APPENDIX B 

FORM OF OPINION OF BOND COUNSEL 

New Jersey Economic Development Authority 

~6 West State Street 

P.O. Box 990 

Trenton, New Jersey 08625 

Re: New Jersey Economic Development Authority 

Special Facility Revenue Bonds 

(Continental Airlines, Inc. Project), Series 1999 

Ladies and Gentlemen:· 

[Date of Closing] 

We have acted as b~nd ~ounsel to the. ·New Jersey Economic Development Authority (the 

"Authority") in connection With the issuance by the Authority of its Special Facility Revenue Bonds 

(Continental Airlines, Inc. Project), Series 1999 in the principal amount set forth in the Indenture (as 

defined below) (the "Bonds"). The Bonds are dated, mature, bear interest and are subject to 

redemption and tender prior to maturity upon the terms and conditions stated therein and in the 

Indenture. All capitalized terms used herein and not defined herein shall have the meaning ascribed to 

such tenms in the Indenture. 

The Bonds are issued under and pursuant to the New Jersey Economic Development Authority Act, 

constituting Chapter 80 of the Pamphlet Laws of 1974 of the State of New Jersey, approved August 7, 

197 4, as amended and supplemented (the "Act"), resolutions adopted by the members of the Authority 

on April 14, 1998 and July 13, 1999, authorizing, among other things, the issuance of the Bonds, and an 

Indenture of Trust dated as of September 1, 1999 (the "Indenture") between the Authority and Chase 

Bank of Texas, National Association, as trustee. 

Concurrently with the issuance of the Bonds, the Authority and Continental Airlines, Inc., a Delaware 

corporation· ("Continental") have entered into two Lease Agreements each dated as of September 1, 

1999 (collectively, the "Lease") which provide for, inter alia, the sub-sublease of the Leased Premises 

from Continental to the Authority, the sub-sub-sublease of the Leased Premises from the Authority to 

Continental, the proceeds of the Bonds to be used by Continental to finance the costs of the Project (as 

defined below), and for the lease of the personal property financed with the proceeds of the Bonds from 

the Authority to Continental. . · . 

Pursuant to the Indenture, the Authority has tran-sferred and assigned to the Trustee certain of its 

right, title and interest in the Continental Sublease (as defined in the Lease), subject to certain reserved 

rights as described therein. The Bonds are also secured by a Guaranty Agreement dated as of 

September 1, 1999 from Continental to the Trustee for the benefit of the Owners of the Bonds (the 

"Guaranty") and Continental's obligations under the Guaranty are secured by a Leasehold Mortgage 

dated as of September 1, 1999 from Continental to the Trustee. 

The Bonds are being issued for the purpose of financing: (i) the construction of a new concourse 

and related facilities to be known as Concourse C-3 and related improvements and certain subsurface 

improvements; ( ii) the renovation and modification of the existing concourses and support areas at 

Concourses C-1 and C-2 and related improvements, including but not limited to, the renovation of the 

Presidents' Club, the renovation of public restrooms, modifications designed to improve passenger flow, 

the refurbishing of elevators, the relocation of administrative offices, the renovation of flight attendant 

crew areas, the modification of baggage claim areas, the installation of preconditioned air units at certain 

jet bridges, the construction of an international ticket counter and bag systems, the reconfiguration of the 

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lobby to expand electronic ticket processing capabilities and the renovation of ramp level airport service 

facilities and also including certain subsurface improvements; (iii) the renovation and modification of 

gates at Concourse A-2 and related Improvements and certain subsurface improvements; ( iv) the 

purchase and installation of machinery and equipment for all of the foregoing, and (v) the payment of 

issuance costs incurred by Continental for the Bonds and the capitalization of interest on the Bonds 

(collectively the "Project"). 

As Bond Counsel to the Authority, we have examined the Act and the proceed·lngs relat"lng to the 

authorization and issuance of the Bonds including, among other things: (a) certified copies of the 

resolutions of the Authority authorizing the issuance of the Bonds, execution and delivery of the 

Indenture, the Lease, and other necessary action; (b) an executed Bond; (c) the executed Indenture 

and Lease; (d) the opinions of Jeffery A. Smisek, Executive Vice President and General Counsel of 

Continental and Jones, Day, Reavis & Pogue, special counsel to Continental, on which we have relied, 

with your permission, as to the matters set forth therein; (e) the opinion of Charles Waters, Esq., counsel 

to the Trustee, on which we have relied, with your permission, as to the matters set forth therein; (f) the 

Representation Letter of Continental, on which we have relied in expressing the opinion set forth in the 

following Paragraph 5; and (g) various certificates executed by the Authority and Continental including a 

certificate pursuant to Section 148 of the Internal Revenue Code of 1986, as amended (the "Code"). 

The Code imposes certain requirements which must be met on a continuing basis subsequent to the 

issuance of the Bonds ih order for interest on the Bonds to be excluded from gross income for federal 

income tax purposes under Section 103 ·of. the Code, including, among other things, requirements 

relating to rebate of arbitrage, investment limitations; use of proceeds for qualtfying airport facilities, 

limitations with respect to payment of issuance costs and acquisition of land, used property and 

prohibited facilities. Failure of the Authority or Continental to comply with such requirements may cause 

interest on. the Bonds to be included in gross income for fedimil income tax purposes, retroactive to the 

date of issuance of the Bonds. Except as otherWise expressly permitted by the Bond Documents, the 

Authority and Continental have covenanted not to take any action or fail totake any action which would 

cause the interest on the Bonds to be included ·in gross income under Section 1 03 of the Code as in 

effect on the "date of issuance of the Bonds. We have assumed, with your permission, continuing 

compliance by the Authority and Continental with the above covenants in rendering our federal income 

tax opinion with respect to the exclusion of interest on the Bonds from gross income for federal income 

tax purposes. 

Based upon and subject to the foregoing and· the further assumptions and qualifications set forth 

below, we .are of the opinion that: - . 

1. The Authority is a public body corporate and politic and an instrumentality of the.·State of 

New Jersey, duly and legally organized and validly existing under the Act, and is authorized to issue 

the Bonds for the purpose of financing, among other things, the Project. The Project is authorized to be financed under the Act. · ' . ·' · 

2. The Bonds have been duly authorized, issued and sold by the Auth.ority, are valid and 

binding special, limited obligations of the Authority, enforceable ·,n accordance with their terms and 

payable as to principal, interest and all other obligations thereunder solely from, and enforceable only 

against, amounts payable by Continental under the Lease and the other revenues arid rights 

assigned or pledged to the Trustee pursuant to the Indenture as security for the debt ev·ldenced by ihe Bonds. · · · · 

3. The Authority has the power to enterlnto and perform its obligations under the Indenture and 

Lease, which have been duly authorized, executed and delivered by the Authority and are valid and 

binding obligations of the Authority, enforceable ih accordance with their respective terms. 

4. The Authority has duly and validly assigned to the Trustee, as security for the Bonds, its 

rights and benefits under the.Continental Sublease, as and to the extent provided in the Indenture. 

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5. Based upon. existing law, intere.st on<the Bonds is.· excluded from the gross income of the 

·owners of the Bonds for federal income lax purposes pursuantto Section 103 of the Code, except as 

to interest on any Bond for any period during which such Bond is held I;Jy a person who is either a 

"sui;Jstanlial user" of the facilities financed.with the proceeds of the Bonds or a "related person" of 

such "substantial user," within the meaning of Section 147(a) of the Code. The difference between 

the initial public offering price.of the Bands at which price a substantial amount of each of the Bonds 

was sold and the principal amount payable at maturity of each of the Bonds constitutes original issue 

discount. The appropriate portion of the original issue discount allocable to the original and each 

subsequent owner of the Bonds will be treated for federal income tax purposes as interest not 

includable in gross income under Section 103 of the Code to the same extent as stated interest on 

the Bonds. The Bonds are "specified private activity bonds" under Section 57(a) (5) of the Code 

and, therefore, interest onthe Bonds will I;Je taken into account as an item of tax preference, for 

purposes of computing alternative minimum taxable income under Section 55(a) (2) of the Code. 

We express no opinion regarding any federal income tax consequences arising with respect to the 

Bonds other than the exclusion of interest on the Bonds for federal income tax purposes and the 

treatment of interest on the Bonds as an item of tax preference. We also express no opinion as to the 

treatment for purposes of federal income taxation of interest on the Bonds (i) upon a Determination 

of Taxability or (ii) the occurrence of any change or taking of any action upon the advice or approval 

of bond counsel other than McCarter & English, LLP. 

6. The interest on the Bonds and any gain on the sate thweof are exempt from the tax imposed 

by the existing New Jersey Gross Income Tax Act. We express no opinion as to the treatment for 

purposes of the New Jersey Gross Income Tax Act of interest on the Bonds or any gain on the sale 

thereof upon (i) a Determination of Taxability or (ii) the occurrence of any change or taking of any 

action upon the advice or approval of bond counsel other than McCarter & English, LLP. 

7. All consents, approvals and authorizations of any governmental or regulatory authority which 

are required to be obtained by the Authority in connection with the issuance or delivery of the Bonds 

or its entering into and performing its obligations under the Bonds, the Lease and the Indenture have 

been obtained, except that no opinion is expressed concerning compliance with state or federal 

securities law. 

The foregoing opinions are qualified to the extent that the enforceability of the Bonds, the Lease and 

the Indenture may be limited under bankruptcy, insolvency, moratorium or other similar laws or equitable 

principles affecting creditors' rights or remedies generally. 

The opinions expressed herein are limited to the taws of the State of New Jersey, exclusive of 

conflicts of taw provisions, and the taws of the United States. 

The opinions expressed herein are based upon the taws and judicial decisions of the State of New 

Jersey and the United States as of the date hereof and are subject to any amendment, repeal or other 

modification of the applicable laws or judicial decisions that served as the basis for our opinions, or taws 

or judicial decisions hereafter enacted or rendered. Our engagement by the Authority with respect to the 

opinions expressed herein does not require, and shall not be construed to constitute, a continuing 

obligation on our part to notify or otherwise inform the addressee hereof of the amendment, repeal or 

other modification of the applicable laws or judicial decisions that served as the basis for this opinion 

letter or of laws or judicial decisions hereafter enacted or rendered which impact on this opinion tetter. 
' ' 

We have made no investigation of, and express no· opinion on, the legality of. the proposed 

construction or use of the Project under applicable lederal, state or local laws or the compliance· of the 

proposed construction or use with ariy such laWs. 

. ~.' 

Very truly Y?urs, 

,_;•. 

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,-. r " 

APPENDIX C 

. SUMMARY OF CERTAIN PROVISIONS OF THE CONTINUING 

. DISCLOSURE AGREEMENT 

Continental Airlines, Inc: ("Continental") will enter into a Continuing Disclosure Agreement (the 

"Disclosure Agreement") with Chase Bank of Texas, National Association, as trustee (the "Trustee") in 

connection· with the issuance and sale 'of the Bonds. The Disclosure Agreement will require Continental to 

provide specified financial and operating data to several repositories described below on a continuing 

basis for owners of the Bonds:· No financial or operating data concerning the New Jersey Economic 

Development Authority. (the "Authority") wiHbe provided on. a continuing basis, and the Authority 

assumes and will have no. liability with ,respeqt to any of the information provided by Continental pursuant 

to the Disc;losure Agreement. 

Certain Definitions Used in the Disclosure Agreements 

The following terms, when used in the Disclosure Agreement or in this summary thereof, will have the 

meanings set faith below: 

''Dissemination Agent'' will mean the Trustee, acting. in its capacity as dissemination agent, or any 

successor dissemination agent designated in writing by Continental and which has filed with the Trustee 

a· written acceptance of such designation. 

"Exchange Act" will mean the Securities and Exchange Act of 1934, as amended. 

"Indenture" shall mean the Indenture of Trust, dated as of September 1, 1999, by and between the 

Authority and the Trustee pursuant to which the Bonds are being issued, as amended from time to time. 

"Lease Agreements" means, collectively, the Lease Agreement (Concourse C-3) and the Lease 

Agreement (Concourses C-1, C-2 and A-2), both dated as of September 1, 1999, between the Authority 

and Continental, as amended from time to time. 

''National Repository" will mean any nationally recognized municipal securities information repository 

identified by the SEC for purposes of the Rule. 

· "Repositories" will mean each National Repository and each State Repository. 

"Rule" will mean Rule 15c2: 12 (b) ( 5) adopted by. the SEC under the Exchange Act, i7 CFR 

240.15c2-12, as the same may be amended from time to time. 

"SEC" will mean the Securities and Exchange Commission. 

"State Repository" will mean any public or private repository or entity designated from time to time 

by the State of New Jersey as a state repository for purposes of the Rule. As of the date of the Continuing 

Disclosure Agreement, there is no' State Repository. 

"Underwriters" shall mean Goldman, Sachs & Co., Merrill Lynch, Pierce, Fenner & Smith Inc., 

Salomon Smith Barney Inc., Apex Securities, Inc., Bane of America Securities LLC, Chase Securities Inc., 

CIBC'World Markets Car[)., Gibraltar Securities Co., J~B. Hanauer & Co. and Lehman Brothers Inc . . -... ·' 

Obligation to Provide Annual Reports 

Continental has agreed that not later than the last day of the sixth month following the end of each of 

its fiscal years, commencing with the fiscal year ending December 31, 1999, it will file, or will cause the 

Dissemination Agent (il any) to file,_with each Repository an "Annual Report." Continental will give 

notice of any change in its fiscal year in the same manner as for a "Listed Event" described below. 

