FY 2015 ADOPTED BUDGET

Transcription

1 FY 2015 ADOPTED BUDGET Finance Department P.O. Box DFW Airport, Texas

2 FY 2015 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... 7 DFW Fund Structure... 9 FY 2015 Budget Comparisons to Other Periods Budget Schedule Executive Summary FY 2015 Key Performance Indicators FY 2015 Budget Comparisons and Walkforward FY Fund Exposures FY 2015 Debt Service Budget Exposure from Capital Projects Passenger Airline Cost per Enplanement (CPE)...17 Revenues Overview 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 2015 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 DFW s Vision Statement FY 2015 Adopted Budget Introduction DFW International Airport - Connecting the World Board of Directors DFW s Mission Statement DFW International Airport will provide our customers outstanding facilities and services, expanding global access and economic benefits to those we serve. DFW s Primary Business Goal Grow the core business of domestic and international passenger and cargo airline service. 2 DFW International Airport

4 FY 2015 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/GIS Group 3 DFW International Airport

5 FY 2015 Adopted Budget Introduction DFW is a located within a four-hour flight time of 95% off the U.S. population and currently ranks third among the world s busiest airports in terms of operations and eighth in terms of passengers. Its central location is the focal point of onee of the nation s largest intermodal hubs, connecting air, rail, and interstate highway systems. DFW currently operates daily passenger flights to 203 destinations worldwide, including 147 nonstop domestic destinations and 56 nonstop international destinations. There are 23 passenger carriers and 18 cargo carriers serving DFW. The Airport is recognized as a premier inland cargo hub, served by major international cargo carriers. According to a study conducted by The University of Texas in Denton (UNT), DFW is the primary economic engine for North Texas, driving $31 billion of economicc impact, supporting 143,000 jobs, and generating $9.0 billion in payroll annually. DFW Infrastructure Airfield DFW has more airfield operational capacity than any airport in the United States with 7 runways: 5 north/south parallels and 2 diagonals. Four of DFW s runways are 13,400 feet in length. DFW is focused on the future and preparing to handle next generation aircraft, including the Airbus A380. Per FAA benchmark studies, thee Airport s designated hourly capacity arrival/departure flow is approximately aircraft operations per hour under reduced instrument flight conditions and approximately aircraft operations per hour under optimum visual flight conditions, a conditionn that prevails approximately 94% of the time. DFW estimatess it is using close to 60% of its aircraft operationn capacity att this time Terminals DFW has 5 terminals (A, B, C, D, and E) totaling 6.3 million square feet of building space, ncluding 165 aircraft boarding gates(10 of thee gates are newly constructed gates at Terminal B), 337 ticketing positions with supportingg self-service kiosks, and 15 security checkpoints. As of June 30, 2014, 17 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 for the first six months of FY DFW Terminal Complex American Airlines operates domestic servicee and international departures in Terminals A and C, and both domestic and international service in Terminal D. Envoy Aviation Group f/k/a American Eagle ( Envoy ) operates domestic and international service in Terminals B and D. 4 DFW International Airport

6 FY 2015 Adopted Budget Introduction All other domestic flights and certain Canadian pre-cleared flights operate from Terminal E. All international flights requiring U. S. Customs and Immigration clearance operates from DFW s Terminal D and B. Terminal D has 2.2 million of square feet and 27 gates. All terminal gate leases expire September 30, 2020 per the terms of the Airline Lease and 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. 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. American Airlines is responsible for the majority of the facilities maintenance, custodial services, and all of the jet bridge and baggage maintenance in Terminals A and C. In Terminal D, American Airlines maintain their preferentially leased jet bridges and the entire baggage system for the terminal. The cost of these maintenance activities are paid directly by American Airlines and not included in DFW s budget or financial statements. 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 5 terminals in 2 directions, and trains arrive an average of every 2 minutes at each terminal. There are 2 Skylink stations in each terminal. The average customer ride is about 5 minutes. DFW also uses buses to transport passengers and employees between terminals on the non-secure side, as well as to 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. Airport Operations Center/Emergency Operations Center (AOC/EOC) 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 the emphasis 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/911 facility is the fusion/correlation center that provides Executive Management and aviation stakeholders with the situational awareness needed to efficiently and quickly manage Airport Board 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 an average of 31,600 calls per month and generates an average of 3,160 work orders per month. DFW Controlling Documents In addition to the Contract and Agreement between the Cities, DFW is governed by several other key documents, including the 30 th Supplemental Bond Ordinance which modified the original 1968 Concurrent Bond Ordinance (collectively called the Bond Ordinances); and the Use Agreements between DFW and the Signatory Airlines. Collectively, these agreements are called the Controlling Documents. 5 DFW International Airport

7 FY 2015 Adopted Budget Introduction 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 requiree that Gross Revenues of the Airport be deposited into the 102 Revenue and Expense Fund (102 Fund). Gross Revenues are defined as all Airportt revenues and receipts except: bond proceeds; Passenger Facility Charge (PFC) proceeds used to fund capital projects (ratherr than for debt service); interest earned on unspent bonds; proceeds in the Capital Accounts; PFC receipts; grant proceeds used to fund capital projects; and sale of land or mineral rights, including natural gas royalties. Strategic Plan DFW updated its Strategic Plan in FY keeping the same overall structure as its previous Plan, but with some change in strategic focus on: The initiation of the 8-year, $2.1 billion Terminal Renewal and Improvement Program (TRIP) to renovate and modernize our 4 older terminals. The impact of global airline alliances on airline and airport competition, and DFW s increased focus on becoming the most preferredd Super Global Hub in the world. A 10 year Airline Use Agreement that redefines DFW s business model and relationship with the airlines. An increased emphasis on becoming a businesss partner with airlines and contractors to provide superior servicess to DFW s passenger guests. An expandedd definition of DFW s primary customer groups beyond the passenger to include airlines and tenants. A critical shift in focus - that all DFW s employees either directly or indirectly support our customers. A financial plan that establishes DFW s financial targets through FY 2020, to be updated annually. The Strategic Plan is a critical document that includess DFW s Vision and Mission Statements and identifies the critical strategies to achieve DFW s Primary Business Goal of growingg the core business of domestic and international passenger and cargo airline service. DFW takes a balanced approach to its Strategic Plan. Management focuses its Key Drivers/Results of being cost competitive, satisfying the customer, and achieving operational excellence, through engaged employees. A copy of DFW s full Strategic Plan is available at A schematic of the DFW Strategic Plan follows: 6 DFW International Airport

8 FY 2015 Adopted Budget Introduction Airline Use Agreement Rate Model The 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 (DFW CC). The following chart is a summary of the current Airline Use Agreement rate model: 7 Operating Revenue and Expense Fund (the "102 Fund) Airline Cost Centers DFW Cost Centers Airfield Terminal DFW Expenses Expenses DFW Revenues (Business Units) Direct Costs Direct Costs Parking, Concessions, RAC, DPS and Overhead Allocations DPS and Overhead Allocations Commercial Development, Debt Service (net of PFCs) Debt Service (net of PFCs) Employee Transp., Taxis, Utilities, and Interest Income Less: Misc Airfield Revenues Less: Misc. Terminal Rentals Less: Expenses General Aviation Federal Inspection Fees Direct Costs Fueling Facility Lease Turn Fees; TSA Rentals DPS and Overhead Allocations Concessions Reimbursements Debt Service (net of PFCs) +/- Transfers/Adjustments +/- Transfers/Adjustments - Transfers/Other - Lower Threshold Adjustment + DFW Terminal Contribution - Skylink Costs + Upper Threshold Adjustment + Annual Capital Transfer - DFW Terminal Contribution +/- True-Up Adjustment +/- True-Up Adjustment Net Cost = Landing Fees (KPI) Net Cost = Terminal Rentals (KPI) Airline Cost & Airline Cost per Enplanement (KPI) Capital Accounts (Capital Improvement Fund) KPI = DFW Cost Center Net Revenues +/- Threshold Adjustments +/- True-Up Adjustment Net Revenues to the DFW Capital Account (KPI) Joint Capital Account Coverage Account DFW Capital Account + Natural Gas Royalties Funded from existing coverage, + Sale of Land Proceeds plus coverage from New Debt Funded annually from DFW CC. - Annual Capital Transfer to the Service from all three cost Contributions must be higher than centers as debt service "Lower Threshold" and cannot Terminal Cost Center increases exceed the "Upper Threshold." 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 (DPS) 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 7 DFW International Airport

9 FY 2015 Adopted Budget Introduction is determined by dividing the net cost of the airfield by estimated landed weights. The budgeted average terminal rental rate is determined by dividing the net cost of the terminal cost center divided by leasable square footage. The Use Agreement requires the Airport to charge an equalized terminal rental rate for all 5 terminals. The amount paid by the airlines for landing fees and terminal rent fees less airline incentive payments 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 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 is also responsible for all costs associated with the Skylink people mover system per the terms of the Use Agreement. The net revenues from this cost center are transferred to the DFW Capital Account providing the net revenues are not lower than the Lower Threshold or not higher than the Upper Threshold. If either of these occur, then a Threshold or True-Up Adjustment is required. One of DFW s most important KPIs is Net Revenues from the DFW Cost Center. This KPI measures the net revenues generated by DFW s non-airline business units, after adjusting for the cost of Skylink, and drives the amount of cash flow that can be transferred to the DFW Capital Account each year. 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. Per the terms of the Use Agreement, an Annual Capital Transfer (described below) is made from the JCA to the Terminal Cost Center to lower airline cost through FY Coverage Account The Airport established the Coverage Account as part of the new Use Agreement in order to implement rolling coverage. It was initially funded from coverage collected in FY 2010 (the last year of the old Use Agreement). 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, each cost center must generate the incremental coverage required to fund 25% of the new debt service. These incremental coverage amounts are collected in the 102 Fund through rates and charges during the fiscal year. DFW Capital Account This is DFW s discretionary account and is funded primarily from the Net Revenues of the DFW Cost Center, 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 prior airline approval. Threshold Adjustments The Use Agreement established a Lower Threshold and an Upper Threshold for Net Revenues from the DFW Cost Center to limit the amount transferred annually to the DFW Capital Account. If DFW Cost Center Net Revenues are budgeted to be less than the Lower Threshold ($43.4 million in FY 2015), an incremental charge (i.e., a Lower Threshold Adjustment) is collected through landing fees in an amount sufficient to achieve the Lower Threshold amount. Conversely, if DFW Cost Center Net Revenues are budgeted to be greater than the Upper Threshold ($64.9 million in FY 2015), then 75% of the excess is credited to the 8 DFW International Airport

10 FY 2015 Adopted Budget Introduction Airfield Cost Center as an Upper Threshold Adjustment. This reduces budgeted landing fees. The remaining 25% may be retained in the DFW Cost Center and transferred to the DFW Capital Account at the end of the fiscal year. The benefit of the Lower Threshold Adjustment is that it guarantees that DFW will have a minimum level of cash to transfer to the DFW Capital Account so that DFW can replace assets on a timely basis. Conversely, the Upper Threshold limits the Airport s ability to generate significantly more net revenues and serves to reduce airlines costs as non-airline revenues increase. It also places a limit on DFW s ability to significantly increase its coverage ratios. The Threshold Amounts are adjusted annually for inflation. 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 the terminals. Any difference becomes a True-Up Adjustment and is either charged or credited to that cost center in the next fiscal year. The True-Up Adjustments for the Airline Cost Centers are applied back to that cost center the following year beginning in January. DFW Cost Center True-Up Adjustments are applied against landing fees beginning in the following January. Annual Capital Transfer Per the terms of the Use Agreement, an annual transfer is made from the Joint Capital Account to the Terminal Cost Center to reduce the cost of the terminals to the airlines for a period of 7 years. This transfer was $28 million in FY 2011 (first year of the new Use Agreement) and will be $12 million in FY The transfer will be reduced by $4 million each year through FY 2017 when it will be eliminated. 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 $6.4 million in FY 2015.W Cost Centers 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 following table summarizes the primary funds used by DFW: Number Fund Description Primary Use 101 Fixed Assets and Long Term Debt Capital Assets/Debt 102 Operating Revenues and Expenses Operations 252 Passenger Facility Charges (PFC) Capital/Debt Service 320s/330s Joint Capital Account and Bond Funds Capital/Bond Proceeds 340s DFW Capital Account Capital s Debt Service and Sinking Funds Principal and Interest 907/910 Public Facility Improvement Corporation (PFIC) Rental Car Facility/Grand Hyatt Hotel 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. 9 DFW International Airport

11 FY 2015 Adopted Budget Introduction Basis of Budgeting The 102 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. Capital expenditures are funded through the issuance of Joint Revenue Bonds, grants, PFCs, or through the DFW or Joint Capital Accounts. From a process standpoint, the Board of Directors approves the Operating Revenue and Expense budget. The Board reviews the capital budget during the Annual Budget process and when it reviews the Financial Plan. The Board does approve all contracts associated with capital projects. FY 2015 Budget Comparisons to Other Periods FY 2014 Budget During FY 2014 the Board approved the use of $5.4 million of contingency budgeted outside of the rate base. The FY 2014 Budget as adjusted by contingency is summarized in the following table. Any reference to the FY 2014 Budget in this budget document relates to the FY 2014 Budget, as adjusted by the approved contingency. Millions FY 2014 Approved Budget $ Approved Changes (and Dates) Overtime for U.S. Customs & Border Protection (November 7, 2013) 2.4 Runway Markings (June 5, 2014) 0.6 Roadway pavement repairs (June 5, 2014) 0.5 Terrazzo Floor Rejuvenation (June 5, 2014) 0.5 Incremental Scanning/Shredding Services (June 5, 2014) 0.2 Roadway Markings and reflective devices (June 5, 2014) 0.1 Guardrail repairs (June 5, 2014) 0.1 Machine cleaning of escalator steps pilot (June 5, 2014) 0.0 Operating Reserve (November 7, 2013) 0.6 Operating Reserve (June 5, 2014) 0.5 FY 2014 Budget with approved contingency $ FY 2014 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 2014 Outlook comparisons to provide the best basis for comparison (rather than comparing to the FY 2014 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 April Financial Plan DFW issued its first 10-year Financial Plan in December 2010 and this plan is updated annually with the latest update in February This Plan was the basis for the negotiation of the Use Agreement with the airlines and has been linked to DFW s Strategic Plan to establish long-term goals for the KPIs shown in yellow in the DFW Business Model discussed above (Airline Cost, CPE, and Net Revenues from DFW Cost Center). Management s long term goal is to achieve or exceed the targets for these KPIs since this was the basis for the Airline 10 DFW International Airport

