aircraft with newer, heavier Boeing airplanes. Capital Program and Debt Service The majority of the capital program for the past several years is related to the Terminal Renewal and Improvement Program (TRIP) for Terminals A, B and E, which is now approaching completion and under budget. TRIP began in FY 2011 and has phased construction through early FY 2018 (excluding Terminal C). All of Terminal A is complete with the final section of Terminal E finishing in the Summer of The final renovated section of Terminal B will be placed into service during the first quarter of FY In addition, the final section of the Terminal E parking garage was placed in service in the third quarter of FY As renovated sections of terminals and garages open, DFW begins to pay debt service on the facilities. Accordingly, debt service increases $53.9 million in FY 2018 compared to FY 2017 Outlook. The FY 2018 debt service includes the 2016A Bonds that are being repaid in five years beginning with FY An incremental $27.1 million of debt service expense will be incurred in FY 2018 on these bonds. The table on the next page summarizes the major changes in operating expense between the FY 2017 Outlook and the FY 2018 Budget. Operating expenses increased $24.5 million (5.5%) from the FY 2017 Outlook, of which, $11.9 million relates to the DFW Cost Center and $ DFW International Airport

15 FY 2018 Adopted Budget Executive Summary million relates to the Airline Cost Centers. Operating expenses increased $11.8 million (2.6%) from the FY 2017 Budget. Explanations of the changes in the walkforward are addressed in the Operating Expenses section. Cost Center Operating Expenses (in Millions) Total DFW Airline FY 2017 Outlook $446.6 $163.1 $283.5 Budget reductions (8.6) (1.7) (6.8) Customer experience Safe and secure Salary annualization and merit pool Fixed contract increases Restore CEO contingency and other items Other increases, net (1.4) Net increase FY 2018 Budget $471.1 $175.0 $ DFW International Airport Revenue and Expense Budget Exposures Revenues - The FY 2018 revenue budget includes an estimated $5.3 million of exposure items that could result in DFW not attaining its revenue budget targets. Revenue Budget Exposures (in Millions) Parking revenues $2.0 Department of Public Safety (DPS) revenues 1.3 Concessions revenues 1.0 Rental car revenues 1.0 Total revenue exposures $5.3 The budget includes an estimated $2.0 million of parking revenue exposure due to the continued potential impact of TNCs. The TNCs have been operating at DFW for more than two years and transactions continue to increase each month although growth has slowed. The Department of Public Safety s revenue budget includes $1.3 million for a Federal reimbursement program for law enforcement officers. The President s proposed budget assumes that this program would be eliminated creating the budget exposure. Concessions has an estimated exposure of $1.0 million due to the continued movement of AA international flight departures from Terminal D to other terminals which have lower average spend per passenger. Rental car revenues have an estimated exposure of $1.0 million due to declines in average rental rates partially due to the competitive impact of TNCs. If rental car companies are unable to maintain pricing at FY 2017 levels, their percentage rent paid to DFW will decrease. Expenses - Expense exposures exist due to winter storms, changing security requirements, and TSA and Customs and Border Protection (CBP) passenger facilitation costs. Unless these exposures result in substantial cost increases, management believes that the CEO Contingency of $4.0 million should be adequate to cover the exposures. The FY 2017 CEO contingency has been fully used for exposures related to security and other items. The budget also includes $10

16 FY 2018 Adopted Budget Executive Summary million of Board-controlled contingency (outside of the rate base) to mitigate additional operating expense exposures or to fund new strategic priorities that arise during the fiscal year. Airline Cost Airline cost represents the fees paid to DFW by the passenger and air cargo carriers, primarily for landing fees and terminal rents. Cost per enplanement (explained below) is based solely on passenger airline cost. The FY 2018 Airline Cost Budget is $479.3 million, $85.0 million (21.6%) higher than the FY 2017 Outlook. Following is a walkforward of airline cost from the FY 2017 Outlook to the FY 2018 Budget. Approximately 66.1% of the increase is related to debt service and fixed Use Agreement items. Variances are explained in the Airline Cost Centers section. Change in Airline Cost - $85.0 Million $17.3 $479.3 $10.7 $2.2 $42.9 $7.8 $4.0 $394.3 FY17OL Increased Debt Service Decreased PFCs Decreased Joint Capital Contribution Increased Operating Expenses ¹ Decreased ASIP ² Decreased DFW CC Transfer ³ FY18B 1 Net of increased other non-airline revenues 2 Air Service Incentive Program 3 Net of increased terminal contribution The debt service increase is due to the completion of TRIP and the 2016A Bonds which have expedited principal retirements. The PFC decrease is due to the one-time PFC benefit received in FY 2017 and impact of adjusting to a two-month reserve balance. The joint capital contribution was eliminated in FY 2018 per the terms of the Use Agreement. Net Operating Expenses increases and are detailed in the operating expense section. The DFW Cost Center Transfer decreased due to lower DFW Cost Center net revenues. Passenger Airline Cost Per Enplanement Cost Per Enplanement (CPE) CPE is the total passenger airline cost paid to DFW divided by the number of enplaned passengers. CPE is a standard metric used by the airline industry. Enplaned passengers is used as the denominator because it is a key revenue/cost driver for the airlines; however, this is not the case for an airport. Airport costs are based on the cost to operate and maintain its facilities and runways. Notwithstanding this issue, DFW (and the industry) use this indicator as a cost performance metric. CPE increases in FY 2018 are due to the factors noted above. 15 DFW International Airport

17 FY 2018 Adopted Budget Executive Summary $16 $12 Airline Cost per Enplanement $11.57 $13.77 $8 $4 $0 FY17 Outlook FY18 Budget CPE Benchmarked to Other Airports DFW s goal is to have a competitive CPE. The following chart benchmarks DFW s fully loaded CPE with the fully loaded CPE projections for DFW s competitive set of 17 large U.S. hub airports using the latest data available from Airports Council International (ACI) surveys from FY Fully-loaded cost is the most meaningful comparison because it includes most of the costs incurred by airlines to operate at an airport, including what they pay the airport (blue), what they pay directly for terminal maintenance and terminal debt service (purple), an estimate of what costs the airlines incur for delay and taxiing (orange) and an estimate for fuel taxes (yellow). DFW s cost structure is projected to increase due to higher debt services costs. The graph illustrates that DFW is competitive from a cost standpoint compared to AA s other major hubs. 16 DFW International Airport

18 FY 2018 Adopted Budget Executive Summary DFW Cost Center Net Revenues The following chart is a walkforward of DFW Cost Center (DFWCC) net revenues. The FY 2018 net revenues budget is $104.8 million, a $23.6 million (18.4%) decrease from the FY 2017 Outlook. This represents the profit from non-airline business, such as Parking, Concessions, Rental Car and Commercial Development. Change in DFW Net Revenues - $23.6 Million $128.4 $2.1 ($11.9) ($1.4) ($4.1) ($8.3) $104.8 FY17 Outlook Increased Revenues Increased Operating Expenses Increased Terminal Contribution Increased Debt Service One-Time Impacts FY18 Budget Operating expenses allocated to the DFWCC are explained in the walkforward of the Operating Expense section. Debt service increased primarily to the incremental existing debt and capital projects. The one-time increase result from the 2016A Bonds and the reduction of PFC s. The following chart highlights the sharing of DFWCC net revenues with the airlines to reduce landing fees. The Use Agreement requires DFW to share 75% of revenues over the upper threshold of $66.4 million (in FY 2018) with the airlines. 17 DFW International Airport

19 FY 2018 Adopted Budget Executive Summary Net Revenues from DFW Cost Center (Millions) $28.8 $76.0 DFW Capital Account Shared with Airlines In addition to the $28.8 million, the Use Agreement requires a terminal contribution from the DFW Cost Center to reduce terminal rates. The terminal contribution for FY 2018 is $3.1 million. The combined amount of $31.9 million reduces landing fees and terminal rates. The $31.9 million share to the airlines in FY 2018 is a decrease of $17.3 million compared to the FY 2017 Outlook. Passengers DFW projects a record number of passengers in FY The FY 2018 Budget for passengers is 67.3 million, an increase of 0.9 million (1.3%) more than the FY 2017 Outlook. Originating passengers begin their trip at DFW. Destination passengers live elsewhere and fly to DFW for business or leisure. People who travel through DFW to get to their final destination are connecting passengers. Enplanements represent all passengers boarding a plane at DFW. FY17 FY18 Increase (Decrease) Passengers (Millions) Outlook Budget Amount Percent Origination % Destination % Connecting % Total Passengers % Enplanements % Changes in these passenger metrics are important because they are the key revenue drivers for Parking (originating passengers), Concessions (enplanements) and Rental Car (destination passengers) revenues. See further detailed explanations in the DFW Cost Center section. 18 DFW International Airport

20 FY 2018 Adopted Budget Executive Summary Revenues Overview The table below summarizes revenues by cost center and compares the FY 2017 Outlook and the FY 2018 Budget. FY17 FY18 Increase (Decrease) Millions Outlook Budget Amount Percent Revenues Airfield Cost Center $172.4 $195.5 $ % Terminal Cost Center % DFW Cost Center % PFCs/CFCs/Other (9.2) (5.4%) Total Revenues $1,000.2 $1,059.0 $ % FY 2018 Airfield and Terminal Cost Center revenues are higher than the FY 2017 Outlook primarily due to increased landing fees and terminal rentals necessary to recover higher debt service and operating expenses attributable to these cost centers. FY 2018 DFWCC revenues increased from the FY 2017 Outlook primarily due to higher commercial development revenues and interest income. PFCs)are collected from enplaned revenue passengers and are used to offset debt service on debt issued prior to TRIP. Customer Facility Charges (CFCs) are collected from rental car customers based on the number of transaction days, and are used to pay debt service on the Rental Car Center. Other Revenues relate to funds transferred from the Public Facility Improvement Corporation (PFIC) to pay debt service associated with the Grand Hyatt Hotel and funds transferred from the DFW Capital Account to pay for debt service associated with the Terminal E garage and DFW s headquarters facility. These revenues are lower than the FY 2017 Outlook primarily due a one-time use of incremental PFCs in FY 2017 and the need to maintain a two-month reserve of PFCs. 19 DFW International Airport Capital Programs and Debt Financing DFW has two capital accounts - the Joint Capital Account, which requires both DFW and airline approval to access funds; and the DFW Capital Account, which DFW may use at its sole discretion. The Joint Capital Account is funded from natural gas royalties, grants, debt proceeds, and interest income on the available cash balances. The DFW Capital Account is funded from net revenues from the DFW Cost Center, grants, debt proceeds (for commercial development) and interest income. The largest component of DFW s capital program is TRIP, which is funded from the Joint Capital Account. TRIP is currently budgeted at $1.9 billion for Terminals A, B, and E. This excludes $817 million for Terminal C, which is currently on hold at the request of American Airlines. As of April 2017, DFW was 96% contractually committed/spent for Terminals A, B and E, and projects $30.4 million in savings at the end of the program. The Joint Capital Account includes funding for an additional $636 million of projects for which DFW has received airline approval. Additionally, DFW has $239 million of capital projects currently underway and funded from the DFW Capital Account. DFW s capital program is explained in more detail in the Capital section.