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Continental's Annual Report will consist of Continental's report on Form 1 0-K and the materials 

physically included .therewith or incorporated by reference therein, filed. by Continental with the SEC, or 

an incorporation by reference of such Form 1 0-K arid such other materials phys.ically included therewith 

or incorporated by reference therein. Continental has agreed that if it ceases to be a reporting company 

under the Exchange Act, it shall provide (a) its auditeo financial statements and operating data of the 

typewh'1ch would be-provided to the. SEC if Continental were a reporting company as well as (b) the 

information otherwise required in th.e Annual Report. The Disclosure Agreem'ent provides that ariy of the 

materials to· be provid~d by Continental under the Disclosure Agreement may be incorporated by 

reference from materials on file with the SEC or with each of the Repositories. 

Continental's audited financier statements shall be prepared· (a) so long as Continental· is a 

reporting company· 'under the Exchange Act, in accordance with the rules of the SEC for preparing 

audited financial statements to be filed as a part of a Form 10-K, and (b) if Continental shall·cease to be 

a reporting company, in accordance with generally accepted accounting principles. 

Oblig;ations to Report Certain Events 

Continental has agreed that when it has actual knowledge of the occu;rence of a. "Listed E~ent", it 

will determine if such event would constitute material information for owners of the Bonds and, if 

knowledge of the occmrence of such Listed Event is material, it will promptly report, or cause the 

Dissemination· Agent (if one is appointed) to report, the ·occurrence with (a) either the National 

Repositories or the Municipal Securities Rulemaking Board, (b) each State Repository and (c')' the 

Trustee. 

The "Listed Events" with respect to the Bonds include the following: 

(a) principal and ' interest payment delinquencies·, 

(b) non-payment related defaults; 

(c) unscheduled draws on any debt service reserves (if any) established with respect to the 

Bonds reflecting financial difficulties; 

(d) unscheduled draws on any credit enhancements (if any) with respect to the. Bonds 

reflecting financial difficulties; 

(e) substitution of credit or liquidity providers (if any) with respect to the Bonds or their failure 

to perform; 

(f)· adverse tax opinions or events affecting the tax-exempt status of the security;. 

(g) modifications to the rights of security holders; 

(h) Bond calls; 

(i) defeasances; 

(i) release, substitution or sale of property securing repayment of the securities; or 

(k) rating changes .. 

The Trustee has agreed in the Disclosure,)\greement that it will, within three business days of 

obtaining actual knowledge of any Listed Events, contact Continental and inform Continental of the Listed 

Event. 

Disclosure of Failure to Provide Annual Report ' ' 

If by (a) 15. business days prior to the date specified for provision of an Annual Report to each 

Repository, the Trustee has not received a copy of the Annual Report to be provided by Continental or the 

appropriate Dissemination Agent,. or (b)- the last day of the sixth month following the end of the 

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applicable fiscal year of Continental, the Trustee has not received notification from Continental that· an 

Annual Report has been filed with each Repository as required by the Disclosure Agreement, the Trustee 

will contact Continental and the appropriate Dissemination Agent (if any) to determine if Continental has 

complied with the obligation under the Disclosure Agreement to file an )\nnwil Report. In the ·event that 

Continental Has not complied with its obligation under the Disclosure Agreement to file an· Annual Report, 

the Disclosure Agreement obligates the Trustee to notify the State Repository and the National 

Repositories or the Municipal Securities Rulemaking Board of such failure. 

Termination of Continuing Disclosure Obligations 

The Disclosure Agreement provides that Continental's obligations thereunder will terminate on the 

legal defeasance, prior redemption or payment in full of the Bonds. The Disclosure Agreement further 

provides that if Continental's obligations under the Lease Agreements and the Disclosure Agreement are 

assumed in full by some other entity and Continental no longer has any liability as to the Bonds, such 

entity will be responsible for compliance with the Disclosure Agreement in the same manner as if it were 

Continental, and Continental will have no further responsibility under the Disclosure Agreement. The 

Disclosure Agreement further provides that it will also terminate upon (a) the Rule being withdrawn or 

having been found by a court of competent jurisdiction to be invalid, or (b) receipt by the Trustee and 

Continental of an opinion of counsel of nationally recognized expertise in matters relating to securities 

laws affecting municipal securities to the effect that the Rule is no longer applicable to the Bonds. 

Amendments to and Waivers of Disclosure Obligations 

Continental and the Trustee may amend the Disclosure Agreement (and the Trustee will agree to 

any amendment requested by Continental provided such amendment does not adversely affect the 

rights, duties or obligations of the Trustee under the Disclosure Agreement) and any provision of the 

Disclosure Agreement may be waived, if 

(a) such amendment or waiver arises from a change in legal requirements, change in law or a 

change in the identity, nature or status of Continental or the type of business conducted by 

Continental; 

(b) the Disclosure Agreement, as amended, would have complied with the requirements of the 

Rule at the time of issuance of the Bonds, after taking into account any amendments or interpretations of the Rule, as well as any change in circumstances; or 

(c) the amendment or waiver does not materially impair the interests of the owners of the 

Bonds, as determined by either ( 1) a party unaffiliated with Continental (such as bond counsel or 

other counsel of nationally recognized expertise in matters relating to the application of federal 

securities laws to municipal obligations who (or which) is not a full time employee of Continental), or 

(2) the approving vote of owners of the Bonds obtained in the same manner as an approving vote of 

owners of \he Bonds of an amendment to the applicable Indenture. 

Defaults and Remedies Under·the Disclosure Agreement 

If Continental fails to comply with any provision of the Disclosure Agreement, any owner of Bonds 

may, or the Tnustee may (and, at the request of any of the Underwriters or owners of not less than a 

majority in aggregate principal amount of the Bonds then outstanding, will), take such act'1ons as may be 

necessary and appropriate, including seeking an order· of mandamus or a court order of specific 

performance, to cause Continental to comply with its obligations under the Disclosure Agreement. A 

default under the Disclosure Agreement shall not be deemed to be an event of default under the 

Indenture or either Lease Agreement or to result in any pecuniary liability of Continental or the 

Trustee, and the sole remedy in the event of any failure of Continental to comply with the 

Disclosure Agreement will be an action to compel performance thereunder. 

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Beneficiaries of ·Disclosure Agreement 

The Disclos~r~ Agreement will inure solelyJo the benefit of the Authority, Coniinental, the Trustee, 

the,Under-Writers, imct the owners of the Bonds (including any person or entity which owns a beneficial 

interesi in a Bond). The Disclosure Agrf!ement cr.eates no, rights in any. other person or entity. · . . . . . . . . 

...... ···::: 

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CA 
APPENDIX D 

SUMMARY OF CERTAIN PROVISIONS OF.THE 

PRINCIPAL LEGAL DOCUMENTS . 

This Appendix o· contains certain information and descriptions relating to the Basic Lease, ine Port 

Authority Leases, the Lease Agreements, the Consent; the Indenture and the Guaranty. Such information 

and descriptions are not comprehensive and may not include all of the information that investors may 

believe is important. Prospective investors should read all of ihese documepts carefully before deciding 

to invest in the Bonds. Copies of all of. these documents are, available from Continental and the 

Underwriters during the ·initial offering period, and all references to any of the Bonds are qualifi~d in their 

entirety by reference to the definitive form thereof and the information with respect thereto included in the 

aforesaid documentll. Capitalized terms used but not defihed in this Appendix o·shall have the me<lning 

given to such terms in this Official Statemimt. 

THE LEASES. 

The Basic Lease 

Continental leases from the Port Authority, 6ursuant to .the Port Authority Lease~, t~e p~emises on 

which the Project is located. The Port Authority Leases are subject to ·the _Basic Lease under which 

Newark, the fee owner of much of the real property' comprising. the majority of ·the Airport and exi.sting 

improvements thereon, has leased the same to the Port Authority. The current expiration date of the 

Basic Lease is December 31, .2031 although it may be subject to earlier ter.min~tion in certain 

circumstances. 

The Port Authority Leases 

Pursuant to the Port Authority Leases, Continental leases the sites upon which the Project is located. 

The portion of the Project comprised of Concourse A-2 is leased to Continental by the Port Authority 

pursuant to the Terminal A Facility· Lease, and the portion of the Project comprised of Concourse C-3 and 

improvements to Concourses C-1 and C~2 is leased to Continental by the Port Authority pursuant to the 

Terminal C Facility Lease. · · •· · 

The Terminal A Facility Lease. The current expiration date .of the Terminal A Facility_ Lease is 

December 31, 2018. The Terminal A Facility· Lease is subjeCt to earlier termination by the Port Authority in 

the event that: 

(a) Continental (i) lakes the benefit of any i.nsolvency statute: (2) makes a general 

. assignment for the benefit of creditors, ( 3) files a voluntary petition in bankruptcy or a petition or 

answer seeking an arrangement or its reorganization or-the readjustment of its indebtedness under 

the federal bankruptcy laws or under any either la\N'or·statute ·of the United Slates of Of any state 

thereof, or ( 4) consents to the appointment of a receiver, trustee or liquidator of all or substantially 

all of its property; 

:. ' 

(b) Contlnental_is adjudged bankrupt by an order.ordecree of a court, or an order or petition 

filed by any of Continental's creditors or st()ckholders. seeki,ng its. reorganization or thereadjustment 

of its indebtedness under the federEjl bankrupky, _laws, or. under-,any .Jaw or statute of the United 

States or of any state thereof. is approved; and such judgment or order is' not stayed or vacated within 

60 days after the entry thereof; 

(c) a receiver, trustee, or fiquidator takes possession or control bf all orsubstantially all of the 

property of Continental for a period of at least 60 days by or pursuant to, or under authority of, any 

legislative act, resolution or rule, or any order.or decree of any' court or, governmental board, agency 

or officer·having jurisdiction; 
(d) Continental voluntarily has no activity at Continental's portion of Concourse A-2 for a 

continuous period of 30 days and fails to cure such default within 30 _days after receiving notice 

thereof, discontinues ·1is operations at th~- Airport, or, after _exhausting or abandoning any right of 

further appeal, because of an act or omission of ContinentaJ,'is prevented for a period of 60 days by 

. action.of any governmental.agericy.other than the Port Authority having jurisdiction thereof, from 

conducting its operations at the Airport, regardless of the fault of Continental; 

(e) any lien is filed· against· Continental's portion of Concourse A-2 or the areas of Con-

. -course 

Concourse 

Ac2 

because 

at the Airport 

of any act 

shared 

or 

by Continental with other airlines leasing portions of such 

omission of Continental that is not discharged or bonded within 

· 60 days after Continental has 'received notice thereof; 

' . (f) except a~. ~ihe;,yisEf_ prC)vided 

Terminal A Facility Lease or 

in the Terminai.,_A Facility Lease, the. letting under the 

the interest or estate of Continental under the Terminal A Facility Lease 

is transferred to, passes to or devolves upon any other person, firm or corporation; 

(g) Continental does not pay the rentals or ,fees on time or does not make any other payment 

required under the Terminal A Facility Lease ·to ihe Port Authority 

of notice by it from the Port Authority 

for a period of 1 0 days after receipt 

to make such payments; or 

(h) Continental 

6n 

fails to observe every other agreement set forth in the Terminal A Facility Lease 

its part within 30 days after receipt of no lice of default thereunder 

where fulfillment onts obligation 

from the Port Authority (except 

·rei:juires activity over a ·period of time, and Continental has 

.. commenced to perform whal<-iver may be 'required for fulfillment within 30 days after receipt of notice 

and. contin'ues such 'performance without interruption except for causes beyond its control). . ' . i . -

The Port Authority also may reallocate gates leased to Continental under the Terminal A Facility 

Lease to other airlines on six months' notice to Continental if Continental does not satisfy usage 

requirements set forth in the Terminal A Facility Lease. Continental would be compensated by such other 

airlines for such a reallocation. · 

. Continental may terminate the Terminal A Facility Lease prior to its expiration if: 

(a) Continental is p~evented from operating 

by 

its air transportation system to and from the Airport 

Terminal 

reason 

A 

of 

Facility 

its inability 

Lease): 

to use all or a substantial part of the runways and taxiways (as defined in the 

•. for a period of longer than 30 consecutive days as a result of any condition of the Airport not 

"due to the fault' of Continental; or ·. · 

for a period of longer than 90 consecutive days as a result of a permanent injunction 

by any court of competent 

issued 

jurisdiction; or 

•. for a p~riod of lorgerthan.90,c~nsecutive days as a result of any order, rule orregulation of 

. with 

the FA)\ 

.which 

qr 

Continental_.is 

(llher. governmental ag,ncy having jurisdiction over the operations of Continental 

unable .to comply at reasonable cost or expense; or 

(b) the Port Authority 

within 20 days after receipt 

fails 

of 

to perform any of its obligations under the Terminal A Facility Lease 

a notice of default thereunder from Continental · (except where 

fulfillment of its obligation requires activity ovei a period 'of time, and the· Port Authority has 

···commenced 

and continues 

to 

such 

perform 

performance 

whatever may 

without 

be required for fulfillment within 20 days'after receipt of notice 

interruption except for causes beyond its control). · 

The Terminal A facilif:y !,.ease .is also subject to earlier termination upon !be expiration, surrender or 

termination of the B~sit Lease. _· . . · · · . · ·· · . · · · . 