12 FY 2015 Adopted Budget Introduction Use Agreement. Accordingly, comparisons to the Financial Plan for Fiscal Year 2015 are included in this Budget Book. A complete copy of the 2015 Financial Plan is available at Presentation of Amounts and Prior Years Actuals The FY 2015 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 2015 presentation. Budget Schedule DFW s fiscal year begins October 1. The FY 2015 Expense Budget was compiled by the various DFW departments in May and then reviewed and modified by Staff in May and June. Presentations were made to representatives of the Signatory Airlines on May 20, and June 04, 2014, with follow-up information provided. A preview of the FY 2015 Budget was presented to the Finance Committee on June 03, The final recommended Budget was presented to and approved by the Board on July 03, The FY 2015 Budget must be submitted to the City Managers of Dallas and Fort Worth by August 15, 2014, with approval of the two City Councils by September 30, DFW International Airport

13 FY 2015 Adopted Budget Executive Summary FY 2015 Key Performance Indicators The following table compares the Key Performance Indicators (KPIs) of the FY 2015 Budget with the FY 2014 Outlook and the FY 2014 Financial Plan for FY 2015 (shown as FY 2015 Financial Plan in tables). Each KPI is discussed further below. Increase (Decrease) Key Performance Indicators FY14 Outlook FY15 Fin'l Plan FY15 Budget FY15B vs. FY14OL FY15B vs. FY15FP Total 102 Expenditure Budget (Ms) $646.4 $736.3 $724.7 $78.3 ($11.6) Airline Costs (Ms) $260.1 $322.5 $315.4 $55.3 ($7.1) Airline Cost Per Enplanement (CPE) $7.76 $9.66 $9.29 $1.53 ($0.37) DFW Cost Center Net Revenues (Ms) $96.5 $88.7 $103.2 $6.7 $14.5 Total Passengers (Ms) Total Landed Weights (Bs) FY 2015 Budget Comparisons and Walkforward The following table compares the Annual 102 Fund Budget (FY 2015 Budget) with the FY 2014 Outlook, the FY 2014 Budget, and FY 2015 Financial Plan. The Budget is comprised of operating expenses and debt service. The FY 2015 Budget is $724.7 million, a $78.3 million (12.1%) increase over the FY 2014 Outlook, but $11.6 million (1.6%) less than projected for FY 2015 in the latest Financial Plan. Consistent with prior years, the Budget request also includes an amount of contingency outside the rate base. This contingency may only be accessed with Board approval. The major increases in the FY 2015 Budget as compared to the FY 2014 Outlook result from debt service related to the Terminal Renewal and Improvement Program and an incremental $5.9 million for customer service enhancements. Excluding these two items, the FY 2015 budget is increasing only 2.0%. Increase (Decrease) FY14 FY14 FY15 FY15 FY15B FY15B Annual Budget (Millions) Budget Outlook Fin'l Plan Budget vs FY14OL vs FY15FP Operating Expenses $374.2 $372.7 $387.0 $391.4 $18.7 $4.4 Gross Debt Service (16.0) Total 102 Fund Expenditures $656.7 $646.4 $736.3 $724.7 $78.3 ($11.6) Contingency O/S Rate Base 10.0 Total Budget w/ Contingency $734.7 During the budget process, the planned activity for FY 2015 is reviewed and aligned with DFW s overall Strategic Plan. Below are some assumptions that were used in preparing the FY 2015 Budget. 12 DFW International Airport

14 FY 2015 Adopted Budget Executive Summary Grow the Core Business Total passenger traffic is budgeted to be 62.6 million (a record), a 0.7 million (1.8%) increase over the FY 2014 Outlook. This compares to a projected 1% increase in the Financial Plan. This growth is lower than recent years growth of 2 to 3 percent due to the expected impact of the expiration of the Wright Amendment at Love Field. DFW expects a 0.6% decrease in origin and destination passengers, but growth in connecting and international passengers. AA began service to Hong Kong and Shanghai in June In addition, Emirates and Qantas will upgage aircraft to A380s and Qatar Airways and Etihad Airways will begin new service to the Middle East. Connecting passengers should increase due to American Airlines decision to re-peak its flight operations during the fiscal year. Landed weights are also increasing year over year due to new international service and American Airlines replacing older, lighter MD80 aircraft with newer, heavier Boeing airplanes. Customer Service Enhancements Continued efforts are being made to improve the overall customer experience both from a passenger and airline perspective. An incremental $5.9 million ($4.7 million plus the 25% operating reserve) of customer service enhancements has been budgeted including: $1.1 million for guest assistance services for wheelchair assistance; $1.0 million for cleaning terrazzo floors and escalators; $0.4 million for parking enhancements such as new parking guidance systems; $0.3 million for baggage handling system improvements; and $1.9 million for increased deicing services, hardstanding services, foul weather maintenance equipment and other airfield projects. Since these costs were not assumed in the Financial Plan; DFW plans a $6.3 million debt restructuring ($5 million plus 25% coverage) to pay for the incremental costs. Cost Competiveness Management seeks to reduce costs and identify efficiencies each year. The FY 2015 Budget reflects cost efficiencies of $2.1 million resulting from savings in asset management, ITS, and materials and supplies, plus $1.0 million savings in pension costs due to improved investment returns. In addition there was $3.4 million of one-time costs incurred in FY 2014 that are not included in the FY 2015 Budget. Terminal Renewal and Improvement Program (TRIP) The TRIP began in the FY 2011 and has phased construction through FY For FY 2015, 4 sections of 3 terminals, along with associated parking garages, will open at various times during the fiscal year. At the same time, other sections will be closed to start construction. This requires DFW to make significant efforts to maintain customer service and constrains DFW s ability to grow terminal parking and concessions revenues. This phased approach also requires additional maintenance and technology support efforts. As renovated sections of terminals and garages open, DFW begins to pay debt service on the facilities ($59.6 million more in FY 2015 than the FY 2014); however debt service is $16.0 million lower than the Financial Plan as the result of slightly delayed openings and restructuring of existing debt ($6.3 million including coverage). The major changes between the FY 2015 Budget and the FY 2014 Outlook and how they impact the DFW Cost Center and the Airline Cost Centers are summarized in the following table. Operating expenses increased $18.7 million (5.0%) from the FY 2014 Outlook, of which, $11.7 million relates to the Airline Cost Centers and $7.0 million relates to the DFW Cost Center. Explanations of the change in the walkforward are discussed in the Operating Expenses section. 13 DFW International Airport

15 FY 2015 Adopted Budget Executive Summary Budget Category (in millions) Total DFW Airline FY 2014 Outlook $372.7 $144.0 $228.7 Merit & salary annualization Fixed contract increases Utilities & fuels Fixed contract increases Health care Property insurance premiums 0.3 (0.0) 0.3 Total fixed contract increases Airline/customer enhancements Airline service improvements Guest Assistance services Terrazzo & escalator cleaning Hardstanding Parking Technology Total airline/customer enhancements New facilities/trip Increases Accounting policy change increases New asset management/ops projects Miscellaneous increases Other contracts Disaster decovery & continuity consulting Other, net (0.1) Total Miscellaneous Increases Operating expense increases Contingency & reserves Restore contingency Adjust operating reserve Total contingency & reserves Net increases before cost reductions Cost reductions and efficencies December winter storm (2.2) (0.1) (2.1) One time projects in 2014 (1.2) (0.3) (0.9) ETAM operational efficiencies (1.0) (0.3) (0.7) Pension & OPEB reductions (1.0) (0.5) (0.5) ITS efficiencies (0.6) (0.3) (0.4) Supplies & equipment reductions (0.5) (0.2) (0.3) Total cost reductions (6.5) (1.7) (4.8) Net increase FY 2015 Budget $391.4 $151.0 $ DFW International Airport

16 FY 2015 Adopted Budget Executive Summary 102 Fund Exposures The FY 2015 Budget includes two specific exposure items that could result in DFW not obtaining its revenue budget targets. The total exposure for FY 2015 is estimated at $5.5 million. Revenues Concessions Advertising Not Under Contract $3.5 Parking Revenues 2.0 Total Revenue Exposures 5.5 In prior years, the budget did not include revenues for business that was not under contract at the time the budget was developed. The FY 2015 budget includes $3.5 million of advertising revenues that are not currently under contract. If these contracts do not materialize, DFW will be challenged to achieve its concessions revenue budget. In addition, the parking revenues budget carries an exposure of an estimated $2 million. It is not clear if the Airport will be able to achieve its planned parking revenue growth given the limited parking capacity due to TRIP construction. However, management was aggressive with its projections. There continues to be operating expense exposures for DFW due to unexpected events. During FY 2014, DFW incurred over $2 million in weather related costs to accommodate passengers and maintain operations. These costs were not specifically budgeted and there are no specific costs in our FY 2015 Budget to cover unexpected expenses. If the CEO Contingency of $2 million is not sufficient to cover unexpected exposures, management may request that the Board approve the use of the $10 million of contingency outside the rate base. FY 2015 Debt Service Budget Exposure from Capital Projects The FY 2015 Budget includes debt service exposure based on assumed completion dates of capital projects (i.e., date of beneficial occupancy or DBO). Once a project DBOs, DFW begins to pay debt service on that project. If the actual DBO date is earlier, DFW will pay more debt service than budgeted. If the actual DBO date is later, DFW will pay less debt service. The following table includes the major capital projects expected to DBO in FY 2015 and the monthly debt service that commences with each project. Monthly Budgeted Debt Service Capital Project DBO (000s)* W. Airfield Dr. Oct-14 $95 Terminal B Section C Oct Terminal E Section C Nov-14 1,163 Terminal A Section B Dec-14 1,018 Terminal E Roadway Expansion Mar Terminal B Section A May Elevated Water Tank May Terminal A Garage Section C Jul *Includes Coverage 15 DFW International Airport

17 FY 2015 Adopted Budget Executive Summary Total 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 (discussed below) is based solely on passenger airline cost. The FY 2015 Airline Cost Budget is $315.4 million, $7.1 million (2.2%) less (better) than the FY 2015 Financial Plan primarily due to lower debt servicee costs that were anticipated in the Financial Plan. Below is a walkforward of airline cost from the FY 2014 Outlook to the FY 2015 Budget. Approximately 89% of the increase is related to debt service and fixed Use Agreement items. Variances are explained in the Airlince Cost Centers section. Airline Cost Walkforward FY 2014 Outlook Debt & Use Agreement Items Debt Service (net of PFCs) Joint Capital Contribution Threshold Adjustment Total Debt and Use Agreement Net Operating Expensess Increased Operating Costs, net Terminal Contribution Increase Threshold Adjustment Increase Other Non-Airline Revenues Increases Total Net Operating Expenses Total Increase FY 2015 Budget Millions $ (0.3) (4.5) (0.9) 6.0 $55.3 $ DFW International Airport

18 FY 2015 Adopted Budget Executive Summary Passenger Airline Cost per Enplanement (CPE) CPE Trending at DFW CPE is defined as total passenger airline cost (i.e., revenue paid to DFW) divided by the number of enplaned passengers. CPE is a common measure used by the airline industry. The denominator is enplaned passengers and is used because it is a key revenue/ /cost driver for an airline. However, this is not the case forr an airport. Airport costs are based on the facilities and runways maintained. Notwithstanding this issue, DFW (and the industry) use this indicator as a performance e measure. The FY 2015 CPE of $9.29 represents an increase of $ 1.53 (19.7%) from the FY 2014 Outlook. From the walkforward above, the increasee is driven primarily by debt service and fixed Use Agreement adjustments. The FY 2015 CPE of $9.29 is $0.37 (3.8%) less (better) than the 2015 Financial Plan primarily due to lower debt service. CPE Benchmarked to Other Airports DFW s goal iss to have a competitive CPE, preferable in the first quartile by the end of TRIP. The following chart benchmarks DFW s fully loaded CPE with the fully loadedd CPE projections for DFW s competitive set of 17 large U.S. hub airports using the latest dataa available from ACI surveys from FY Fully loaded cost is the most meaningful comparison becausee it includes most of thee costs incurred by airlines to operate at an airport, including what they pay the airport (light blue), what they pay directly for terminal maintenance and terminal debt service (dark blue), andd an estimate of what costs the airlines incur for delay and taxiing (red). DFW s cost structure is projected to continue to increase through the completion of TRIP due to higher debt servicess costs. The chart highlights that DFW s FY 2014 results were the fifth lowest CPE and remains in the first third for large hub airports. DFW is well-positioned from a cost standpoint compared to AA s hubs and the US Airways hub airports. The chart also shows that DFW s FY 2015 Budget compares favorably with the other airports results from FY Management expects the airport to return to the first quartile by 2020 as other airport costss rise in association with their capital plans. 17 DFW International Airport