21 FY 2018 Adopted Budget Airline Cost Centers Airline Cost Centers There are two airline cost centers, the Airfield and the Terminal. The airlines pay DFW landing fees to cover the net cost of the airfield, and terminal rents to cover the net cost to operate and maintain the terminals. At the end of each fiscal year, DFW performs a reconciliation or true-up of actual costs paid and revenues received. If there is a variance (i.e., if revenues collected exceed or are lower than the actual cost), then the Airport provides a credit or adds an incremental charge in the following fiscal year to settle the difference. In November 2016, DFW initiated an approximate $9 million rate reduction to adjust the Passenger Facility Charges (PFC s) reserve balance to a two-month balance. This one-time adjustment in the FY 2017 Outlook will not be made in FY Airline Cost Walkforward The following table is a walkforward of airline cost between the FY 2017 Outlook and the FY 2018 Budget. Airline Cost Walkforward (in Millions) Total FY 2017 Adjusted Outlook $394.3 Debt & Use Agreement Items Debt Service 42.9 Passenger Facility Charges (PFCs) 7.8 Joint Capital Contribution 4.0 Total Debt and Use Agreement 54.8 Net Operating Expenses Increased Airline Cost Centers O & M 12.5 Increased Other Non-Airline Revenues (1.8) Total Net Operating Expenses 10.7 Other Air Service Reduced Incentive Program Payments 2.2 Reduced DFW Cost Center Transfer, net* 17.3 Total Other Air Service 19.5 Total Increase 85.0 FY 2018 Budget $479.3 * net of increased Terminal Contribution 20 DFW International Airport

22 FY 2018 Adopted Budget Airline Cost Centers Summary of Airline Cost The following table compares the summary of airline cost for the FY 2017 Outlook and the FY 2018 Budget. Payments to the airlines for the Air Service Incentive Program (ASIP) are made from the DFW Capital Account and are accounted as rebates to the airlines. Accordingly, these payments are shown as a reduction of airline cost. FY17 FY18 Increase (Decrease) Airline Revenue/Costs (in Millions) Outlook Budget Amount Percent Landing Fees $113.9 $155.4 $ % Terminal Leases % FIS Fees % Turn Fees & Terminal Office Rents % Aircraft Parking % Sub-total Airline Revenue/Cost % Less: ASIP (5.6) (3.4) 2.2 (38.8%) Total Airline Cost/Revenue post ASIP $394.3 $479.3 $ % Airfield Cost Center The table below compares the FY 2017 Outlook and the FY 2018 Budget for the Airfield Cost Center. Note that revenues equal expenses in this cost center in both periods. Revenue variances to the FY 2017 Outlook are explained below. See the Operating Expenses section for expenditure variances. FY17 FY18 Increase (Decrease) Airfield CC (in Millions) Outlook Budget Amount Percent Revenues Landing Fees $113.9 $155.4 $ % Transfer from DFW CC (18.8) (39.4%) Other % Total Revenues % Expenditures Operating Expenses % Net Debt Service % Total Expenditures % Net Airfield Revenue $0.0 $0.0 $0.0 n/a 21 DFW International Airport

23 FY 2018 Adopted Budget Airline Cost Centers Landing Fee Revenues The FY 2018 landing fees budget is $155.4 million, an increase of $41.5 million (36.5%) from the FY 2017 Outlook due to the increases in operating expenses and debt service charged to the airfield and a decrease in the revenue sharing from the DFW Cost Center. The increase in debt service is primarily the result of the issuance of the 2016A Bonds which has accelerated principal payments. Other Airfield Revenues Other airfield revenues include threshold adjustments transferred from the DFW Cost Center, Corporate Aviation (CA) fees, Department of Public Safety (DPS) revenues and airline consortium rent for lease of the fuel farm. The airlines have formed a fuel consortium to operate and maintain the fuel farm. See the DFW Cost Center section for variance explanations. The Airfield is a residual cost center with landing fees as the balancer. The following table compares Airfield Cost Center revenues and expenditures for the FY 2017 Outlook and the FY 2018 Budget showing the landing fee revenues necessary to cover budgeted net airfield costs. FY17 FY18 Increase (Decrease) Airfield CC (in Millions) Outlook Budget Amount Percent Expenditures Operating Expenses $86.9 $92.3 $ % Net Debt Service % Total Expenditures % Revenues Aircraft Parking % Corporate Aviation % Fuel Facility % DPS % Other (0.0) (0.0) 0.0 (2.3%) Transfer from DFW Cost Center (18.8) (39.4%) Revenues before Landing Fees (18.5) (31.6%) Landing Fees $113.9 $155.4 $ % Landing Fees and Landed Weights The following charts compare landing fees and landed weights for the FY 2017 Outlook and the FY 2018 Budget. The landing fee rate is assessed per 1,000 pounds of maximum approved landed weight for each specific aircraft as certified by the FAA. Changes in landed weights will not affect total landing fees because DFW must charge the airlines collectively for the cost to operate the airfield. Thus, an increase in landed weights will lower the average landing fee rate and a decrease in landed weights will cause the landing fee rate to increase. 22 DFW International Airport

24 FY 2018 Adopted Budget Airline Cost Centers Signatory landing fees are budgeted at $3.57 in FY 2018, a $0.92 (34.7%) increase from the FY 2017 Outlook. This will generate sufficient revenue to pay for budgeted airfield costs. Per the Use Agreement, non-signatory airlines are assessed a rate that is 25% greater than signatory airlines. Non-signatory landed weights are only 2.2% of total weights in FY $5.00 $4.00 $3.00 $2.00 $1.00 $0.00 Landing Fee Rates (per 1,000 pounds) $3.57 $2.65 FY17OL FY18B FY17OL Landed Weights (in Billions) FY18B Cargo DFW is recognized by the industry as one of the top cargo airports in the world. The Airport s prime location allows assorted cargo to reach millions of U.S. customers by road, while also reaching several continents by plane in a matter of hours. Ninety eight percent of the Continental U.S. population can be reached via truck within 48 hours from DFW Airport. Approximately 10.5% of all landing fees are budgeted to come from cargo aircraft for the FY 2018 Budget. 23 DFW International Airport

25 FY 2018 Adopted Budget Airline Cost Centers Terminal Cost Center The table below compares the FY 2017 Outlook and the FY 2018 Budget for the Terminal Cost Center. Note that revenues equal expenses in this cost center in both periods. Revenue variances between the FY 2018 Budget and the FY 2017 Outlook are explained below. See the Operating Expense section for expenditure variations. FY17 FY18 Increase (Decrease) Terminal CC (in Millions) Outlook Budget Amount Percent Revenues Operating Revenue Terminal Leases $229.7 $267.9 $ % FIS Fees % Turn Fees & Office Rents % Other % Total Operating Revenue % Transfers DFW Terminal Contribution % Joint Capital Transfer (4.0) Total Transfers (2.6) (45.6%) Total Revenues % Expenditures Operating Expenses % Net Debt Service % Total Expenditures % Net Terminal Revenue $0.0 $0.0 $0.0 n/a 24 DFW International Airport

26 FY 2018 Adopted Budget Airline Cost Centers The Terminal is a residual cost center with terminal leases as the balancer. The following table compares Terminal Cost Center revenues and expenditures for the FY 2017 Outlook and the FY 2018 Budget showing the terminal lease revenues necessary to cover budgeted net terminal costs. FY17 FY18 Increase (Decrease) Terminal CC (in Millions) Outlook Budget Amount Percent Expenditures Operating Expenses $196.6 $203.8 $ % Net Debt Service % Total Expenditures % Revenues Operating Revenue FIS Fees % Turn Fees & Office Rents % Other % Operating Revenues % Transfers DFW Terminal Contribution % Joint Capital Transfer (4.0) Total Transfers (2.6) (45.6%) Revenues before Leases % Terminal Leases Needed $229.7 $267.9 $ % Terminal Leases The FY 2018 Terminal Lease budget is $267.9 million, a $38.2 million (16.6%) increase from the FY 2017 Outlook due primarily to increases in net debt service charged to the terminals, operating costs and the phase out of the Joint Capital Transfer. The increase in debt service is the result of TRIP and the issuance of 2016A Bonds with accelerated principal. Terminal lease fees are charged to airlines based on the direct and allocated costs to operate the terminals. Total terminal operations, maintenance and debt service costs, including utilities for the five terminals, are divided by leasable square feet to calculate an average lease rate per square foot. American Airlines pays directly for the maintenance costs of Terminals A and C. These costs are added into the numerator of this formula to derive the fully loaded average rate. American Airlines receives rent credit for their costs. The amount of the rent credit was negotiated as part of the Use Agreement ($39.8 million in FY 2018). 25 DFW International Airport

27 FY 2018 Adopted Budget Airline Cost Centers Average Terminal Rents before Credits The following chart compares average terminal rents before credits for the FY 2017 Outlook and the FY 2018 Budget. The increase in the FY 2018 Budget compared to the FY 2017 Outlook is due to increases in net debt service charged to the terminals, increases in operating costs and the phase out of the $4 million transfer credit from the Joint Capital Account compared to FY 2017 as described in the Use Agreement. FY 2017 is the last year of this credit. $300 $225 $150 $75 $0 Average Terminal Rents before Credits per square foot $275 $223 FY17OL FY18B Federal Inspection Services (FIS) Fees Costs are allocated to the FIS based on its percent share of terminal square footage. The FIS budget for FY 2018 is $25.5 million, a $0.2 million (0.6%) increase from the FY 2017 Outlook. The FY 2018 rate is based upon terminal costs excluding new debt service. The rate for FIS per international passenger clearing customs at DFW is budgeted at $6.72. DFW expects 3.8 million International FIS passengers in FY 2018 compared to 3.6 million in FY FIS passengers do not include arriving passengers from a limited number of countries in which passengers clear U. S. Customs in the departing country (e.g., Canada and Abu Dhabi). Turn Fees and Office Rents Turn fees are paid by airlines for common use gates in Terminals D and E in lieu of permanently renting space. Per the terms of the Use Agreement, turn fee rates must change at the same percentage as terminal lease rates. The turn fees and office rents budget for FY 2018 is $33.7 million, a $2.9 million (9.6%) increase from the FY 2017 Outlook. Other Terminal Revenues Other terminal revenues include TSA rents, concessions O & M reimbursements, catering fees and allocable miscellaneous DPS revenues. Concessionaires are required to reimburse the Airport (for Terminals B, D and E) and American Airlines (for Terminals A and C) for the allocated maintenance cost per square foot of the terminals. The other terminal revenues budget for FY 2018 is $19.7 million, a $1.5 million (8.5%) increase from the FY 2017 Outlook primarily due to increases in catering fees and concessions O&M reimbursements. 26 DFW International Airport

