George Bush Intercontinental Airport Master Planning Principles of Lasting Results September 8, 2014

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Agenda

Brief history of planning at IAH

Activity at IAH Today and Forecasted

Master planning principles ― Flexibility in capital plans ― Strategy ― Partnership

Principles in action: planning of a new international terminal

Introduction History of IAH

Past planning examples

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IAH in 1978 (before deregulation)

A B

Point-to-point service mandated by regulation;

Two runway airfield;

5 Houston Airport System and United Airlines Master Plan Briefing

Two innovations in the 1960s made Houston cutting edge

Bring the airplanes to the passengers ― Minimized walking distances to planes providing four

concourses at each corner of the terminal; ― Allowed passengers to dwell in terminal area longer,

“eliminating the need for the passenger to travel to the gate before the flight is called”

― Downside: small departure lounges with inadequate space for concessions

Terminal exits in six directions ― Minimized walking distances to cars by allowing

elevators to parking on roof of terminal or going to lower level to take train

― Separated pedestrian and vehicle traffic for “safety, comfort, and convenience”

― Downside: led to 8 curbfronts for just two terminals

Planning in the 1960s

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IAH in 1990 (Continental hub)

A B C D

Connecting hub airport;

Four runway airfield;

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IAH in 2014 (United Hub, Latin American Gateway)

A B C D

E

Connecting hub airport;

Five runway airfield;

FIS

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Central FIS – Planning in the late 90s

Activity Today & Forecasted Population growth

Forecast passengers Forecast of operations

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About Houston

Largest City in Texas Fourth largest city in

the U.S. 2 million people in City

limits 6 million people in

Houston-Galveston region Strong energy-based

economy

IAH

EFD HOU

Introduction

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The Houston MSA is expected to grow by 3.4 million people (55%) by 2035

0.0%

0.5%

1.0%

1.5%

2.0%

2.5%

3.0%

1990-2011 2011-2016 2016-2021 2021-2026 2026-2035 2011-2035

Com

poun

d an

nual

gro

wth

rate

POPULATION GROWTH RATES

Houston MSA

United States

Sources: Houston MSA: Houston-Galveston Area Council; U.S.: Woods & Poole, Economic and Demographic Projections, 2011.

Forecast Historical

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IAH enplaned (boarding) passengers are expected to double by 2035

-

5

10

15

20

25

30

35

40

4519

9019

9219

9419

9619

9820

0020

0220

0420

0620

0820

1020

1220

1420

1620

1820

2020

2220

2420

2620

2820

3020

3220

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Enpl

aned

pas

seng

ers (

mill

ions

)

International

Domestic

Compound Annual Growth Rate 2011 - 2035 2.4% 4.9% 3.0%

Compound Annual Growth Rate 1990 - 2011

Domestic 3.4% International 6.7%

Total 4.0%

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IAH aircraft takeoffs and landings expected to grow to 840,000 by 2035

- 100 200 300 400 500 600 700 800 900

1,00019

9019

9219

9419

9619

9820

0020

0220

0420

0620

0820

1020

1220

1420

1620

1820

2020

2220

2420

2620

2820

3020

3220

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Airc

raft

ope

ratio

ns (t

hous

ands

)

Air carrier Air taxi General aviation and military

Compound Annual Growth Rate 2011 - 2035 2.1% 1.7% 1.9%

Compound Annual Growth Rate 1990 - 2011

Air carrier 1.7% Air taxi 7.0%

Total 2.5%

Master planning principles

Flexibility Strategy

Partnership

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Plan for the market – not the airline ― Reflect the values of City of Houston ― Address rapid growth in international activity ― Address the continued growth of the domestic spoke airlines (e.g. Spirit, Delta, American)

Start with the end in mind ― Inform near-term planning decisions ― Develop a financial framework to get you there

Don’t neglect the near-term ― Address current issues to keep the airport in business ― Provide incremental improvement

Strategy – how we mirror our strategic plan in our facility planning exercises

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Terminal planning ― Provide clear spans wherever practical ― Plan for common use ― Invest in planning and design to provide for change (flexible apron layout)

Airfield planning ― Start with the ultimate layout of site and work backwards ― Consider the incremental cost of providing for one standard beyond what may be required

(e.g. plan for ADG V aircraft rather than ADV IV in your near-term fleet)

Revisit the CIP often ― Revise the priorities on a yearly basis to accommodate changes in the market ― Prune projects that no longer appear justified ― Advance projects that generate revenues ― Defer projects that appear to have merit but are not yet ripe for implementation ― Maintain what you have, don’t defer maintenance to the point of detrimentally affecting a

healthy operation

Flexibility – how we ensure the plan can adapt to future unforeseen changes

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Partnership — airport management and airlines must act as a team

No major capital improvements will be forced upon the airlines

The cost structure will be fair to all airlines serving the market

The balance sheet for Houston Airport System must remain strong

Three core principles guided our partnership with our airlines:

Throughout the airline consultation disagreement on the details would require falling back to agreed-upon principles

With endgame in mind, the parties were able to work through more minor disagreements

Fair cost structure was defined through benchmarking

“we might not like the leveraging of PFCs for that particular project, but in the end, if the rates and charges are reasonable…we can live with it.”

