Template revised January 10, 2019.
COMMISSION
AGENDA MEMORANDUM
Item No.
8o
ACTION ITEM
Date of Meeting
December 10, 2024
DATE: December 10, 2024
TO: Stephen P. Metruck, Executive Director
FROM: Lance Lyttle, Managing Director, Aviation Division
Rick Duncan, Director, AV Business & Properties
SUBJECT: 2025 – 2034 Signatory Lease and Operating Agreement between the Port and the
Airlines operating at Seattle-Tacoma International Airport (“SEA” or “Airport”)
Total Estimated SLOA V Lease Revenue (10-year): $8,424,000,000
Previously authorized total SLOA IV Lease Revenue (6-year): $2,900,000,000
ACTION REQUESTED
Request Commission authorization for the Managing Director, Aviation Division to execute 2025-
2034 Signatory Lease and Operating Agreements (“SLOA V”) between the Port and various
airlines for the use of facilities at the Airport.
EXECUTIVE SUMMARY
A signatory lease and operating agreement will memorialize the conditions under which airlines
use Airport facilities and the methodologies the Airport employs to charge airlines for use of the
space and facilities. The purpose of this request is to approve SLOA V as the successor lease
agreement to the 2018-2024 Signatory Lease and Operating Agreement (“SLOA IV”) which
expires on December 31, 2024. The Commission Motion of September 13, 2022, amended the
SLOA IV agreement to extend it to December 31, 2024, to provide time for the airport and airlines
to get a better understanding of the industry and its trends as the recovery of the COVID-19
Pandemic continued. This agreement will secure airline commitments at SEA until December 31,
2034.
JUSTIFICATION
A multi-year lease agreement provides a greater degree of certainty to the Airport and the
airlines than shorter-term alternatives. The only practical alternative to a new lease agreement
would be for the Port to implement rates by resolution. Resolution 3677, as amended, describes
the methodologies the Port would use to charge airlines in the absence of a lease agreement.
The Port and the airlines agreed that a negotiated lease agreement is preferable to implementing
rates by resolution.
COMMISSION AGENDA – Action Item No. 8o Page 2 of 6
Meeting Date: December 10, 2024
Template revised June 27, 2019 (Diversity in Contracting).
Diversity in Contracting
No new contracting opportunity applies to this request.
DETAILS
COMPARISON OF KEY LEASE TERMS
Provision
SLOA IV (2018 – 2024)
SLOA V (2025-2034)
Term
5-year plus extension
10 Years
Definition of a gate
Distinction and weighting difference
between a passenger loading bridge gate
(1.0) and a ground boarded gate (0.5)
No change
Ticket Counters
Any signatory carrier can have pref ticket
counters
A carrier must have a pref gate to qualify for pref
ticket counters
Minimum number of
common use gates as
designated by the Port
2019: 16 2022: 21
2020: 18 2023: 22
2021: 18 2024: 22
None; fixed number of preferential gates with a
Minimum Use Requirement (“MUR”) to retain
preferential assignment
Minimum Use
Requirements
None
A pref carrier must annually average 6X flights
per day per gate (Feb 1- Oct 31) to maintain
their gate count
Preferential gate
allocation formula
• Threshold
• Months of seats data
6.0x average daily weighted turns to enter
pref pool
9: 6 months of actual (February – July) and 3
months of forecast (August - October)
Gates re-allocation January 1 of each
calendar year.
2024 gate allocation “frozen” at 67 gates
allocated for preferential use, with the MUR to
maintain allocation in future years.
Gates out for construction
or unanticipated repair
• Port to make “pref airlines whole” by
providing a 1:1 NB gate from the
common use pool of gates when a pref
gate is out for construction (OFC)
• No limit to gates OFC
POS will target maximum of 2 contact gates out
for construction at any time and will make up to
2 common use gates available at any given time
to replace preferential use gates taken out of
service for this purpose, exclusive of gates taken
out of service through the completion of the
Sout Satellite Renovation project.