28 FY 2018 Adopted Budget Airline Cost Centers Transfers - Joint Capital Account Transfer Per the terms of the Use Agreement, an annual transfer is made from the Joint Capital Account to the Terminal Cost Center to subsidize terminal rates. The annual transfer of $28 million in FY 2011 was reduced by $4 million each year until it phased out completely in FY Transfers - DFW Terminal Contribution Per the terms of the Use Agreement, DFW pays for a portion of the terminal cost. This amount is based on DFW s proportionate share of expenses for common use and vacant space in the terminals. From a cost center standpoint, this contribution is shown as a source of cash in the Terminal Cost Center and a use of cash for the DFW Cost Center. DFW can reduce its contribution to the Terminal Cost Center by leasing more space to other airlines or tenants, increasing common use turn fees and by reducing costs in the terminals. The DFW terminal contribution is $3.1 million, a $1.4 million (83.9%) increase from the FY 2017 Outlook primarily due to net debt service offset by increased common use turn fees. Cost Per Enplanement (CPE) Calculation The following table shows the passenger airline cost per enplanement calculation and compares the CPE for the FY 2017 Outlook and the FY 2018 Budget. This KPI only includes passengerrelated airline revenues (i.e., costs) and excludes cargo and general aviation revenues. FY17 FY18 Increase (Decrease) Cost Per Enplanement (in Millions) Outlook Budget Amount Percent Enplanements (1) % Passenger Airline Cost per Enplanement Airline Cost/Revenue $399.9 $482.8 $ % Less: Cargo (10.4) (16.3) (5.9) 56.8% Sub-total PAX Airline Revenue % Less: ASIP - Passenger Airlines (5.6) (3.4) 2.2 (38.8%) Total PAX Airline Revenue post ASIP % Cost per Enplanement (CPE) (2) $11.57 $13.77 $ % 1 General Aviation enplanements are excluded from CPE calculation 2 Actual rates, not in millions 27 DFW International Airport

29 FY 2018 Adopted Budget DFW Cost Center DFW Cost Center The table below compares the FY 2017 Outlook and the FY 2018 Budget for the DFW Cost Center. DFW Cost Center Net Revenues are shared between the airlines (to lower landing fees) and DFW Capital Account at the end of the fiscal year. For FY 2018, 75% of net revenues in excess of the upper threshold of $66.4 million are transferred to the Airfield Cost Center as a threshold adjustment. Thus the net reduction in net revenues transferred to the DFW Capital Account is projected to be $76 million, $4.8 million (6%) less than in FY FY17 FY18 Increase (Decrease) DFW Cost Center (in Millions) Outlook Budget Amount Percent Revenues Parking $161.6 $164.3 $ % Concessions % Advertising (1.9) (12.3%) Rental Car (RAC) (0.1) (0.3%) Commercial Development % Subtotal % Employee Transportation (0.7) (4.0%) Utilities & Miscellaneous (0.8) (9.4%) DPS % Interest Income % Total Revenues % Expenditures Operating Expenses % Net Debt Service % Total Expenditures and Debt Service % Gross Margin - DFW Cost Center (21.6) (12.6%) Less: Terminal Contribution % Less: Skylink % DFW Cost Center Net Revenues (23.6) (18.4%) Transfer to Airfield Cost Center* (18.8) (39.4%) Amount to DFW Capital Account $80.8 $76.0 ($4.8) (6.0%) * Threshold Adjustment Revenue variances are explained in the rest of this section. Expenditure variances are covered in the Operating Expenses section. 28 DFW International Airport

30 FY 2018 Adopted Budget DFW Cost Center Passenger Revenues DFW Cost Center has four business Passenger Revenue per Enplanement units that strive to maximize net $7.60 revenues (Parking, Concessions, Rental Car Center and Commercial $7.25 Development). Passenger Revenue per $7.15 $7.17 $7.20 Enplanement measures passenger related revenues from business units that operate to make a profit (i.e. $6.80 Parking, Concessions, Rental Car) but excludes revenue from other business units that are priced to break even (such as Employee Transportation and nonterminal utilities) and Commercial $6.40 FY16 Actual FY17 Outlook FY18 Budget Development that is not correlated to passengers. The chart to the right compares Passenger Revenue per Enplanement. The FY 2018 Budget is $0.08 lower than the FY 2017 Outlook because of lower parking revenue with growing passengers. Parking Business Unit Beginning in FY 2017, DFW began to combine parking and ground transportation revenues into one revenue category to be consistent with FAA reporting and to reflect the fact that the two are very closely aligned. To get to the airport, originating passengers have the choice to park at the airport, get dropped off at the airport, or to take a taxi, limo or services provided by transportation network companies (TNCs), such as Uber and Lyft. The following table shows the composition of parking and ground transportation revenues. $200 $150 $100 $50 $0 $ % Parking and Ground Transportation Revenue (in Millions) $156.6 $161.6 $ % 10.2% 11.6% 93.5% 90.8% 89.8% 88.4% FY15 Actual FY16 Actual FY17 Outlook FY18 Budget Public Parking Ground Transportation Parking Background Parking is DFW s most significant source of non-airline revenue. Customers are charged parking fees based on the length of stay and the parking product used. The table on the following page highlights DFW s parking products, spaces and parking rates. Ground transportation fees are paid by taxis, limos, TNCs and other shared-ride transportation companies that require airport access to drop-off and pick-up passengers. DFW also collects a 29 DFW International Airport

31 FY 2018 Adopted Budget DFW Cost Center privilege fee of 10% (of sales) from off-airport parking and valet providers. The Airport contracts directly with a third party to provide a DFW branded valet service. DFW Parking Space and Rate Summary Parking Product Available Space Daily Parking Rate Terminal 30,493 $24 all day parking Express Lots 7,669 $12 uncovered; $15 covered Remote 4,871 $10 uncovered Intra-day n/a $9 to $10 (up to 6 hours) Valet n/a $31 (uses existing parking facilities) Meeter-Greeter n/a $3 (30 minutes-2 hours) Drop-Off n/a $2 (8-30 minutes) Pass-Throughs n/a $4 (0-8 minutes) Taxi, Limos, TNCs n/a $4 (up to 2 hours) Over the past few years, DFW has made substantial investments in new parking garages, systems and improvements. By the end of FY 2018, DFW will have spent over $470 million on such investments. These investments include new garages for Terminals A and E, a Parking Control System, new parking plazas, a new Parking Guidance System in Terminals A, D, and E and the expanded Express lots. These investments require an annual debt service of almost $31 million annually. The annual operating costs on the new parking control system and new parking guidance system will be $2.2 million in FY FY 2018 Budget The FY 2018 parking revenue budget is $164.3 million, an increase of $2.7 million (1.7%) from the FY 2017 Outlook due to the anticipated growth of TNCs. The FY 2018 Budget has an exposure of $2 million due to potential impact on DFW s other parking products that could result from TNC growth over what has been budgeted. Parking Revenue per Originating Passenger The primary drivers for parking revenues are originating passengers, parking prices, and average length of stay. The goal is to maximize revenue per originating passenger. The decrease in parking revenue per originating passenger for the FY 2018 Budget versus the FY 2017 Outlook is due to customers choice of parking product and shorter lengths of stay. $9.60 $9.20 $8.80 $8.40 $8.00 Parking Revenue per Originating Passenger (Excluding Pass-Through) $9.18 $9.26 $9.13 FY16 Actual FY17 Outlook FY18 Budget 30 DFW International Airport

32 FY 2018 Adopted Budget DFW Cost Center Concessions Business Unit Background Terminal concessions consist of food and beverage, retail and duty free, advertising, and various customer services/amenities. Concessions agreements consist of leases or contracts that range from 5 to 10 years and include a minimum annual guarantee and percentage rent. Concessions also issues short term permits for kiosks and storage location. As of May 31, 2017, the Airport had 208 total locations and 85% are currently paying percentage rent. Concessions revenues also include contracts for sponsorships, advertising and communications services which generally have periodic or one-time payments that may be amortized over the life of the contract. Concessions goal is to optimize retail, services, and food and beverage options for customers to increase revenue per enplanement; and to grow new revenue streams from sponsorships, communications and advertising not tied directly to enplanements. Concession offerings have continued to evolve to better align with customer preferences through the TRIP and Terminal D Master Plan efforts. In February 2017, DFW awarded a new contract for ATM s. DFW plans to release Requests For Proposals (RFPs) annually through 2018, which will include lounges, retails, and food and beverage, to ensure new offerings and a proper mixture of products to passengers. FY 2018 Budget The FY 2018 concessions budget is $80.2 million, a $1.2 million (1.5%) decrease from the FY 2017 Outlook due to a change in advertising contracts, net of an increase in enplanements. Construction in Terminal D and airline terminal utilization may impact FY 2018 revenues. There is an estimated $1 million of exposure. Concessions Revenue per Enplanement This is the Concession Business Unit s most significant KPI because it measures the amount of revenue earned by DFW from terminal concessions per enplaned passengers. This is also a standard metric used by the airport industry. The decrease in concessions revenue per enplanement in FY 2018 as compared to the FY 2017 Outlook is primarily due to slower revenue growth from delay in the opening of new concepts in Terminals C, D, and airline utilization of different terminals and faster passenger growth. $2.20 $2.00 $1.80 $1.60 $1.40 $1.20 Concessions Revenue per Enplanement (Excluding Advertising) $1.90 $1.99 $1.98 FY16 Actual FY17 Outlook FY18 Budget 31 DFW International Airport

33 FY 2018 Adopted Budget DFW Cost Center Rental Car Center (RAC) Business Unit Background The RAC covers 155 acres and includes a common building with individual counters and back office space for each rental car company. The facility also includes a parking garage for ready and return car spaces, a bus maintenance facility, overflow surface parking areas and individual rental company service sites including car wash racks, maintenance bays and fueling systems. The Airport collects ground lease, percentage rent (10% of sales), and O&M expenses from the rental car companies. The ground lease rate increases 3% each year. There are 5 rental car companies in the consolidated rental car facility with 13 brands operating from the RAC, providing a total available inventory of approximately 25,000 cars. The largest 3 rental car companies and their market share are Enterprise/Vanguard (35%), Avis/Budget/Payless/Zipcar (29%) and Hertz (29%). New rental car alternatives, such as TNCs (Uber and Lyft) and ridesharing from personal/fleet cars, could become a threat to the rental car business at DFW Airport. DFW management has very little control over rental car company activities. It assists the RAC companies where possible and maintains the RAC facility to high standards. Most RAC patrons are business travelers. RAC sales and DFW revenues tend to follow the economy. RAC revenues can rise or fall based on the number of DFW destination passengers, the percentage of destination passengers renting cars, the average stay per renter, and the average daily price charged for the cars. FY 2018 Budget The FY 2018 rental car revenue budget is $33.2 million which is flat to the FY 2017 Outlook. All other factors are assumed to stay constant with the FY 2017 Outlook because management has no control over these factors. There is an estimated $1 million of exposure due to various market factors, such as off-airport shared ride options and TNCs. RAC Revenues per Destination Passenger This KPI measures the amount of percentage rent paid by the rental car companies to DFW divided by destination passengers (i.e. passengers from other cities that fly to DFW for business or pleasure). The FY 2018 Budget for RAC revenues per destination passenger is projected to be lower than the FY 2017 Outlook primarily due to a lower daily rate assumption and other market factors due partially to the competitive impact from TNCs. $2.80 $2.40 $2.00 $1.60 $1.20 Rental Car Revenue per Destination Passenger $2.76 $2.72 $2.68 FY16 Actual FY17 Outlook FY18 Budget 32 DFW International Airport