: The Terminal C. Facility Lease.> The current expiration date of the Terminai·O Facility. Lease with 

respect to Concourses C-1 and 0-2 is March 31, 2013 and with respect to Concourse C-3 is March 31, 

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2028. The Terminal C Facility Lease is subject to earlier termination by the Port Authority in the event 

that: 

(a) Continental (1) becomes insolvent" or takes the benefit of any ·insolvency statute, 

(2) makes a general assignment for the benefit of creditors, (3) files a ·voluntary petition in 

bankruptcy or a petition or answer seeking an arrangement or. its reorganization or the readjustment 

of its indebtedness under the federal bankruptcy laws or under any other law or statute of the United 

States or any state thereof or ( 4) consents to the appointment of a receiver, trustee or liquidator of 

all or substantially all of its property; 

(b) Continental is adjudged bankrupt by an order or decree of a court or em order is made 

approving a petition filed by any of Continental's creditors or stockholders seeking the reorganization 

of Continental or the readjustment of its indebtedness under the federal bankru.ptcy laws or under 

any law or statute of the United States or any state thereof, and such judgment or order is not stayed 

or vacated within 60 days after the entry thereof; 

(c) a receiver, trustee or liquidator takes possession or control of. all or substantially all the 

property. of Continental for a period of at least 60 days by or pursuant to, or underthe authority of, 

any legislative act, resolution or rule, or any order or decree of any col.lrt of governmental board, 

agency or officer having jurisdiction; · · · · · 

(d) Continental voluntarily abandons, deserts or vacates Terminal C or discontinues any 

activities permitted or required under the Terminal C Facility Lease at the Airport, or after exhausting 

or abandoning any right of further appeal, Continental is prevented for a period of 60 days by action 

of any government agency (other than the Port Authority) having jurisdiction thereof; frorn 

conducting its operations at the Airport, regardless of the fault of Continental, unless the same shall 

be or would become, with the passage of tirne, an event on the basis of which Continental could 

terminate the Terminal C Facility Lease as described below; 

(e) any lien is filed against Terminal Cor the non-exclusive areas (as defin.ed in the Terminal C 

Facility Lease) because of any act or omission of Continental and is not removed, discharged or 

bonded within 60 days after Continental receives notice thereof; 

(f) except as otherwise provided in the Terminal C Facility Lease, the letting under the 

Terminal C Facility Lease or any part thereof or the interest or estate or any part thereof of 

Continental under the Terminal C Facility Lease is transferred, passes to or devolves upon any other 

person, firm or corporation; 

(g) a petition under any part of the federal bankruptcy laws or an action under any present or 

future insolvency law or statuie is filed against Continental and is not dismissed within 60 days after 

the filing thereof; · · 

(h) ii.-Continental ( 1 ) becomes a merged (non-surviving) corporation in a merger, a constituent corporation in a consolidation or a corporation in dissolution except with the consent of the Port 

Authority or as otherwise expressly permitted by the Terminal C Facility Lease or (2) Continental 

becomes a possessor (surviving) corporation in a merger without the consent of the Port Authority 

and without complying with other provisions set forth in the Terminal C Facility Lease;_ f • • '. _, • - - '. •• -. \ 

(i). Continenlal fails to pay the rentals or fee~ on tirne or to make any· other payment required 

under the Terrn_inal C Facility Lease when due to the Port Authority for ten days after receipt of notice 

by Continental ,from the Port Authority to make. such payments; or . 

(j) Coniinental fails to keep, perform. and. observe each arid every other promise, covenant or 

agreement made by it in the Terminal C Facility Lease within 30 days after receipt of notice of default 

thereunder from the Port Authority, (except where fulfillment of its obligation requires activity over a 

period of time and Continental has commenced to perform whatever may be required for fulfillment 

within 30 days after receipt of notice of default and continues to perform without interruption except 

for causes beyond Continental's control) .. 

0-3 
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l 

I 

l 

I 

J 

' l 

i 

The Port Authority also may reallocate gates leased to Continental under the Tenilinal C ·Facility 

Lease to other airlines on six months' notice to Continental, if Continental does not satisfy usage 

requirements set forth _in the Te.rminal C Facility Lease, .Continental would be compensated by such other 

airlines for such aJeallocation. 

Continentar may terminate the Terminal C Facifity Lease prior to its expiration'if: · <! '· -, 

(a) Continental is prevented from operating its air transportation system to and from the. Airport 

by reason of its inability to use a substantial part or all of the runways and taxiways {as, defined in the 

Terminal C Facility Lease): 

. • for a period ot longer than 30 consecutive days as a result of any condition of the Airport not 

due to fhe fault of. Continental; or 

• for a period of longer than 90 2onsecutive days as a result of a permanent injunction issued 

by any court of competent jurisdiction; or ·· · 

•. for 'a period of longer than 90 consecutive days as a result of arJY"order, rulE¥ or· regulation of a 

governmental agency having jurisdiction over the operations of Continental with which 

Continental is unable to comply' at reasonable cost or expense; or · 

(b) the Port Authority falls to perform any of its obligations under the :Terminal C Facility Lease 

within 20 days after receipt of notice of default thereunder from Continental (except where fulfillment 

of its obligation requires activity over a. period of. time, and the Port Authority has commenced to 

perform whatever, may be required for fulfillment within 20 days after re10eipt of the notice of default 

and continues such performance without interruption except for causes beyond its control). 

However, neither Continental nor the Port Authority may terminate the Terminal C Facility Lease as to 

Concourse C-3 without the consent of the Trustee as long as the Leasehold Mortgage and the reletting 

rights of the Trustee 'remain in effect · · 

The Terminal C Facility Lease is alsa subject to earlier termination upon the· expiration, surrender or 

termination of the Basic Lease. 

The Ccmcourse A-2/C-1/C-2 Lease Agreement 

General. The Authority will issue the Bonds in order to assist Continental-in financing, among other 

things, the costs of the Project, including the portion.thereof covered by the Concourse A-2/C-1/C-2 

Lease Agreement (the "Concourse A-2/ C-1 I C-2 'prcijec.t"). Concurrently with the delive,Y oj the Bonds, 

Continental will sub-sublease to the Authority; and the. Authority will sub-sub-sublease back to Continental, the portion of the Leased Premises covered by the Concourse A-2/ C-1/C-2 Lease Agreement, which 

does not include any subsurface rights (the· "Concourse A-2/C-1/C-2 Leased Premises''), and the 

Authority will lease to Continental the portion of ·the Leased Personal; Property· covered by the 

Concourse A-2/ C-1/C'2 Lease .Agreement (.the "Concourse A-2/C-1 i C'2 Leased Personal Property''), 

for which Continental will agree to pay Facility Rent-and Additional Rent. 

Term. The terms ofthe Authority Sublease ana the Continental Sublease created by the Concourse A-2/C-.11C-2 Lease Agreement (the ·~concourse A2/C'1/C-2 AuthoritY' Sublease", and the 

"Concourse A-2/C-1/C-2 Continental Sublease,'' re,pectively), and of the· Concourse A'2/C-1/C-2 

Lease Agreement itself, will commence on the date of issuance of the Bonds and .unless terminated 

earlier on account of an Event of Default described under _"Default and Remedies" below, will terminate • • - • • • ; ' - •• • • < 

as follows: .· . -~, . 

(a) The Concourse A-2/C-1/C-2 Authority Sublease· will terminate on the earliest of:' · 

• 12:01 a.m. on September 16, 2029; ,,. ,. 

the date on which no Bonds are outstanding under the Indenture; 

D-4 
the expiration or earlier surrender or termination of the last remaining Port Authority Lease in 

its entirety; 

• the expiration or earlier ~urrender. or termination of the Basic Lease; 

• 12:01 a.m. on tne·day after the date of the expiration of the Concourse A-21C-11C-2 

Continental Sublease; ·' 

· • the surrender or termination of the Concourse A-21C-1 IC-2 Continental Sublease; 

the rejection of the Concourse' A-21C-1 IC·2 Continental Su.blease pursuant to Section 365 of 

the Federal Bankruptcy Code or a similar provision of any state bankruptcy code upon or 

following the occurrence of an Act of Bankruptcy (as defined below, see "~Default and 

Remedies"), with respect to Continental;. or 

• the termination ·or revocation of the. Consent by the Port Authority pursuant to the terms 

thereof. See "~Consent of Port Authority" below. 

(b) The Concourse A:2.1C-1/C-2 Continental Sublease will terminate on the earliest of: 

• 11:59 p.m. on September 15, 2029; 

the date on which no Bonds are outstanding under the Indenture; 

• 11:59 p.m. on the date prior to thi:f expiration of the last remaining Port Authority Lease in its 

entirety; 

the earlier surrender .or termination of the last remaining Port Authority Lease in its entirety; 

• the expiration or earl.ier termination or surrender of the Basic Lease; 

• the expiration or earlier termination or surrender of the Concourse A-21C-1/C-2 Authority 

Sublease; 

the rejection of the Concourse A-2/C-1 IC·2 Continental Sublease pursuant to Section 365 of 

the Federal Bankruptcy Code or similar provision of any state bankruptcy code upon or 

following the occurrence of an Act of Bankruptcy with respect to Continental; or 

• the terrllinati~n or revocatio'n of the Consent by. the Port Authority pursuant io the terms 

· thereof. See "~.Consent of Port Authority" below. · 

. . .. 

(c) The expiration, termination or surrender of one Port Authority Lease ("Lease A") in its 

entirety will have no effect on the term of the Concourse A-21C-1 IC-2 Authority Sublease or the 

. Concourse A-2/C-11C-2Continental Sublease with respect to the Concourse A-21C-1/C-2 Leased 

. Premises that is covered by the ·o.tber Port Authority Lease ("Lease B") except in the case where 

Lease B either ( 1) contemporaneously therewith expires, terminates or is surrendered or (2) has 

previously expired, terminated or been surrendered, in which case, both the Concourse A·21 C-1 I 

C-2 Continental. Sublease and .the Concourse A,2 I C-1 I G-2 Authority Sublease will terminate on the 

expiration, termination. or surrender of Lease A in its entirety. , 

(d) Notwithstanding (a) and (b). above, the term of the Concourse A-2/C-1/C-2 Lease 

: Agreement with respect to the Concourse A-2/C-1/C-2 Leased Premises covenid by each Port 

Authority Lease will expire with respect to such Concourse A-2/C-1/C-2 Leased Premises 

(1) under the Concourse A-2/C-1/C-2 Authority Sublease at 12:01 a.m. orie day prior to the 

expiration of the relevant Port Authority . Lease in its entirety and immediately upon the earlier 

termination or surrender thereof.and (2) under the Concourse A-2/ C-1/C-2 Continental Sublease at 

t 1:59 p.m. two days prior to the: expiration of such Port Authority Lease in its entirety and 

immediately upon the. earlier termination or surrender thereof. 

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.. ·._ : -~ -~_::.~·~···_·_. :·_ ::-;.,•.:::)_.-_:~~-<~-~·.::.:._.;:{,~':~· ~-:':.:.:':·~-~;~:.::._::.:.· .. -_: ;.;: __ :. 

:~:~tsti~1~£f~%~IE~~Si:t~~~~;-~. 

(e) Notwithstanding (a) and (b} above or the-acknowledgment set forth under"- Subordiwith 

nation of Leasehold Estates" below, the term of the Concourse A-2/C-1/C-2 Continental Sublease 

respect to the Concourse A:21C-1/C-2.LeasedPersoral Pr()perty will not ~xpi(e in the event of: . . - ~ :· - .. ;- . -· : '~ ' " - ~- ' . .. ' :- ' 

the expiration, surrender, or termination of one or t:>oth of. the F?ort .Authority Leases in its or 

their entirety as a result of the expiration, surrender 'or ter;ninfjtion of ·the Basic Lease so long 

as Continental continues to have permitted occupancy of ·the· related portion of the Concourse A-2/C-1/C-2 Leased- Premises (including~ occupancy as a result of· a permitted 

Concourse 

holdover tenancy) or another area of land fjt the Airport at which Continental may operate the 

A-2/C-11 c:2 Leased Personal Propeiiy'or< .. · .. · . . - . . -, :C" ,-

• the surrender, termination or expiration of ttie Terminal A Facility Lease so long as Continental 

continues to have permitted occupancy of ihe premises leased' pursuani'the'ieto (including 

occupancy as a result of a permitted holdoveuenancy) .or another area of land at the Airport 

at which Continental may operaie the Coricourse,A:2/ C-1f,C.2 Leased Personal Property or 

• the surrender, termination or expiration of the Terminal C Facility Lease soJong as Continental 

' continues to have permitted ·occupancy of the premises leased p-ursuant thereto (including 

occupancy as a result of a permitted holdover_ tenancy) or anoth.e' area of land at the Airport 

at which Continental may operate the Concourse A-2/C-1/C-2 Leased Personal Property. 

