Template revised January 10, 2019.
COMMISSION
AGENDA MEMORANDUM
Item No.
10a
ACTION ITEM
Date of Meeting
July 14, 2026
DATE: July 6, 2026
TO: Stephen P. Metruck, Executive Director
FROM: Rick Duncan, Director, Aviation Business & Properties
Eileen Francisco, Director, Aviation Project Management Group
SUBJECT: Concourse B United Airlines Lounge Tenant Reimbursement Agreement (TRA) and
Post-IAF Airline Realignment Budget Increase (C801158)
Amount of this request:
$17,352,000
Total estimated project cost:
$158,252,000
ACTION REQUESTED
Request Commission authorization for the Executive Director to 1) increase the Post-IAF Airline
Realignment project budget by $3,752,000, 2) execute a Tenant Reimbursement Agreement with
United Airlines for $15,500,000 to support the construction of the Concourse B United Airlines
Lounge, and 3) authorize the remaining project budget of $17,352,000. This results in a total
estimated project cost of $158,252,000.
EXECUTIVE SUMMARY
As part of the Post-IAF Airline Realignment project (Airline Realignment) and pursuant to the
2018 Signatory Lease and Operating Agreement (SLOA IV), the Port has relocated United Airlines
(UA) aircraft operations, preferential gates, and support spaces from Concourse A to Concourse
B. Relocation of UA’s lounge is the final step in completion of the multi-year project.
SLOA IV and the 2023 realignment agreement with UA stipulates the Port must provide UA with
a like-for-like replacement for any lost amenities associated with relocation. Under Commission
authorization and a January 2023 and April 2025 Memoranda of Agreement (MOA) UA has
recently completed design and is prepared to start construction of a new 7,181 square-foot
lounge on Concourse B adjacent to their new preferential gates. This request increases the
combined budget for both projects. Over the past five years, the Airline Realignment project has
experienced minor cost increases to expedite the project schedule to maintain critical path and
mitigate numerous unforeseen conditions. This request would authorize the remaining project
budget, the execution of the TRA between the Port and UA and increase the combined project
budget by $3,752,000.
COMMISSION AGENDA – Action Item No. 10a Page 2 of 5
Meeting Date: July 14, 2026
Template revised June 27, 2019 (Diversity in Contracting).
JUSTIFICATION
Upon completion of construction of both projects, the Port’s requirement to provide UA with a
like-for-like replacement lounge per SLOA IV will be satisfied. Additionally, this relocation
supports the broader operational objectives to relocate UA’s operations from Concourse A to
Concourse B.
Diversity in Contracting
A 19% WMBE Aspirational Goal has been set for the Concourse B lounge project.
DETAILS
In March of 2021, Commission authorized $26,000,000 for the Airline Realignment project. Of
this amount, $4,400,000 was authorized for an MOA with UA for the design of the like-for-like
lounge replacement at their new location.
Subsequent Commission actions advanced the broader Airline Realignment project, which is
projected to reach substantial completion Q3 2026. As part of those actions, the Port informed
Commission of UA’s design start and informed Commission the UA lounge project would return
with future authorization requests to complete the project and execute the construction TRA.
This is that follow-on action.
Today’s $3,752,000 budget increase request addresses the UA Lounge project costs and Airline
Realignment funds needed to reach substantial completion of the lounge and airline realignment
in general. $3,252,000 is allocated to the UA lounge. This increases the total UA Lounge budget
from the estimated $18,000,000 to $21,252,000. This increase is primarily driven by cost
escalation associated with construction market conditions and finalizing construction design
from a 2021 estimate. The remaining $500,000 is included to address any future potential risks
related to the Port-managed scope portion of the Airline Realignment project.
Scope of Work
(1) Construct a new 7,181 square-foot, Concourse B UA Lounge under a TRA with UA.
(2) Complete the balance of the Port-managed Airline Realignment project, including any
subsequent work to address risks that could not be mitigated within the current
construction budget.
Schedule
Activity
Construction start for United Lounge
2026 Quarter 3
In-use date
2027 Quarter 4
COMMISSION AGENDA – Action Item No. 10a Page 3 of 5
Meeting Date: July 14, 2026
Template revised June 27, 2019 (Diversity in Contracting).
The following table summarizes the current budget, requested budget increase, and revised total
project budget for both the Airline Realignment scope and Concourse B UA Lounge project under
the shared CIP.
Cost Breakdown
Current Budget
Budget Increase
Revised Total Budget
Airline Realignment
Scope
$136,500,000
$500,000
$137,000,000
Concourse B UA Lounge
$18,000,000
$3,252,000
$21,252,000
TRA Value
$13,600,000
$1,900,000
$15,500,000
Other project costs
$4,400,000
$1,352,000
$5,752,000
Total
$154,500,000
$3,752,000
$158,252,000
ALTERNATIVES AND IMPLICATIONS CONSIDERED
Alternative 1 – Approve only the UA Lounge budget increase of $3,252,000 and TRA execution.
Do not approve the Airline Realignment budget increase of $500,000.
Cost Implications: $3,252,000
Pros:
(1) This is the lower cost alternative.