34 FY 2018 Adopted Budget DFW Cost Center Commercial Development Business Unit Background The Airport has a total land mass of 17,207 acres. As of June 1, 2017, 2,233 acres have been commercially developed. Management estimates that approximately 4,146 acres of additional land is available for future development. A commercial development land use plan has been completed and approved by the Board. The Airport focuses primarily on developing land that has airport synergy such as logistics and warehousing. Commercial development revenues include ground leases, foreign trade zone tariff and facility rents generated from non-terminal Airport facilities, and property and surface use fees primarily from natural gas drilling. Multi-year lease agreements are negotiated with tenants on a square foot or acre basis. Some facilities such as the Hyatt Regency Hotel and Bear Creek Golf Course also have percentage rent components. Industrial space demand has been consistent in the northern part of the airport specifically in the Coppell Industrial, International Commerce Park and Northwest Logistics areas. Current construction in mixed-use developments close to Main Street and Highway 114 includes automobile dealerships. The airport is increasingly focused on the southern region in response to market driven space demand, particularly the Passport Park, Bear Creek and Walnut Hill areas. The key drivers for commercial development revenues are acres developed and the average ground rental rate. Approximately 62% of the ground lease revenue is based on negotiated rates and 38% on the airport services ground rental rate which are primarily older leases that have airfield access. The airport services ground rental rate per acre changes with inflation and will be $27,653 in FY FY 2018 Budget The FY 2018 commercial development revenue budget is $44.4 million, a $1.4 million (3.2%) increase from the FY 2017 Outlook primarily due to lease rate increases. Other DFW Revenues and Expenses The fees charged in this category are established to recover costs (except interest income). Employee Transportation DFW charges fees for employees to access the transportation system that takes employees from the employee parking lots to the terminals. For most employees, the employer (airlines, concessionaires) pays these fees for their employees. The FY 2018 Budget is $16.9 million, a $0.7 million (4.0%) decrease from the FY 2017 Outlook due to a rate reduction due to lower cost to provide the service per employee. 33 DFW International Airport

35 FY 2018 Adopted Budget DFW Cost Center Utilities & Miscellaneous This revenue category represents fees charged to non-airline users of utilities, HVAC, trash removal, water, and certain permit and accounting fees. Utility charges to users are based on the cost to provide the services. The FY 2018 Budget is $7.3 million, a $0.8 million (9.5%) decrease from the FY 2017 Outlook primarily due to permit fees. DPS Revenues The Department of Public Safety (DPS) receives reimbursements from the TSA, badging, fire training and other services. The FY 2018 Budget is $7.3 million, flat to the FY 2017 Outlook. There is a $1.3 million exposure in Law Enforcement Officer (LEO) Program due to proposed reductions in funding from the Federal government. Interest Income Interest income includes interest earned on investments from the Operating Revenue and Expense Fund, the three-month Operating Reserve, and Debt Service Reserve Fund and the Rolling Coverage Account. The FY 2018 interest income budget is $8.3 million, a $0.8 million (10.2%) increase from the FY 2017 Outlook due to higher assumed interest rates and higher reserve balances. Skylink Expenses related to Skylink are covered in the DFW Cost Center so that bonds related to Skylink can remain non-amt which lowers interest rate. The FY 2018 Budget is $41.4 million, a $0.6 million (1.5%) increase from the FY 2017 Outlook primarily due to debt and indirect cost allocation offset by lower bridge inspections that occur in alternating years. Terminal Contributions Per the terms of the Use Agreement, DFW pays terminal costs based on common use space and its share of vacant leasable space. The FY 2018 Budget is $3.1 million, a $1.4 million (83.9%) increase from the FY 2017 Outlook due to higher costs per square feet in the terminals. 34 DFW International Airport

36 FY 2018 Adopted Budget Operating Expenses FY 2018 Expense Budget by Major Cost Driver The FY 2018 Budget is $954.2 million, an increase from the FY 2017 Budget of $64.4 million (7.2%) and an increase of $78.4 million (9.0%) from the FY 2017 Outlook. FY18B v FY17B FY18B v FY17OL FY17 FY17 FY18 Inc (Dec) Inc (Dec) Annual Budget (in Millions) Budget Outlook Budget Amount Percent Amount Percent Operating Expenses $459.3 $446.6 $471.1 $ % $ % Gross Debt Service % % Total 102 Expenditures Budget $889.7 $875.8 $954.2 $ % $ % Contingency O/S Rate Base 10.0 Total Budget w/contingency $964.2 Operating Expense Budget Walkforward The following tables are walkforwards between the FY 2017 Outlook and the FY 2018 Budget: Operating Expenses (in Millions) Total DFW Airline FY 2017 Outlook $446.6 $163.1 $283.5 Budget reductions (8.6) (1.7) (6.8) Customer experience Safe and secure Salary annualization and merit pool Fixed contract increases Restore CEO contingency and other items Other increases, net (1.4) Net increase FY 2018 Budget $471.1 $175.0 $ DFW International Airport

37 FY 2018 Adopted Budget Operating Expenses Detailed Operating Expense Budget Walkforward Budget Category (in Millions) Total DFW Airline FY 2017 Outlook $446.6 $163.1 $283.5 A. Budget reductions (8.6) (1.7) (6.8) B. Customer experience Custodial Passenger services Total customer experience C. Safe and secure DPS security ITS security/disaster recovery Total safe and secure D. Salary annualization and merit pool Salary annualization Non DPS - merit DPS security - merit and tenure progression Total salary annualization and merit pool E. Fixed contract increases Facility maintenance Technology Healthcare Terminal Link bussing contracts Insurance premiums Total fixed contract increases F. Restore budgets CEO contingency Other maintenance contracts Winter weather Total restore budgets G. Other increases Facility maintenance & janitorial supplies Marketing Capitalization Availability, Disparity and Economic study Terminal contribution, cost center shift (1.4) Other, net (0.4) 0.6 (1.1) Total other increases (1.4) Net increase FY 2018 Budget $471.1 $175.0 $296.1 Note: The reference letters in the previous table are cross-referenced to the variance explanations in the Expense Comparison by Summary Account explained further in this section. 36 DFW International Airport

38 FY 2018 Adopted Budget Operating Expenses A. Budget reductions ($8.6) million Budget reductions related to FY 2017 non-recurring, reimbursable and various other savings have been removed from the FY 2018 Budget. FY 2017 one-time projects ($2.5 million) were eliminated from the FY 2018 Budget. These projects were completed in FY 2017 and are non-recurring. Customs and Border Protection (CBP) reimbursement ($1.5 million). Supplies ($1.2 million) include miscellaneous maintenance and operating, computer software and general supplies. Marketing and rebranding ($0.9 million) due to completion of the rebranding effort. Other reductions ($2.5 million) are from a variety of projects, contracts and utilities. B. Customer experience $2.5 million The budget reflects the Airport s continued emphasis to invest in strategic priorities. Customer experience includes increases in contractual requirements for Terminals B and E custodial operations ($2.2 million), wheelchair assistance for Terminal D ($0.2 million) and an expansion of electrical seating contract for all terminals ($0.2 million). Management believes these changes will continue to keep DFW near the top of its competitive set for customer survey scores. C. Safe and secure $1.8 million Another important strategic priority is safe and secure. The Department of Public Safety budget includes six new officers to provide increased security presence in the terminals and to staff vendor dock screening at Terminals A and E, plus two additional positions to support new TSA initiatives ($1.1 million). The dock screening will allow concessionaires to bring in product downstairs, rather than through TSA lanes upstairs, which will improve passenger throughput. The budget also includes the addition of new ITS software and professional services that will enhance ITS security ($0.7 million). D. Salary annualization and merit pool $10.7 million In FY 2017, management intentionally held many positions open. The FY 2018 Budget assumes that these positions will be filled; although the assumed hire dates have been staggered throughout the fiscal year. Salary annualization accounts for $7.4 million of this increase. The budget also includes a 3.2% merit pool for nine months in FY 2018 (beginning the first pay period in January), the annualization of last year s merit increase (for the first quarter of the fiscal year), and a 3.2% DPS STEP table increase ($2.6 million) and DPS tenure step progression ($0.7 million). 37 DFW International Airport

39 FY 2018 Adopted Budget Operating Expenses E. Fixed contract increases $9.0 million Contract increases in this category are fixed in nature due to, for example, annualization of partial year contracts from FY 2017, contracts with cost escalation and airline requests for new services and insurance premiums. Facility maintenance contracts ($3.4 million) include annualization of contracts related to baggage handling systems in Terminals B and E which were outsourced for a part of FY 2017, plus conveyances and other terminal facility maintenance contracts. Technology ($2.6 million) includes increased scope for automated access control, shoulder mounted cameras for DPS, ramp sign maintenance, incremental full year impact of new contracts and first year maintenance contracts on various new software systems placed in service, such as TSA managed screening lanes, ACMS software maintenance and parking yield management system. Healthcare costs are projected to increase 5% in FY The budget has been increased a total of $2.1 million for medical costs, long and short-term disability, life insurance plus the amount necessary to cover annualization of currently open positions that will be hired in FY Terminal Link bussing contracts ($0.8 million) primarily due to the impact of a full year of the new Terminal Link contract. Insurance premiums ($0.2 million) are increasing due to increased property values due to TRIP and new buildings. F. Restore budgets $6.6 million This category reflects increases for operating expenses being restored to FY 2017 Budget levels in the following areas: Restore CEO contingency ($4.0 million). CEO contingency is included in the rate base and may be used by the CEO without Board approval. Total requested contingency for FY 2018 is $4 million. Over the past eleven years, budgeted CEO contingency has ranged from $7.5 million to $1.75 million. The entire CEO contingency was utilized in FY Restore other maintenance contracts ($1.4 million) for landscaping, Infor training, perimeter fence repair, studies related to drainage and Terminal E satellite electrical, and other miscellaneous contracts related to fleet, energy, and heavy equipment repairs. Restore winter weather budgets ($1.2 million). FY 2017 was an extremely mild winter in the DFW area so these costs are not included in the Outlook. The FY 2018 Budget 38 DFW International Airport

40 FY 2018 Adopted Budget Operating Expenses restores deicing contract, winter weather and deicing supplies and equipment to slightly under FY 2017 Budget levels. G. Other increases $2.5 million Other increases include expenses that are non-recurring or variable in nature. Facility maintenance and janitorial supplies ($1.6 million) include pavement materials and supplies and reverse osmosis filters. Marketing ($0.5 million) for the new parking on-line booking/yield management system that will become operational early in FY This new system will allow customers to prepay for their parking at discount rates. Capitalization ($0.5 million) relates to costs no longer eligible for capitalization because of the TRIP completion and lower capitalization of ITS staff costs for capital projects. An Availability, Disparity and Economics Study ($0.3 million) is required to be completed every 5-10 years per federal guidelines. This study will be initiated in FY 2018 and completed in FY Other, net decrease ($0.4 million) includes the change in operating reserve offset by ITS consulting, other contract increases and one-time expense. 39 DFW International Airport