19 FY 2015 Adopted Budget Executive Summary PHX ATL CLT SEA DFW MSP DEN SFO IAH LAX BOS MIA DTW DCA PHL ORD EWR JFK Fully Loaded C.P.E. - DFW 2014 vs Competitivee Set 2013 $18.73 $20.61 $22.64 $ $24.85 $ $27.66 DFW 2015 $26.38 $28.34 $29.00 $31.10 $31.24 $31.98 $32.26 $32.47 $ $ Cost on Airport Books Cost on Airlines' Books* Delay and Taxiing Cost** Source: 2013 CPEs from ACI Survey. Delay and Taxiing Cost from Ricondo 2014 study. Other estimates from DFW Finance. * Estimated Maintenance and Debt Service cost paid directly by Airlines. Additional direct airline CPE representss an estimate for airline-specific direct costs divided by airline enplanements. EWR, JFK, LAX, ORD amounts from 2013 Oliver Wyman study. ** Excludes gate delays, which are primarily due to airline actions. $ $ $0 $10 $20 $30 $40 $50 $60 $ 70 $80 Net Revenues from DFW Cost Center The chart compares net revenues from the DFW Cost Center. The FY 2015 net revenues budget is $103.2 million, a $6.7 million ( 6.9%) increase from the FY 2014 Outlook. The increase is primarily attributable to increased parking and concessions revenues. The growth over the Financial Plan is due to the higher concessions revenues and lower debt service compared to the Financial Plan. Almost $10 million of the parking increase results from a proposed increase in parking rates including a $1 increase for TollTag transactions between 30 minutes - 2 hours, a $1 increasee between 2 4 hours, and $2 increase for parking over 4 hours in the central terminal area. See the DFW Cost Center section for more detail. 18 DFW International Airport

20 FY 2015 Adopted Budget Executive Summary Passengers The FY 2015 Budget for passengers is million, a 1.1 million (1.5%) increase over the FY 2014 Outlook primarily due to increased international traffic through larger aircrafts and new service. It is anticipated that the merger of AA and US Airways will result in continued expansion at DFW, evidenced by new service to Shanghai and Hong Kong. The budget of 62.6 million is 0.8 million (1.3%) higher than the Financial Plan. Passenger statistics can be divided into several categories as shown in the following table. Originating passengers begin their trip at DFW. Destination passengers live elsewhere and fly to DFW for work or pleasure. People who travel through DFW to get to their final destination are connecting passengers. Enplanements represent all passengers boarding a plane at DFW FY14 Outlook Passengers Millions 61.8 FY15 Fin'l Plan 62.6 FY15 Budget Increase (Decrease) Passengers (Millions) Originating Destinatio on Connecting FY14 Outlook FY15 Fin'l Plan FY15 Budget FY15B vs FY14OL (0.1) (0.1) 1.1 FY15B vs. FY15FP (0.1) (0.1) 0.8 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 discussion in the DFW Cost Center section. 19 DFW International Airport

21 FY 2015 Adopted Budget Executive Summary Revenues Overview The following table summarizes 102 Fund revenues by cost center. FY14 Outlook FY15 Fin'l Plan FY15 Budget Increase (Decrease) FY15B vs. FY14OL FY15B vs. FY15FP Millions Revenues Airfield Cost Center $143.8 $151.1 $146.8 $3.0 ($4.3) Terminal Cost Center DFW Cost Center PFCs/CFCs/Other (4.6) Total Revenues Budgeted terminal and DFW Cost Center revenues for FY 2015 are higher than the FY 2014 Outlook primarily due to increased costs and debt service in these cost centers. In addition, terminal revenues are higher than what was assumed in the FY 2015 Financial Plan primarily because of higher turn fee revenues and increase costs. Airfield cost center revenues are lower than the FY 2015 Financial Plan due to increase in net revenues from DFW Cost Center reducing the landing fee revenue. Budgeted DFW revenues for FY 2015 are higher than the FY 2014 Outlook primarily due to increases in parking and concessions revenues. See more detailed information in the Airline Cost Center and DFW Cost Center sections of this document. Budgeted Passenger Facility Charge (PFC) and Customer Facility Charge (CFC) revenues are used to pay eligible debt service. PFC/CFC/Other revenues are higher than the FY 2014 Outlook due to revenues paid by the DFW Capital Account in FY 2015 for a portion of debt service associated with the DFW cost center. PFC/CFC/Other revenues are lower than the FY 2015 Financial Plan due to lower eligible debt service compared to the Plan. See more discussion on debt service and use of PFCs/CFCs in the Operating Expense Summary. Capital Programs and Debt Financing DFW has 2 capital accounts, the Joint Capital Account which normally 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 receives funds 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 the Terminal Renewal and Improvement Program (TRIP) in the Joint Capital Account. The TRIP is currently budgeted at $2.0 billion over the next 5 years (see chart). As of the June 2014, DFW has awarded $1.2 billion in contracts for TRIP. The TRIP is preapproved as part of the Use Agreement. Also included in the Joint Capital Account is $667 million of various other projects which DFW has received airline majority in interest (MII) approval. Additionally, DFW has a large number of capital projects currently underway and funded from the DFW Capital Account. DFW s capital program is discussed in more detail in the Capital section and in the Financial Plan. 20 DFW International Airport

22 FY 2015 Adopted Budget Executive Summary Millions FY10 FY11 FY12 FY13 FY14 FY15 FY16 FY17 FY18 FY19 Total Terminal A $519 Terminal B $450 Terminal E $557 Terminal C $519 Total $14 $120 $239 $364 $323 $348 $314 $184 $96 $43 $2,045 DFW management has entered into discussions with Signatory Airlines to rebaseline the TRIP budget and schedule for all four terminals. In addition, AA has requested as part of this process that DFW estimate the incremental schedule and cost impact of two potential scope additions: (1) building back the high Terminal C gates (gates C35-C39) currently planned to be demolished as part of TRIP; and (2) the construction of a new Terminal C parking garage to replace the existing garage. The rebaseline process is currently expected to be complete in mid-summer Then the Signatory Airlines will evaluate the total cost and decide if the potential additions should be included in the program, and/or if other scope can be reduced. At the conclusion of this process, DFW will request Signatory Airline approval of a new baseline TRIP budget and schedule for the four terminals. The current target date for completion of this process is July 31, No additional debt funding is anticipated for Terminals A, B and E in FY Future funding for the rebaseline effort and Terminal C will most likely occur in future periods. The FY 2015 Budget reflects an updated TRIP schedule resulting in relatively minor changes to in-service dates of terminal sections from the Financial Plan. As explained in other sections in the Budget Book, an updated TRIP schedule is expected to result in less debt service and concession revenue for FY 2015 than was estimated for FY 2015 in the Financial Plan. Natural Gas Revenues The Use Agreement requires natural gas royalties to be deposited into the Joint Capital Account. Estimated natural gas royalty revenues for FY 2015 are $6.8 million, which is approximately the same amount DFW is forecasted to receive in FY DFW International Airport

23 FY 2015 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. Federal Aviation Administration (FAA) regulations prohibit an airport from making a profit on aviation activities. Consequently, the landing fees and terminal rentals must be set to cover the anticipated net cost to provide the services only. 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. DFW anticipated a better than budget performance in FY Accordingly, the FY 2014 Outlook includes a current year rate reduction of $7.5 million and a $2.5 million true-up credit. Airfield Cost Center The following table compares Airfield Cost Center revenues and expenditures for the FY 2014 Outlook, the FY 2014 Financial Plan for FY 2015 (referred to as FY 15 Financial Plan in the tables), and the FY 2015 Budget. Note that revenues equal expenses in this cost center in all periods. Revenue variances to the FY 2014 Outlook are explained below. See the Operating Expenses section for expenditure variances. Increase (Decrease) FY14 FY15 FY15 FY15B vs. FY15B vs. Airfield CC (in Millions) Outlook Fin'l Plan Budget FY14OL FY15FP Revenues Landing Fees $109.3 $124.1 $107.6 ($1.7) ($16.4) Transfer from DFW CC Other Total Revenues (4.4) Expenditures Operating Expenses (2.3) (0.8) Net Debt Service (3.6) Total Expenditures (4.4) Net Airfield Revenue $0.0 $0.0 $0.0 $0.0 $0.0 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 2014 Outlook, the Financial Plan, and the FY 2015 Budget showing the landing fee revenues necessary to cover budgeted net airfield costs. 22 DFW International Airport

24 FY 2015 Adopted Budget Airline Cost Centers Increase (Decrease) FY14 FY15 FY15 FY15B vs. FY15B vs. Airfield CC (in Millions) Outlook Fin'l Plan Budget FY14OL FY15FP Expenditures Operating Expenses $77.6 $76.1 $75.3 ($2.3) ($0.8) Net Debt Service (3.6) Total Expenditures (4.4) Revenues Aircraft Parking (0.0) 0.0 Corporate Aviation Fuel Facility (0.0) (0.2) DPS Other (0.0) 0.0 (0.1) (0.0) (0.1) Transfer from DFW Cost Center Revenues before Landing Fees Landing Fees $109.3 $124.1 $107.6 ($1.7) ($16.4) Landing Fee Revenues The FY 2015 landing fees budget is $107.6 million, a decrease of $1.7 million (1.6%) from the FY 2014 Outlook primarily due to the decreases in operating expenses charged to the airfield and an increase in the transfer from the DFW Cost Center, partially offset by increases in debt service. Landing Fees are $16.4M (13.2%) less than the Financial Plan due to higher than anticipated DFWCC net revenues which subsidize this cost center. Other Airfield Revenues Other airfield revenues include threshold adjustments transferred from the DFW Cost Center, Corporate Aviation (CA) fees, the fuel farm fees paid by the airlines to cover debt service and overhead of the fuel farm, and DPS revenues. FY 2015 Transfer from DFW Cost Center increased compared to the FY 2014 Outlook due higher net revenues in the DFW Cost Center. Landing Fees and Landed Weights The charts compare landing fees and landed weights for the FY 2014 Outlook, the FY 2015 Financial Plan, and the FY 2015 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. Signatory landing fees are budgeted at $2.69 in FY 2015, a $0.02 (0.01%) decrease from the FY 2014 Outlook. This will generate sufficient revenue to pay for budgeted airfield costs. Landing fees are lower than the FY 2015 Financial Plan by $0.54 (16.7%) due to higher DFWCC transfers and higher landed weights. 23 DFW International Airport

25 FY 2015 Adopted Budget Airline Cost Centers $5.00 Landing Fee Rates (per 1,000 lbs.) $4.00 $3.00 $2.71 $3.23 $2.69 $2.00 $1.00 $0.00 FY14 Outlook FY15 Fin'l Plan FY15 Budget Landed Weights (in Billions) FY14 Outlook FY15 Fin'l Plan FY15 Budget 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. 98% of the U.S. population can be More than 50 million consumers can be reached by truck within 24 hours and reached via truck within 48 hours or less. Approximately 8.2% of all landing fees are budgeted to come from cargo aircraft for the FY 2015 Budget. 24 DFW International Airport

26 FY 2015 Adopted Budget Airline Cost Centers Terminal Cost Center The following table compares Terminal Cost Center revenues and expenditures for the FY 2014 Outlook, the Financial Plan, and the FY 2015 Budget. Note that revenues equal expenses in this cost center in all periods. Revenue variances between the FY 2015 Budget and the FY 2014 Outlook are explained below. See the Operating Expense section for expenditure variations. Increase (Decrease) FY14 FY15 FY15 FY15B vs. FY15B vs. Terminal CC (in Millions) Outlook Fin'l Plan Budget FY14OL FY15FP Revenues Operating Revenue Terminal Leases $116.4 $159.9 $166.8 $50.4 $6.8 FIS Fees Turn Fees & Office Rents Other Total Operating Revenue Transfers DFW Terminal Contribution (4.5) Joint Capital Transfer (4.0) 0.0 Total Transfers (3.7) (4.5) Total Revenues Expenditures Operating Expenses Net Debt Service Total Expenditures Net Terminal Revenue $0.0 $0.0 $0.0 $0.0 $0.0 The Terminal is a residual cost center with terminal leases as the balancer. The table on the following page compares Terminal Cost Center revenues and expenditures for the FY 2014 Outlook, the FY 2015 Financial Plan, and the FY 2015 Budget showing the terminal lease revenues necessary to cover budgeted net terminal costs. 25 DFW International Airport

27 FY 2015 Adopted Budget Airline Cost Centers Increase (Decrease) FY14 FY15 FY15 FY15B vs. FY15B vs. Terminal CC (in Millions) Outlook Fin'l Plan Budget FY14OL FY15FP Expenditures Operating Expenses $151.1 $159.3 $165.1 $14.0 $5.9 Net Debt Service Total Expenditures Revenues Operating Revenue FIS Fees Turn Fees & Office Rents Other Operating Revenues Transfers DFW Terminal Contribution (4.5) Joint Capital Transfer (4.0) 0.0 Total Transfers (3.7) (4.5) Revenues before Leases Terminal Leases Needed $116.4 $159.9 $166.8 $50.4 $6.8 Terminal Leases The FY 2015 terminal lease budget is $166.8 million, a $50.4 million (43.3%) increase from the FY 2014 Outlook due primarily to increases in net debt service charged to the terminals, operating costs, and a reduced Joint Capital Transfer. Terminal lease fees are charged to airlines based on the budgeted direct and allocated costs to operate the terminals. Total terminal operations and maintenance cost, including HVAC and other utilities for all 5 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 get 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 ($39.0 million in FY 2015). Average Terminal Rents before Credits The chart below compares average terminal rents before credits for the FY 2014 Outlook, the FY 2015 Financial Plan, and the FY 2015 Budget. The increase in the FY 2015 Budget compared to the FY 2014 Outlook is due to increases in net debt service charged to the terminals, increases in costs, and a reduction of $4 million in the transfer credit from the Joint Capital Account compared to FY 2014 as described in the Use Agreement. 26 DFW International Airport

28 FY 2015 Adopted Budget Airline Cost Centers $200 $180 $160 $140 $120 $100 $80 $60 $40 Average Terminal Rents before Credits per square foot $139 $179 $185 FY14 Outlook FY15 Fin'l Plan FY15 Budget 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 2015 is $21.2 million, a $0.3 million (1.3%) increase from the FY 2014 Outlook. The FY 2015 rate is based upon terminal costs reduced new debt service in the Terminal Cost Center. The rate for FIS per international passenger clearing customs at DFW is expected to be $6.78, compared to a rate of $6.95 in FY International FIS passengers are expected to be 3.13 million in FY 2015 compared to 2.84 million in FY Turn Fees and Office Rents The turn fees and office rents budget for FY 2015 is $19.6 million, a $6.3 million (47.5%) increase from the FY 2014 Outlook. The significant increase is the result of larger aircraft (e.g., A380 aircraft) and increased air service being provided by international carriers. 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 fees rates must increase at the same percentage as terminal rates. Other Terminal Revenues The other terminal revenues budget for FY 2015 is $13.9 million, a $0.3 million (1.9%) increase from the FY 2014 Outlook. 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 increase in the FY 2015 Budget compared to the FY 2014 Outlook is due to higher non-airline terminal related revenues. 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 was $28 million in FY 2011 and will be reduced by $4 million each year until it is phased-out completely in FY Accordingly, the FY 2015 amount is $12 million. 27 DFW International Airport