Obligations of Continental Unconditional 

under 

. . T[le ql)liga\ion of-. Continental to make the payments 

the Concourse A-2/C-1/C-2 Lease Agreement is provided to be absolute and unconditional, 

regardless of any defense or rights of setoff, it being the intention of the Authority and Continental that 

the 

whatsoever. 

payments ·required thereunder will · be•· paid in• full when due witnout· any delay or diminution 

hand 

Continental agrees (a) to rnake pq.yments to tl)e Trustee, which when added to amounts on 

and 

in the Debt Service Fund will be sufficient to provide for the payment 6f the principal, purchase price 

redemption price, if any, of and interest on the Bonds when due·, and (b). to pay to the Authority and 

the Trustee other amounts due under the Concourse A-2/C-1/C-2 Lease Agreement. Continental's 

obligation to make payments under the Concourse A-2/C-1/C-2 Lease Agreement shall survive 

under 

termination of the Concourse A-2/C-1/C-2 Lease Agreeme-nt far·as long as any Bonds are outstanding 

the· Indenture. · ' 

C-1/C-2 

Continental's Obligation to Maintain Corporate Existence. During the term of the Concourse A-21 

Lease Agreemeni, 'contin~ntal will maintain. its corporati/~xfstence, and will n6t;;ell, assign, 

transfer or otherwise dispose of (whether in cine t}ansaGtion or' ii(a series"of iransactions) substantially 

all 

unreasonatii'/; 

of its assets without the prior written consent of the Authority, which consent shall not be withheld 

or 

prbvided, however, Continental nia:/~·merge with or into or con-solidate ··with another entity 

sell, assign, transfer or otherwise dispose of (whether irt or\e"hahsaction or i.[l a series of transactions) 

substantially all of its assets,1 and the ConcbiJrse A-2/C-1' IC-2'lease Agreement may·be transferred 

such 

pursuant to such merger, consolidation, sale;· assignment, transrehir other'di'spositibn without obtaining 

consenl'and. without violating the Concourse A-21 C-11 (;-2liia?e- Agreement if' · -· 

(a) 

Authority 

Continental causes· the proposed surViving, resulting. or -transferee company to furnish the 

and the Trustee with a change of ownership information form; 

(b) the n~t \North of the' surviving; resulting or tia_nsferee company following the merger, consolida-

" :ticiil oi"'trajlSfer' is at least 95% o(the 'net woiif(of Continental immediatelyyreceding 

merger, 

the 

consolidation or transfer;: · .. . . . . 

(c)· any litigation or' investigation in ·which the surviving,: resulting or transferee company or its 

' . officers and directors are-irivorved,'-and any court, administrative or other orders to which the 

·surviving; resulting or transferee c'ompany onts' officers and directors are subject

matters 

1'relate to 

assumed from Continental or arising in the ordinary 'course of business; 

D-6 

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;';;- , 

-c' 

(d) the Authority receives an opinion of Bond Counsel that the merger, consolidation or transfer 

shall not impair the excludability of interest paid on the Bonds from the gross income of the 

holders thereof for purposes of federal income taxation or cause a reissuance of the Bonds; 

(e) the surviving, resulting or transferee company assumes in writing all of the obligations of 

Continental under the Concourse A-2/C-1 /C-2 Lease Agreement, the Consent and the Port 

Authority Leases; 

(f) after the merger, consolidation or transfer, the Concourse A-2/C-1 /C-2 Project shall be 

operated as an authorized project under the Act; 

(g) no event of default by Continental under the Guaranty, the Indenture, ihe Lease Agreements, 

the leasehold Mortgage or an Administration Expense Guaranty Agreement between Continental and the Authority relating to certain administrative expenses of the Authority (the "Administration Expense Guaranty'') (collectively, the "Bond Documents'') or the Port AuthoritY Leases 

has occurred and is continuing; and · 

(h) such merger, consolidation or transfer will not cause Continental to be in default under either or 

both of the Port Authority Leases. 

Covenant Against Sale and Removal. Continental covenants in the Concourse A-2/C-1/C-2 Lease 

Agreement that if it disposes of any of the Concourse A-2/C-1/C-2 Leased Personal Property in 

exchange for cash or cash equivalents, Continental shall either (a) cause the Bonds to be redeemed 

pursuant to the optional redemption or extraordinary optional redemption provisions of the Indenture in an 

amount at least equal to the disposition proceeds, (b) purchase· the Bonds in the open market for 

delivery to the Trustee as paying agent for cancellation in the amount that will retire· all nonqualified bonds 

within the meaning ofTreasury Regulations Section 1.142-2( e) or (c) expend such disposition proceeds 

within six months of the date of the disposition to acquire similar replacement or other property that will 

constitute property that is part of an airport or property that is functionally related and subordinate thereto 

within the meaning of· Section 142 of the Internal Revenue Code and continue to operate the 

Concourse A-2/C-1/C-2 Project as an "authorized project" under the Act. 

Subordination of Leasehold Estates. The Authority, the Trustee (by its acceptance of the trust 

estate), all holders of the Bonds (by the purchase and acceptance of a Bond) and Continental 

acknowledge in the Concourse A-2/C-1/ C-2 Lease Agreement that the Concourse A-2/C-1/C-2· Lease 

Agreement is subject in all respects to the terms of the Basic Lease and the Port Authority Leases and 

that (a) the termination, surrender or expiration of the Basic Lease or (b) the termination, surrender or 

expiration of both of the Port Authority Leases in their entirety having occurred whether at the same time 

or at different times, shall automatically result in the terminatiOn of the Concourse A-2/C-1/C-2 Lease 

Agreement and, further, that the termination, surrender or expiration of either Port Authority Lease in its 

ent~rety shall automatically result in the release of that portion of the Concourse A-2/C-1/C-2 Leased 

Premises subject to such terminated, surrendered· or expired ·Port- Authority Lease from the Concourse A-2/C-1/C-2 Lease Agreement, and from and after such expiration, surrender or termination such 

portion of the Leased Premises shall no longer be a part of the Concourse A-2/C,1/C-2 leased 

Premises. 

Preservation of Project as Qualified Exempt Facility. Subject to "- Covenant Against Sale and 

Removal" above, Continental covenants in the Conqourse A-2/C-.1/C-2. Lease Agreement that if all or a 

portion of the Project (as defined on the date of issuance of the Bonds) no longer qualifies as an airport 

that is an exempt facility within the meaning of Section 142(a) (1) of the Internal Revenue Code, it will, 

within 90 days, either (a) cause the Bonds to be redeemed pursuant to the extraordinary optional 

redemption provisions of the Indenture in an amount that will retire all nonqualified Bonds within the 

meaning of Treasury Regulations Section -1.142~2 (e); (b) establish a defeasance escrow within the 

meaning of Treasury Regulations Section 1.142-2 (c) and deposit therein sufficient funds to defease all 

nonqualified Bonds; or (c) purchase Bonds in the open market for delivery to the Trustee as paying 

0-7 
agent for cancellation in the amount that will retire all nonqualified Bonds within the meamng of Treasury 

Regulations Section 1.142-2( e). 

Insurance; Damage, Destruction, Condemnation and Other Payment. Continental must maintain 

property insurance and liability insurance .in respect of the Concourse A-21C-i IC-2 Project in accordance with the terms of the Port Authority Leases .. Except.to the extent the Port Authority Leases provide 

otherwise, if at any time during the term of the Concourse A-21 C-i I C-2 Lease Agreement the whole or a 

portion of the Concourse A-21C-11C-2 Project is damaged or destroyed, or taken or condemned by a 

competent authority for any public use or purpose, or by agreement between the Port Auth"cirity and I or 

Continental and those authorized to exercise such right, or if the temporary use of the Concourse A-21 

C-11 C-2 Project shall be so taken by condemnation or agreement, the Authority has no right or obligation 

to rebuild, replace, repair or restore the Concourse A-21C-11C-2 Project, and Continental has no 

obligation under the Concourse A-21C-11C-2 Lease Agreement to. rebuild, replace, repair or restore the 

Concourse A-21C-11C-2 Project. Continental is required to give written notice of sLi.ch damage, 

destruction or condemnation to the Authority and the Trustee, but there is to be no abatement, 

postponement or reduction in the rent or other amounts payable by Continental under the Concourse A-21 C-11 C,2 Lease Agreement. In the event that the whole or a part of the Project is damaged or 

destroyed or taken or condemned by a competent authority, and Continental elects not to rebuild, 

replace, repair or restore the Project, Continental must then redeem all outstanding Bonds unless it 

receives the opinion described in clause (b) under ·"THE BONDS- Extraordinary Mandatory Redemption by the Authority" in this Official Statement. If Continental does elect to rebuild; replace, repair or 

restore the Concourse A-21 C-1/C-2 Project;. it. will do so at its own cost and. expense and shall not by 

reason of payment of any excess cos.ts be entitled to reimbursemenHrom the Authority, the Trustee or 

any Bondholder, nor shall the rent or other amounts payable by Continental under the Concourse A-21 

C-i IC-2 Lease Agreement be abated, postponed or reduced. Any proceeds received by or payable to 

Continental or the Authority as a result of such damage, destruction or condemnation (whether from 

insurance, as a condemnation award or otherwise) will be paid to Continental and applied in accordance 

with the terms of the .Port Authority Leases. Holders of the Bonds will have no pledged or other security 

interest in the proceeds of any insurance or condemnation awards received or receivable by Continental 

or the Authority. 

Indemnification and Expenses of the Authority, the Tender Agent and the Trustee. Continental 

agrees to indemnify and hold harmless the Authority, any person who "controls" the Authority (within the 

meaning of Section 15 of the Securities Act of 1933, as amended), the Trustee, the Tender Agent, the 

Paying Agent, the Registrar and any member, principal, officer, director, official, employee, agent and 

attorney thereof or of the Authority or- the State of New Jersey from any loss, claim, damage or liability 

(including all·costs, expenses and reasonabl.e counsel. fees incurred in investigating or defending such 

claim), caused by, relating to, arisingoufof; resulting from, or in any way connected with (a) the 

condition, use, ownership, possession, conduct, management, planning, design, acquisition, construe-. 

lion,. installation or financing (except with respect .to information provided by the Authority under the 

captions "THE AUTHORITY" and., "NO LITIGATION" (as it relates to the Authority) in this Official 

Statement) of the Concourse A-21C-11G-2 Project or any part thereof including the payment of rebatable 

arbitrage to.· the United. States federal-gove.mment; or, (b) any untrue statement of a material fact 

contained in information provided by Continental with respect to the transactions contemplated by the 

Concourse A-21C-i IC-2 Lease Agreement; or (c) any omission of any material fact necessary to be 

stated therein in order to make any such statement not misleadirig or incomplete (except with respect to 

information provided by the Authority under the captions "THE AUTHORITY" and "NO LITIGATION" (as 

it relates to the Authority) in this 'Official Statement), except to thfr extent cei.used by the gross 

negligence or willful misconduct of an indemnified party. · 

As part of the Addtt'1onal Rent, Continental agrees to pay_ the administrative fees and expenses of the 

Authority incurred in connection with the issuance of the Bonds and the performance by the Authority of 

its duties under the Concourse A-21 C-1/C-2 Lease Agreement and the Indenture. Continental agreeS to 

pay the Trustee's and the Tender Agent's compensation and expenses under the Indenture. 
0 " 

Assignment and Amendment of the Concourse A-2 /C-1 /C-2 Lease Agreement Except in the 

circumstances described above under "-Continental's Obligation to Maintain Corporate Existence" 

and in accordance with the Leasehold Mortgage, Continental may not assign the Concourse A-21 C-1/ 

c,2 Lease Agreement in wholeor in part or sublease its_interest in the Concourse A'2lC-11C-2 Project in 

whole without the pri'or written consent of the Autho'rifY, ·which consent may not b~ unreasonably 

withheld. No consent of the Authority will be required for ·any assignment to an affiliate of Continental, 

provided however, that Continental remains jointly and severally liable with the proposed assignee. 

With respect to any subletting in whole or in part of the Concourse A-21C-11C-2 Project or any 

permitted assignment of the Concourse A-2/ C-1/ C-2 Lease Agreement, Continental shall nevertheless 

remain liable to the Authority for the payment of all rent and for the full performance of all of the terms, 

covenants and conditions of the Concourse A-2/C-1/C-2 Lease Agreement and of any other Bond 

Document to which it is a party. 

The Concourse A-2/C-1/C-2 Lease Agreement may be amended only with the written consent of 

the Authority, Continental and the Trustee and in accordance with the provisions of the Indenture, as 

described under "THE INDENTURE- Amendments to the Lease Agreements, the Leasehold Mortgage 

or the Guaranty" in this Appendix D. 

Assignment of Authority's Interest in Concourse A-2 /C-1 /C-2 Leased Premises. The Authority may 

not assign or transfer the Concourse A-21 C-1 I C-2 Lease Agreement, or the rents to be received 

thereunder, without the consent of Continental and the Trustee except to the Trustee as provided in the 

Indenture and the Concourse A-21C-1/C-2 Lease Agreement 

Release of Portions of the Concourse A-2 /C-1 /C-2 Leased Premises. The Authority and the Trustee 

will, upon written direction from Continental (as long as there is no uncured event of default under the 

Concourse A-2/ C-1/ C-2 Lease Agreement) or upon direction from the Port Authority with the consent of 

Continental, grant such rights of way or easements over, across or under the Concourse A-2/C-1/C-2 

Leased Premises, or grant such permits or licenses with respect to the use thereof, free from the terms 

and conditions of the Concourse A-2/ C-11 C-2 Lease Agreement a's shall be necessary or convenient for 

the operation or use of the Concourse A-2/C-1/C-2 Project or desirable for the use by Newark, the Port 

Authority or a public utility of another parcel of property at the Airport; provided, that in order to grant 

such ·rights of way, easements, permits or licenses, the Authority and the Trustee must receive (a) a 

certificate froin Continental to the effect that such grant will not materially adversely affect the use or 

operation of the Concourse A-2/ C-1/ C-2 Project and (b) an opinion of a firm with a national reputation in 

the field of municipal finance law selected by .Continental and reasonably acceptable to the Authority to 

the effect that such grant is permitted by the Act, the Indenture and the Concourse A-2/C-1/C-2 Lease 

Agreement, and will not for purposes offederal income taxation adversely affect the exclusion from gross 

income of interest on the Bonds. Additionally, as long as there is no uncured event' of default under the 

Concourse A-2/ C-1/ C-2 Lease Agreement or if directed by the Port Authority, Continental may direct the 

Authority and the Trustee to release and remove from the Concourse A-2/ C-1/ C-2 Lease Agreement any 

unimproved part of the Concourse A-2/C-11C-2 Leased Preniises;-provided, that in order to release and 

remove such. Concourse·A-2/C-1/C-2 Leased Premises, the Authority and the Trustee must receive 

( x) a certificate from Continental to the effect that such release or removal will not materially adversely 

affect the use or operation of the Concourse A-2/C-1/C-2 Project and· (y) an opinion of a firm with a 

national reputation in the field of municipal finance law selected by Continental and reasonably 

acceptable to the Authority to the effect that such release or removal is permitted by the Act, the 

Indenture and the Concourse A-2/ C-1/ C-2 Lease Agreement, and will not for purposes of federal income 

taxation adversely affect the exclusion from gross income of interest on the Bonds. 