41 FY 2018 Adopted Budget Operating Expenses Operating Budget by Category The table below compares the FY 2017 Outlook with the FY 2018 Budget by expense category. Variance explanations by major cost driver follow in the walkforward. FY17 FY18 Increase (Decrease) Annual Budget (in Millions) Outlook Budget Amount Percent Salaries & Wages $140.4 $150.0 $ % Benefits % Contract Services % Utilities (0.6) (2.1%) Equipment & Supplies % Insurance % Fuels % General, Admin & Other % Contingency* % Subtotal % Change in Operating Reserve (3.0) (65.6%) Total Budget $446.6 $471.1 $ % * FY17 budgeted contingency of $4 million has been reallocated to the budget categories in w hich it w as used. Salaries and Wages The FY 2018 salaries and wages budget is $150.0 million, a $9.6 million (6.9%) increase from the FY 2017 Outlook of $140.4 million due to annualization of unfilled positions planned to be hired, and 3 months of the FY 2017 merit ($6.3 million), a 3.2% merit pool and a 3.2% DPS STEP table increase ($2.6 million), DPS tenure step progression ($0.7 million), 8 new DPS positions ($0.8 million), and reduced capitalization ($0.5), offset by the deferral of vacant positions ($0.9 million) and overtime reduction ($0.4 million). The hiring of new and vacant positions has been staggered throughout FY 2018 based upon operational needs and strategic priority. Benefits The FY 2018 benefits budget is $72.5 million, a $3.6 million (5.2%) increase from the FY 2017 Outlook of $69.0 million. This is primarily the result of increases in healthcare costs (5%, approximately $1.3 million), benefits for new positions ($0.2 million) and annualization of benefits for unfilled and new positions to be hired in FY 2018 ($2.1 million). Contract Services The FY 2018 contract services budget is $174.2 million, a $8.0 million (4.8%) increase from the FY 2017 Outlook of $166.2 million due to restoring winter weather deicing contracts and other delayed spending in FY 2017 ($2.0 million); increases in customer experience for custodial contracts, wheelchair assistance, foreign language concierge and other customer experience improvements ($2.1 million); computer systems for security/disaster 40 DFW International Airport

42 FY 2018 Adopted Budget Operating Expenses recovery, fixed and variable contracts for hardware, software and maintenance ($3.8 million); enterprise contract for Terminals B and E baggage handling systems, mechanical, electrical, and plumbing services (MEPS), and conveyances ($3.2 million); contract reimbursable from capital fund due to TRIP completion ($1.1 million); contract labor in Parking to manage the new taxi overflow lot and curbside traffic ($0.5 million); and bussing costs for the new Terminal Link contract ($0.9 million). These increases are offset by one-time project savings ($2.7 million); legal contracts savings ($1.4 million); and Customs and Border Protection (CBP) reimbursement savings ($1.5 million). Utilities The FY 2018 utilities budget is $25.6 million, a $0.6 million (2.1%) decrease from the FY 2017 Outlook of $26.2 million. Decreases in electricity ($0.5 million), and communications costs ($0.5 million) were offset by increases in sanitary sewer and solid waste ($0.3 million) and water ($0.1 million). To lower energy rates DFW recently locked in favorable electric commodity rates through February FY Equipment and Supplies The FY 2018 equipment and supplies budget is $20.2 million, a $1.6 million (8.7%) increase from the FY 2017 Outlook of $18.6 million primarily due to increases related to the winter weather ($1.0 million) for deicing, winter weather supplies and equipment, pavement repair supplies ($0.9 million), reverse osmosis filters ($0.6 million), and DPS uniforms/equipment ($0.2 million), offset by reduction in facility maintenance supplies ($0.7 million), boarding bridges parts ($0.3 million) and janitorial supplies ($0.1 million). Insurance The FY 2018 insurance budget is $5.9 million, a $0.2 million (2.8%) increase from the FY 2017 Outlook of $5.7 million primarily due to increased premiums based on claims experience and the value of DFW s assets primarily due to TRIP improvements. Fuels The FY 2017 fuels budget is $4.4 million, a $0.4 million (10.0%) increase from the FY 2017 Outlook of $4.0 million due to increased fuel utilization for additional fleet for DPS and Parking. General and Administrative (G&A) The FY 2018 general and administrative budget is $9.5 million, a $0.6 million (7.0%) increase from the FY 2017 Outlook of $8.8 million due to increased business development ($0.2 million), board memberships and sponsorships ($0.1 million), staff training ($0.1 million) primarily related to new ITS systems, DPS, and Customer Experience, and other net increases ($0.2 million) such as fingerprinting, postage and other miscellaneous administrative expenses. Contingency The FY 2018 Budget includes $4.0 million of contingency inside the rate base to be spent at the CEO s discretion for projects and unforeseen events that come up during the fiscal year. The 41 DFW International Airport

43 FY 2018 Adopted Budget Operating Expenses FY 2017 Budget included $4.0 million for contingency. Over the last eleven years, the CEO contingency has ranged from $7.5 million to $1.75 million. Operating Reserve DFW is required to have a 90-day cash reserve for operating expenses. The FY 2018 Change in Operating Reserve budget of $4.6 million is the amount necessary to fund the reserve. This is a $3.0 million reduction from the FY 2017 Outlook. Contingency Outside of Rate Base Beginning in FY 2010, DFW began to add contingency outside of the rate base to the budget. This is done so that the airlines do not have to pay for the contingency during the year in the rate base, but provides management with flexibility should costs rise unexpectedly and as an incentive to budget costs more accurately. This also allows management to make investments in the DFW cost center or to pursue marketing initiatives if incremental revenues are generated. Management must obtain Board of Directors approval prior to using this contingency. Contingency outside the rate base is recommended to be $10 million for FY 2018, consistent with the prior years. 42 DFW International Airport

44 FY 2018 Adopted Budget Operating Expenses Net Debt Service Budget The FY 2018 Net Debt Service budget is $322.4 million, a $63.1 million (24.3%) increase from the FY 2017 as shown in the table below. The increase in Existing Debt Service has been scheduled to gradually increase through FY 2018 as agreed upon in the Use Agreement. New Debt Service increases result from the completion of TRIP and other capital projects in FY 2017 and FY 2018 and the accelerated principal reductions included in the FY 2016A Bonds. FY17 FY18 Increase (Decrease) Debt Service (in Millions) Outlook Budget Amount Percent Debt Service and Coverage Existing Debt Service $274.5 $286.6 $ % New Debt (TRIP) Service % PFIC Related Debt Service % DFW Capital Acct Debt Service % Less: Interest Income (0.0) (100.0%) Gross Debt Service and Coverage % Offets to Debt Service PFCs for Existing Debt Service (11.0) (7.9%) PFIC Transfers % DFW Capital Acct Transfers % Total Offsets (9.2) (5.4%) Net Debt Service Paid by Rate Base $259.3 $322.4 $ % 1 Shown net of Capitalized Interest 2 Public Facility Improvement Corp for RAC, Grand Hyatt, and Hyatt Place Infrastructure 3 AHQ and Terminal E Garage Passenger Facility Charges (PFCs) are collected from revenue enplaned passengers and are used to offset debt service from debt issued prior to TRIP. The decrease is due to a one-time increase in excess PFCs used for debt service in FY 2017 ($9 million) and the amount necessary to collect to bring the PFC reserve back to 2 months ($2 million). PFC s are only used to help pay for Existing debt, not New Debt. DFW issued $280 million of bonds in a private placement in September 2016 that will fully amortize over 5 years. Including coverage, debt service on this bond issue will be $57.7 million in FY 2018, an increase of $27.1 million over FY Additionally, DFW plans to issue approximately, $270 million of bonds in a private placement in the fall that is forecasted to increase FY 2018 debt service by $2.45 million (plus $0.6 million of coverage). Public Facility Improvement Corporation (PFIC) debt service relates to debt associated with the RAC, Grand Hyatt Hotel, and Hyatt Place Hotel infrastructure. This debt service is funded from the PFIC so that the debt service does not impact the rate base. Similarly, DFW Capital Account Debt Service is related to the consolidated headquarters and Terminal E garage. This is funded with transfers from the DFW Capital Account so it does not impact the rate base. The table below shows the categories of the $63.1 million Net Debt Service increase by major cost center. 43 DFW International Airport

45 FY 2018 Adopted Budget Operating Expenses Cost Centers Airline Net Debt Service Variance (in Millions) DFW Airfield Terminal Total Total Existing Debt Service $1.0 $2.1 $0.4 $2.5 $3.6 New Debt Service A Bonds PFCs Total Debt Service Variance $12.3 $17.7 $33.1 $50.8 $63.1 Positions The table below summarizes the total number of operating and capital positions assumed in the FY 2018 Budget. Operating positions are paid out of the 102 Fund. Salaries and benefits of capital positions are capitalized and paid from the capital accounts. A summary of positions by department is included at the end of the Department section. FY 2017 Budget FY 2017 Changes* FY 2017 Adjusted Budget FY 2018 New positions FY 2018 Budget Operating 2, , ,044 Capital 120 (9) Total 2, , ,155 * FY 2017 changes include 4 positions that will be filled by end of FY 2017 (2 ITS and 2 Parking) Eight new positions have been added for FY 2018, all are funded in the Fund 102 Operations Expense Budget. Division Position Summary by Division FY17 FY18 Adjusted Budget Changes Budget Administration & Diversity Finance and Information Technology Revenue Management Operations Global Strategy & Development Infrastructure and Development Legal Audit Services Executive Office Total DFW 2, , DFW International Airport

46 FY 2018 Adopted Budget Departments Department Overview and Walkforwards DFW is organized into Divisions, which are comprised of Departments. Each Division page includes a summary of the Division s major functions and a walkforward of the FY 2018 Budget by major cost driver. The table below is a budget comparison by Department, in thousands. FY17 FY17 FY18 Budget Outlook Budget Increase (Decrease) FY18B vs FY17B Increase (Decrease) FY18B vs FY17O Energy, Transportation & Asset Mgmt. $120,529 $118,221 $123,032 $2, % $4, % Commercial Development 2,516 2,462 2, % % Planning Department 3,674 3,625 3, % % Design, Code, & Construction 3,891 3,891 3, % (0) (0.0%) Infrastructure and Development 130, , ,235 2, % $5, % 0 Parking 56,789 52,615 55,376 (1,414) (2.7%) 2, % Concessions 3,526 3,243 3,405 (121) (3.7%) % Customer Experience 39,747 39,344 41,571 1, % 2, % Marketing Services 7,705 7,248 6,901 (804) (11.1%) (346) (4.8%) Revenue Management 107, , ,253 (515) (0.5%) 4, % 0 Public Safety 76,831 76,887 82,770 5, % 5, % Operations 12,377 12,036 12,376 (1) (0.0%) % Environmental Affairs 8,577 8,178 8,527 (50) (0.6%) % Operations 97,784 97, ,673 5, % 6, % 0 0 Information Technology 53,492 50,987 56,271 2, % 5, % Finance 6,856 6,689 6,662 (194) (2.9%) (27) (0.4%) Treasury/Cash Management 1,283 1,313 1,277 (6) (0.5%) (36) (2.8%) Aviation Real Estate 1,421 1,336 1, % % Finance & Technology 63,052 60,325 65,679 2, % 5, % 0 0 Business Diversity and Development 1,516 1,500 1, % % Human Resources 8,286 8,201 8, % % Procurement & Materials Management 4,841 4,727 4, % % Risk Management 8,733 8,472 8, % % Corporate Communications 4,534 4,430 4, % % Administration and Diversity 27,909 27,330 28, % 1, % 0 0 International Marketing/Public Affairs 3,385 3,411 3, % % Government Relations 1,067 1,129 1,001 (65) (5.8%) (128) (11.4%) Airline Relations , % % Cargo Business Development (19) (4.1%) % Research & Analytics % % Global Strategy & Development 6,740 6,718 7, % % 0 0 Legal 4,780 4,796 3,412 (1,368) (28.5%) (1,385) (28.9%) Audit Services 2,667 2,667 2, % % Executive Office 5,329 5,276 5, % % Contingency 0 0 4,000 4,000 n/a 4, % Non Departmental 12,668 11,788 9,685 (2,983) (25.3%) (2,103) (17.8%) Total Operating Expenses $459,307 $446,650 $471,119 11, % 24, % 45 DFW International Airport