29 FY 2015 Adopted Budget Airline Cost Centers 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 and by reducing costs in the terminals. The DFW terminal contribution is $6.4 million, a $0.3 million (6.1%) increase from the FY 2014 Outlook. Summary of Airline Costs The following table compares the summary of airline costs for the FY 2014 Outlook, the FY 2015 Financial Plan, and the FY 2015 Budget on a Use Agreement and GAAP (Generally Accepted Accounting Principles) basis. The difference between the Use Agreement basis and the GAAP basis is primarily related to prior year true-ups. These true-ups are reflected as a reduction/addition in airline cost for the Use Agreement in the year that the airlines receive/pay for the true-up; however for GAAP, these true-ups are reflected in the year earned. 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. These payments are not part of the 102 Fund however. Increase (Decrease) Airline Revenue/Costs (in Millions) FY14 Outlook FY15 Fin'l Plan FY15 Budget FY15B vs. FY14OL FY15B vs. FY15FP Landing Fees $109.3 $124.1 $107.6 ($1.7) ($16.4) Terminal Leases FIS Fees Turn Fees & Terminal Office Rents Aircraft Parking (0.0) (1.6) Sub-total Airline Revenue/Cost (7.1) Less: ASIP (12.1) (13.9) (16.3) (4.2) (2.4) Total Airline Cost/Revenue post ASIP (9.6) 28 DFW International Airport

30 FY 2015 Adopted Budget Airline Cost Centers Cost Per Enplanement (CPE) Calculation The following table shows the passenger airline cost per enplanement calculation and compares the CPE for the FY 2014 Outlook, the FY 2015 Financial Plan, and the FY 2015 Budget. This KPI only includes passenger-related airline revenues (i.e., costs) and excludes cargo and general aviation revenues. Increase (Decrease) Cost Per Enplanement (in Millions) FY14 Outlook FY15 Fin'l Plan FY15 Budget FY15B vs. FY14OL FY15B vs. FY15FP Passenger Airline Enplanements (1) Passenger Airline Cost per Enplanement Airline Cost/Revenue $260.1 $322.5 $315.4 $55.4 ($7.1) Less: Cargo and GA Landing Fees (9.3) (10.0) (9.1) Sub-total PAX Airline Revenue (6.2) Less ASIP - Passenger Airlines (12.1) (13.9) (15.8) (3.6) (1.9) Total PAX Airline Revenue post ASIP (8.1) Cost per Enplanement (CPE) (2) $7.76 $9.66 $9.29 $1.90 ($0.37) 1 General Aviation enplanements are excluded from CPE calculation 2 Actual rates, not in millions 29 DFW International Airport

31 FY 2015 Adopted Budget DFW Cost Center DFW Cost Center Revenues and Expenses The table below compares the FY 2014 Outlook, the FY 2015 estimates contained in the FY 2014 Financial Plan (called the FY 2015 Financial Plan in the tables), and the FY 2015 Budget for the DFW Cost Center. Net revenues from the DFW Cost Center are transferred to the DFW Capital Account at the end of the fiscal year. For FY 2015, 75% of net revenues in excess of $64.9 million are transferred to the Airfield Cost Center as a threshold adjustment. Revenue variances are discussed in the rest of this section. Expenditure variances are covered in the Operating Expenses section. Increase (Decrease) FY14 FY15 FY15 FY15B vs. FY15B vs. DFW Cost Center (in Millions) Outlook Fin'l Plan Budget FY14OL FY15FP Revenues Revenue Management Revenues Parking $121.1 $136.1 $136.0 $14.9 ($0.1) Concessions (1.9) Rental Car (RAC) Commercial Development Total Revenue Mgmt Revs (0.6) Employee Transportation Taxis and Limos Utilities & Miscellaneous (0.1) (0.5) DPS Allocation Interest Income (0.3) Total Revenues Expenditures Operating Expenses (1.0) Net Debt Service (15.2) Total Expenditures and Debt Service (16.2) Gross Margin - DFW Cost Center Less: Terminal Contributions (4.5) Less: Skylink DFW Cost Center Net Revenues Less: Transfer to Airfield Cost Center Transfer to the DFW Capital Account $72.3 $71.9 $74.5 $2.2 $ DFW International Airport

32 FY 2015 Adopted Budget DFW Cost Center Revenue Management Revenues DFW s Revenue Management Division manages 4 business units that strive to maximize net revenues (parking, concessions, rental car, and commercial development). The chart to the right compares Revenue Management Revenue per Enplanement. The FY 2015 Budget is $0.52 higher than the FY 2014 Outlook because of parking rate increases and growth in Concession revenues. The reduction from the Financial Plan is due primarily to slower than expected opening of new concession outlets due to an updated TRIP schedule. More information is included in the business unit write-ups that follow. $9.40 $9.00 $8.60 $8.20 $7.80 $7.40 $7.00 Revenue Mgmt. Revenue per Enplanement $8.23 FY13 Actual $8.37 FY14 Outlook $9.01 FY15 Fin'l Plan $8.89 FY15 Budget Parking Business Unit Background The Parking Business Unit (PBU) is DFW s most significant source of non-airline revenue. Customers are charged parking fees based on the length of stay and the parking facility used. The table below highlights DFW s parking products, spaces and parking rates. DFW Parking Space and Rate Summary No. of Parking Spaces Spaces Closed for Renovation Spaces Available Post TRIP Renovation Spaces (1) FY 2015 Daily Parking Rate (2) Parking Products Terminal Lots $20 toll tag; $22 cash or credit card A (3 structures) 4,914-4,914 7,700 (reflects a $2 increase) B (3 structures) 3,524 (860) 2,664 3,524 C (4 structures) 5,781-5,781 5,781 D (1 structure) 7,796-7,796 7,796 E (3 structures) 4,050-4,050 5,685 Infield (uncovered) 2,449 (618) 1,831 1,605 Total Terminals 28,514 (1,478) 27,036 32,091 Express Lots 8,466-8,466 8,466 $11 uncovered; $13 covered Remote Lots 4,871-4,871 4,871 $9 uncovered Intra-day n/a n/a n/a n/a $6 to $9 (up to 6 hours) Valet n/a n/a n/a n/a $27 (uses existing parking facilities) Meeter-Greeter n/a n/a n/a n/a $3 (30 minutes-2 hours) Pass-throughs/Drop-off n/a n/a n/a n/a $1 toll tag; $2 cash (0-30 minutes) Total Public Spaces 41,851 (1,478) 40,373 45,428 Employee Parking 8,784-8,784 8,784 (1) Included in FY 2014 Financial Plan (2) Includes sales tax. 31 DFW International Airport

33 FY 2015 Adopted Budget DFW Cost Center The Airport is unique from an airport parking perspective because the Airport has parking plazas on the north and south ends of International Parkway (i.e., the entrances to the Airport), so that all customers and visitors must go through the plazas to access the Airport. In addition, many patrons drive through the Airport while traveling from north to south or south to north. These patrons pay a $1 pass-through/drop-off fee if they have a toll tag and $2 if paying with cash or credit card for the first 30 minutes. Intra-Day fees graduate to $9 with daily rates beginning at 6 hours. Any stay over 6 hours is considered one full day. DFW collects a 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. The PBU is also responsible for busing customers from the parking lots to the terminals (Express and Remote products) and between the terminals (Terminal Link). The chart below shows the Proposed Vehicle Parking Fees for FY Duration Proposed Vehicle Parking Fees (2) Terminal (1) Covered Uncovered Remote Express Express 0 min - 30 min with Tolltag $1 $2 $2 $1 0 min - 30 min $2 $2 $2 $1 30 min - 2 hours $3 (3) $2 $2 $1 2-4 hours $6 (3) $3 $3 $2 4-6 hours $9 $4 $4 $ hours with Toll Tag $20 $13 $11 $ hours $22 $13 $11 $9 (1) Including DFW Business Center (2) All Parking fees, excluding valet parking, include sales tax. The sales tax is based on applicable tax jurisdiction. (3) Reflects a $1 increase FY 2015 Budget The FY 2015 parking revenue budget is $136.0 million, a $14.9 million (12.3%) increase from the FY 2014 Outlook. This reflects a $1 increase for TollTag transactions between 30 minutes - 2 hours, $1 increase between 2 4 hours, and $2 increase for parking over 4 hours in the central terminal area. The proposed rate increases are expected to generate incremental revenues of $9.8 million. The remaining revenues of $5.1 million are based on market growth assumption of 4.2%. Management believes this to be an aggressive budget with up to $2 million at risk. The FY 2015 Budget is $0.1 million (0.1%) lower than the Financial Plan projection. $10.20 $9.80 $9.40 $9.00 $8.60 $8.20 $7.80 $7.40 $7.00 Parking Revenue per Originating Passenger $8.71 $8.72 FY13 Actual FY14 Outlook $9.80 $9.82 FY15 Fin'l Plan FY15 Budget 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 increase in parking revenue per originating passenger for the FY 2015 Budget versus the FY 2014 Outlook is due to rate increases and management s expectation of growth in the market for DFW s improved parking products. 32 DFW International Airport

34 FY 2015 Adopted Budget DFW Cost Center Concessions Business Unit Background Terminal concessions primarily consist of food and beverage, retail and duty free, advertising, and various customer services/amenities. Concessions agreements generally are for a term of 5 to 10 years and include a Minimum Annual Guarantee (MAG) and percentage rent. As of May 31, 2014, the Airport had 207 total locations and 137 packages. Approximately 87% of packages 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 FY 2014, DFW awarded the first phase of Terminal D locations, resulting in the award of 13 Terminal D locations and 3 Terminal B locations to support the Terminal B Stinger and B-D Connector facilities. The next phase, with an anticipated release of Fall 2014, will include locations in Terminal B, D, and E. FY 2015 Budget The FY 2015 concessions budget is $72.6 million, a $4.8 million (7.0%) increase from the FY 2014 Outlook due to the net impact of increasing enplanements and the opening of new concessions. During FY 2015, although three sections will open after TRIP, there also will be one section of Terminals A, B, and E each closed for TRIP. DFW concession openings and closings due to TRIP and new concepts in Terminal D will result in a net of five incremental new locations opening. Concession revenues have an exposure of $3.5 million due to an assumption that advertising contracts will be renewed in FY 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 $0.11 increase in concessions revenue per enplanement in FY 2015 as compared to the FY 2014 Outlook is primarily related to the opening of new concessions in Terminal A, B and E that will provide new concession offerings to passengers. Revenue per enplanement is lower than the Financial Plan because of slower than anticipated openings of new Concession concepts resulting from a revised TRIP schedule. $2.60 $2.40 $2.20 $2.00 $1.80 $1.60 $1.40 Concessions Revenue per Enplanement $2.12 FY13 Actual $2.21 FY14 Outlook $2.41 FY15 Fin'l Plan $2.32 FY15 Budget 33 DFW International Airport

35 FY 2015 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 7 rental car companies with 11 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 Hertz (30%), Avis/Budget (25%), and Enterprise/Vanguard (28%). There are no major off airport rental car operations competing with the 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. DFW 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 2015 Budget The FY 2015 rental car revenue budget is $31.9 million, a $0.2 million (0.7%) increase from the FY 2014 Outlook due to increases in average daily rate projected for FY The FY 2015 Budget is $0.3 million better than the projection in the FY2015 Financial Plan due to the impact of lower transaction days assumed in the Plan. All other factors are assumed to stay constant with the FY 2014 Outlook because management has no control over these factors. 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 2015 Budget for RAC revenues per destination passenger is projected to be 1.2% higher than the FY 2014 Outlook primarily due to an estimated increase in average daily rate. $2.80 $2.60 $2.40 $2.20 $2.00 $1.80 $1.60 $1.40 Rental Car Revenue per Destination Passenger $2.56 FY13 Actual $2.48 $2.48 $2.51 FY14 Outlook FY15 Fin'l Plan FY15 Budget 34 DFW International Airport

36 FY 2015 Adopted Budget DFW Cost Center Commercial Development Business Unit Background The Airport has a total land mass of 17,207 acres. As of June 30, 2014, 2,029 acres have been commercially developed. Management estimates that approximately 4,090 acres of additional land is available for future development. A commercial development land use plan has been completed and approved by the Board. Management has also had a consultant prepare a detailed feasibility study of the full cost and benefits of the different development areas identified in the land use plan. The Airport focuses primarily on developing land that has airport synergy such as logistics and warehousing. Any land lease over 40 years requires the approvals of the Cities of Dallas and Fort Worth. 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. DFW is currently in the construction process for the new Southgate Plaza project that will include the new DFW Airport Headquarters, restaurants, a USPS Customer Service Facility, a Hyatt Place Hotel, as well as pad-ready sites for future Office and Hospitality developments. The Common Infrastructure to support current and future leasing phases at Founders Plaza center is underway and slated to be complete in FY Other future development opportunities include land around the new DART station on the southeast side of the Airport and several industrial, office, and mixed use commercial sites on the north and south sides of the Airport. The key drivers for commercial development revenues are acres developed and the average ground rental rate. Approximately 40% of the ground lease revenue is based on negotiated rates and 60% on the airport services ground rental rate. The airport services ground rental rate per acre increases with inflation and will be $27,059 in FY FY 2015 Budget The FY 2015 commercial development revenue budget is $37.6 million, a $0.5 million (1.3%) increase from the FY 2014 Outlook. FY 2015 reflects an increase of $1.9 million in new ground lease rents and a decrease of $1.7 million of one-time revenue received from DART related proceeds and fees. 35 DFW International Airport