Tax Covenant Except as otherwise expressly permitted by the Bond Do.cuments, Continental and 

the Authority agree not to take any actlon or fail to take any action that would cause the interest paid on 

the Bonds to be included in gross income for federal income· tax purposes under the Internal Revenue 

Code as in effect on the date of issuance of the 'Bonds, except during a period in which any Bond is held 

D-9 
by a '.'substantial user" of a facility financed with the proceeds of the Bonds or "related person" to such 

"substantial user" within the meaning of Section 14T(a) of the Internal Revenue Code. 

Neither the Authority nor Continental shall have any liability to Bondholders or the Trustee or 

otherv.iise as a result of its or their failure to comply with this covenant, except that in the event of 

a Determination of Taxability, the ·Bonds will be 'subject to redemption as described iii this Official 

Statement under "THE BONDS- SpeciaiRedemption Upon a Determination of Taxability". ·... . 

Public Purpose Covenant. Continental covenants to operate and maintain the Concourse A-2/C-1/ 

C-2 Project tis provided in the Concourse A-2/C-1./ c:2 Lease Agreement and to maintain and preserve 

the Concourse'A-2/C-11C'2 Project as an authorized project under the Act' · · 

Default and Remedies. The Concourse.A-21C-1/C-2 Lease Agreement provides that any Dne or 

rnore of the following constitutes an "Event of Default" thereunder: · ·• 

(a) any material representation or warranty by or on behalf of Co.ntinental made .in the 

Concourse A·21C-11C-2 Lease Agreement or. in any report, certificate, financial statement or other 

. instrument furnished in connection with the Concourse A-2/C-liC-2 Lease Agreement proves to 

have been false or misleading in any material respect when made; or 

(b). default in the payment of principal, purchase price or redemption price, if any, of or interest 

on the Bonds when due; provideq that such a default will. not occur until jive Business Days after 

such payment is due; or 

(c) except as provided in clause (b) above,· default in the duEi payment of any other amounts 

or the due observance or performance of any other covenants, conditions or agreements on the part 

of Continental requ(red to be observed. or performed pursuant to the terms of the Concourse A-2/ 

C-1/C-2lease Agreement or pursuant to any. certificate or other instrument furnished in connection 

with the Concourse A-2/ C-1/C-2 Lease Agreemen·t (including .the Administration Expense Guar-

·anty) and continuation of the detaul( unremedied for 3o days afler written notice thereof to 

Continental from the Authority or the Trustee, provided that if said default cannot be correCted within 

such period it will not constitute an Event of Default if corrective action is .. institwted by Continental 

within such period and diligently pursued .until the default is corrected; and provided further that in 

no event will the failure of Continental _to, comply with and carry out the provisions of the continuing 

disclosure agreement described in Appendix C hereio be deemed to constitute an Event of Default 

· under the Concourse A-2./C-1 IC-2 Lease Agreement; or . . ' . . 

· · (d) the occurrence· of any event of'default under the Indenture; or . . ·-~~ 

(e) .,either ( 1) a petition in bankruptcy is filed by> Continental under the federal or a state 

bankruptcy code or .a receivership, .c_onser.vatorship, insolvency; assignment for the benefit. of 

creditors or other similar proceeding·; is commenced by Continental under the federal or. a state 

bankruptcy code or (2) a petition, :in ban.kruptcy .is tiled against Continenta.l under the federal or a 

state bankruptcy code or a receivership, conservatorship, insolvency, assignment of the benefit of 

creditors or other similar proceeding is commenced against Continental under the federal or a state 

bankruptcy code which is (x). consented to or not timely contested by Continental,. (y) results in the 

entry of an order for relief or (z) is not dismissed within 60 days (each, an '.'Act of Bankruptcy" of 

Continental). 

Upon the occurrence of an Event of-Default under·lhe Concourse A-2/.C'1/C-2 Lease Agreement, 

and at any time thereafter during the continuance of such Event of" Default, the Authority and I or the 

Tnustee, as assignee of the Authority, may take one or more of the following remedial steps without 

limiting any rights and remedies that may be· available under the' Leasehold Mortgage: 

(a) subject to the terms of the Indenture, in tne case of a default in the payment of principal of 

or interest on the Bond.s when due, declare the entire unpaid· amount payable under the ConD-10 
course A-2/ C-1 I C-2 Lease Agreement to be immediately due and payable, whereupon such amount 

shall become due and payable, without presentment, demand, protest or other notice of any kind; or 

(b) subject to the limitation on interests, rights and remedies described under"- Consent of 

Port Authority" and to the terms of the Indenture, take any action at law or in equity to collect the 

payments then due and thereafter to become due under the Concourse A-2/C-1/C-2 Lease 

Agreement or to enforce performance and observance of any obligation, agreement or covenant of 

Continental under the Concourse A-2/C-1/C-2 Lease Agreement; or 

(c) after 30 days: notice to. Continental by the Authority or Trustee, perform for the account of 

Continental any covenant in the performance of which Continental is in default without entry on the 

Concourse A-2/C,1/C-2 Leased Premises or make any payment for which Continental is in default; 

provided, however, that the Authority shall have no right to cure a default, breach or performance 

. obligation· of Continental under either of the Port Authority Leases. Continental shall pay to· the 

Authority and the Trustee upon demand any amount paid by them in the performance of such 

covenant and any amounts which shall have been paid by reason of failure of Continental to comply 

with any covenant or provision of the. Concourse A-2/C-1/C-2 Lease Agreement, including 

reasonable counsel fees incurred in con.nection with the prosecution or defense of any proceedings 

instituted by reason of default of Continental, plus interest in accordance with the Concourse A-2/ 

C-1/C-2. Lease Agreement; or 

(d) discontinue disbursement of any portion of the Bond proceeds. 

ln. addition to other remedies permitted by law, subject to the limitations described under"- Conse.nt,.of Port Auttioiity- Limitation. on Interests, R.ights and Remedies", the following .constitute 

additional andexclusive remedies of the Authority. . 

(a) Continental shall, at the direction of the Authority, prepay all amounts due 'under the 

Con·course A-2/C-1/C-2 Lease Agreement in fuli together with interest accrued and to accrue to the 

redemption date upon the occurrence of any of the following: ( 1) Continental ceases to operate the 

Project or ceases to cause the Project to be operated as an authorized project under the Act, in 

·either case, for twelve consecutive months, ·without first obtaining the written consent of the 

Authority, (2) an Event of Default described under clause (a) of the d-efinition of "Event of Default" 

above or described in clause (a) of the definition of "Event of Default" in "-The Concourse C-3 

Lease Agreement" tielow, (3) Continental ceases to maintain or cause to be maintained the liability 

insurance required by the Lease Agreements·for the benefit of the Authority for 30 .consecutive days 

alter notice of such failure by the Authority and three Business Days to· cure or ( 4) the Authority is 

·uniible to exercise its right to specific performance'of any covenani .. of Continental pursuant to the 

Lease Agreements due to the fact that such specific performance would constitute a breach or 

default of or would conflict with or violate the Port Authority Leases or either of them or involve the 

specific enforcement of any covenant of Continental under the Bond Documents relating to or of a 

property interest if the performance of such covenant would constitute a breach of the Port Authority 

· Leases or either of them. The Authority shall give notice to Continental and the Trustee of any such 

occurrence whereupon the Trustee shall give notice to the Bondholders of the redemption, of the 

Bonds pursuant to the terms of the Indenture and will set a red~mption date pursuant to the terms of 

the Indenture, but in no event later than 60 days alter the Authority gives notice to the Trustee of the 

· · occurrence. 

(b) In addition to the .remedy specified in paragraph (a) above, if Continental commits a 

breach or threatens to commit a breach of any of the provisions of the Concourse A-2/C-1/C-2 

Lease Agreement or any of the other Bond Documents, the Authority shall have the right and 

remedy, without posting bond or other security, to have the provisions of the Concourse A-2/C-1/ 

C-2 Lease Agreement specifically enforced by any court having equity jurisdiction, Continental 

having acknowledged and agreed that any such breach or threatened breach will cause immediate 

and irreparable injury to the Authority and that money damages will not provide an adequate remedy. 

D-11 
therefor; provided; however, the Authority shall not exercise any right of specific performance if such 

.. performance would constitute a breach or default of or be in conflict With or violate the Port Authority 

Leases or either of them nor shall the Authority have any right to specifically enforce any covenant of 

· Coniine~ta! under the 'Bond Documents relating to_ or of a property interest if th~ 'performance of 

such _covenant would 'constitute a breach of Pori Authority Leases or either of them. 

The liability ol the A~thority u~de[\he Concourse A-2/ C-i1 C-2 Lease Agreement Shall be limited to 

the Authority's interest in the Concourse A-2/C:1/C-2 Lease Agreement and there 'shall be no other 

recourse·.against the Authority, its·members, officers, and employees, past, present' or future, or against 

the properties .or any other· projects·.of the Authority. In the performance of the agreements: of the 

Authority contained in the Concourse A-2/ C-.1/ C-2 Lease Agreement, any obligation it may' incur for the 

payment of money. shall nbt be a debt or obligation of the State of New Jersey or any political subdivision 

thereof. The Authority does not assume general liability for the repayment of the Bonds or for the costs, 

fees, penalties, taxes, interest; chargesi insurance, or any other payments· recited in the Concourse A-2/ · 

C-1IC'2 Lease Agreement, but shall be obligated to pay the same only out otthe amounts payable by 

Continental under the Lease Agreements. The Authority shall not be required to do any act whatsoever or 

exercise any diligence whatsoever to. mitigate the damages to Continental iUm Event of Default shall 

occur under ·the Concourse- A-2/C- 1/C-2 Lease• Agreement Nothing iri the Concourse A-2/C-1/ C-2 

Lease Agreement shall preclude Continental from proceeding against the Authority for specific performance (or other equitable rE!medy in the nature of specific performance) of the Authority's obligations 

under the Concourse A-2/C-i./C-2 Lease Agreement · · -

THE STATE OF NEW JERSEY IS NOT OBLIGATED TO PAY, AND NEITHER THE FAITH AND 

CREDIT NOR TAXING POWER OF THE STATE OF NEW JERSEY IS PLEDGED TO THE PAYMENT 

OF, THE PRINCIPAL, PURCHASE PRICE OR REDEMPTJON PRICE, IF ANY, OF OR INTEREST ON 

THE BONDS. THE. BOND$ ARE S~ECIAL, LIMITED OBLIGATIONS OF THE AUTHORITY, PAYABLE 

SOLELY OUT OF THE REVENUES OR OTHER RECEIPTS, FUNDS OR MONEYS OF THE AUTHORtTY PLEDGED UNDER. THE INDENTURE AND FROM ANY AMOUNTS OTHERWISE AVAILABLE 

UNDER THE INDENTURE FOR THE PAYMENT OF THE BONDS. THE BONDS DO NOT N.OW AND 

SHALL NEVER CONSTITUTf: A CH,ARGE AGAINST THE GENERAL CREDIT OF THE AUTHORITY. 

THE AUTHORITY HAS NO TAXING POWER. 

Notwithstanding anything to the contrary contained in the Concourse A-2/C-1/C:2 Lease 

Agreement, upon,the.9ccurrence of an Event of Default by Continental,un_der the Concourse A-2/ 

C'1/C-2 Lease.-Agr.eelllerit, the Authority- shall, have rio right or obligation to re-let the Leased 

Premises or, otherwise_ lie ieq.,ired to mitigate 11ny. damages to Continental as_ a result of_ such 

Event. of Defauli. . . . ' . . . .. . . . -· . . ·,. - . 

i ;'· .. ·, ro· 

The Concour~e C;;l Lease AgreellJent. 