47 FY 2018 Adopted Budget Departments Expense Budget Walkforward Budget Category (in Millions) Total DFW Airline FY 2017 Outlook $446.6 $163.1 $283.5 A. Budget reductions (8.6) (1.7) (6.8) B. Customer experience Custodial Passenger services Total customer experience C. Safe and secure DPS security ITS security/disaster recovery Total safe and secure D. Salary annualization and merit pool Salary annualization Non DPS - merit DPS security - merit and tenure progression Total salary annualization and merit pool E. Fixed contract increases Facility maintenance Technology Healthcare Terminal Link bussing contracts Insurance premiums Total fixed contract increases F. Restore budgets Contingency Other maintenance contracts Winter weather Total restore budgets G. Other increases Facility maintenance & janitorial supplies Marketing Capitalization Availability, Disparity and Economic Study Terminal contribution, cost center shift (1.4) Other, net (0.4) 0.6 (1.1) Total Other increases (1.4) Net increase FY 2018 Budget $471.1 $175.0 $296.1 Note: The reference letters in the previous table are cross-referenced to the variance explanations in the following budget comparison and walkforward tables in this section. 46 DFW International Airport

48 FY 2018 Adopted Budget Departments Infrastructure and Development Division Energy, Transportation and Asset Management (ETAM) ETAM manages the operation, maintenance, repair and renewal of DFW s infrastructure asset portfolio including energy & utility systems, passenger terminals, facilities, airfield, public works, vehicle fleet and the Skylink automated transit system. Commercial Development The Commercial Development Department plans, develops, markets and leases aviationrelated industrial/warehouse, cargo/distribution facilities, mixed-use office, retail and hospitality spaces and available land at DFW. Commercial Development is responsible for investment analysis, development, cashflow management, operations and maintenance of the Airport s hotel assets that include the Grand Hyatt and Hyatt Place. Commercial Development also evaluates and implements business opportunities that diversify DFW s revenue stream such as the exploration and production of natural gas, the Bear Creek Golf Course, management of Foreign Trade Zones and negotiations of ROW for highway, utilities and passenger rail. Planning The Planning Department is responsible for guiding the development and growth of DFW Airport through strategic, holistic and proactive analysis developed in collaboration with Airport stakeholders. Planning s primary focus areas include Long-Range Master Planning and Tactical/ Implementation Planning for terminal facilities, airfield, landside, land use and wayfinding/signage. Design, Code and Construction (DCC) Design, Code and Construction (DCC) has overall responsibility for the efficient, economical delivery of design and construction of capital and O&M funded developments, improvements, and major rehabilitation projects at DFW such as the $2.7 billion TRIP program. DCC also provides technical support services and/or personnel to other DFW departments as needed to fulfill DFW s mission. With the exception of uncapitalized projects and Code Compliance activities related to third party building permits, all costs are funded by the capital funds. 47 DFW International Airport

49 FY 2018 Adopted Budget Departments Budget Comparison and Walkforward Infrastructure and Development (in thousands) FY17 FY18 Outlook Budget Energy, Transportation & Asset Mgmt. $118,221 $123,032 Commercial Development 2,462 2,537 Planning Department 3,625 3,776 Design, Code, and Construction 3,891 3,891 Total Airport Development Division $128,198 $133,235 Salaries & Wages $21,140 $22,990 Benefits 10,861 11,618 Contract Services 63,441 63,434 Equipment & Supplies 10,566 13,039 Insurance 0 0 Utilities 21,776 21,506 Administrative Total Airport Development Division $128,198 $133,235 Walkforward from FY 2017 Outlook Reference FY 2017 Outlook $128,198 Salaries and Wages 1,850 A, D Benefits 757 A, D, E Contract Services (7) A, E, F, G Equipment & Supplies 2,473 F, G Utilities (270) A, E, F, G Administrative 233 G Total FY 2018 Proposed Budget $133, DFW International Airport

50 FY 2018 Adopted Budget Departments Revenue Management Division Parking Operations Parking Operations consists of Operations, Customer Relations, Ground Transportation Service, and Busing. Parking Operations is responsible for parking products, pricing, service delivery and reporting, handling customer feedback, monitoring electronic parking transactions, billing, and providing transportation services to DFW Remote Lots, Trinity Railway Express, Terminal Link, Express Parking and the Employee Shuttle. Concessions The Concessions Department provides the public with high quality goods and services that are competitively priced, conveniently located, and reflects the needs and desires of the traveling public with the goal of exceeding customer expectations while maximizing revenue for the DFW Airport. This includes all of the passenger-related concessions and associated revenues within the airport terminals, Rental Car Center (RAC), telecommunications, and selected properties outside the terminals. Customer Experience The Customer Experience Department drives the day to day operation within the Terminals, ultimately aiming to provide all customers an elevated experience in a clean, working and friendly environment. It consists of the following three sections: Service Delivery focuses on frontline staff including managing the custodial function, as well as, services provided by all business partners, based on agreed service standards which are measured and reported throughout the day. Experience Development ensures each day is planned from a customer experience perspective, and there is a regular review function to ensure continuous improvement. This includes innovations and improvements proactively designed and implemented to drive overall Customer Experience excellence, and Terminal Managers to drive customer experience performance through stakeholder management, with a focus on relationship management. Customer Relations provides a suite of products and services to streamline DFW s customer services to engage with customers to deliver moments of WOW. This includes the Ambassador Volunteer Program and Meet & Greet services. Marketing Services Marketing Services is responsible for increasing awareness of and loyalty for DFW s products and services, as well as creating an overarching positive brand image that strengthens the vision and mission of the airport. Efforts include the following: Creates and implements a comprehensive marketing strategy to drive increased revenue and customer satisfaction utilizing a combination of traditional and digital media, as well as experiential marketing programs. Defines and manages the Airport s brand to ensure that an enhanced brand image is portrayed to every one of DFW s audiences. 49 DFW International Airport

51 FY 2018 Adopted Budget Departments Develops and manages innovative digital solutions, including, but not limited to, DFW s web site, mobile app and in-terminal touchscreens, to ensure a consistent message and brand are portrayed on these assets. The Department is also responsible for measuring consumer insights to help DFW s leadership make strategic decisions about products and services that address the needs of our customers, as well as opportunities facing DFW Airport, in order to enhance the customer s experience at every stage of his/her visit. Budget Comparison and Walkforward Revenue Management Division (in thousands) FY17 BY18 Outlook Budget Parking $52,615 $55,376 Concessions 39,344 41,571 Customer Experience 3,243 3,405 Marketing Services 7,248 6,901 Total Revenue Mgmt Division $102,450 $107,253 Salaries & Wages $23,112 $24,959 Benefits 13,037 13,686 Contract Services 60,955 64,381 Equipment & Supplies 4,683 3,501 Utilities 1 1 Administrative Total Revenue Mgmt Division $102,450 $107,253 Walkforward from FY 2017 Outlook Reference FY 2017 Outlook $102,450 Salaries & Wages 1,847 A, B, D Benefits 649 A, B, D, E Contract Services 3,426 B, E, G Equipment & Supplies (1,182) A, G Utilities (0) Administrative 63 G Total FY 2018 Proposed Budget $107, DFW International Airport

52 FY 2018 Adopted Budget Departments Operations Division Public Safety (DPS) It is the mission of the DFW Airport Department of Public Safety to provide the highest level of professional services to the Airport community through efficient planning, mitigation, response, and recovery from natural and manmade events that threaten lives, critical assets, or business continuity. Public Safety carries out this mission through three divisions of Police, Fire, and Security and Emergency Management. Operations The Airport Operations Department is responsible for ensuring compliance with Federal Aviation Regulation Part 139 Airport Safety and Certification. The department manages daily airfield operations, airfield construction safety programs, the DFW Wildlife Management Program, and provides technical and simulated driver s training programs. The department also manages the Airport Operations Center, Corporate Aviation operations, and provides ramp control services at Terminal D and at Terminal E. The Airport Operations Department partners on a daily basis with local FAA air traffic control facilities and with air carrier tenants in efforts to maximize the efficiency of Dallas-Ft. Worth International Airport. Environmental Affairs DFW has committed to achieving environmental excellence by embedding the principles of sustainability throughout the corporate culture of the organization and by establishing environmental compliance as a priority in achieving sustainable economic growth. DFW s Environmental Affairs Department (EAD) implements a comprehensive environmental program by providing regulatory and technical guidance to DFW departments, tenants, and contractors, which ensures that airport activities and operations are conducted in a manner that conforms to various environmental laws, policies and requirements regulated by the Environmental Protection Agency, the Texas Commission on Environmental Quality, the Texas State Department of Health, the Federal Aviation Administration, and local governments. The comprehensive Environmental Management System (EMS) covers five major programs (Water Resources, Waste, Environmental Planning & Development, Environmental Design & construction, and Sustainability) that house a subset of 21 core, compliance-based programs. 51 DFW International Airport

53 FY 2018 Adopted Budget Departments Budget Comparison and Walkforward Operations Division (in thousands) FY17 FY18 Outlook Budget Public Safety $76,887 $82,770 Operations 12,036 12,376 Environmental Affairs 8,178 8,527 Total Operations Division $97,101 $103,673 Salaries & Wages $56,981 $60,038 Benefits 27,859 29,195 Contract Services 6,698 7,915 Equipment & Supplies 2,873 3,309 Insurance 0 0 Utilities 1,373 1,623 Administrative 1,317 1,593 Total Operations Division $97,101 $103,673 Walkforward from FY 2017 Outlook Reference FY 2017 Outlook $97,101 Salaries and Wages 3,056 A, C, D Benefits 1,336 A, C, D, E Contract Services 1,217 A, G Equipment & Supplies 436 G Utilities 250 A, G Administrative 276 G Total Proposed FY 2018 Budget $103, DFW International Airport

54 FY 2018 Adopted Budget Departments Finance and Technology Division Information Technology Information Technology Services (ITS) is responsible for supporting the technical needs of the DFW Airport community by providing reliable systems, proactively responding to issues, and implementing a wide range of viable technologies that represent meaningful choices in terms of cost and functionality. ITS is currently divided into 8 functional sections: The Technology Lab is responsible for future innovation and the research, development, and piloting of new technologies at the Airport. Customer Support manages the Help Desk, Field Technicians, and the frontline ITS Business Consultants. IT Programs is responsible for long running technology programs like Disaster Recovery, Asset Management, and Training. The IT Project Management Office manages new initiatives and projects to a successful completion. Development and Delivery is responsible for the software development and implementation of executive decision support systems, records management, CADD/GIS, web development, and the implementation of work-flow technologies. Enterprise Systems is responsible for the support and maintenance of the entire DFW Software Portfolio. Infrastructure Operations is responsible for the maintenance and administration of the voice and data communications infrastructure, desktop and server computing environments, databases, storage, and Terminal systems. Technology Security is responsible for the management and compliance of DFW's security programs and the analysis, management, and monitoring of the perimeter security devices. Finance Finance is comprised of 3 groups: Accounting, Financial Planning, and Capital Planning & Accounting. Accounting is responsible for financial reporting, general ledger accounting, internal controls, revenue collections, accounts payable, accounts receivable, payroll, and fixed assets. The Accounting group also mans a call center to interact with customers on parking related transactions. Financial Planning is responsible for developing and monitoring DFW s Operating Budget and Outlook for revenues and expenses. This group is also responsible for establishing DFW s rates, fees and charges, and performing departmental financial analysis. In addition, Financial Planning analyzes DFW s business units to determine profitability, implementation of activity based costing, project analysis, process improvement and management methodologies for proper allocations of revenues and expenses. Capital Planning and Accounting are responsible for developing and monitoring DFW s Capital Budget and forecast. Treasury Management Treasury/Cash Management is responsible for providing strategic financial management for the Airport. This includes overseeing debt issuance/management, cash management, banking relations, DFW investments, retirement fund investments, grants and PFC administration. 53 DFW International Airport

