PORT OF SEATTLE

MEMORANDUM

COMMISSION AGENDA

Item No.

Date of Meeting

December 6, 2011

DATE: November 28, 2011

TO: Tay Yoshitani, Chief Executive Officer

FROM: Michael Ehl, Director, Airport Operations

Peter Garlock, Chief Information Officer

Wayne Grotheer, Director, Aviation Project Management Group

SUBJECT: South Satellite Common-Use Infrastructure Expansion at Seattle-Tacoma

International Airport (CIP C800276).

Amount of This Request: $2,403,500 Source of Funds: Airport Development Fund

State and Local Taxes Paid: $109,500 Jobs Created: 25

ACTION REQUESTED:

Request Port Commission authorization for the Chief Executive Officer to advertise and execute

a major construction contract and provide installation of computer hardware by Port staff for the

South Satellite Common-Use Infrastructure Expansion project at Seattle-Tacoma International

Airport (Airport), for $2,403,500 out of a total projected program cost of $2,909,500.

SYNOPSIS:

The Airport has installed “common-use” infrastructure and equipment at several locations in the

terminal, such as most international gate areas and ticket counters, that can be used

interchangeably by participating airlines as a productivity and cost-savings program. A flexible,

common-use environment allows more airlines to use existing terminal facilities without

reoccurring capital investment. The Airport is further able to handle more passengers and support

future growth within the current terminal footprint. This project brings common-use equipment

and infrastructure to gates at the South Satellite (SSAT).

This project will install the Airport’s new common-use infrastructure at nine SSAT gates

preferentially leased by Delta Air Lines, and installs Port standard casework at gates S1, S7, S8

and S9, plus repositions gate podiums closer to passenger loading bridge doors. The original

scope of this project also included conversion of up to fourteen ticket counter positions to

common-use and installation of common-use computer equipment at three Concourse A gates.

That work has since been accomplished by other projects or deemed unnecessary in light of

future airline realignment work. The budget has been adjusted downward by $608,500 to reflect

this reduced scope.

COMMISSION AGENDA

Tay Yoshitani, Chief Executive Officer

November 28, 2011

Page 2 of 5

BACKGROUND:

Delta Air Lines’ (DL) consolidation of its flight operations at the SSAT has created efficiencies

for its growing international operations because the Federal Inspection Service (FIS) area is also

located at the SSAT. DL has also recently constructed a new VIP lounge for their passengers on

the roof of the South Satellite. The Port supports the DL consolidation, but this has driven the

need for installation of common-use infrastructure and equipment at four additional SSAT gates.

DL has preferentially leased nine mid and wide-body gates, but four of these still need to be

available for use by other international carriers, when the capacity (and access to the FIS) has

been exceeded at the Port-owned gates (S10, S11, S12, S15 and S16).

The Port and the carriers are interested in creating additional operational efficiencies at the gates

in an ongoing effort to reduce airline operating costs. The project repositions podiums and back

screens to locations closer to the passenger loading bridge doors to support this goal. The carriers

can more effectively manage the boarding of a flight with gate agents that can perform multiple

tasks from a single workstation near the bridge door.

PROJECT JUSTIFICATION:

The purpose of this project is to facilitate an expansion of the Airport’s common use

environment through a program of Port sponsored projects that will support operations, bring

gate podiums and ticket counters to Port standards and provide common use infrastructure.

Project Objectives:

 Increase utilization of existing SSAT gates while avoiding incremental major capital

investment.

 Support future international carrier growth.

 Allow operations to be handled without delays to arrivals and departures when current

capacity is exceeded.

 Update the gate podium facilities to match current Airport standards already in place at most

SSAT gates.

 Increase efficiencies at gates by relocating podiums closer to the boarding doors.

 Expand a passenger processing system that maximizes flexibility, meets operational needs

and reduces airline costs.

 Reduce airline expenses through more efficient use of resources necessary to manage

boarding and check in processes.

PROJECT SCOPE OF WORK AND SCHEDULE:

Scope of Work:

At the completion of this project SSAT gates will be newly equipped with the following:

Gates S-1, S-7, S-8, S-9

 New Port standard gate podium casework and backstand monitors repositioned closer to

boarding doors

 Common use equipment and infrastructure

 Updated task lighting and signs

COMMISSION AGENDA

Tay Yoshitani, Chief Executive Officer

November 28, 2011

Page 3 of 5

Gates S-2, S-3, S-4, S-5 and S-6,

 Existing Port standard casework repositioned closer to boarding gate doors

 Updated task lighting and signs

Schedule:

Began Design 3rd Qtr 2009

Begin Construction 1st Qtr 2012

Project Completion 3rd Qtr 2012

FINANCIAL IMPLICATIONS:

Budget/Authorization Summary: Capital: Expense: Total:

Original Budget

$3,018,000

$500,000

$3,518,000

Budget Decrease

($437,000)

($171,500)

($608,500)

Revised Budget

$2,581,000

$328,500

$2,909,500

Previous Authorizations

$506,000

Current request for authorization

$2,075,000

$328,500

$2,403,500

Total Authorizations, including this request

$2,581,000

$328,500

$2,909,500

Remaining budget to be authorized

Project Cost Breakdown - Capital This Request Total Project

Project Cost Breakdown – RMM Expense

This Request

Total Project

Construction costs (RMM)

$300,000

Sales tax (RMM)

$ 28,500

Total

$328,500

Construction Costs

$1,064,000

Port furnished equipment and installation

$465,000

$600,000

Sales tax

$81,000

$94,000

Outside professional services

$78,000

$255,000

Aviation PMG and other soft costs

$387,000

$568,000

Total:

$2,075,000

$2,581,000

Totals Capital and Expense:

$2,403,500

$2,909,500

COMMISSION AGENDA

Tay Yoshitani, Chief Executive Officer

November 28, 2011

Page 4 of 5

Budget Status and Source of Funds:

This project is included in the 2011-2015 capital budget and plan of finance within CIP

#C800276. The funding source will be the Airport Development Fund.

Financial Analysis and Summary:

CIP Category

New/Enhancement

Project Type

Renewal & Replacement

Risk adjusted Discount rate

N/A

Key risk factors

N/A

Project cost for analysis

$2,581,000

Business Unit (BU)

Terminal

Effect on business performance

NOI after depreciation will increase

IRR/NPV

N/A

CPE Impact

CPE will increase by $.02 by 2013. However, no

change to business plan forecast as this project was

included. Asbestos abatement costs, depending on the

timing will cause a short term increase in CPE by

$.02 in 2012.

Lifecycle Cost and Savings:

Operation and Maintenance expenses by Aviation Maintenance are anticipated to increase by

$30,000 annually.

It is also anticipated that the implementation of this project will involve asbestos abatement. The

current estimate is $300,000. The asbestos abatement costs will be charged to expense (as an

environmental remediation liability project) in the year the triggering event occurs.

ENVIRONMENT AND SUSTAINABILITY:

This project demonstrates environmental sustainability by improving existing Port assets and

better utilizing existing resources thus reducing the potential environmental impact of new gate

construction.

STRATEGIC OBJECTIVES:

The South Satellite Common Use Expansion project supports two of the Port’s Strategies and

Objectives, notably:

This project promotes the Port’s strategic goals to “Ensure Airport and Seaport Vitality” and “Be

a Catalyst for Regional Transportation Solutions” by providing the airlines with the tools and

equipment to achieve on-time performance. Flexible infrastructure at gates will improve the

Airport’s asset base since more airlines will be able to use existing facilities for their operations.

COMMISSION AGENDA

Tay Yoshitani, Chief Executive Officer

November 28, 2011

Page 5 of 5

Creating a flexible common-use environment allows carriers and the Airport to spend fewer

capital dollars recreating facilities as operational conditions change. Carriers are able to share the

same ticket counter and gate facilities, including passenger processing hardware, without

spending on redesign and construction to customize the operating environment for a single

airline’s needs. This helps increase total Airport through-put rates, in the existing footprint of the

terminal, as passenger volumes increase.

BUSINESS PLAN OBJECTIVES:

Installation of common-use infrastructure and equipment will facilitate greater utilization of

SSAT international gates. This project will improve customer service and provide a means to

serve airlines in a less expensive way (than expanding the SSAT building envelope) which

minimizes the growth of cost per enplaned passenger. As future international growth occurs this

will create significant economic benefits in Seattle and the greater Puget Sound area.

TRIPLE BOTTOM LINE SUMMARY:

This project standardizes gate amenities and gives the airlines opportunities to operate their gate

operations more efficiently.

ALTERNATIVES CONSIDERED AND THEIR IMPLICATIONS:

1. The recommended action is for the Port to provide a common-use environment at

the South Satellite, utilizing the latest technology, to optimize flexibility to

accommodate growth and irregular operations by all carriers that use these facilities.

2. Delta Air Lines could retain proprietary communications technology only at the

SSAT gates without addition of common use gates, resulting in a less flexible gating

environment. This will not allow other carriers to benefit from the flexibility of the

common use environment for growth or support irregular operations.

3. Expansion of the SSAT building to provide additional gates could be implemented

immediately, at high capital cost, to create adequate facilities to handle the irregular

operations and future growth of DL and other international carriers. It is expected that

this option would have little carrier support at this time.

OTHER DOCUMENTS ASSOCIATED WITH THIS REQUEST:

None.

PREVIOUS COMMISSION ACTION:

August 25, 2009 - Common Use Expansion Design Authorization