' Ge~era/,' The A~thoritywill issue the Bonds in order to assist Continental in financing, among other 

things: the cost~: of-the Project, including the portion thereot'covered by the Concourse C-3 Lease 

Agreement (thEl ''Concourse C:3 ~roject:') _Concurrently with the delivery of the Bonds, Continental will 

sub-sublease to the-AuthoritY, an·d the-Authority will sub-sub-suplease back to Continental,_ the portion of 

the Leased Premises covered by th~ Concourse C-3 Lease Agreement, which does noi .include any 

subsurface rights (the "Concourse C-3 Leased Premises"), and the Authority will lease to Continental 

the portion of the Leased Personal Property-' covered by the Concourse· C-3 Lease Agreement (the 

''Concourse C•3' Leased' Personal Property"), for which C6ntinental will agree to pay Facility Rent and 

Additional Rent:- ·· · 

Term. The terms of. the Authority Sublease and the Continental Sublease created by the Concourse C-3 ·Lease Agreement' (the. "Concourse C-3 Authority Sublease" and the "Concourse C-3 

Continental Sublease'',. respectively), and of the Concourse C-3 Lease Agreement itself, will commence 

D-12 
on the date of issuance ot the Bonds and unless terminated earlier on· account of an Event of Default 

described under "Default and Remedies" below, will terminate as follows: 

(a) The. Concourse C-3 Authority Sublease will terminate on the earliest of: 

• 12:01 a.m. on September 16, 2029; 

• the date on which no Bonds are outstanding under the Indenture; 

the expiration or e~rlier surrende.r ~r termination of the Terminal C Facility Lease in its entirety; 

• the expiration or earlier surrender or termination of the Basic Leese; 

• 12:01 a.m. on the.day aitertlie date of the expiration of the Concourse C-3 Cq~tinental 

Sublease; 

the surrender or termination of the Concourse C-3 Continental Sublease; 

the rejection of the Concourse C-3 Continental Sublease pursuant to. Section 365 of the 

Federal· Bi~nkruptcy Code or a similar provision of any state bankruptcy code upon or 

following' the occurren'ce of an Act of Bankruptcy with respect to· Continental; or 

the termination or revocation of the Consent by the Port Authority pursuant to the terms 

thereof. See ':_~Consent of Port Authority" below. 

(b) The Concourse C-3 Continental Sublease will terminate on the earliest of: 

• 11:59 P·ni·.o~ S~ptember15, .2029; 

the date on which no Borid.s are outstanding ~ndei the Indenture; 

• · t1 :59' p.m. on the date prior to the expiration- cit the Terminal C Facility Lease in its entirety; 

the earlier surrender or termination of the Terminal C Facility Lease in its entirety; 

the expiration or earlier termination or surrender of the Basic Lease; 

the expiration or earlier termination or surrender of the Concourse C-3 Authority Sublease; 

the rejection of the Concourse C-3 Continental Sublease pursuant to Section 365 ·of the 

Federal Bankruptcy Code or similar provision of any state bankruptcy code upon or following 

the occurrence ol an· Act of Bankruptcy with respect to Continental; or 

the termination or revocation of the Consent by the Port Authority pursuant to the terms 

thereof. See "-Consent of Port Authority'; below. · · · ' . .-~ . . '• ' . . . - . ~- . ' -. 

·(c) Notwithstanding:(a) and (b) above, the term of the Concourse C-3 Lease Agreement with 

respect to the Concourse C-3 Leased Premises covered by the Terminal C Facility Lease will expire 

with respect to ·such Concourse C-3 Leased_ Premi.ses (1) under the Concowrse' C-3 Authority 

.. Sublease at 12:01 a.m. one day· prior to' the expiration of the Terminal C Facility Lease in its entirety 

and immediately upon the earlier termination or surrender thereof and (2) under the Concourse C-3 

·Continental Subleasec at 11:59 p.m. two days prior t.o. the expiration of the Terminal C Facility Lease 

in its entirety and immediately upon the earlier termination or surrender thereof. 

(d)· Notwithstanding. (a)• and (b) above and the acknowledgment set forth under"- Subordination of Leasehold Estates" below, the term of the Concourse C-3 Continental Sublease with 

respect to the Concourse C-3 Leased Personal Property will not expire in the event of: . . . ' . . . . . ·- . . . . . . 

the expiration, surrender, or termination of the Terminal C Facility Lease in its entirety as a result 

of the expiration, surrender or termination of the Basic Lease so long as Continental continues 

to have ·permitted· occupancy of- the related-portion of the Concourse C-3 Leased Premises 

(ihduding occupancy as a result of a ·permitted holdover tenancy) or another area or land at 

the Airport at which Continental may operate the Concourse C-3 Leased Personal Property or 

D-13 
. • the expiration, surrender, or termination of the Terminal C Facility Lease in its entirety so long as 

Continental continues to have permttted. occupancy of the premises leased pursuant thereto 

(including occupancy as a result of a permitted holdover tenancy) or another area or land at 

the Airport ai whicn Continental may operate the Concourse C-3 Leased Personal Property. 

Obligations of Continental Unconditional. The obligation of Continental to make the payments 

under the Concourse C-3 Lease Agreement is provided to be absolute and unconditional, regardless of 

any defense or rights of setoff, it being the intention of the Authority and Continental that the payments 

required thereunder will be paid in full when due withdut any deiay or diminution whatsoever. Continental 

agrees (a) to make payments to the Trustee, which when added to amounts on hand in the Debt Service 

Fund will be sufficient to provide for the payment of the principal, purchase price and redemption price, if 

any; ·of and interest ori th.e Bonds wheri""due, arid (b) ·to pay to the Authority and the Trustee other 

amounts due under the Concourse C-3 Lease Agreement. Continental's obligatiorf to make payments 

under the Concourse C-3 lease Agreement shall survive termination of the Concourse C-3 Lease 

Agreement for as long ·as· any Bonds are outstanding wider the Indenture. . 

.Contine(lta/'s Obligationio.Maintain Corporate Existence. During the term of the c;oncourse C-3 

Lease Agreement,. Continental will maintain its.corporate existence, and will not sell, assign, transfer or 

otherwise dispose· of (whether in one. trans~ction or·· in a series of transactions) substantially all of its 

assets without the prior written consent of the Authority, which consent shall not be withheld unreasonably; provided, however, Continental may merge with or into or consolidate with'another entity or sell, 

assign, transfer or otheiwise dispose of (whether in one transaction or ·,n a series of transactions) 

substantially all of its assets, and the Concourse C-3 Lease Agreement may be transferred pursuant to 

such merger, consolidation, sale, assignment, transfe(. or other disposition without obtaining such 

consent and without violating the Consourse,C-3 Lease Agreement if; 

.. (a). Contin.ental causes the proposed surviving, resulting or transferee company to furnish the 

Autho.rity and the Trustee with a change of ownership information form; 

(b) the net worth of the surviving, resulting or transferee company following the merger, consolidation or transfer is ·at least 95% of the net worth of Continental immediately preceding the 

merger, consolidation qr transfer; 

(c) any litigation or investigation in which the surviving, resulting or transferee company or its 

·officers and directors are invoived, and any court, administrative or other orders to which the 

surviving, resulting. or transferee company or its officers and directors are subject, relate to 

matters assumed from Continental or aiising in the ordinary course of business; 

(d) 

(e) 

the Au.tliority receives an opini~n ·at Bond ·Counsel that the merger, co~solidation or transfer 

shall not impair the excludability of interest' paid on the Bonds from the gross income of the 

holders thereo'f for purposes of federal· income· taxation or cause a reissuance of the Bonds; 

th:e ,SUNiVing, 'resQiting N,transfefee Company assumes in writing aiJ Of the Obligations Of 

Continental "under the Concourse C-3 Lease Agreemenf, 'the Consent and the Terminal C Fa~ilii] Leas'l; · · · · ·. , , · · · · 

(f). 'after the-merger, consolidation or transfer, the Concourse C-3 Project shall be operated as an 

authorized project under the Act; 

(g) no event of default by Continental under the Bond Documents or the·Terminal C Facility Lease 

has.accurred'and is continuing; and 

( h J such ~~rg·er, consolidation or transfer will not cause continent~! to be in default under the 

Terminal C Facility Lease . 

. . Covenant Against Sale and Removal. Continental covenants in the Concourse C:3 Lease Agreement thi)t i,f it disposes of any ofthe Concourse C-3 Ueased);'ersonal Property in exchange for cash or 

cash equivaiEmts, Continertte.l shall either (a) .cause the Bonds to be redeemed pursuant to the optional 

D-14 
redemption or extraordinary optional redemption provisions of the Indenture in an amount at least equal to 

the disposition proceeds, (b) purchase the Bonds in the open market for delivery to the Trustee as 

paying agent for cancellation in the amount that will retire all nonqualified bonds within the meaning of 

Treasury Regulations Section 1.142-2 (e) or (c) expend such disposition proceeds within six months of 

the date of the disposition to acquire similar replacement or other property that will c-onstitute property 

that is part of an airport or property that is functionally related and subordinate thereto within the meaning 

of Section 1 42 of the Internal Revenue Code and continu·e to operate the Concourse C-3 Project as an 

"authorized project" under the Act 

Subordination of Leasehold Estates. The Authority, the Trustee (by its acceptance of the trust 

estate) , all holders of the Bonds (by the purchase and acceptance of a Bond) and Continental 

acknowledge in the Concourse ·c-3 Lease Agreement that the Concourse C-3 Lease Agreement is 

subject in all respects to the terms of the Basic Lease and the Terminal C Facility Lease and that (a) the 

termination, "surrender or expiration of the Basic Lease or (b) the termination, surrender or expiration of 

the Terminal C Facility Lease in its entirety shall automatically result in the termination of the Concourse C-3 Lease Agreement. 

Preservation of Project as Qualified Exempt Facility. Subject to "- Covenant Against Sale and 

Removal" above, Continental covenants in the Concourse C-3 Lease Agreement that if all or a portion of 

the Project (as defined on the date of issuance of the Bonds) no longer qualifies as an airport that is an 

exempt facility within the meaning of Section 142(a) (1) of the Internal Revenue Code, it will, Within 

90 days, either (a) cause the Bonds to be redeemed pursuant to the extraordinary optional redemption 

provisions of the Indenture in an amount that will retire all nonqualified Bonds within the meaning of 

Treasury Regulations Section 1,142-2 (e); (b) establish a defeasance escrow within the meaning of 

Treasury Regulations Section 1. 142-2( c) and deposit therein sufficient funds to defease all nonqualified 

Bonds; or (c) purchase Bonds in the open market for delivery to the Trustee as paying agent for 

cancellation in the amount that will retire all nonqualified Bonds within the meaning of Treasury 

Regulations Section 1,142-2 (e), 

Insurance; Damage, Destruction, Condemnation and Other Payment. Continental must maintain 

property insurance and liability insurance in respect of the Concourse C-3 Project in accordance with the 

terms of the Terminal C Facility Lease. Except to the extent the Terminal C Facility Lease provides 

otherwise, if at any time during the term of the Concourse C-3 Lease Agreement the whole or f! portion of 

the Concourse C-3 Project is damaged or destroyed, or taken or condemned by a competent authority for 

any public use or purpose, or by agreement between the Port Authority and I or Continental and those 

authorized to exercise such right, or if the temporary use of the Concourse C-3 Project shall be so taken 

by condemnation or agreement; the Authority has no right or obligation to rebuild, replace, repair or 

· restore the Concourse C-3 Project, and Continental has no obligation under the Concourse C-3 Lease 

Agreement to rebuild, replace, repair or restore the Concourse C-3 Project. Continental is recuired to give 

written notice of such damage, destruction or condemnation to the Authority and the Trustee, but there is 

to be no abatement, postponement or reduction in the rent or other amounts payable by Continental 

under the Concourse C-3. Lease Agreement In the event that the whole or a part of the Project is 

damaged or destroyed or taken or condemned by a competent authority, and Continental elects not to 

rebuild, replace, repair or restore the Project, Continental must then redeem all outstanding Bonds unless 

it receives the opin,ion described in clause (b) under "THE BONDS- Extraordinary Mandatory 

Redemption by the Authority" in this Official Statement If Continental does elect to rebuild, replace, 

repair or restore the Concourse C-3 Project, it will do so at its own cost and expense and in accordance 

with the terms of the Terminal C Facility Lease and shall not by reason of payment of any excess costs be 

entitled to reimbursement from the Authority, the Trustee or any Bondholder, nor shall the rent or other 

amounts payable by Continental under the Concourse C-3 Lease Agreement be abated, postponed or 

reduced_ Any proceeds received by or payable to.Continental or the Authority as a result of such damage, 

destruction or condemnation (whether from insurance, as a condemnation award or otherwise) will be 

paid to Continental and applied in accordance with the terms of the Terminal C Facility Lease. Holders of 

D-15 
condemnation 

the• Bonds will 

awards 

haye nO' pledged or other security interest in the proceeds of any insurance or 

received or receivable by Continental or the Authority. 

agrees 

Indemnification and E;penses of the Authority, the Tender Agent and the Trustee. Continental 

meaning 

to 

of 

indemnify 

Section 

and 

15 

hold harmless. the Authority, any person who "controls" the Auth~rity (within t(1e 

of the Securities ACt of 1933, as amended), 

Paying Agent and 

the Jrustee, the Tender Agent, the 

attorney-thereof or 

the 

of 

Registrar and any member, principal, officer, director, official, employee, agent and 

(including all 

the Authority or the State of New Jersey from any loss, .claim, damage or liability 

claim), caused 

costs, 

by, 

expenses and reasonable counsel fees incurred in investigating or defending such 

condition, use, ownership, 

relating·to, arieing out of. resulting from, or in any.way connected with (a) the 

tion, installation,or 

possession, conduct, management, planning, design, acquisition, construc.-

captions 'THE AUTHORITY" 

financing (except with respect to Information provided by the Authority under the 

and ."NO LITIGATION". 