55 FY 2018 Adopted Budget Departments Aviation Real Estate Aviation Real Estate (ARE) oversees and manages the contractual relationship and serves as the liaison between the Board and the Airlines and other tenants of passenger terminals and aviation-related facilities, including air cargo and hangars. ARE negotiates and drafts permits, leases, and other documents for aviation real estate property, is intricately involved in the development and implementation of the Board s Capital Improvement Program (CIP), and performs financial, operational, statistical, and business analysis related to terminal operations and aviation. ARE is responsible for aviation facilities strategic planning, with the goal of maximizing efficiency within the terminals and other aviation facilities. Budget Comparison and Walkforward Finance & Technology (in thousands) FY17 FY18 Outlook Budget Information Technology $50,987 $56,271 Finance 6,689 6,662 Treasury/Cash Management 1,313 1,277 Aviation Real Estate 1,336 1,470 Total CFO Division $60,325 $65,679 Salaries & Wages $19,559 $20,888 Benefits 8,990 9,436 Contract Services 23,991 27,830 Equipment & Supplies 3,800 4,130 Utilities 3,035 2,503 Administrative Total Finance & Technology Division $60,325 $65,679 Walkforward from FY 2017 Outlook Reference FY 2017 Outlook $60,325 Salaries and Wages 1,329 A, C, D Benefits 446 A, C, D, E Contract Services 3,838 A, E, G Equipment & Supplies 330 G Utilities (532) A, G Administrative (58) A, G Total FY 2018 Proposed Budget $65, DFW International Airport

56 FY 2018 Adopted Budget Departments Business Diversity and Development 55 DFW International Airport Administration and Diversity Division The Business Diversity & Development Department (BDDD) is responsible for administering the Board s Title VI, Disadvantaged, Small, Minority, and Women-owned Business Enterprise Programs. BDDD has the overall responsibility to administer, monitor and enforce the policies and procedures associated with the Programs and engage the diverse business community with airport contracting opportunities. Human Resources The Human Resources (HR) Department at DFW partners with line managers to identify, hire, train, and provide ongoing coaching and support to the employees. Specific functional areas of focus for HR include talent acquisition, talent development, diversity and inclusion, employee records and information, employee relations, compensation, benefits, and employee health and wellness. The department supports these functions through policy development and revision (where appropriate), extensive training (both online and in-person), and through one-on-one coaching with leaders, where appropriate. Procurement & Materials Management Procurement & Materials Management (PMM) provides DFW-wide centralized procurement, materials management, and reprographic services. PMM manages professional services contracts/procurements and P-card program, and prepares Official Board Actions (OBAs) for Board meetings. The Central Warehouse provides central receipt, financial and physical management of inventory, management of excess and obsolete property, and provides DFWwide mail service. Print Services provides centralized reproduction, printing, and binding services for departments within the Airport. Risk Management Risk Management identifies, analyzes and evaluates exposures, develops and implements loss prevention measures that reduce costs, and ensures compliance with applicable laws and regulations and DFW Board Policies. Areas of general administration include incident and claims management, safety training, management of self-funded, and insured claims programs involving property and casualty liability, general liability, errors and omissions, employment liability, fiduciary/fidelity exposures, contractual review/interpretation, breach of contract, auto liability, driver safety and workers compensation liability. Corporate Communications The Corporate Communications Department is responsible for elevating the reputation of DFW Airport. In this role, the Department will provide DFW Airport s collective voice through communications, outreach, engagement and collaboration to support the Airport in achieving its business objectives. The Department is responsible for delivering impactful and results-oriented communications and creating advocacy among the audiences it serves. Corporate Communications consists of dayto-day media relations, social media, community engagement, business communications, Board and Owner city relations, and internal communications.

57 FY 2018 Adopted Budget Departments Budget Comparison and Walkforward Administration and Diversity Division (in thousands) FY17 FY18 Outlook Budget Business Diversity and Development 1,500 1,878 Human Resources 8,201 8,348 Procurement & Materials Management 4,727 4,898 Risk Management 8,472 8,925 Corporate Communications 4,430 4,746 Total Admin & Diversity Division $27,330 $28,795 Salaries & Wages $9,629 $10,204 Benefits 5,235 5,254 Contract Services 3,658 4,342 Equipment & Supplies Insurance 5,726 5,889 Utilities 0 0 Administrative 2,493 2,505 Total Admin & Diversity Division $27,330 $28,795 Walkforward from FY 2017 Outlook Reference FY 2017 Outlook $27,330 Salaries and Wages 576 D Benefits 19 D, E Contract Services 685 A, G Equipment & Supplies 12 A, G Insurance 163 E Administrative 11 A, G Total FY 2018 Proposed Budget $28, DFW International Airport

58 FY 2018 Adopted Budget Departments International Marketing and Public Relations Global Strategy and Development Division International Marketing and Public Relations is responsible for developing and executing DFW s international strategy to drive airline and cargo business development and customer retention for international audiences. The group is responsible for both traditional and digital media, and also produces numerous trade shows, conferences, and trade missions that raise awareness of the DFW brand around the world. Government Relations Government Relations provides strategic expertise to airport staff and board members related to state and federal governmental issues; and serves as a point of contact for congressional and legislative representatives and staff, and state and federal agencies. The work involves monitoring and interpreting legislative and regulatory action at all levels, keeping executive staff informed of impact to DFW Airport and/or the aviation industry, and leading the Airport s educational and advocacy advocates to state and federal government entities. Airline Relations Airline Relations works to create an airport business environment where airline partners stay, succeed, and grow. The primary business goal is to position DFW as the airport of choice for passenger and cargo services. The Airline Relations group has two essential purposes: Retention, which focuses on the growth of existing carriers and New Business that focuses on developing new airline business. Airline Relations focuses on strengthening relationships with the airlines Network, Sales, and Commercial departments and formulates strategies to increase airline services. Cargo Business Development The Cargo group oversees and coordinates DFW s multi-departmental effort to develop and execute the airport s cargo and logistics strategy. This group seeks to shift the airport s cargo business development efforts from a historical focus on airlines that supply cargo capacity, and instead concentrate DFW s efforts on persuading key decision-makers among freight forwarders, logistics companies, customs brokers, and shippers who can drive cargo traffic itself to and through the airport (i.e., a demand side business development approach). Research and Analytics The Research & Analytics group seeks to grow DFW s global brand through a targeted focus on KPIs, powered by advanced research and analytics. The group is responsible for providing actionable intelligence to support both internal and external customers. This includes supporting the growth of new air service by developing sophisticated quantitative and qualitative business cases to pitch new air service to target airlines. 57 DFW International Airport

59 FY 2018 Adopted Budget Departments Budget Comparison and Walkforward Global Strategy & Development (in thousands) FY17 FY18 Outlook Budget International Marketing/Public Affairs $3,411 $3,632 Government Relations 1,129 1,001 Airline Relations 974 1,022 Cargo Business Development Research & Analytics Total Global Strategy Division $6,718 $7,039 Salaries & Wages $1,604 $1,911 Benefits Contract Services 2,491 2,264 Equipment & Supplies Insurance 0 0 Utilities 0 0 Administrative 2,039 2,180 Total Global Strategy Division $6,718 $7,039 Walkforward from FY 2017 Outlook Reference FY 2017 Outlook $6,718 Salaries and Wages 307 D Benefits 94 D, E Contract Services (227) A, G Equipment & Supplies 6 G Administrative 141 G Total FY 2018 Proposed Budget $7, DFW International Airport

60 FY 2018 Adopted Budget Departments Legal The Legal Department is responsible for providing advice and counsel to the Airport Board and Staff and for overseeing the prosecution and defense of litigation involving DFW Airport. Legal Department attorneys are provided by the Dallas and Fort Worth City Attorney s Offices in accordance with the 1968 Contract and Agreement. Budget Comparison and Walkforward Legal (in thousands) FY17 FY18 Outlook Budget Salaries & Wages $217 $212 Benefits Contract Services 4,382 3,002 Equipment & Supplies 5 7 Insurance 0 0 Utilities 0 0 Administrative Total Legal $4,796 $3,412 Walkforward from FY 2017 Outlook Reference FY 2017 Outlook $4,796 Salaries & Wages (5) D Benefits 16 D, E Contract Services (1,380) A, G Administrative (18) A, G Total FY 2018 Proposed Budget $3, DFW International Airport

61 FY 2018 Adopted Budget Departments Audit Services The Department of Audit Services assists the Board of Directors and management by independently reviewing programs and activities and providing recommendations and advice as appropriate. The Department works to influence positive change related to achieving the Board s goals and objectives, using resources efficiently and effectively, complying with laws and regulations, safeguarding assets, providing relevant and reliable information to decision makers, and protecting the Board s brand and reputation. Budget Comparison and Walkforward Audit Services (in thousands) FY17 FY18 Outlook Budget Salaries & Wages $1,563 $1,545 Benefits Contract Services Equipment & Supplies Insurance 0 0 Utilities 0 0 Administrative Total Audit Services $2,667 $2,693 Walkforward from FY 2017 Outlook Reference FY 2017 Outlook $2,667 Salaries & Wages (18) D Benefits 39 D, E Contract Services 6 G Equipment & Supplies (3) A, G Administrative 2 G Total FY 2018 Proposed Budget $2, DFW International Airport

62 FY 2018 Adopted Budget Departments Executive Office The Chief Executive Officer, as the chief administrator and executive officer of the DFW Airport Board, recommends policies to the Board of Directors for the planning, constructing, maintaining, operating and regulating of DFW. The Chief Executive Officer, along with the Executive Staff (6 Executive Vice Presidents and support staff), oversees the implementation of adopted policies and is responsible for conducting monthly and special meetings with the Board of Directors. This budget also includes salaries and wages of support staff for the CEO and Executive Staff and the CEO Contingency. Budget Comparison and Walkforward Executive Office (in thousands) FY17 FY18 Outlook Budget Salaries & Wages $2,905 $2,988 Benefits 1,178 1,112 Contract Services Equipment & Supplies Administrative CEO Contingency* 0 4,000 Total Executive Office $5,276 $9,656 Walkforward from FY 2017 Outlook Reference FY 2017 Outlook $5,276 Salaries & Wages 83 D Benefits (66) D, E Contract Services 450 G Equipment & Supplies (52) A, G Administrative (35) A, G CEO Contingency 4,000 E Total FY 2018 Proposed Budget $9,656 *FY17 budgeted contingency of $4M has been reallocated to the departments in which it was used. 61 DFW International Airport

