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Concession Redevelopment Los Angeles International Airport Board of Airport Commissioners August 9, 2010.

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Presentation on theme: "Concession Redevelopment Los Angeles International Airport Board of Airport Commissioners August 9, 2010."— Presentation transcript:

1 Concession Redevelopment Los Angeles International Airport Board of Airport Commissioners August 9, 2010

2 2 Terminals 1, 2, 3, 6, Bradley and Encounter Updates presented to the Board of Airport Commissioners –December 21 –February 16 –May 17 –August 9 (today)

3 3 Why Use Terminal Commercial Manager Model? Consistent Findings: 1.LAX concessions underperform relative to other airports, and have been losing ground 2.Underperformance will cost LAWA revenue in the future and the revenue is needed given our future debt service obligations 3.Concession development can be used to improve the condition of terminals 4.Major concession agreements expire on December 31, 2010, excluding TBIT and duty free 5.Bradley West opening requires that new concession operators participate in design and construction processes 6.Terminal Commercial Manager is the best solution for LAWA 1.Sales and LAWA Revenue 2.Expanding concessions footprint and improving terminal areas 3.ACDBE opportunities 4.Concepts valued by passengers 5.Revitalizing concessions over the duration of long-term agreements

4 4 Historical Context - Change since 1998 LAX lags other large airports in growth in spend rate over the last decade Without a modified course of action LAX will likely continue to fall behind

5 5 Future Potential – Improve Passenger Satisfaction and Revenue Passenger Satisfaction - Higher sales/passenger is the best available metric Sales Potential – Operating at the higher end of airport industry scale, LAX should (x-duty free sales): –Realize $54m-$108m in additional annual sales –Results in $500m-$1.0b of additional sales over the life of the concession agreements LAWA Net Revenue - Improving concession fee structures will determine how much of the potential upside LAWA would receive

6 6 Changes Since Last Update 1.Uncertainties regarding Terminals 4, 5, 7, and 8 1.Phasing plans 2.Construction schedule 3.Alternative implementation plans undecided at this time 2.Schedule for other terminals 1.LAWA closed on the Terminal 2 transaction on June 30 2.Expiration date for current concession agreements (December 31, 2010). New operators in Terminals 1, 2, 3, and 6 not expected to be in place before expiration. 3.Window for coordinating with Bradley West design team is closing 4.Risk of affecting Bradley West opening date has increased

7 7 Current Bradley West Schedule Assessment Waiting for resolution of 4, 5, 7, and 8 causes delays on remaining program Approval process schedule needs to be considered and lengthened Running fewer parallel processes helps schedule Bradley West Concession Development Task Base Case Duration (in weeks) Revised Duration (in weeks) Weeks Gained or Lost from Revisions Draft RFQ Issued for comment312 Comments considered422 Final RFQ Issued110 Responses developed by proposers844 Evaluation by LAWA1037 Certification of qualified list642 RFP Issued to qualified list110 Responses developed proposers16124 Award816-8 TCM designates subtenants12 0 TCM design20164 LAWA approval of design844 Plan check/bid110 Final permits110 Total Weeks997821 Weeks (until April 2012)77 Schedule deficit-22

8 8 Revised Competitive Process – Three Shorter Phases 1.Qualify Use one RFQ to create a qualified list for all available terminals – Eliminate concept of RFQs based on specified terminal grouping Focus would be on experience with TCM models elsewhere – Not about ideas for LAX Evaluation committee would score responses to create qualified list 2.Propose Facility groupings determined at RFP stage (rather than the earlier RFQ) All qualified prospers would be invited to propose on any LAWA-defined terminal group Proposals would require LAX-specific conceptual design, marketing plan, ACDBE program, transition plan, financial proposals, etc. Degree of design development would be reduced from previous plans to accelerate schedule Evaluation committee would score and ranked responses 3.Award Board award would be in the form of a “Management and Development Agreement” which would automatically convert to a “Concession and Lease Agreement” upon satisfactory completion of a “Definitive Improvement Plan” #2 ranked firm would be on stand-by for each opportunity if the “Definitive Improvement Plan” fails to materialize Each TCM would manage incumbent concessionaires in assigned terminals while “Definitive Improvement Plan” is in development TCM would select subtenant operators of areas in terminals after award

9 9 Proposed TCM Scope and Services - No Changes Required and Optional –Design and construction of terminal improvements, including concession shell space –Funding improvements –Developing phasing and transition plans –Managing initial and recurring subtenant leasing process –Managing construction by subtenants –Developing opportunities for subtenants providing the following services Food & beverage, retail, free wifi, vending, ATM, currency exchange, business services, per-use and common-use lounges Excluded –Advertising/media –Self-operating concession areas –Subleasing to duty free operations and other airport-wide concessions (e.g., pay phones, luggage carts)

10 10 Next Steps Issue draft RFQ for comment Receive comments and issue one RFQ for all terminals Finalize terminal groups and prepare RFP Above scheduled for completion before September 20 Receive RFQ responses and finalize list of qualified firms Issue RFPs Total duration of tasks listed above is about four months

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