1. 1 CMAA Owners’ Forum May 2010 American Airlines Ken Bower, MD Facilities

2. 2 AMR Capital Planning  An annual forecast of all capital needs They are grouped into one of the following categories: 1) business critical, 2) has a quick ROI, 3) a regulatory requirement or 4) improves the customer experience  Capital spending falls into the following six asset categories –Aircraft –Facility –Interior A/C Modification –Other A/C Modifications –Ground Equipment –Computer

3. 3 PROPOSED PROJECTS 2010 Project NameAsset Type2010 $,000DeptLocation BOS Admirals Club Facility$ 2,200MKTGBOS BWI GSE & Cargo Relocation Facility1,050CargoBWI HDQ Campus Furnishings Facility7,500CREHDQ HDQ FTA Central Plant Analysis Facility388CREHDQ HDQ TCC Refurbishment and Remodel (3 Yr Plan) Facility1,000CREHDQ JFK Admirals C Club Expansion Facility4,100MKTGJFK JFK Concourse B Scanners Facility900DCSJFK JFK Expand FIS Recheck Facility Facility1,344DCSJFK JFK Hangar 10 Fire Alarm Facility400DCSJFK JFK Interstitial Level Ventilation Facility600DCSJFK JFK Master Plan Baggage Facility335DCSJFK JFK Relocation to Nippon Cargo Facility Facility7,124DCSJFK LAX Prelim A&E In-Line Bag Screening System Facility3,235DCSLAX LAX Priority Check-in Facility260DCSLAX LGA Admirals Club Executive Center Facility 500DCSLGA LGA Admirals Club Refurbishment Facility1,500DCSLGA LGA Brick Restoration Facility300DCSLGA LGA Concourse D Security Checkpoint Facility800DCSLGA LGA Concourse D Upgrade Facility2,475DCSLGA LGA Escalator Facility4,100DCSLGA

4. 4 PROPOSED PROJECTS 2010 Project NameAsset Type 2010 $000 DeptLocation LGA Fire Alarm Replacement Hgr 1,3,5 Facility$ 380DCSLGA LGA Prelim A&E Fees In-Line Bag Screening Facility822DCSLGA LHR Admirals Club Facility9,937MKTGLHR MIA Capitalized Management Costs Facility400CREMIA MIA Communications Infrastructure Facility196CREMIA MIA Conveyor & Airfield Equipment Facility512DCSMIA MIA Early Bag Storage System Facility312DCSMIA MIA Flagship Lounge Facility995MKTGMIA MIA North Terminal Expansion - CRE Facility1,495CREMIA MIA Program Contingency Facility640CREMIA MIA Regional Commuter Facility Facility570DCSMIA MIA Sabre Infrastructure & Equipment Facility609DCSMIA ORD- Baggage Handling System Upgrade (BHS Computer) Facility206DCSORD ORD Hanger 1&2 Fire Protection Facility5,650DCSORD ORD Jet-bridges Facility5,200DCSORD RNO Right Sizing Facility150DCSRNO SFO Admiral Club Refurbishment Facility1,077MKTGLHR SFO Terminal Move Facility240DCSMIA TUS SWRO UPS Replacement Facility176CREORD YYZ Admirals Club Relocation Facility150MKTGORD

5. 5 Departmental Guidelines  If a firm is interested in doing work for American…it will go through a comprehensive prequalification process – Complete our standard qualification form and get that in front of the right person –Include all pertinent company information, i.e. staff, financials, experience, etc  AA requires that all qualified firms must have: –Airport experience –Project type of experience

6. 6 Departmental Guidelines  We only use AA standard contracts  Normally, Initial project funding will provide for design services through the Design Development Phase –A&E agreement : compensation based upon DLM – cost estimate / schedule  Estimate is basis for creation of construction funding document used to gain company approval. –Over $25M …..must be approved by BOD

7. 7 Departmental Guidelines  AA Project Manager Responsible for development of project’s business plan, i.e. project implementation/delivery  For those projects that exceed $10M, AA will typically secure additional resources to assist the Project Manager – Project auditor/accountant –Contract project manager  For those projects that exceed $50M we will secure supplemental staff via: –Program Manager –Construction Manager –Extended A&E Services

8. 8 Recipe for Project Delivery  Selecting a project delivery method is a lot like ordering off a menu at a NY diner  Everyone here is aware that there are numerous methods and that the language and terms used for each can be confusing  Design-Bid-Build: The most tried and true way to contract for a project. Owners hires architect to design and prepare contract documents, general contractor then bid on the documents with the successful bidder being awarded a contract to build it. –Considered by American to be the safest option –In theory, it may be the slowest way to execute a project