Newly Constructed Gates
Newly constructed gates will go into
common pool, but could then be allocated,
at Airport’s discretion, for preferential use.
Newly added gates will be allocated or
withdrawn on an alternating basis between the
preferential and common use pools.
• Majority-in-Interest
threshold
• Implications of MII vote
Yes
$10.0 million for aeronautical rate base costs
No change
Pre-approved up to $300 million for
planning and design for projects needed to
construct new gates on north side of the
Airport.
MII eliminated and replaced with CIP
Collaboration protocol
CIP Collaboration protocol
No reference
High level collaboration language to be included
in SLOA with specific processes to be defined
outside of SLOA
• Checkpoint meetings integrated with SEA
existing process
• Escalation process that can be activated by
SEA or Signatory Airline vote
COMMISSION AGENDA – Action Item No. 8o Page 3 of 6
Meeting Date: December 10, 2024
Template revised June 27, 2019 (Diversity in Contracting).
Rented space takeback
Airport can take back space due to capital
project, must provide like-for-like
Airport can take back space if needed for any
commercial reason, provide like-for-like if
available but not required
Mid-term space
adjustment
None
Airlines may reduce its space by up to 20% at the
5-year mark
Revenue Sharing
Port will share with airlines a percent of net
revenues in excess of 1.25x debt service as
follows:
• 2018: 40%
• 2019: 20%
• 2020-22: 0%
0%
Financial Reopener
Not addressed
Airport may reopen financial model negotiations
by mutual agreement with airlines under specific
conditions
Airfield Rate-making
methodology
•Airfield residual rate structure where all net
airfield costs are paid by airlines
•Allows debt service coverage “charge-up”
mechanism to minimum of 125% airport-
wide (charge coordinated with terminal cost
center)
•Mid-year adjustments if deemed necessary
•Annual adjustments to actual
No Change
Terminal Rate-making
methodology
• Terminal compensatory rate structure
(cost allocated to rentable space
pursuant to Sect. 8.3.2)
• Mid-year adjustments may be
implemented if variance of 10+% is
forecast versus budget
• Annual adjustments to actual
• Airport has vacancy risk on publicly
accessible aeronautical and non-
aeronautical space only. Other rates
are set over rented space vs. rentable.
No Change
Employee Parking
No reference
Memorialize employee parking stabilization plan
to phase in increasing parking rates associated
with the expanded employee parking operation
for all users of the lots (airline and non-airline
employees)
Cruise baggage
Include 50% of cost for baggage handling
from ship to airport in rate base for Bag
Makeup.
No Change
Eligibility for Signatory
status
Airline must offer regularly scheduled
service
No Change
Debt service coverage
Allows debt service coverage “charge-up”
mechanism to minimum of 125% airport-
wide (charge coordinated with terminal cost
center)
No change from SLOA IV but defines
method/timing for airlines to recover
extraordinary coverage charges, if triggered, in
future periods after coverage requirements are
met.
Insurance
$500M aviation liability per occurrence;
$10M commercial general liability per
occurrence.
Security Deposit/ Security
Fund
No surety required for carriers operating in
good financial standing at the Airport for at
least 24 months.
No change
COMMISSION AGENDA – Action Item No. 8o Page 4 of 6
Meeting Date: December 10, 2024
Template revised June 27, 2019 (Diversity in Contracting).
ALTERNATIVES AND IMPLICATIONS CONSIDERED
Alternative 1 – Reject approval of SLOA V and implement rates in accordance with Resolution
3677, as amended.