37 FY 2015 Adopted Budget DFW Cost Center Other DFW Revenues and Expenses The fees charged in this category are established to recover costs (except interest income). Certain categories like taxi fees are regulated such that DFW is supposed to charge break even prices. Due to the new cost allocation methodologies contained in the Use Agreement, a few of these cost centers are not fully recovering their costs. Where there are significant differences, management has elected to manage to a break-even over a number of years to keep price increases reasonable. There are no year-end reconciliations or true-ups in these cost centers. Employee Transportation DFW charges fees to employees for providing transportation from the parking lots to the terminals. Many times the companies or airlines pay these fees for their employees. The FY 2015 Budget is $14.4 million, a $0.8 million (5.6%) increase from the FY 2014 Outlook due to rate increases to cover incremental employee bussing costs and shifts in cost center allocations. Taxi, Limo and Shuttle Fees These fees are paid by taxis, limos, shuttles and other sharedride transportation companies that require airport access to drop-off and pick-up passengers. The FY 2015 Budget is $9.1 million, a $0.4 million (4.9%) increase from the FY 2014 Outlook due to anticipated growth in ground transportations especially limousine service. 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 2015 Budget is $6.7 million, a $0.1 million (1.3%) decrease from the FY 2014 Outlook due to decrease in permit fees. DPS Revenues The department of public Safety (DPS) receives reimbursements from the TSA for certain services, and for badging and fire training services. The FY 2015 Budget is $6.4 million, a $0.3 million (4.9%) increase from the FY 2014 Outlook primarily due to increased fire training center revenues. DPS revenues are allocated to the cost centers on the same basis as DPS expenses. Interest Income Interest income includes interest earned on investments from the Operating Revenue and Expense Fund, the 3 month Operating Reserve, and Debt Service Reserve Fund, and the Rolling Coverage Account. The FY 2015 interest income budget is $2.6 million, a $0.9 million (56.2%) increase from the FY 2014 Outlook due higher interest rates. The FY 2015 Budget is a $0.3 million (10.2%) decrease from FY 2015 in the FY 2014 Financial Plan due to slightly lower interest rates (0.25% in the Financial Plan versus 0.20% in the Budget). Skylink Expenses related to Skylink are covered in the DFW Cost Center so that bonds related to Skylink can remain non-amt. The FY 2015 Budget is $22.7 million, a $0.2 million (0.9%) increase from the FY 2014 Outlook due to CPI related contract increases. Terminal Contributions Per the terms of the Use Agreement, DFW pays terminal cost based on common use space and its share of vacant leasable space. The FY 2015 Budget is $6.4 million, a $0.4 million (6.1%) increase from the FY 2014 Outlook. 36 DFW International Airport

38 FY 2015 Adopted Budget Operating Expenses FY 2015 Expense Budget by Major Cost Driver The FY 2015 Budget is $724.7 million, an increase of $78.3 million (12.1%) from the FY 2014 Outlook and an increase from the FY 2014 Budget of $68.0 million (10.4%). However, the Budget is under the Financial Plan projection for FY 2015 by $11.6 million (1.6%). A walkforward between the FY 2014 Outlook and the FY 2015 Budget follows: Increase (Decrease) FY14 FY14 FY15 FY15 FY15B FY15B Annual Budget (Millions) Budget Outlook Fin'l Plan Budget vs FY14OL vs FY15FP Operating Expenses $374.2 $372.7 $387.0 $391.4 $18.7 $4.4 Gross Debt Service (16.0) Total 102 Fund Expenditures $656.7 $646.4 $736.3 $724.7 $78.3 ($11.6) Contingency O/S Rate Base 10.0 Total Budget w/ Contingency $734.7 Operating Expense Budget Walkforward Operating Expenses (in millions) Total DFW Airline FY 2014 Outlook $372.7 $144.0 $228.7 Merit & salary annualizaton Fixed contract increases Airline/customer service enhancements New facilities/trip Accounting policy changes New asset management/ops projects Miscellaneous increases Operating expense increases Contingency & reserves Restore contingency Adjust operating reserve Net increases before cost efficiencies Cost reductions and efficiencies (6.5) (1.7) (4.8) Net increase FY 2015 Expense Budget $391.4 $151.0 $ DFW International Airport

39 FY 2015 Adopted Budget Operating Expenses Detailed Operating Expense Budget Walkforward Budget Category (in millions) Total DFW Airline FY 2014 Outlook $372.7 $144.0 $228.7 A Merit & salary annualization Fixed contract increases B Utilities & fuels C Fixed contract increases D Health care E Property insurance premiums 0.3 (0.0) 0.3 Total fixed contract increases Airline/customer enhancements F Airline service improvements G Guest Assistance services H Terrazzo & escalator cleaning I Hardstanding J Parking Technology Total airline/customer enhancements K New facilities/trip Increases L Accounting policy change increases M New asset management/ops projects Miscellaneous increases N Other contracts O Disaster decovery & continuity consulting P Other, net (0.1) Total Miscellaneous Increases Operating expense increases Contingency & reserves Q Restore contingency R Adjust operating reserve Total contingency & reserves Net increases before cost reductions Cost reductions and efficencies S December winter storm (2.2) (0.1) (2.1) T One time projects in 2014 (1.2) (0.3) (0.9) U ETAM operational efficiencies (1.0) (0.3) (0.7) V Pension & OPEB reductions (1.0) (0.5) (0.5) W ITS efficiencies (0.6) (0.3) (0.4) X Supplies & equipment reductions (0.5) (0.2) (0.3) Total cost reductions (6.5) (1.7) (4.8) Net increase FY 2015 Budget $391.4 $151.0 $240.4 Note: The reference letters in the previous table are cross-referenced to the variance explanations in the Expense Comparison by Summary Account discussed further in this section. 38 DFW International Airport

40 FY 2015 Adopted Budget Operating Expenses A. Merit & Salary Annualization $4.8 million This amount represents the cost impact of a 3% merit pool for nine months in FY 2015 (beginning the first pay period in January); the annualization of last year s merit increase (for the first quarter of the fiscal year); annualization of last year s vacant positions that had funding deferred for three months; and changes in the vacancy factor from an average of 5.0% in FY 2014 to an average 5.5% in FY The change in vacancy factor is based on experience in FY B. Utilities & Fuels $2.2 million The increase in Utilities and Fuels is driven by increased commodities costs, increased consumption for new facilities, and new taxes. Electric rates are locked in through March 2015 and are expected to increase approximately 6.9% for the last six months of FY Gas rates are locked in through September 2014 and are expected to increase approximately 7.5%. New facilities impacting FY 2015 include the B-D Connector, the B North Stinger, the DART Rail Station, and the new consolidated headquarters building, offset by reductions in the North and South Towers and the old administrative building. C. Fixed Contract Increases $1.2 million Busing contracts for Employee, terminal link, and express are projected to increase $0.7 million due to inflation and increased bus utilization with the move of employees from Terminal D to employee parking lots; and Skylink maintenance & inspections will increase $0.5 million due to inflation and the every-other-year cycle of inspections. D. Health Care $0.4 million Health care costs, which include medical benefits, long term disability, short term disability and life insurance are increasing $0.4 million due to medical inflation. The low rate increase of 3.3% for FY 2015 is attributable to the benefits of DFW s wellness program, plan design changes, and the linkage of medical premiums to wellness participation. E. Property Insurance Premiums $0.3 million Property insurance costs will increase in FY 2015 due to past claims experience and increased value of buildings, primarily due to TRIP improvements in the terminals and new parking garages. The valuation of DFW s assets has increased $598 million for FY F. Airline Service Improvements $1.4 million This increase represents additional funds for deicing ($0.5 million), new foul weather equipment maintenance ($0.1 million); incremental baggage handling maintenance ($0.3 million), and other airfield improvements ($0.5 million). Last year, DFW cut its deicing budget below historic levels. The FY 2015 Budget restores the budget. DFW added new equipment over the past few years to handle bad weather days. The FY 2015 budget assumes a full year of maintenance cost. Additional funding has also been added to cover incremental baggage handling maintenance for Terminal E to maintain proper performance levels until the system can be replaced during TRIP. 39 DFW International Airport

41 FY 2015 Adopted Budget Operating Expenses G. Guest Assistance Services $1.1 million The guest assistant services budget has been increased $1.1 million primarily to provide more wheelchair assistance in for international passengers in Terminal D (non-american Airlines). This is necessary to serve the increased of number of international passengers and an aging population that requires more assistance. H. Terrazzo Floor Restoration & Escalator Cleaning $1.0 million The incremental funding will allow DFW to enhance the customer experience in Terminal D by restoring the terrazzo floor to its original condition and thoroughly cleaning the grooves in the escalator steps which have become unsightly and filthy. Neither of these activities has been done in the 8 years since Terminal D has opened. This work will be completed in the evening and will become an ongoing maintenance activity in the future. I. Hardstand Operations $0.8 million Due to a lack of international gates in Terminal D during peak arrival times, DFW will have to hardstand additional operations in Costs include maintenance on equipment such as Cobuses, mobile passenger jet bridges, portable water carts, pre-conditioned air units and ground power units, contract personnel to drive the buses, and fuel for the buses and equipment. J. Parking Technology Enhancements $0.4 million DFW has enhanced the customer experience in the parking garages by installing parking guidance systems in the new sections of the Terminal A garage and in the Terminal D garage (this summer) that allows guests to easily find parking spaces. The incremental amount of $0.4 million will fund the increased maintenance costs for this system. K. TRIP/New Facility Increases $2.9 million DFW has installed as enabling projects new communication rooms and IT systems (e.g., Voice Evacuation, CCTV) in all the older terminals as part of TRIP, including Terminal C; and the Terminal B-North Stinger was opened in FY The incremental cost for ITS maintenance and support of these systems, and the custodial services for the stinger are projected at $1.1 million. In addition, internet bandwidth is being expanded in the new headquarters building to provide faster download speed. This is projected to cost an additional $0.4 million. L. Accounting Policy Changes $2.7 million In prior years, certain expenses were charged to capital accounts rather than the 102 Operating Fund. For GAAP purposed, these costs were expensed. The net result of this policy was to increase the need to issue debt. As part of the FY 2014 Financial Plan process, it was decided that these costs should be funded from the 102 Fund in the future reducing the need to issue more debt. Those expenses included salary and benefits of employees working on TRIP ($ DFW International Airport

42 FY 2015 Adopted Budget Operating Expenses million), ADE overhead ($1.1 million) and certain natural gas costs ($0.4 million) and certain planning studies. M. New Asset Management and Operations Projects $2.1 million There are numerous one-time Asset Management and Operations Department in the FY 2015 budget including $0.6 million of terminal projects; $0.4 million for Energy Plaza assessments, $0.3 million for Fire Station #3 waterproofing, $0.1 million for fence repair; $0.1 million for Skylink employee parking lot pavement; $0.1 million for Airport Operations Center reporting and communication software; $0.1 million for Airfield lighting study; and $0.1 million for radios. N. Other Contract Increases $0.7 million This category includes numerous small contract increases including rodent/pest control, international waste, art maintenance, noise compatibility, environmental contracts, Public Affairs contracts, Legal contracts, and employee medical clinic contract, resulting in an increase of $0.7 million. O. Disaster Recovery & Continuity Consulting $0.2 million In response to an audit recommendation, the budget in FY 2015 reflects an increase of $0.2 million for a new disaster recovery and business continuity consultant. P. Other $0.7 million This category includes the net increases and decreases from many small projects. Increases for overtime, new positions, employee incentive program, and other are offset by decreases in travel, training, and the Customs and Border Protection overtime reimbursement program. Q. Restore CEO Contingency $1.5 million DFW budgets have historically contained a CEO contingency ranging from $2.5 million to $1.75 million. The CEO contingency is included in the rate base and may be used by the CEO without Board approval. It is recommended that the CEO contingency be $2 million in FY This increase represents the portion of the CEO contingency that has been used in FY R. Adjust Operating Reserve $0.7 million DFW is required to have a 90-day cash reserve for operating expenses. The budget in FY 2015 reflects a $0.7 million increase in the Operating Reserve because of budgeted expense changes. In FY 2015, the actual reserve needs to be increased by $4.7 million due to a net cost increase of $18.7 million. In a budget to budget comparison, the resulting Operating Reserve increase is $0.7 million. S. December Winter Storm ($2.2) million The DFW Metroplex experienced a severe winter storm in December The impact was increased expenses for deicing, foul weather equipment, supplies and overtime. These one-time expenses have not been budgeted in FY 2015 and are reflected as a cost reduction. 41 DFW International Airport

43 FY 2015 Adopted Budget Operating Expenses T. One Time Projects ($1.2) million The FY 2014 Budget funded various projects and studies that will not recur in FY 2015, such as certain airfield projects, special events, and other one-time projects. Management tracks onetime projects during the year and does not budget for them in the following fiscal year, requiring new work to be justified. Accordingly, this amount is reflected as a budget reduction. U. Energy, Transportation, & Asset Mgmt. Operational Efficiencies ($1.0) million Energy, Transportation, & Asset Management has committed to identify and implement operational efficiencies in FY 2015 resulting in cost efficiencies of $1.0 million. In order to achieve these efficiencies, areas being evaluated are facilities maintenance, parts and materials management, landscaping, and other maintenance projects. V. Pension/OPEB ($1.0) million The funding requirements for the defined benefit retirement plan and other post-employment benefits (OPEB) are actuarially determined for DFW each year. The FY 2015 contribution for the defined benefit plans has decreased $1.0 million due primarily to a better investment returns over the past five years. W. ITS Efficiencies ($0.6) million Information Technology Services consulting contracts were reduced to fund six new permanent positions. These new positions will increase efficiencies and better utilize ITS resources. X. Supplies and Equipment ($0.5) million This category includes savings related to a variety of supplies and equipment resulting in a FY 2015 decrease of $0.5 million. Savings are related to repairable supplies ($0.2M), general supplies ($0.1M), equipment ($0.1M), and various other savings ($0.1M). 42 DFW International Airport