63 FY 2018 Adopted Budget Departments Airport Non-Departmental The Airport Non-Departmental budget reflects the change in operating reserve, payroll accruals, incentive compensation, affordable health care act fees, supplemental retirement costs, and any other expenses that are recognized at a Board-wide, rather than a departmental, level. These include Outlook adjustments made at a high level, medical insurance claims stop loss reimbursement, and medical claim overruns. Budget Comparison and Walkforward Airport Non-Departmental (in thousands) FY17 FY18 Outlook Budget Salaries & Wages $3,667 $4,288 Benefits Contract Services 1 1 Equipment & Supplies 0 0 Insurance 0 0 Utilities 0 0 Administrative 0 (0) Operating Reserve 7,991 4,628 Total Non-Departmental $12,113 $9,685 Walkforward from FY 2017 Outlook Reference FY 2017 Outlook $12,113 Salaries & Wages 621 Management Incentive/Excellence Awards Benefits 314 Benefit adjustments made in Outlook and LHD over/under Contract Services 0 Equipment & Supplies 0 Administrative (0) Operating Reserve (3,362) Operating Reserve requirement decrease Total FY 2018 Proposed Budget $9, DFW International Airport

64 FY 2018 Adopted Budget Capital Budget Capital Budget DFW has two capital accounts in its Construction and Improvement Fund: the DFW Capital Account and the Joint Capital Account (JCA). The DFW Capital Account is DFW s discretionary account. It may be used for any legal purpose and does not require airline approval. DFW uses this fund for renewals and replacements and other discretionary projects. Funding for the DFW Capital Account is from the DFW Cost Center net revenues, interest income, grants and bond proceeds primarily for commercial development projects. DFW has numerous capital projects currently underway and funded from the DFW Capital Account. (See detailed pages that follow.) The JCA requires airline approval for capital projects and are typically funded through the sale of bonds. In addition to bond proceeds, the JCA is funded from natural gas royalties, sale of land proceeds, grants and interest income. The largest component of DFW s capital program had previously been the Terminal Renewal and Improvement Program (TRIP) which is funded from the JCA. The TRIP program is currently budgeted at $1.9 billion for Terminals A, B, and E. This excludes $817 million for Terminal C, which is currently on hold at the request of American Airlines. Terminal A is already complete, leaving only the last sections of Terminals E and B to complete the program that is not currently on hold. As of April 2017, DFW was 96% contractually committed/spent for Terminals A, B and E and is currently forecasting approximately $30.4 million in savings at the end of the program. The final phase of TRIP is Terminal B section B, which is scheduled to open in December DFW s next largest capital program involves renewal of aging critical airside and landside infrastructure. Since DFW Airport is the 3 rd largest airport in the world in terms of land mass, with 17.2K acres, there is a significant amount of infrastructure to maintain. Much of the airfield, landside, utilities and other infrastructure were constructed when the airport opened 43 years ago and is now approaching end of useful life. This program is discussed in more detail in the Major Capital Project Descriptions section. 63 DFW International Airport

65 FY 2018 Adopted Budget Capital Budget Projected Capital Uses of Cash by Capital Account DFW projects to spend approximately $482.4 million on capital expenditures in FY 2018 as summarized in the following chart. FY 2018 Projected Capital Expenditures ($482.4M) DFW Capital Account Transfer to 102 Fund $12.4 DFW Capital Account * $88.0 Joint Capital Account - TRIP $97.4 Joint Capital Account - Non- TRIP $284.6 * Includes $8.9M debt financed for Commercial Development, excludes contingency The following table summarizes projected capital expenditures for projects to be in progress during FY Active Projects in FY 2018 Actual Forecast Prior Projected Future Total Capital Budget (Millions) FY 2016 FY 2017 Years FY 2018 Years Budget DFW Capital Account $116.0 $136.3 $174.1 $88.0 $330.3 $592.4 Joint Capital Acccount TRIP , ,906.4 Non-TRIP , ,514.9 Transfers to 102 * Total Capital $631.3 $592.9 $2,157.9 $482.4 $1,610.7 $4,251.0 * Debt service (including coverage) for Airport Headquarters & E Parking Garage 64 DFW International Airport

66 FY 2018 Adopted Budget Capital Budget 65 DFW International Airport Capital Project Approval Process DFW has a Financial Plan that includes a long term Capital Plan. In FY 2010, DFW management developed a 10-year capital plan as the basis for negotiating the Use Agreement. Some of the FY 2018 projects from the list on the prior page were derived from that plan. Many of the new projects highlighted in blue are new projects which are officially in a planning status. When a project manager is ready to initiate one of the projects from the Capital Plan, a detailed capital worksheet is prepared including alternatives, and presented to the Capital Committee for review and approval. CEO approval is required for projects equal to or greater than $750,000. Projects on this list may be modified or eliminated if planning assumptions on costs and benefits do not materialize upon more detailed analysis. It is possible that new projects may arise during the fiscal year due to the dynamic nature of an airport. This just-intime capital planning process provides flexibility to manage changes most effectively. From a process standpoint, the Board of Directors does not approve an overall capital budget. Instead, the Board generally reviews projects to be funded with bond proceeds before the bonds are sold and reviews individual capital projects as contracts for those projects are brought to the Board for approval. Major Capital Project Descriptions There are several major capital initiatives in the FY 2018 Capital Budget including: Terminal Renewal and Improvement Program (TRIP) DFW s domestic Terminals A, B and E are nearing completion after several years of major rehabilitation/ redevelopment of terminal facilities which are at end-of-useful life. The current approved TRIP budget remains at $2.7 billion and includes $816.7 million for Terminal C, which remains on hold as previously described. Each TRIP terminal contains 3 sections, which are being reconstructed 1 terminal section at a time to maintain sufficient gate capacity to meet airline operational requirements. The first terminal section was completed in March 2013 with the final 2 terminal sections coming on line during FY 2017 and FY As of May 2017, an estimated $30.4 million of savings is forecasted for Terminals A, B, and E. Approximately $97 million is anticipated to be spent during FY This assumes no further capital expenditures for TRIP Terminal C. Airfield Reconstruction and Expansion As part of the next major capital development program, DFW is reconstructing and expanding various areas of the airfield to renew end of life airfield infrastructure as well as continuation of a planned program to enhance airfield safety and capacity. Airline MII approval was received for $242 million to rehabilitate/reconstruct several areas of the east airfield which are approaching end-of-useful life. The major east airfield reconstruction involves Runway 17C and related airfield projects, including taxiway L. The majority of the east airfield projects are currently in various stages of design with construction for much of these projects commencing in early FY FAA Airport Improvement Program (AIP) grants are programmed for these projects with reimbursement of 75% of eligible costs. The amount of FY 2018 AIP

67 FY 2018 Adopted Budget Capital Budget grants projected to be awarded to DFW for these projects is in the $35M - $40M range. Approximately $124 million is anticipated to be spent during FY 2018 (gross of grants). A $51 million expansion of the Terminal D - South aircraft ramp is currently underway with $20 million in AIP Discretionary grant funding awarded, for a total $31 million net of grants. This expansion is required to meet current and future demand for additional aircraft parking positions for hardstand operations. Approximately $22 million is anticipated to be spent in FY A $14 million project to strengthen Taxiway Y bridge is also currently in design, with $8 million in AIP Discretionary grant funding awarded, for a $7M total cost net of grants. This is the north crossover taxiways for aircraft movements over International Parkway between the west and east sides of the airfield. This project is required to accommodate heavier Aircraft Design Group (ADG) VI aircraft, (i.e., A-380 and ) which exceeds the load bearing capacity of the current crossover aircraft taxiway bridges. Approximately $6.7 million is anticipated to be spent in FY DFW plans to continue expansion of the End-Around Taxiways (EAT) for the northeast and southwest quadrants to mirror the expansion in the previously constructed EAT in the southeast quadrant. This is part of an airfield safety and capacity program which will minimize the likelihood of runway incursions and increase runway capacity of the airfield. Airline MII approval has been granted for $14 million for design of both the southwest and northeast EAT, as well as $104 million for construction of the northeast EAT. The northeast EAT would be the next EAT to be constructed, followed by the southwest EAT, and eventually the northwest EAT to complete the entire EAT system. Additionally, DFW Airport has already submitted an FAA Letter of Intent (LOI) request for $310 million of AIP Discretionary LOI funding for the remaining three EAT s to complete the larger program for EAT s at DFW Airport. While currently unknown whether this level of funding would actually be granted to DFW Airport, this amount would represent 72% of the total anticipated EAT program cost. Landside Roads, Bridges, and Rail Just as the airfield infrastructure is undergoing plans for major renewal, the landside infrastructure is also planned for major renewal and reconstruction as this infrastructure also approaches end-of-life. DFW has received airline MII approval for $9 million for design of roads and bridges reconstruction. Approximately $5 million is estimated to be spent on design during FY Additionally, as part of a larger regional surface transportation solution for the North 66 DFW International Airport

68 FY 2018 Adopted Budget Capital Budget Central Texas Region, DFW will construct a rail station adjacent to Terminal B to accommodate the T Rail service from downtown Fort Worth. Design for this rail station is complete. DFW received airline MII approval for $43 million for this project. Approximately $20 million is anticipated to be spent during FY 2018 for this rail station which is scheduled to start passenger service by the end of Gate Expansion and Terminal Passenger Processing Capacity Expansion Additional gate capacity is planned in D- South. Projects include programming and preliminary design for future gate expansion south of Terminal D which was pre-approved in the Use Agreement. Gate expansion is being analyzed as part of a holistic Central Terminal Area (CTA) study that includes expansion of passenger processing capacity in Terminal D, expansion of bag makeup units, Customs and Border Control (CBP) processing improvements for International passengers and the D-south airline ticket hall expansion to accommodate future planned capacity for new International carriers. DFW is currently using hardstand operations until additional contact gates can be constructed. Also planned for FY 2017 and early 2018 are 10 Automated Screening Lanes (2 lanes in each Terminal) to improve throughput time for passenger screening. Approximately $12 million is projected to be spent during FY 2018 on these various initiatives. Commercial Development and Other Facilities Infrastructure to support several new planned Commercial Development projects including Passport Park in southeast quadrant of DFW, Walnut Hill Industrial, Coppell Industrial and others. Additionally, construction will continue into FY 2018 on Southgate development to complete the US Post Office. Approximately $14 million is anticipated to be spent on Commercial Development during FY Employee Parking Expansion DFW has received airline MII funding approval to expand the existing employee surface lots to accommodate increased airlines and tenant headcount working in the Central Terminal Area (CTA). For a longer-term solution, DFW has also received airline MII for preliminary programming of employee parking garages that would be located in close proximity to the terminals. This would replace the three surface employee parking lots which require busing operations. Approximately $8 million is anticipated to be spent on Employee Parking programming, design, and buildout during FY DFW International Airport

69 FY 2018 Adopted Budget Capital Budget Other projects include various reconstruction/consolidation projects for DFW facilities. Airline MII approval has been received for facilities as follows: DPS Station #1 to accommodate planned growth, expansion of Airport Operations Center/Emergency Operations Center (AOC/EOC) to expand the role of the AOC to more of an integrated operations center. Another project includes the reconstruction/consolidation of several end of life campuses currently encompassing Design/Code & Construction department and Energy Transportation & Asset Management, Environmental Affairs, and several other operations functions into a consolidated location in the southwest quadrant of the airport which has required airfield access. Airline MII approval was received for $12 million for design of this consolidated campus. Approximately $6 million is anticipated to be spent on this initiative during FY The table on the following pages summarizes the airline MII approvals that DFW Airport has received thus far, including those projects in the new Use Agreement. 68 DFW International Airport