Statement) of 

(as it relates to the Authority )_in this Official 

to 

the Concourse C-3 Project or any part thereof including thE! payment of rebatabie arbitrage 

information 

the United 

provided 

States 

by 

federal 

Continental 

government: or (b) any untrue statement of a material fact contained in 

Lease Agreement: 

with respect to the transactions contemplated by the Concourse C-3 

make any such statement 

or (c) any omission of any material fact necessary to be stated therein in order to 

the. Authority under 

not misleading or incomplete (except with respect to information provided by 

the captions 'THE AUTHORITY" and "NO LiTIGATION" 

Authonty) 

(as it relates to the 

in this Official Statement), 

misconduct of an 

·except to. the extent caused by the gross negligence or willful 

indemnified party .. 

As part of the Additional Rent. Continental agrees to pay the administrative 

Authority incurred 

fees and expenses of the 

·,ts duties under 

in connection with the issuance of the Bonds and the performance by the Authority of 

Trustee's and Tender 

the Concourse 

Agent's 

C-3 Lease Agreement and the Indenture. Continental agrees to pay the 

compensation and expenses under the Indenture. 

described 

Assignment 

above 

and Amendment of the Concourse C-3 Lease Agreement. Except in the circumstances 

with 

under"- Continental's Obligation to Maintain Corporate Existence" and in accordance 

the Leasehold Mortgage, Continental may not assign the Concourse C-3 Lease Agreement 

or in part or sublease 

in whole 

of the Authority, which 

its interest in the Concourse C-3 Project in whole without the prior written consent 

reqvired for any assignment 

consent may not be unreasonably withheld. No consent of the Authority will be 

jointly andseverally 

to an affiliate of Continental, provided however, that Continental remains 

liable with the proposed assignee. 

assignment 

·With respect 

of 

to any subletting in whole or in part ofthe Concourse C-3 Project or any permitted 

Authority 

the Concourse C-3 Lease Agreement, Continental shall nevertheless remain liable to the 

conditions 

for 

of 

the payment of all rent and· for the full performance of all of the terms, covenants and 

the Concourse C-3 Lease Agreement and of any other Bond Document to which it is a party. . . . -. . . ·- . - . 

Authority, 

The Concourse 

Continental 

C·3 Lease Agreement may be amended only with the written consent of the 

described under 

and. the :Trustee and in accordance with the provisions of: the Indenture, as 

"THE INDENTURE ~.Amendments to the Lease Agreements, 

or the Guaranty" 

the Leasehold Mortgage 

in this Appendix D. 

Assignment of Authofity's 

assign or 

Interest in.Concourse C-3 Leased Premis.es .. The Authority may not 

the consent 

transfer 

of Continental 

the Concourse C-3 Lease Agreement. or the rents to _be (eceived thereunder, without 

and the Trustee except tci the Trustee as providec;l_in 

Concourse C-3 Lease Agreement. 

the Indenture and the 

· 

upon 

Release 

written 

of 

direction 

Portions of the Concourse C-3 Leased Premises. The Authority and the Trustee will, 

Concourse C-3 Lease 

from·· 

Agreement) 

Continental (as long as there is no uncured event of default under the 

Continental, grant such 

.or upon direction from the Port .Authority with the consent of 

Premises, or grant 

rights of way or easements over, across or under the Concourse C-3 Leased 

conditions of 

such permits or licenses w'1th respect to the use thereof, free from the terms and 

the Concourse C-3 Lease Agreement as shall be micessary or convenient for the operation 

D-16 
or use of the Concourse C-3 Project or desirable for the use by Newark, the Port Authority or a public 

utility of another parcel of property at the Airport; provided, that in order to grant such rights of way, 

easements, permits or licenses, the Authority and the Trustee must receive (a) a certificate from 

Continental to the effect that such grant does not materially affect the use or operation of the 

Concourse C-3 Project and (b) an opinion of a firm with a national reputation in the field of municipal 

finance law selected by Continental and reasonably acceptable to the Authority to the effect that such 

grant is permitted by the Act, the Indenture and the Concourse C-3 Lease Agreement, and will not for 

purposes of federal income taxation adversely affect the exclusion from gross income of interest on the 

Bonds. Additionally, as long as there is no uncured event of default under the Concourse C-3 Lease 

Agreement or if directed by the Port Authority, Continental may direct the Authority and the Trustee to 

release and remove from the Concourse C-3 Lease Agreement any unimproved part of the Concourse C-3 Leased Premises; provided, that in order to release and remove such ·concourse C-3 Leased 

Premises, the Authority and the Trustee must receive (x) a certificate irom Continental to the effect that 

such release or removal will not m"aterially adversely affect the use oi operation of the Concourse C-3 

Project and (y) an op·lnion of a firm with a national reputation in the field of muh·lcipal finance law selected 

by Continental and reasonably acceptable to the Authority to the effect that such release or removal is 

permitted by the Act, the Indenture and the Concourse C-3 Lease Agreement, and will not for purposes 

of federal income taxation adversely affect the exclusion from gross income of interest on the Bonds. 

Tax Covenant. Except as otherwise expressly permitted by the Bond Documents, Continental and 

the Authority agree not to take any action or fail to take any action that would cause the interest paid on 

the Bonds to be included in gross income for federal income tax purposes under the Internal Revenue 

Code as in effect on the·date of issuance of the Bonds, except during a period in which any Bond is held 

by a "substantial user" of a facility financed with the proceeds of the Bonds or "related person" to such 

"substantial user" within the meaning of Section 14 7 (a) of the Internal Revenue Code. 

Neither the Authority nor Continental shall have any liability to Bondholders or the Trustee or 

otherwise as a result of its or their failure to comply with this covenant, except that in the event of 

a Determination of Taxability, the Bonds will be subject to redemption as described in this Official 

Statement under "THE BONDS - Special Redemption Upon a Determination of Taxability". 

Public Purpose Covenant. Continental covenants to operate and maintain the Concourse C-3 

Project as provided in the Concourse C-3 Lease Agreement and to maintain and preserve the 

Concourse C-3 Project as an authorized project under the Act. 

Default and Remedies. The Concourse C-3 Lease Agreement provides that any one or more of the 

following constitutes an "Event of Default" thereunder: 

(a) any material representation or warranty "by or on behalf of Continental made in the 

Concourse C-3 Lease Agreement or in any report, certificate, financial statement or other instrument 

furnished in connection with the Concourse C-3 Lease Agreement proves to have been false or 

misleading in any material respect when made; or 

· (b) default in the payment cit prinCipal, purchase price or redemption price, if any, of or interest 

on lhe Bonds when due; provided that such a default will not occur until five Business Days after 

such payment i_s due; or 

(c)- except as provided in clause (b) above, default in the due payment of any other amounts 

or the due observance or performance of any other covenants, conditions or agreements on. the part 

of Continental required to be observed or performed pursuant to the terms of the Concourse C-3 

Lease Agreement or. pursuant to any certificate or other instrument furnished in connection with the 

Concourse C-3 Lease Agreement,(including the Administration Expense Guaranty) and continuation of the default unremedied for 30 days after written notice thereof to Continental from the 

Authority or.the Trustee, provided that if said default cannot be corrected within such period it will 

not constitute an Event of Default if corrective action is instituted by Continental within such period 

and diligently pursued until the ·default is corrected; and provided further that in no event will the 

failure of Continental to comply with and carry out the provisions of the continuing disclosure 

D-17 
" ' 

agreement described in Appendix C hereto be deemed to constitute an Event of Default under the 

Concourse C-3 Lease Agreement; or 

( d} the occurrence of any event of default under the Indenture; or 

(e) the occurrence of an Ad oi Bankruptcy by Continental. 

Upon the occurrence of an Event of Default under the Concourse C-3 Lease Agreement, and at any 

time thereafter during the continuance of such Event of Default, the Authority and/or. the Trustee, as 

assignee of the Authority, may take one or more of the following remedial steps without limiting any rights 

and remedies that may be available under the Leasehold Mortgage: · 

(a} subject to-the ter!T]s of the Indenture, in the case of a default in the payment of pri.ncipal of 

or interest on the Bonds when,.due, declare the entire unpaid amount payable under the Con-

. course C-3 Lease Agreement'io be immediately due and payable, whereupon such amount sh-all 

become due and payable, wi,thout presentment, demand, protest or other notice of any kind; or . 

(b) subjeCt to the limitation on interests, rights and remedies described· under"- Consent of 

Port Authority" and to the terms of the Indenture, take any action at law or in equitY to collect the 

payments then due and· thereafter to become due under the-Concourse C-3 Lease Agreement or to 

enforce performance and.observance of any obligation, agreement or covenant of Continental under 

the Concourse C-3 Lease Agreement; or · 

( c} alter 30 days' notice to Continental by the Authority or Trustee, perform for the account of 

Continental any covenant ·in the performance of which Continental is in default without entry on the 

Concourse C-3 Leased Premises (except as permitted pursuant to the Leasehold Mortgage) or 

make any payment lor which Continental is in default; provided, however, that the Authority shall 

have no. right to cure a default, breach or performance obligation of Continental under the Terminal C 

Facility·Lease.·continental shall pay to the Authority and the Trustee upon demand any amount paid 

by them in the performance of such covenant and any amounts which shall have been paid by 

reason of failure of Continental to comply with any covenant or provision of the Concourse C-3 Lease 

Agreement, including reasonable counsel fees incurred in connection with the prosecution or 

defense of any proceedings instituted by reason of default of Continental, plus interest in accordance with the Concourse C-3 Lease Agreement; or 

( d} discontinue disbursement of any portion of the Bond proceeds. 

In addition to other. remedies permitted by law, subject to the limitations described under"- Consent of J?ort Authority- Limitation on Interests, Rights and Remedies" below, tjle following constitute 

additional and exclusive.remedies of the_ Authority, 

(a} Continental shall, at the direction of the Authority, prepay all amounts due under the 

Concourse C-3 Lease Agreement in full together with interest accrued and to accrue to the 

redemption date upon the occurrence of any of the following: ( 1} Continental ceases to operate the 

Project or ce~ses to cause the Project to be operated as an authorized project under the Act, in 

either case, for twelve consecutive months, without first obtaining the written consent of the 

Authority, (2} an Event of Default described under clause (a} of the definition of "Event of Default" 

above or described in clause (a} of· the-· definition of "Event of Default" in "--'-Concourse A-2/C-1/ 

C'2 Lease Agreement" above, (3} Continental ceases to maintain or cause to be maintained the 

liability insurance required by the Lease Agreements for the benefit of the Authority lor 30 

consecutive days alter-notice of such failure by the' Authority and three Business Days to cure or 

( 4} the Authority is unable to exercise its right to specific performance of any covenant of 

Continental pursuant to the Lease Agreements due to the fact that such specific performance would 

constitute a breach or default of or would conflict with or violate the Port Authority Leases or either of 

them or involve the specific enforcement of any covenant of Continental-under the Bond Documents 

relating to or of a property interest if the performance of such covenant would constitute a breath of 

D-18 
'' 

· the Port ·Authority Leases or either of them. The Authority shall give notice to Continental and the 

·Trustee of any such-occurrence whereupon the-Trustee shall give notice to the Bondholders of the 

redemption of the Bonds pursuant to the terms of the Indenture and will set a redemption date 

pursu-ant to the terms of.the Indenture, but in no event later than 60 days after the Authority gives 

notice to the Trustee'of the occurrence. 

(b) In addition to the remedy specified in paragraph (a) above, if Continental commits a 

breach or threatens to commit a breach of any of the provisions of the Concourse· C-3 Lease 

Agreement cir any ·of the other Bond Documents, the Authority shall have the right and remedy, 

without posting bond or other security, to have the ·provisions of the Concourse C-3· Lease 

Agre~ment specifically enforced by any court having equity jurisdiction, Continental having ackriowl-

. ·edged and agreed that any such breach or threatened breach will cause immediate and ·irreparable 

injury to the Authority· a'nd· that money' damages will not provide an adequate remedy therefor; 

provided, however,' the Authority shall not exercise any right of specific performance if such 

·performance would constiiute:a breach or default of or be in conflict witt1 or violate the Terminal C 

Facility Lease nor shall the Authority have any right to specifically enforce any covenant of 

Continental under the Borrd Documents relating to or of a property interest if the performance of 

such covenant. would _constitute a breach of the Terminal C Facility Lease. 

The liabiliiy of the Authority under the Concourse· C-3. Lease Agreement shall be limited to the 

Auihority's interest in the Concourse C~3 Lease Ag'reement and there shall be no other recourse against 

the Authoriiy, its members, offic~rs, and employees, past, present or future, or against the properties or 

any other projects of the Authority. In \he performance of the agreements of the Authority contained-in the 

C~ncourse C-3 Lease-Agreement, apy obligation it may incur!or the payment cit money shall not be a 

debt or obligation of the State of· New Jersey or any political subdivision thereof. The Authority 'does not 

assume general _liability for the repayment of the Bonds· or for the costs, fees, penalties,_ taxes, interest, 

charges, insurance, or any other payments recited in the. Concourse C-3 Lease Agreement, but shall be 

obligated to pay the same only out of the amounts payable by Continental under the Lease Agreements. 

The Authority shall not tie required to do any act whatsoever or exercise any diligence whatsoever to 

mitigate the damages to Continental if an Event of Default shall· occur under the Concourse C-3 Lease 

Agreement. Nothing in the Concourse C-3 Lease Agreement shall preclude Continental from proceeding 

against the Authority for specific performance (or other equitable remedy in the nature of specific 

performance) of the Authority's obligations under the Concourse C-3 Lease Agreement. 