44 FY 2015 Adopted Budget Operating Expenses Operating Budget by Category The following tables compare the FY 2014 Outlook with the FY 2015 Budget by expense category. Variance explanations by major cost driver follow in the walkforward. Increase (Decrease) FY14 FY15 FY15 FY15B vs. FY15B vs. Operating Budget (in Millions) Outlook Fin'l Plan Budget FY14OL FY15 F Plan Salaries & Wages $118.2 $123.1 $125.6 $7.3 $2.4 Benefits (1.8) Contract Services Utilities Equipment & Supplies Insurance Fuels General, Admin & Other (0.4) (0.5) Contingency (0.5) Subtotal Operating Reserve Total Budget $372.7 $387.1 $391.4 $18.7 $4.4 Budget Walkforward (millions) Sals Bens Conts Util Supp Ins Fuels G & A Cont Op Res Total FY 2014 Outlook Expense Increases A Merit & Salary Annualization B Utilities & Fuels C Fixed Contract Increases D Health Care E Property Insurance Premiums F Airline Service Improvements G Guest Assistance Services H Terrazzo & Escalator Cleaning I Hardstand J Parking Technology K New Facilities/TRIP Increases L Accounting Policy Change Increases M New Asset Management/Ops projects N Other Contracts O Disaster Recovery & Continuity Consulting P Other 1.8 (0.7) (0.4) 0.7 Q Restore Contingency R Adjust Operating Reserve Net Increases before Cost Reductions (0.4) Cost Reductions S December Winter Storm (0.1) (1.7) (0.4) (2.2) T One Time Projects in FY 2014 (1.2) (1.2) U ETAM Operational Efficiencies (0.8) (0.2) (1.0) V Pension & OPEB (1.0) (1.0) W ITS efficiencies (0.6) (0.6) X Supplies & Equipment (0.5) (0.5) Total Cost Reductions (0.1) (1.0) (4.4) 0.0 (1.1) (6.5) Net Increase (0.4) FY 2015 proposed budget DFW International Airport

45 FY 2015 Adopted Budget Operating Expenses Salaries and Wages The FY 2015 salaries and wages budget is $125.6 million, a $7.3 million (6.2%) increase from the FY 2014 Outlook of $118.2 million due to a 3.0% merit pool ($3.0 million), new positions ($1.1 million), accounting policy changes ($1.0 million), annualization of FY 2014 merit increase ($0.9 million), and net vacancy factor and other changes ($1.3 million). Benefits The FY 2015 benefits budget is $62.1 million, a $0.2 million (0.3%) increase from the FY 2014 Outlook of $61.9 million. This is the net result of decreased pension/opeb contributions ($1.0 million), health care increases ($0.4 million); accounting policy change ($0.6 million), and social security and other net increases ($0.2 million). Contract Services The FY 2015 contract services budget is $135.9 million, a $5.2 million (4.0%) increase from the FY 2014 Outlook of $130.7 million due to cost reductions and efficiency savings related to the December winter storm ($1.7 million), ETAM operational efficiencies ($0.8 million), ITS efficiencies ($0.6 million) and reductions in one-time projects ($1.2 million) such as assessments, airfield paint removal, etc. These savings are offset by increases in contracts ($1.2 million) such as terminal link, employee and express busing, and Skylink operations and inspections, customer enhancement increases for guest assistant services ($1.1 million), terrazzo floor rejuvenation and escalator step cleaning ($1.0 million), hardstand operations ($0.8 million), and parking customer enhancements ($0.4 million), new facilities and TRIP related custodial and maintenance increases ($1.9 million), ADE overhead increases due to accounting policy change ($1.1 million), increases for new asset management and operations projects ($1.7 million), and other contract increases ($0.3 million). Equipment and Supplies The FY 2015 equipment and supplies budget is $17.3 million, a $1.7 million (10.7%) increase from the FY 2014 Outlook of $15.6 million primarily due to cost reductions and efficiency savings related to the December winter storm ($0.4 million), general and repairable supplies, and equipment ($0.5 million), and ETAM operational efficiencies ($0.2 million). These savings are offset by increases in baggage handling maintenance, uniforms, injection pavement foam, asphalt hot mix, and deicing supplies ($1.4 million); equipment and supplies for new facilities and TRIP ($1.0 million), and various new Asset Management and Operations projects ($.4 million). Utilities The FY 2015 utilities budget is $26.8 million, a $1.8 million (7.1%) increase from the FY 2014 Outlook of $25.0 million due to increases in electricity ($0.5 million); water and sewer ($0.6 million); and communications costs ($0.7 million). Fuels The FY 2015 fuels budget is $5.0 million, a $0.5 million (10.1%) increase from the FY 2014 Outlook of $4.5 million primarily due to CNG/propane rate increases. 44 DFW International Airport

46 FY 2015 Adopted Budget Operating Expenses Insurance The FY 2015 insurance budget is $6.0 million, a $0.3 million (5.0%) increase from the FY 2014 Outlook of $5.8 million primarily due to increased premiums based on claims experience and the value of DFW s assets, due to TRIP improvements and the new parking garages. General and Administrative (G&A) The FY 2015 general and administrative budget is $6.7 million, a $0.4 million (5.4%) decrease from the FY 2014 Outlook of $7.1 million due to lower travel expenses and decreases in Board sponsorships and memberships. Contingency The FY 2015 Budget includes $2.0 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. Operating Reserve DFW is required to have a 90-day cash reserve for operating expenses. This is the amount necessary to fund the reserve. 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 an incentive to budget costs more accurately. This 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 $10.0 million for FY 2015, consistent with the FY 2014 amount. 45 DFW International Airport

47 FY 2015 Adopted Budget Operating Expenses Net Debt Service Budget The FY 2015 net debt service budget is $198.0 million, a $53.4 million (36.9%) increase from the FY 2014 Outlook and an $11.3 million (5.4%) decrease from the FY 2015 Financial Plan as shown in the table below. FY14 Outlook FY15 Fin'l Plan FY15 Budget Increase (Decrease) FY15B vs. FY15B vs. FY14OL FY15FP Debt Service (in Millions) Debt Service and Coverage Pre-TRIP Debt Service $219.3 $234.4 $229.8 $10.5 ($4.7) TRIP Debt Service (6.6) PFIC Related Debt Service (0.1) 0.0 DFWCA Debt Service (4.5) Less Interest Income (0.2) 0.0 (0.2) 0.0 (0.2) Gross Debt Service and Coverage $273.7 $349.3 $333.3 $59.6 ($15.9) Offsets to Debt Service PFCs for Pre-TRIP Debt Service (0.1) PFIC Transfers (0.1) (0.0) DFWCA Transfers (4.5) Total Offsets (4.6) Net Debt Service Paid by Rate Base $144.7 $209.4 $198.0 $53.4 ($11.3) 1 Shown net of Capitalized Interest 2 RAC and Grand Hyatt Hotel 3 Consolidated Headquarters The Net Debt Service increase of $53.4 million over the FY 2014 Outlook is primarily due to the increase in TRIP debt service. Pre-TRIP debt service is scheduled to gradually increase through FY 2017 as agreed upon in the Use Agreement. It is lower than the Financial Plan however due to additional debt restructuring to offset the increase in customer service enhancements. The increase in TRIP debt service is a result of completion of terminal projects in FY 2014 and FY TRIP debt service is not PFC eligible. PFIC Debt Service relates to debt associated with the RAC and Grand Hyatt Hotel. 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. This is funded with transfers from the DFW Capital Account so it does not impact the rate base. 46 DFW International Airport

48 FY 2015 Adopted Budget Operating Expenses Positions The following table summarizes the total number of operating and capital positions assumed in the FY 2015 Budget. Operating positions are paid out of the 102 Fund. Salaries 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. Positions FY14 Budget FY14 Changes FY15 Budget Operating 1, ,816 Capital 112 (6) 106 Total 1, ,922 The change in the number of positions consists of the addition of thirteen positions as detailed in the table below and the movement of six positions from Capital to Operating as a result of the change in accounting policy. The additional positions in Finance and ITS are offset by reductions in temporary staffing and ITS consulting. Department Number Position Executive Office 1 EVP of Airport Development and Planning Finance 2 Finance Parking Revenue Specialists ITS 1 Senior Storage Administrator ITS 1 Sr. IT Infrastructure Specialist ITS 1 APPIAN Analyst ITS 1 ETL Analyst ITS 1 Systems Integration Developer (AODB) ITS 1 Field Service Technician ETAM 2 Maintenance Worker III, Pavement ETAM 2 Signs and Marking Technician 47 DFW International Airport

49 FY 2015 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 2015 Budget by major cost driver. The following table is a budget comparison by Department, in thousands. Increase (Decrease) FY14 FY15 FY15B vs Outlook Budget FY14OL Energy, Transportation & Asset Mgmt. $125,927 $130,145 4,218 Public Safety 63,725 64,805 1,080 Operations 11,018 11, Environmental Affairs Department 5,049 5, Planning Department 2,419 2,251 (168) Operations 208, ,171 6,033 Parking 46,613 48,408 1,795 Concessions 3,260 3,267 7 Commercial Development 2,244 2,169 (75) Customer Services Department 12,457 14,280 1,823 Marketing Services Department 9,201 9, Revenue Management 73,774 77,450 3,676 Human Resources 6,570 6, Procurement & Mat'l Mgmnt 4,461 4,420 (41) Business Diversity & Development 1,338 1, Risk Management 9,290 9, Public Affairs 5,035 5,034 (2) Administration & Diversity 26,694 27, Information Technology 35,363 39,117 3,753 Finance 6,816 6,748 (68) Treasury 1,292 1,280 (12) Air Service Development 2,277 2,202 (75) Aviation Real Estate 1,428 1,348 (80) Governmental Relations 1,193 1,095 (97) CFO/Airline Business & Technology 48,369 51,791 3,422 Airport Development and Engineering 958 2,191 1,232 Legal 2,556 2, Audit Services 2,258 2, Executive Office 4,229 4, Contingency 330 2,000 1,670 Non Departmental 5,383 6, Total Operating Expenses $372,689 $391,410 $18, DFW International Airport

50 FY 2015 Adopted Budget Departments Expense Budget Walkforward Budget Category (in millions) Total DFW Airline FY 2014 Outlook $372.7 $144.0 $228.7 A Merit & salary annualization Fixed contract increases B Utilities & fuels C Fixed contract increases D Health care E Property insurance premiums 0.3 (0.0) 0.3 Total fixed contract increases Airline/customer enhancements F Airline service improvements G Guest Assistance services H Terrazzo & escalator cleaning I Hardstanding J Parking Technology Total airline/customer enhancements K New facilities/trip Increases L Accounting policy change increases M New asset management/ops projects Miscellaneous increases N Other contracts O Disaster decovery & continuity consulting P Other, net (0.1) Total Miscellaneous Increases Operating expense increases Contingency & reserves Q Restore contingency R Adjust operating reserve Total contingency & reserves Net increases before cost reductions Cost reductions and efficencies S December winter storm (2.2) (0.1) (2.1) T One time projects in 2014 (1.2) (0.3) (0.9) U ETAM operational efficiencies (1.0) (0.3) (0.7) V Pension & OPEB reductions (1.0) (0.5) (0.5) W ITS efficiencies (0.6) (0.3) (0.4) X Supplies & equipment reductions (0.5) (0.2) (0.3) Total cost reductions (6.5) (1.7) (4.8) Net increase FY 2015 Budget $391.4 $151.0 $ DFW International Airport

51 FY 2015 Adopted Budget Departments Operations Division Energy, Transportation and Asset Management (ETAM) ETAM manages DFW s physical infrastructure assets and services to include energy management, thermal energy production and distribution, potable water and sanitary sewer system operation, pretreatment plant operation, spent aircraft deicing fluid collection, storage system operation, Skylink system operation and vehicle fleet maintenance. Services include facilities maintenance, commissioning/retro-commissioning of physical assets, infrastructure/facility management, solid waste management, and customer support. Department of Public Safety (DPS) The Department of Public Safety ensures the protection of life and property through the effective and efficient delivery of professional public safety services to the airport community to include Police, Fire and Special Services. Airport Operations Airport Operations is responsible for managing airside and landside operations, ground transportation, Corporate Aviation and technical training. Airport Operations ensures the continuous availability of aviation support services and facilities for efficient and safe operations. Environmental Affairs Environmental Affairs implements comprehensive environmental compliance programs throughout DFW Airport, which includes support to the National Environmental Policy Act and the Federal Aviation Administration; regulatory and technical guidance to DFW departments, tenants, and contractors engaging in activities subject to environmental laws, regulations, rules, and enforcement agency policy; and management of a compliance-focused Environmental Management System and 21 core compliance programs as well as the Noise Compatibility Office. Planning Planning is responsible for directing and coordinating the overall planning activities of DFW including facilities, airfield, and transportation/roadway planning, and for directing DFW s signage program. 50 DFW International Airport

52 FY 2015 Adopted Budget Departments Budget Comparison and Walkforward Operations Division (in thousands) FY14 FY15 Outlook Budget Asset Management $125,927 $130,145 Public Safety 63,725 64,805 Operations 11,018 11,572 Environmental Affairs 5,049 5,397 Planning 2,419 2,251 Total Operations Division 208, ,171 Salaries & Wages 65,122 68,214 Benefits 34,075 33,591 Contract Services 68,318 69,445 Equipment & Supplies 16,354 17,464 Utilities 23,102 24,216 Administrative 1,167 1,241 Total Operations Division $208,138 $214,171 Walkforward from FY 2014 Outlook Reference FY 2014 Outlook $208,138 Salaries and Wages 3,091 A, L, Benefits (484) D, L, V Contract Services 1,128 C, H, K, M, S, T,U Equipment & Supplies 1,110 F, K, S, T, X Utilities 1,114 B Administrative 74 P Total Proposed FY 2015 Budget $214, DFW International Airport