9. 9 Recipe for Project Delivery  Design-Bid-Build: (cont) –It is price driven and prices may reflect an artificially low bid/s –Owner must have in-house expertise and resources to play the game –Provides owner with desired checks and balances  Design –Build: Owner elects to secure services for design and construction from a single entity. –Faster project completion –Enhanced communications between A/E & contractor –Fewer administrative duties –A/E under contractor…owner loss of control over designer

10. 10 Recipe for Project Delivery  Design –Build: (cont) –No checks and balances –Requires owner’s in house staff resources with an additional challenge  Construction Management: A method of delivery with the most variations There are three basic ways to use with the manager acting as an advisor, an agent or at risk constructor –CM-Advisor : Contractual relationship is with owner to oversee the designer and contractor *Something goes wrong…CM says “sorry” as he is not financially at risk *Additional cost to owner *More appropriate for large projects and owners without in-house resources *No guarantees to owner

11. 11 Recipe for Project Delivery  Construction Management: (cont) –CM-Agent : Contractual relationship is with owner acting as its agent, CM administers the construction throughout the planning design and construction phases of the project. *Usually empowered to act in behalf of the owner, but, CM is not financially at risk for anything that may go wrong –Owner still holds separate contracts with designer and general contractor and/or various prime subs –CM not responsible for means or methods *Additional cost to owner *More appropriate for large projects & owners w/o in-house resources *No guarantees to owner

12. 12 Recipe for Project Delivery  Construction Management: (Cont) –CM-at -Risk: Perhaps the most popular model with most owners The CM is hired by owner and engaged during the initial stages of design and ultimately becomes the general contractor *Owner gains expertise of builder early in the project’s development. *Removes any ‘mystery’ of pricing for the contractor * Cost and schedule of the project are guaranteed  Program Management: The PM serves an ‘owners representative’ in all aspects –Any company with restricted resources or is lacking in-house expertise –True PM is also completely free from any conflict of interest

13. 13 Recipe for Project Delivery  So how many project delivery methods are there? –Traditional ‘Design-Bid-Build ‘and … –The ‘Team Approach’  You can use any term you want….general contractor, design- builder, construction manager, program manager or any other names ….… –They all simply help describe how you want to assign design and construction responsibilities….and –They all work off of the customary owner-architect-contractor relationships

14. 14 What AA’s Menu Looks like  So which project delivery system is best….from one owner’s perspective it is the one that : –Has the right People (integrity, confidence and trust) –Completes the project within Budget –Completes the project on Schedule –Has the ability to cost effectively Manage Change –Produces uncompromising Quality –Delivers a Safe work environment –Provides for DMWBE participation –Provides the Resources necessary to get the job done

15. 15 This Owner Selected the wrong Delivery Method

16. 16

17. 17 Intro  Thank you……………… I do recall that there was a pre-AMR life for me …but time has blurred the details?  Following the suggested framework…I will start by touching upon AMR’s programs and plans related to capital construction  Slide 1 AMR Capital Planning

18. 18 AMR Capital Planning Talking points  The following two slides represent the majority of the projects that actually made the 2010-2011 Capital plan  Each department, division, station compiles its list of projects along with a brief description/scope of work…..this is often referred to as the “wish list”  Process begins each September and is completed in January when the final project list is reviewed with the BOD

19. 19 Talking points slides 3/4  Over 90% of the projects in any given year will be under $10M  The majority of the capital dollars spent in any given year will be spent at our “corner posts”….. –DFW….MIA….ORD…..New York…..LAX  This list reflects a projected CRE capital spending of $65M in 2010 and $42M in 2011  In comparison we spent in: –2005….$275M

20. 20 A&E Selection Process  RFP’s are issued by the responsible project manager  Proposals are requested by invitation only and are evaluated and rated based upon a number of subjective as well as a number of quantitative measures: –People & related experience –Consultants & related experience –Hourly rates and total fee must be competitive –DMWBE participation with a goal of 22%

21. 21 CRE Departmental Guidelines  Bid Threshold –Less than $25K…..local project (CRE not required) –$25k to $50K……CRE managed & can sole source the work –Excess of $50K……CRE managed and competitively bid  AMR uses Standard Contracts for professional services and construction *Stipulated Sum *Time and Material (GMAX, Cost Plus, Unit Price)

22. 22 CRE Contractor Selection Process  AA Project Manager responsible for establishing list of contractors to be invited to bid. –All firms must have been prequalified *Previous experience with: –American – work on airport –projects of similar type and size –References: Firm and staff –Financial strength –Willingness to sign standard contract