Pros:
(1) No limit on the number of common gates the Port can withhold
(2) Port has flexibility to determine the optimal gate allocation methodology
(3) Airport retains potential for marginally higher revenues that may be collected under
a commercial compensatory agreement
(4) No MII, airport has control of its capital program with minimal administrative burden
for collaboration processes
Cons:
(1) Failure to reach agreement indicates airport and its major airline customers are not
in alignment
(2) Rate methodology does not offer economies of scale to benefit airlines with multiple
flights per day (most fees are based on a per use basis), reducing benefits of
operations of scale for SEA’s largest airlines, including the hub airlines.
(3) While the rate methodology incorporated into Resolution 3677, as amended, was
designed to conform to federal Department of Transportation requirements and thus
withstand a legal challenge, airlines at Sea-Tac could still elect to mount a legal
challenge, which could be expensive and administratively burdensome.
(4) Added financial protection from extraordinary coverage will not be available to the
Port.
(5) Airline revenues would be reduced in certain cost centers.
(6) No obligation for airlines to maintain presence at SEA, introducing potential for future
vacancy risk.
(7) Viewed less favorably by the rating agencies compared to having an agreement.
COMMISSION AGENDA – Action Item No. 8o Page 5 of 6
Meeting Date: December 10, 2024
Template revised June 27, 2019 (Diversity in Contracting).
This is not the recommended alternative.
Alternative 2 – Approve SLOA V
Pros:
(1) Agreement on a ten-year lease provides level of certainty for both the Airport and the
airlines though 2034.
(2) Airlines contractually “back” the airport’s aeronautical revenues for the term of the
lease, reducing vacancy risk.
(3) Improved processes agreed to by airlines to improve collaboration on capital project
delivery, increasing efficiency and decreasing cost.
(4) No MII, airport has control of its capital program
(5) MUR (minimum use requirements) incentivizes airline efficiency with their operations
or at the risk of having preferentially assigned gates converted to common use gates.
(6) Control over real estate is still maintained, allowing for flexibility during the massive
capital program and construction.
Cons:
(1) Port is limited in the number of gates it can allocate for as common use, thus
potentially limiting the Port’s direct control over use of a portion of its gates.
(2) Port agrees to meter employee parking rate escalations for all employees over a multi-
year period.
This is the recommended alternative.
FINANCIAL IMPLICATIONS
The lease provisions of SLOA govern over $550 million per year of aeronautical revenues and is
expected to increase to $1.05 billion per year over the next ten years. The passenger airline cost
per enplaned passenger (CPE) is estimated between $20.57 and $37.76 for the 10-year term. The
debt service coverage trigger permits the Airport to include in the airline rate base debt service
coverage up to 25% of debt service as needed to bring total Airport debt service coverage up to
1.25x. This ensures that the Airport will maintain at least 1.25x debt service coverage. This
provision is the same as in SLOA IV.
Additionally, SLOA V will memorialize the Employee Parking Rate Stabilization Plan, which will
diversify the cost of acquiring new real estate and infuse $27 million over the first six years
amongst various aviation non-aeronautical cost centers to phase in the parking rates to a
forecasted average increase of ~10% per year.
COMMISSION AGENDA – Action Item No. 8o Page 6 of 6
Meeting Date: December 10, 2024
Template revised June 27, 2019 (Diversity in Contracting).
ATTACHMENTS TO THIS REQUEST
(1) 2025 – 2034 Signatory Lease and Operating Agreement (SLOA V)
(2) Letter to airlines regarding hold-over for SLOA V execution
(3) Presentation
PREVIOUS COMMISSION ACTIONS OR BRIEFINGS
• October 10, 2017 – Commission motion to extend SLOA III to March 31, 2018
• November 28, 2017 – Commission guidance to restart negotiations
• December 19, 2017 – Commission motion regarding sustainable aviation fuels
• February 13, 2018 – Commission motion to extend SLOA III to May 31, 2018, to facilitate
approval and implementation of SLOA IV by June 1, 2018 (retroactive to January 1, 2018).
• February 27, 2018 – Commission motion to execute SLOA IV
• September 13, 2022 – Commission motion to execute SLOA IV extension