53 FY 2015 Adopted Budget Departments Revenue Management Division Customer Service The Customer Service Department oversees the Ambassador Volunteer Program and Terminal Management. All areas of Customer Service focus on meeting public demands, safety, security, and guest relations to allow for improved satisfaction and operational efficiency. Marketing Services Marketing Services is responsible for developing and executing DFW s trade and consumer marketing plans in order to drive increased revenues and new airline business and for ensuring that a consistent brand image is portrayed to every one of DFW s audiences. 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 is responsible for the management and administration of all passenger-related concessions and associated revenues within the airport terminals, Rental Car Center (RAC), telecommunications, and selected airport properties outside the terminals. Commercial Development The Commercial Development Department plans, develops, markets and leases airline hangars, air-cargo and logistics facilities, hotels, gas/convenience stores, and commercially available land at DFW. Commercial Development also evaluates and implements business opportunities that diversify DFW s revenue stream. 52 DFW International Airport

54 FY 2015 Adopted Budget Departments Budget Comparison and Walkforward Revenue Management Division (in thousands) FY14 FY15 Outlook Budget Customer Service $12,457 $14,280 Marketing Services 9,201 9,326 Parking 46,613 48,408 Concessions 3,260 3,267 Commercial Development 2,244 2,169 Total Revenue Mgmt Division 73,774 77,450 Salaries & Wages 20,510 21,629 Benefits 11,661 12,035 Contract Services 38,367 41,230 Equipment & Supplies 1,900 1,666 Utilities 1 4 Administrative 1, Total Revenue Mgmt Division $73,774 $77,450 Walkforward from FY 2014 Outlook Reference FY 2014 Outlook $73,774 Salaries & Wages 1,119 A, L Benefits 374 D, L, V Contract Services 2,863 C, G, I, N, Equipment & Supplies (234) S, X Utilities 3 B Administrative (449) P Total FY 2015 Proposed Budget $77, DFW International Airport

55 FY 2015 Adopted Budget Departments Business Diversity and Development 54 DFW International Airport Administration and Diversity Division The Business Diversity & Development Department (BDDD) is responsible for administering the Board s Disadvantaged and Minority/Women-owned Business Enterprise Programs. BDDD has the overall responsibility to administer, monitor and enforce the DBE and M/WBE policies, standards and procedures. Human Resources Human Resources (HR) primary functions are to develop and implement programs to enhance the effectiveness of the workforce. HR is responsible for consulting and advising management on employee relations issues, including employee corrective action, complaints, and grievances; assisting employees with concerns; and developing and administering policies and procedures to ensure compliance with federal and state regulations. HR also has responsibility for coordinating the recruitment and staffing activities of DFW. HR also manages and provides strategic direction for DFW Airport s internal communication and diversity programs. HR is responsible for writing and managing the content, messaging, and distribution of all employee communications, in order to educate employees on key DFW Airport initiatives, and create communication vehicles to inform staff of business news and recognize the efforts of DFW Airport employees. 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, intervenes with loss prevention measures that reduce costs, and ensures compliance with applicable laws and regulations. Areas of general administration include liability claims management, safety training, management of self-funded, fully insured, and partial 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, and short/long term disability. Risk Management also oversees both the DFW health and wellness program, LiveWell, and the newly created Integrated Disability Management program. Public Affairs The Public Affairs Department is responsible for community and media relations for DFW Airport. In this role, the Department is responsible for media responsiveness, crisis communications and issues management as well as leading and articulating DFW s communications agenda. The Department is responsible for relationship-management with

56 FY 2015 Adopted Budget Departments external audiences, including local and international chambers of commerce, business-tobusiness communications, and advocacy for airline route decisions. The Department also leads special events planning, dignitary visits and protocol, and DFW and aviation education community and leadership initiatives in its role as lead department for most external communications. The Board and Owner City Relations Department is responsible for relations related to the DFW s Board of Directors, the owner and host cities, and local governments. The Department also leads the day-to-day operations related to the monthly Board meeting process. Budget Comparison and Walkforward Administration and Diversity Division (in thousands) FY14 FY15 Outlook Budget Business Diversity & Development $1,338 $1,380 Human Resources 6,570 6,614 Procurement & Materials Mgt 4,461 4,420 Risk Mgt 9,290 9,849 Public Affairs 5,035 5,034 Total Admin & Diversity Division $26,694 $27,296 Salaries & Wages 8,245 8,859 Benefits 4,927 5,076 Contract Services 4,227 3,961 Equipment & Supplies Insurance 5,754 6,044 Administrative 2,965 2,807 Total Admin & Diversity Division $26,694 $27,296 Walkforward from FY 2014 Outlook Reference FY 2014 Outlook $26,694 Salaries and Wages 614 A, L Benefits 149 D, L, V Contract Services (266) P Equipment & Supplies (27) X Insurance 290 E Administrative (158) P Total FY 2015 Proposed Budget $27, DFW International Airport

57 FY 2015 Adopted Budget Departments Information Technology Services CFO/Airline Business and Technology Division Information Technology Services (ITS) is responsible for delivering technology solutions to DFW and is divided into 4 sections. Enterprise Systems is responsible for the development and maintenance of technology solutions for DFW human resources, procurement, fixed asset, parking, data architecture, and public safety systems. Systems Operations is responsible for the development, implementation, maintenance, and administration of the voice and data communications infrastructure, desktop and server computing environments, and data base administration. Business Solutions is responsible for the development and implementation of executive decision support systems, records management, CADD/GIS, web development, and the implementation of work-flow technologies. Terminal Systems is responsible for the development and maintenance of life safety systems, security systems, and passenger service systems. 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. 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 is responsible for developing and monitoring DFW s Capital Budget and forecast. In 2014, the construction accounting and reporting function (6 positions) was transferred from Airport Development and Engineering to Finance. Treasury/Cash 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, and grants and PFC administration. Aviation Real Estate Aviation Real Estate serves as the liaison between the Airport and the tenants of all passenger terminals and aviation-related facilities, including air cargo and hangars. Through permits and leases, Aviation Real Estate manages the contractual relationship with the tenants. The department is also responsible for aviation facilities strategic planning, with the goal of maximizing efficiency within the terminals and other aviation facilities. Air Service Development Air Service Development is responsible for developing and implementing both the comprehensive air service strategy as well as the marketing programs designed to attract new entrants, domestic and international carriers to DFW. In addition, Air Service Development 56 DFW International Airport

58 FY 2015 Adopted Budget Departments encourages existing DFW carriers to both enter into new markets as well as to increase service in markets which are already served. Increases in air service either through new entrant carriers, or via existing carriers provide substantial economic benefit for the Dallas/Fort Worth Metroplex. Air Service Development focuses on both domestic and international passenger and cargo airlines, respectively. This section is responsible for formulating strategic plans that include targeting top target markets and airlines, monitoring airline business trends, targeting potential airline services, and presenting business case presentations for target airlines to review. Through the business case presentations, Air Service Development promotes DFW by highlighting its numerous advantages and world-class facilities, and provides analytical demonstrations of the viability of the DFW market for new airlines and new service. Governmental Relations The Government Relations Department directs the government affairs function at the airport; 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. Budget Comparison and Walkforward CFO/Airline Business & Technology (in thousands) FY14 FY15 Outlook Budget ITS $35,363 $39,117 Finance 6,816 6,748 Treasury 1,292 1,280 Air Service Development 2,277 2,202 Aviation Real Estate 1,428 1,348 Governmental Relations 1,193 1,095 Total CFO Division 48,369 51,791 Salaries & Wages 18,246 19,589 Benefits 8,751 8,855 Contract Services 17,065 17,109 Equipment & Supplies 1,270 2,565 Utilities 1,921 2,584 Administrative 1,116 1,087 Total CFO Division $48,369 $51,791 Walkforward from FY 2014 Outlook Reference FY 2014 Outlook $48,369 Salaries and Wages 1,344 A, L Benefits 104 D, L, V Contract Services 45 J, W Equipment & Supplies 1,295 F, K Utilities 663 B Administrative (29) P Total FY 2015 Proposed Budget $51, DFW International Airport

59 FY 2015 Adopted Budget Departments Airport Development and Engineering (ADE) Airport Development has overall responsibility for the efficient, economical design and construction of facility development and major rehabilitation projects at DFW. Airport development also provides technical support services and/or personnel to other departments at DFW as needed in fulfilling DFW s mission. With the exception of overhead and Airport Development s Code Compliance activities, all costs are funded by the 301 fund, not the 102 fund. Budget Comparison and Walkforward Airport Development and Engineering (in thousands) FY14 FY15 Outlook Budget Salaries & Wages $564 $651 Benefits Contract Services 40 1,118 Equipment & Supplies 1 0 Utilities 1 0 Administrative 1 0 Total Airport Development $958 $2,191 Walkforward from 2014 Outlook Reference FY 2014 Outlook $958 Salaries & Wages 87 A Benefits 70 D, V Contract Services 1,078 L Equipment & Supplies (1) X Administrative (1) P Total FY 2015 Proposed Budget $2, DFW International Airport

60 FY 2015 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) FY14 FY15 Outlook Budget Salaries & Wages Benefits Contract Services 2,188 2,257 Equipment & Supplies 7 7 Administrative Total Legal $2,556 $2,634 Walkforward from 2014 Outlook Reference FY 2014 Outlook $2,556 Salaries & Wages (8) A Benefits 3 D, V Contract Services 68 N Administrative 14 P Total FY 2015 Proposed Budget $2, DFW International Airport

61 FY 2015 Adopted Budget Departments Audit Services The Department of Audit Services is an independent appraisal function that reviews and evaluates DFW activities as a service to the Board of Directors and management. The Department of Audit Services reports directly to the Board of Directors through the Finance/Audit Committee. The Department performs work contributing to the safeguarding of assets; economical and efficient use of resources; accomplishment of established objectives and goals; compliance with laws, regulations, and DFW policies; and the reliability and integrity of information used by decision-makers. Budget Comparison and Walkforward Audit Services (in thousands) FY14 FY15 Outlook Budget Salaries & Wages 1,339 1,509 Benefits Contract Services Equipment & Supplies Administrative Total Audit Services $2,258 $2,542 Walkforward from 2014 Outlook Reference FY 2014 Outlook $2,258 Salaries & Wages 170 A Benefits 58 D, V Contract Services 42 N Equipment & Supplies 3 F Administrative 11 P Total FY 2015 Proposed Budget $2, DFW International Airport

62 FY 2015 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. Budget Comparison and Walkforward Executive Office (in thousands) FY14 FY15 Outlook Budget Salaries & Wages 2,377 2,766 Benefits 1,022 1,156 Contract Services Equipment & Supplies Administrative 889 2,577 Total Executive Office $4,559 $6,971 Walkforward from 2014 Outlook Reference FY 2014 Outlook $4,559 Salaries & Wages 389 A Benefits 135 D, V Contract Services 210 O Equipment & Supplies (9) X Administrative 1,688 P, Q Total FY 2015 Proposed Budget $6, DFW International Airport

63 FY 2015 Adopted Budget Departments Total Airport Non-Departmental The Total Airport Non-Departmental budget reflects the change in Operating Reserve, payroll accruals, incentive compensation, and salary and benefits savings that are recognized at a Board-wide, rather than a departmental, level.. Budget Comparison and Walkforward DFW Non-Departmental (in thousands) FY14 FY15 Outlook Budget Salaries & Wages 1,625 2,133 Benefits Contract Services 2 0 Operating Reserve 3,315 4,001 Total Non-Departmental $5,383 $6,365 Walkforward from 2014 Outlook Reference FY 2014 Outlook $5,383 Salaries & Wages 508 A Benefits (210) D, V Contract Services (2) P Operating Reserve 686 R Total FY 2015 Proposed Budget $6, DFW International Airport

64 FY 2015 Adopted Budget Departments Position Walkforward FY14 FY 15 Division/Department/Section Budget Transfers Changes Budget Executive Office Legal 5 (0.5) 4.5 Audit Services Airport Development and Engineering 98 (6) 92 Administration & Diversity Human Resources Procurement & Materials Mgmt Risk Management Business Development & Diversity Public Affairs Total Admin & Diversity CFO, Airline Business and Technology Aviation Real Estate 8 8 Finance Treasury Management 8 8 Air Service Development 9 9 Information Technology Services Governmental Relations 2 2 Total CFO, Airline Business and Technology Revenue Management Customer Service Marketing Services Commercial Development 16 (1) 15 Parking Operations Concessions Total Revenue Management Operations Airport Operations Department of Public Safety Energy, Transportaiton & Asset Management Environmental Affairs Planning Total Operations 1, ,035 Total DFW 1, , DFW International Airport

65 FY 2015 Adopted Budget Capital Budget Capital Budget DFW has 2 capital accounts in its Construction and Improvement Fund: the DFW Capital Account and the Joint Capital Account. 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 transferred from the net revenues from the DFW Cost Center, interest income, grants, and bond proceeds for commercial development projects. The Joint Capital Account requires airline approval for money to be spent. Since the FY 2011 Use Agreement, DFW has received airline approval for $2.04 billion of bond funding for the Terminal Renewal and Improvement Program (TRIP), which includes $123 million of additional approved scope beyond the original $1.92 billion program budget. Additionally, $668 million of non-trip project approvals, including $220 million for other pre-approved projects related to Airfield, Roadway/Rail, Utilities, Parking, and various other projects, $126 million for terminal gate expansion projects, $197.6 million for a new parking garage at Terminal A, and various other projects, for a total of $2.71 billion of approved projects (see table for details on following page MII Approvals Since New Use Agreement ). Funding for this account comes from bond proceeds, natural gas royalties, sale of land proceeds, grants, and interest income. The Use Agreement provides for a Joint Capital Account Transfer of $12 million in FY 2015 to the Terminal Cost Center to subsidize terminal rentals. This transfer will be reduced by $4 million each year until it is totally phased out in FY The TRIP program is currently undergoing a re-baseline initiative in light of cost and schedule pressure experienced on the initial phases of the program. The re-baseline activities entails a comprehensive evaluation of both a lessons-learned on already completed TRIP terminal sections, as well as extensive stakeholder reviews of go-forward scope and cost reforecasting. Additionally, as part of this re-baseline, the airlines have request the Airport estimate the incremental schedule and cost impacts of two potential scope additions: (1) Build back of the high Terminal C gates (gates C35-C39) currently planned to be demolished as part of TRIP which currently has a Rough Order Magnitude (ROM) estimate of $100 million; and (2) Construction of a new Terminal C parking garage to replace the existing garage, ROM estimated at approximately $220 million. These estimates are preliminary and subject to change. The final re-baseline cost and schedule was not yet finalized at the time of this writing and therefore, none of these incremental costs are included in the following table and charts. The final re-baseline budget and schedule is planned to be finalized in mid-july Since the TRIP schedule impacts the annual debt service expense and revenue budgets, the FY 2015 expense budget was adjusted in anticipation of relatively minor slides in the opening dates of the remaining terminal sections scheduled to be completed during FY These anticipated delays resulted in slightly less FY 2015 TRIP debt service and terminal concessions revenue than was previously estimated for FY 2015 in the FY 2014 Financial Plan. 64 DFW International Airport