Principles in action International terminal

planning example

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What is driving new international terminal development

Growing international service in the last two years ― Air China ― Interjet (Oct 2014) ― Korean Air ― SAS ― Turkish Airlines ― Lufthansa (upgrade to A380 Aug 12) ― Emirates (upgrade to A380 Dec 14)

Functional deficiencies ― Failing building systems ― Increasing O&M expenses ― Insufficient airline club space ― Inefficient use of space ― Gate reconfiguration to accommodate

the A380

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Refresh, circa 2010 ― Aesthetic improvements to existing Terminal D ― $429M in 2013 USD ― 13 narrowbody equivalent gates (NBEq*) ― No new capacity relative to existing facility

Renovate, mid-2012 ― Rehabilitate existing building, add single pier ― $710M in 2013 USD ― 789k square feet – 4 stories (existing building ~480k sf) ― Meets code, adds club and concession space ― 20 NBEq; net addition of 7 new NBEq

Rebuild, late 2012 ― Rebuild entire building, add single pier ― $713M in 2013 USD ― 715k square feet – 3 stories ― 20 NBEq; net addition of 7 new NBEq ― Meets code, adds club and concession space ― Adds additional roadway lane and curb and ticket hall depth

Concepts considered prior to master planning process

* NBEq aircraft: 739 with winglets

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Focused only on the needs of foreign flag airlines ― Financial risk to HAS unacceptably high ― High cost structure for airlines using the building ― Insufficient building utilization throughout the day

Provided insufficient capacity enhancement at great cost ― Inability to accommodate the hub carrier United

and their need for additional international gates ― Inability to accommodate new entrant airlines

Failed to address related facilities ― Expansion of the FIS ― Baggage handling system capacity ― Terminal roadway and curbfront congestion ― Utility Infrastructure Problems

The previous terminal concepts were rejected

Inconsistent with our strategic plan for balance capacity

Would not increase flexibility

Lacked partnership with multiple airlines

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We identified goals that we share with our airline partners

HAS Perspective Airline Perspective

Growing international passenger demand

Seeks to accommodate new entrant demand and provide excellent customer experience

Seeks to capture increasing share of profitable international market segment

Operational efficiency Seeks low-cost, flexible improvements

Seeks efficient airfield and terminal operations for profitability and operational flexibility

Aging legacy infrastructure

Seeks to bring infrastructure to reasonable condition and minimize operational disruptions

Seeks competitive cost structure for required investments; required new international capable gates

Passenger experience

Seeks to reduce terminal curb and road congestion and provide excellent in-terminal customer experience

Seeks modern facilities, comparable to other terminals, at reasonable cost

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Mickey Leland International Terminal (MLIT)

Source: Mickey Leland International Terminal Program Definition Manual, HNTB, June 30, 2014.

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Addressed both United Airlines’ and the foreign flag airlines need for additional international arrival gates in the near-term

Common use facility would be most efficient use of capital

Financial risk shared by United Airlines and the foreign flag airlines lower unit the costs given greater use of the building throughout the day

No second FIS would be required (a second FIS was required for the East Terminal and/or United’s proposed expansion of Terminal B)

Minimum connect times would remain same as in today’s terminal configuration

Minimal environmental impacts as the site is already in use

MLIT advantages over previously considered concepts

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Flexibility ― Open spans allow for the evolution of the ticketing lobby, security checkpoint, and

departure lounges ― Aircraft parking positions provide for the spectrum of fleet: A380s, widebody, narrowbody

and regional jets

Strategic approach ― Common use facility designed with the market demand, in mind, as opposed to the

individual airlines ― Account for continued airline consolidation and airline alliances (e.g. alliance clubs) ― Provides capacity enhancement and greater operational efficiency

Partnership driven ― Reasonable capital investment which will provide certainty with regard to airline cost

structure ― Plan enjoys consensus of airlines ― Financial risk spread among all airlines and the City of Houston

MLIT – How will the plan “stand the test of time”

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Thank You

Source: Mickey Leland International Terminal Program Definition Manual, HNTB, June 30, 2014.