(2) Funds would remain available for other Aviation capital priorities.
(3) Allows UA lounge to co-locate their lounge with current gate assignments.
Cons:
(1) The Airline Realignment project may need to return to Commission at a future date for
additional funding if necessary.
This is not the recommended alternative.
Alternative 2 – Increase both project budgets and authorize the TRA execution to deliver the
Concourse B UA Lounge and complete remaining Airline Realignment scope.
Cost Implications: $3,752,000. This results in a total estimated project cost of $158,252,000.
Pros:
(1) Fulfills the Port’s like-for-like replacement obligation under SLOA IV.
(2) Provides a permanent replacement lounge on Concourse B that aligns with UA’s
relocated operations.
(3) Supports completion of remaining Airline Realignment scope.
(4) Supports improved gate utilization and continued optimization of international-capable
Concourse A facilities.
Cons:
(1) Funds will be unavailable for other uses.
(2) This is the higher cost alternative.
This is the recommended alternative.
COMMISSION AGENDA – Action Item No. 10a Page 4 of 5
Meeting Date: July 14, 2026
Template revised June 27, 2019 (Diversity in Contracting).
FINANCIAL IMPLICATIONS
This request increases the overall Post-IAF Airline Realignment project budget by $3,752,000,
resulting in a revised total estimated project cost of $158,252,000. Of the $3,752,000 increase,
$3,252,000 is for the Concourse B UA Lounge and $500,000 is for remaining Airline Realignment
scope that is directly managed by the Port.
The Concourse B UA Lounge total project cost is now projected at $21,252,000. The $15,500,000
construction TRA with UA is included within the $21,252,000 UA Lounge total.
The current authorization request is $17,352,000. This authorization request includes previously
budgeted but not yet authorized funds, plus the current $3,752,000 budget increase, and
provides the authority needed to execute the UA construction TRA and authorize the revised
total project budget.
Cost Estimate/Authorization Summary
Capital
Expense
Total
COST ESTIMATE
Original estimate
$35,000,000
$35,000,000
$70,000,000
Previous changes – net
$153,575,000
$925,000
$154,500,000
Current change
$2,711,000
$1,041,000
$3,752,000
Revised estimate
$156,286,000
$1,966,000
$158,252,000
AUTHORIZATION
Previous authorizations
$139,975,000
$925,000
$140,900,000
Current request for authorization
$16,311,000
$1,041,000
$17,352,000
Total authorizations, including this request
$156,286,000
$1,966,000
$158,252,000
Annual Budget Status and Source of Funds
This project, CIP C801158 was included in the 2026-2030 capital budget and plan of finance with
a capital budget of $153,575,000 and an expense budget of $925,000 for a total cost of
$154,500,000. This request increases the total project budget by $3,752,000, from $154,500,000
to $158,252,000. The budget increase supports both the Concourse B UA Lounge and remaining
Airline Realignment scope. As reflected in the Cost Estimate/Authorization Summary, the current
budget increase includes $2,711,000 capital and $1,041,000 expense.
The requested budget increase for the Concourse B UA Lounge and the supplemental increase
for Airline Realignment scope is presented together because they are part of the same CIP and
share the same funding source. Funding sources will remain consistent with the broader Post-IAF
Airline Realignment project.
COMMISSION AGENDA – Action Item No. 10a Page 5 of 5
Meeting Date: July 14, 2026
Template revised June 27, 2019 (Diversity in Contracting).
Financial Analysis and Summary
Project cost for analysis
$158,252,000
Business Unit (BU)
Gates
Effect on business performance
(NOI after depreciation)
NOI after depreciation will increase due to inclusion of
capital (and operating) costs in airline rate base.
IRR/NPV (if relevant)
N/A
CPE Impact
$0.49 in 2028
Future Revenues and Expenses (Total cost of ownership)
The project team is working with Aviation Maintenance and Facilities and Infrastructure groups
to finalize the existing asset data and coordinate the phased delivery of in-use assets. Operating
and maintenance costs for new infrastructure and systems will be determined later.
ATTACHMENTS TO THIS REQUEST
(1) Presentation slides
PREVIOUS COMMISSION ACTIONS OR BRIEFINGS
June 25, 2024 – The Commission authorized the balance of the Post-IAF Airline Realignment
construction scope and noted that the UA lounge would return under a separate
reimbursement agreement and future authorization request.
January 9, 2024 – The Commission authorized $7,500,000 to advance the project schedule
for the Post-IAF Airline Realignment project.
September 26, 2023 – The Commission authorized $14,400,000 for enabling construction
work, procurement of long lead items, an increase in project authorization, and execution
of a project labor agreement for the Post-IAF Airline Realignment project.
September 12, 2023 – The Commission was briefed on program status and the schedule for
future authorization requests.
February 14, 2023 – The Commission authorized $7,000,000 to amend a project-specific
design contract and execute a change order to the GCCM pre-construction services
contract for the Post-IAF Airline Realignment project.
March 23, 2021 – The Commission authorized $26,000,000 for project-specific service
agreements, GCCM pre-construction services, Port crews, and an MOA with UA in support
of the Post-IAF Airline Realignment project.