66 FY 2015 Adopted Budget Capital Budget Projected Capital Uses of Cash by Capital Account DFW projects to spend approximately $756.5 million on capital expenditures in FY 2015 as summarized in the following chart. FY 2015 Projected Capital Expenditures ($756.3M) Joint Capital Account Transfer to 102 Fund $12.0 DFW Capital Account Transfer to 102 Fund $3.4 DFW Capital Account* $234.5 Joint Capital Account - TRIP $348.0 Joint Capital Account - Non- TRIP $158.4 *$93.6M is debt financed for Commercial Development and other projects. The following table summarizes total projected capital expenditures for projects to be in progress during FY Active Projects in FY 2015 Actual Forecast Prior Projected Future Total Capital Budget (Millions) FY 2013 FY 2014 Years FY 2015 Years Budget DFW Capital Account Joint Capital Acccount TRIP , ,044.9 * Non-TRIP Transfers to Total Capital $616.0 $736.5 $1,420.1 $756.3 $1,333.7 $3,558.7 * TRIP approved budget subject to increase as part of re-baselining. 65 DFW International Airport

67 FY 2015 Adopted Budget Capital Budget The following table summarizes the airline MII approvals that DFW Airport has received thus far, including those projects in the new Use Agreement. MII Approvals Since New Use Agreement $'s in Millions Item# Project Name TRIP Non TRIP Total MII Approvals In New Use Agreement: 1 TRIP (base scope) $1,922.0 $1, $220M Pre Approved Capital Projects Term D South Extension (4 add'l gates) Term D North Extension (B/D Connector B1, B2, B3) Term B North Stinger (10 new gates) add'l MII approval Total Use Agreement MII Approved Projects $1,922.0 $310.0 $2,232.0 MII Approvals Subsequent to New Use Agreement: 6 TRIP (cost/scope increase to base Term B BHS) $17.5 $ TRIP Programming & Schematic Design Cost (excluded from TRIP budget) TRIP: Terminal A, B, C, & E Window Replacement Funding of Design costs for add'l Add/Alt projects TRIP: Natural Gas Lines (Term B, C, & E only) N. Express Covered Parking Expansion (1,000 spaces) Ph 1 * Term D North Extension (B/D Connector B1, B2, B3) Budget Increase Less: $20M taken from Term D South Ext (Item #3) for B North Stinger ($20.0) (20.0) 14 Term B North Stinger (10 new gates) add'l MII approval Aircraft Operation Area (AOA) Snow/Ice Removal Equipment Skylink Bond Issuance Terminal A Parking Garage Reconstruction (All sections) W Parking Expansion for Employee Parking * Aircraft Design Group VI Gating Solutions (Design Only) FY11 ADE Overhead (JCA cash funded) FY11 Natural Gas Reimbusables (JCA cash funded) FY12 ADE Overhead (JCA cash funded) FY12 Natural Gas Reimbusables (JCA cash funded) FY13 - FY20 Natural Gas Reimbursables (annual NTE $1.4M) (JCA cash funded) Terminal Electric Vault Replacement Snow & Ice Facility Modifications N.Express Public Covered Parking Expansion (phase 2) TRIP Annual Transition Costs (NTE $2M/yr through 2017) Terminal A Concession Loading Dock D Hardstand Equip for International Ops CTA Strategy Study (Phase 1 & 2) FY13 - FY20 ADE Overhead ($3.5M annual NTE through FY20) DPS Station #1 Rehab/Expansion (partial design only) Reimb TRIP Contingency for Term A & B Automated Passport Control (APC) Phase 1 for U.S. Citizens AA Terminal (A, B, & C) Branding/Cust Service elements Design B/D Sterile Corridor Extension AA Reimb for TRIP Self-Perform Work Design - Term E Roadway Improvements TRIP Contracting Capacity - Terminal A Terminal A Parking Garage - Additional funds Project re-allocation w/i Categories $220M Pre-approved & Taxiway "L" ADG VI (A-380) Jetbridge & Associated Terminal Modifications at D15/ TRIP - Terminal A Concessions Storage TRIP - Passenger Information Centers MII APPROVALS SINCE NEW USE AGREEMENT $122.9 $357.9 $480.8 TOTAL MII APPROVALS INCLUDING NEW USE AGREEMENT PROJECTS $2,044.9 $667.9 $2,712.8 Other MII funding approvals unrelated to Capital Projects: 46 RAC/Facility Improvement Corp (FIC) Bond Refunding $112.0 MII APPROVALS OTHER $112.0 TOTAL MII APPROVALS CAPITAL PROJECTS + OTHER $2, DFW International Airport

68 FY 2015 Adopted Budget Capital Budget The following table shows cash flow projections, gross of grant reimbursements, for the DFW capital projects. New projects (projects not included in FY 2014 capex spend) are highlighted in blue and are subject to change. DFW CAPITAL ACCOUNT (In Millions) Prior Future Project Name Years FY15 Years Term E Parking Garage (section C) Southgate: DFW Consolidated HQ Air Service Incentive Plan (ASIP) Other Discretionary (Annual) Term E Parking Garage (section B) Rehabilitate Airfield Pavements FY Rehab Airfield Pavements FY Terminal "D" Annual Capital Renewal Rehab Airfield Pavements FY Replace Remote Buses Replace Employee Buses ARFF Truck Replacement Rehabilitate Airfield Lighting Systems FY Term D Common Use VIP Club # Coppell Freeway Commercial DD# Skylink Renewal Program - Skylink Car Overhaul NW Logistics (Ph II) DD# Replace Terminal Link Vans Term D Parking Guidance System (PGS) Rehab Airfield Lighting Systems FY Rehabilitate Airfield Lighting Systems FY ITS System Operations FY2013 Refresh Southgate: Infrastructure IT Bus Solutions: Replace Computer-Aided Dispatch (CAD) Walnut Hill Industrial (Ph I) DD# Rehabilitate Airfield Pavements FY Southgate: USPS (Post Office) Replace Heavy Equipment Founders Plaza Ph I & II Beltline Transit Oriented Development (TOD) IT Terminal Sys: FY13 Arinc Multi-System Upgrade Replace Express Vans Skylink Renewal Program - Auto Train Control (ATC) Term E PGS (section B & C) Mid-Cities Bridge IT Terminal Sys: Term D BHS Refresh/Upgrade Rehabilitate Industrial Wastewater (IW) System Bus Ramp Infrastructure Landside Roadway Slope Stability and Erosion Repair IT Term Sys Group Relocation Term D Concessions Master Plan Bear Creek - DFW (Ph I) DD# Skylink Renewal Program - Skylink Station Rehabilitation Projects <1M TOTAL DFW CAPITAL ACCOUNT $159.0 $234.5 $474.3 ADD: TRANSFER TO 102 (for FY 2015 Debt Service for Airport Headquarters) $3.4 TOTAL USES OF DFW CAPITAL ACCOUNT $159.0 $237.9 $ DFW International Airport

69 FY 2015 Adopted Budget Capital Budget The following projects will be funded from the Joint Capital Account during FY Spend amounts are gross of grant reimbursements. New projects (projects not included in FY 2014 capex spend) are highlighted in blue and are subject to change. JOINT CAPITAL ACCOUNT (In Millions) Prior Future Project Name Years FY15 Years Terminal Renewal and Improvement Program (TRIP) $1,060.0 $348.0 $636.9 TOTAL JOINT CAPITAL ACCOUNT (TRIP) $1,060.0 $348.0 $636.9 Non-TRIP: Term A Garage/Roadway (section C) $0.0 T/W "Lima" Reconstruction $22.7 Term E Roadway Improvements (section B/C) $9.8 Rehabilitate Landside Roads & Bridges Ph $0.0 W. Airfield Drive $0.0 Elevated Water Tower (2.5 MG) $0.0 Term D South: Ramp Expansion (Phase 1) $19.9 ITS Radio System Expansion $6.2 DPS Station #1 Reconstruction/Expansion $21.1 ADG VI: A-380 D11/ $0.4 Rehab & Reconfigure Water Pump Stations $3.7 Term B High Gate Electrification/PCA $0.0 ADG VI: A-380 D15/ $0.0 Term D South: Gate expansion $162.8 Term B/D FIS Corridor Extension into B4 - B9B $39.9 Rehabilitate Landside Roads & Bridges Ph 3a $0.0 Term D South: Term D Mods $32.2 Replace E. Airfield Dr Sanitary Sewer Lift Station $0.0 Term D South: D5 Bus Gate $6.8 Concessions Loading Docks Term E- section A $4.1 Rehab Open Storm Channels FY14/ $1.0 Access Control Mgt Sys (ACMS) $1.9 Spill Prevent Counter Controls (SPCC) $0.0 Projects <1M TOTAL JOINT CAPITAL ACCOUNT (NON-TRIP) $51.2 $158.4 $347.9 TOTAL JOINT CAPITAL ACCOUNT $1,111.2 $506.4 $984.8 ADD: USE AGREEMENT CAPITAL TRANSFER TO 102 $12.0 TOTAL USES OF JOINT CAPITAL ACCOUNT $1,111.2 $518.4 $ DFW International Airport

70 FY 2015 Adopted Budget Capital Budget 69 DFW International Airport Capital Project Approval Process In FY 2010, DFW management developed a 10-year capital plan as the basis for negotiating the Use Agreement. The FY 2015 projects from the list on the prior page were derived from that plan. Most of the new projects are officially in a planning status. When the project manager is ready to initiate the project, a detailed capital worksheet is prepared including alternatives, and presented to the Capital Committee for review and approval. Executive Management approval is required for projects over prescribed limits. 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-in-time capital planning process provides flexibility to manage the process most effectively. From a process standpoint, the Board of Directors does not approve an overall capital budget. Instead, the Board 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 included in the FY 2015 Capital Budget including: Terminal Renewal and Improvement Program (TRIP) As DFW s domestic terminals approach end of useful life, a major rehabilitation/ redevelopment program is underway for Terminals A, B, C and E. The current approved budget is $2.04 billion, subject to change with the TRIP re-baseline initiative. The first terminal section, Terminal A Section A, was completed in March 2013 with the second phase scheduled for completion in the spring of FY Construction is currently underway for Terminal B Section C, and Terminal E Section C, both of which are also anticipated to be completed in the Fall of FY Total program completion is scheduled for Approximately $348 million is anticipated to be spent during FY Parking Expansion Parking capacity at Terminal A will be expanded by approximately 52% through the reconstruction of a new more efficient parking facility with approximately 7,600 spaces to replace the prior parking structure and implement roadway improvements. This garage is being constructed in 3 phases, lasting approximately 1 year per phase. Section A/phase 1 of this new parking garage, along with the associated roadway improvements opened in March Section B/phase 2 opened in May Section C/phase 3 is scheduled to open in the Summer of Also, a reconstruction of Terminal E section B and C is planned which will increase parking capacity by 51%, as well as improve the associated roadways to alleviate traffic congestion in front of Terminal E. Approximately $104 million is anticipated to be spent during FY 2015 on these new parking projects. Terminal Gate Expansion Additional gate capacity is planned in Terminals D, D-South, and B to meet increased forecasted gate demand. Projects include Programming and Schematic Design (PSD) for future potential gate expansion south of Terminal D which was pre-approved in the Use Agreement. Forecasted gate demands and the eventual gate expansion are currently being analyzed as part of a holistic Central Terminal Area

71 FY 2015 Adopted Budget Capital Budget study to identify the timing, configuration, and location of future gate expansion. Current and near-term forecasted international flights are also requiring interim hardstand operations until additional contact gates can be constructed. Additionally, DFW Airport is anticipating the need to accommodate new large aircraft (A-380) from foreign flag carriers at Terminal D and cargo carriers in west cargo. Construction at gate D15/D16 for an A-380 jetbridge and associated terminal modifications are underway to accommodate both Emirates and Qantas which have signed a Letter of Intent to service DFW Airport with this new large aircraft. Additionally, design is anticipated to begin shortly for another A-380 jetbridge at gate D11/12 to support forecasted demand. Approximately $5.8 million is anticipated to be spent during FY Taxiway L Reconstruction As part of DFW s ongoing airfield pavements rehabilitation program, a $51 million project ($20.4 million net of AIP grants) is planned to reconstruct a major east side taxiway which has reached the end of useful life. Design is complete using 75% AIP grant funding and construction is scheduled to begin during FY Approximately $24.5 million ($7.3 million net of grants) is anticipated to be spent during FY Roadway Improvements Landside roadway improvements are being made to West Airfield Drive and Mid-Cites Boulevard to widen from 2 lanes to 4 lanes to accommodate increased traffic, particularly for current West Cargo tenants. Completed in June 2014, the Mid-Cities roadway project included construction of a bridge over Bear Creek to eliminate roadway closures during flood events. Additionally, various landside roadway improvements are planned at numerous locations throughout the Airport to rehabilitate roadway sections which are reaching the end of useful life. Approximately $40.1 million is anticipated to be spent during FY Commercial Development and Other Several locations are planned for Commercial Development, including Founders Plaza off SH114/SH121 to include 2 car dealerships, Coppell Industrial off I-635, and Southgate at the southern portion of DFW Airport adjacent to the RAC. The Southgate development includes construction of a DFW Airport consolidated Corporate Headquarters, including a parking garage, as well as a Hyatt Place Hotel, Post Office, and 3 restaurants. Approximately $40.2 million is anticipated to be spent during FY DFW International Airport