THE STATE OF NEW JERSEY IS NOT OBLIGATED TO PAY, AND NEITHER THE FAITH AND 

CREDIT NOR TAXING POWER OF THE STATE OF NEW JERSEY IS PLEDGED TO THE PAYMENT 

OF; THE PRINCIPAL, PURCHASE PRICE OR REDEMPTION PRICE, IF ANY, OF OR INTEREST ON 

THE BONDS. THE BONDS ARE SPECIAL, LIMITED OBLIGATIONS OF THE AUTHORITY, PAY ABLE 

SOLELYOUT OF THE REVENUES OR OTHER RECEIPTS, FUNDS OR MONEYS OF THE AUTHORITY PLEDGED UNDER THE INDENTURE AND FROM ANY AMOUNTS OTHERWISE AVAILABLE 

UNDER THE INDENTURE FOR THE PAYMENT OF THE BONDS. THE BONDS DO NOT NOW AND 

SHALL NEVER CONSTITUTE A CHARGE AGAINST THE GENERAL CREDIT OF THE AUTHORITY. 

THE AUTHORITY HAS NO TAXING POWER. . '•J . . :- •-,. . 7 ' 

· Notwithstanding anythin'g to the contrary contained in the Concourse C-3, Lease Agreement, 

upon· the _occurrence of an Event of Default by Conti.nental under the Concourse· C-3 Lease 

Agreement, the Authority shall have no right. or obligation to re-let the Leased Premises or 

otherwise, be required to mitigate any damages to Continental as a result of such Event of 

Default. 

Consent ofPort Authority 

Consent; · The Port Authority ·Leases require that th6 Port- Authority consent in writing to the Lt>ase 

Agreements and the Leasehold Mortgage. Such consent is provided under the Consent. 

D-19 
Limitation on Interests, Rights and Remedies .. Notwithstanding the Lease Agreements, the lnden- . 

ture or any of the other Financing Documents (as defined below), or any of the provisions of the Lease 

Agreements, the ln.denture or any other Financing Documents, or any other facts or circumstances to the 

contrary, the .. Authority, each Bondholder (by the. purchase or transfer and acceptance of a Bond) and 

the Trustee (all of the foregoing hereinafter collectively called the "Financial Parties"): 

. (a) acknowledge and agree, together with Continental, that the only property intE)rest (other 

. than the Leasehold Mortgage) that the Authority shall have had in the whole or any portion of the 

Leased Premises, the Port Authority Leases and the premises thereunder (the whole and any portion 

of the foregoing being herein collectively called the "Properties") is to have subleased the Leased 

·Premises to Continental and imposed upon Continental the ·obligations set .·forth in- the Lease 

Agreements and that upon the. subleasing of. the Lea.sed Premises to Continental all property 

interests of the Authority 'llfillbe forever extinguished, and.except for s.uch limited property interest 

which will no longer exist and ca,nnot be revived and except as permitted under the. Leasehold 

Mortgage and as desccibed under. "SECURITY F;OR JHE B,ONDS ~Leasehold Mortgage and 

Reletting" in this Official Statement or as permitted under the Port A~thority Leases, none of the 

Financial Parties has, has had, nor shall have any property interests in the Properties; .. 

(b) acknowledge· and agree,· together with Continental, that except as set forth under 

"SECURITY FOR THE _BONDS- Leasehold Mortgage a,nd Reletting" in this Official Statement, 

none of the Financial Parties has nor shall have any rights to perform the promises arid covenants of 

... 'Continental under the Port Authority Leases nor any rights to enforce the rights. and remedies of 

Continental against the Port. Authority under the Port Authority Leases or otherwise or any right to 

sell, convey, transfer, mortgage, acquire or pledge the Properties, or to in any way 'or by any means 

disturb Continental's use, occupancy, possession or quiet enjoyment of the Properties; 

(c} agree, together with Continental, to the extent permitted by law; to waive now and at all 

times in the future all legal, security and equitable ( 1) interests, rights and remedie·s, if any, claimed 

under the Consent or otherwise in law or in equity in, with respect to or against the Properties and 

the Port Authority in connection with the Financing Documents and the Financing Transaction 

(except to enforce the Consent, the rights of the Trustee and the Bondholders under the Leasehold 

·Mortgage and the rights of Continental under the Terminal C Facility Lease relating to the Leasehold 

Mortgage) and (2) interests, rights and remedies (other than under or pursuant to the Leasehold 

Mortgage), if any, in, with respect to or against the Properties under the Lease Agreements, the 

Indenture, any other Financing Documents or otherwise in connection with )he. Financing 

.Transaction;· .:: ~ -·' ;- ' -~ ··:j,_'=: ,:.. 

". J- {'B)' .. agiee, tb- the .extent pe-rrhitted by laW;· .tO ·waive n6W' and at. all· times iil-the ·tutt..ir·e all legal, 

secuitty··and equitable ( 1 )·interests; rights and: remedies under Title 46 ofthe· New Jersey Statutes 

··~--'Annotated ·and under all other laWs of the· State of New Jersey in, with respeCt to or· against the 

·' <Properties· (except to Concourse C-3 as provided under the Leasehold Mortgage)'; and:~(2)' all 

property interests; if' any, not set forth In (c) (1) and (2rand (d) (1) above; ..• , 

.. ' · '· (e) understand and agree, together with Continental a~d the. Port Authority, that n~thing contained in the Consent shall affect the Authority's ( 1) right to cause an extraordinary mandatory 

·redemption oftheBonds pursuant to the extraordinary mandatory redemption provisions setforth in 

·:the Indenture or ( 2) right to specific performance pursuant to either of the Lease Agreements; 

provided, however, the, Authodty shall not exercise such right o! specific: performance if· SU<)h 

" . performance would constitute a breach:· or· default of or would .conflict with or violate. the Port 

Authority Leases or either of them; and 

· (f) acknowledge and agree that neither the Financial Parties nor any of. them shall have the 

right to specifically enforce any covenant of Continental under the Financing Documents ii the 

performance: of such. covenant would, constitute a breach ot the Port Authority Leases or either of 

them. · 

D-20 
· · In addition, Continental, the Authority and the Trustee agree that none· of the Financial Parties or 

Continental shall have any claim, interest, remedy or right of action agafnst the Port Authority '(except to 

enforce the Consent) or against, under or with respect to the Properties (other than the interests, 

remedies and rights:under the Leasehold Mortgage) or the Basic Lease, at law or in equity arising out of 

or in connection l'iith the Financing Documents or the Financing Transastion.. · ··· ·· ... , .. 

"Financing Documents" means all the agreements and documents that relate to or <1re part of the 

Financing Transaction, including, but not limited to, the resolutions .of the Authority authorizing the 

issuance and sale of the Bonds; the Lease Agreements; th!l Leasehold Mortgage; the certificate of the 

Authority relating toarbitrage; the Purchase Agreement between Golqriw.n, S<1c.h,'3 & cO:: as repre~enta,; 

tive of. the Underwriters and the Authority relating to the Bonds; the lnpenture; the Bards; the Guar,anty,; 

the Administration E~pense Guaranty; the Preliminary OffiCial Statement; and the Official Sta!eme~f''• ' 

''Fimincing Transactibn'' means the Lease Agreements and the fi~~~~/ng transa~ti6n qf ):Yhl~h:thE)y are a~p~j-f. ··,,:- .. . . . ... ~- ':_':.~ .;C~---~ 

-., . . . . - ;·. -- ' il '--

Similar covenants to the above are included in the Indenture and the Lease Agreements: · · ' ·• 

Consent Not To Be Used As Bl'lsis For Suit. Continental, the AuthoritY and the Trustee agree that 

they shall not introduce or claim that they or the holders of the Bonds are entitled in law· or equity: 

(a) to introduce in any forum the Consent, the permission granted thereunder, qri~donsisten· 

cies between the Port Authority Leases, the Consent and the Basic lease, on the'drie hand, and the 

Financing Documents on the other hand, against the Port Authority" (except' ici 'ehfaide the 

Consent) , the Properties or the rights or obligations of Continental and the Part· Authority unde'r the 

Port Authority Leases, or as the basis for a contention that the Financing .Document~ or any of them 

apply ,to, affect, control, effect or are determinative as to the Port:Authority or the Prof)ertjes §except 

to enforce the Consent); or .... 

(b) to any compensation, award, suit, action, estoppel, injunction, proceeding or other iegal or 

equitable right or remedy against the Port Authority {other .than enforcement of the .. Consent) or the 

Properties based on the Consent, the permission granted thereunder or any inconsistency or 9onflict 

between the Financing Documents and the Consent, the Basic Lea0e. or the Ppr\,Authority.,L.e.ases. 

Any introduction in any forum by the Bondholders or any of them of the Consent, the permission granted 

thereunder or any inconsistency or. conflict between the Financing Documents and the Consent, the Port 

Authority Leases or the Basic Lease (except to' enforce the Consent) shall be and· is deemed to be a 

breach of the Consent. • · · 

Revocation Upon Default. If Cohtinental does riot cure or cause to be cured (or if a breach or default 

cannot be cured within 15 days and Continental has not promptly commenced t6 perform', Or·has not 

diligently continued to perform without interruption,-whatever may be .required to.c;ure such breach or 

default) any breach or default of the Consent by Continental, the Authority, the Trustee or any holder of 

the Bmds·within 15 days after receipt of notice of such default from the Port Authorityi the Consent may 

be revoked upon 15<•days' written notice to Continental; but no such revocation·shalt<'affectthe·Port 

Authority Leases or either of them or the Leasehold Mortgage or the Port Authority's consent thereto . . -' . - ;::··· - . ' . <··· --. ' . - . .. . .. ,; . .. . ''·· :,· .. ·; ... ;!: .• -~; ~,, -··.:.' f::-' j. ··. ":_•, ··: '·' 

Termination of Consent. The Consent and the consent of the Port Authority granted thereunder shall 

automatically terminate with respect to the Lease Agreements without-•notice to Continental, the 

Authority, the. Bondholders. or .the Trustee, upon the eaniesHo <occur of the following: .,.' •·: 

. (a) the expiration, surrend~roi t~rmin?iiori' of both of.ttie Port Authority L~~~e~. whetqer at th~ same or at different times, provided, howe~er,.it bqth of the Port AuthorityLef;lses expire on . .\he s~me 

d?te, then the Consent will terminate piiJhe day prior tp such expira\(on a.a~e; _ . .•. . ·. . . ; .. 

· · (b) the expiration or earlier termination dr' surrender of both of Hie· Authority Subleas'es; 

whether at the same time or at different times; ·." •·· · ··· · · 

D-21 
(c) .thE! ,expiration or eariier termination or surrender of both of the Continental Subleases, 

w_hether at the pame time or at different times; 

(d) the date on whic_h the redemption, 6ancellation, defeasaric~. discharge or payrrien\ of all 

'the Bon'ds and any additional parity bonds issued pursuant to the Indenture shall occur or 'on 'any 

other event which shall rescilt in none of the Bonds or such paritf bonds- being outstanding; or 

(e) the termination, surrender or expiration of the Basic Lease .. 

The termination of the Cons~nt and the consent of Port Authority granted-thereunder would resUlt 'in 

atermihat'1on· of the Lease· Agreements. See ''THE LEASES__::__ The Concourse A-2/C-1/C-2. Lease 

Agreement---:- . Term" . . arid ,..:c._. . The ·;--· Concourse c-:3 Lease Agreement-

. ,, - - ,_-, Term''in this Appendix b:' - ..... ·-.-:. . - ·- . 

The Consent may also be revoked with respect to the Leasehold Mortgage upon the expiration, 

caricellatibn or termin-ation of tt\ihiustee;s reletting 'rights urider the Leas;jhold Mortgage. The Leasehold 

Mortgage and the right of the Trustee to seek the reletting of Concourse C-3 will automatically terminate 

on the earl_iest to occur of the following:,_- , ·'· :' 

(a) the expiration, swrender or termination. -of the Terminal .C Facility Leas_e as to 

Concourse C~3; · _, · ·· · ' · ·" · · < : . _ (b) , the _expiration, revocat)on or termination of the Consent as to Concourse C-3, except if the 

Terminal C Facility Lease and the Guaranty remain in effect ancj the Consent is revoked or terminated 

because of the rejection of either or both of the Lease Agreements by Continental or a bankruptcy 

trustee in bankruptcy; · · · · - · 

(c) the expiration or earlier termination or surrender . of the· Concourse C-3 Continental 

·Sublease or the AuthoritY Sublease; as to Concourse C-3, or the Concourse C-3 Le'ase Agreement 

except if the Terminal C Facility Lease and the Guaranty remain in effect and the lease Agreements 

are terminated by their rejection .by Continental or a bankruptcy trustee in bankruptcy; 

(d) the date cih which the redemption, cancellation, defeasance, discharge or payment of all 

the Bonds and any additional parity bonds issued pursuant to the Indenture shall occur oi on any 

other event which shall result in none of the Bonds or. any such. parity bonds being outstanding; 

(e) tHe termination, surrender or expiration of the· Basic Lease; 

(f) the failure of the. Trustee to deliver a Foreclosure Notice _30 deys after a Leasehold 

Mortgage Event of Default; 

(g) .the _date of any notice gi\(en by the Trustee that it ,~lects not tp_exercise. its reletting rights 

under the Lea~ehold Mortgage; 

(h) ·the effective date_oi the reletting of Concourse C-3 to a Qualifying Replacement Tenant;· 

(i) the effective-date of. the assignment and assumption agreement pursuant to. which a 

Qualified Replacement Tenant agrees to take possession of Concourse C-3:·and 

(j) the expiration or earlier termi~ation or cancellation of the Foreclosure Perioii' ' 

'-

Acknowledgement of Leasehold Mortgage._ In the Consent; the Trustee acknowledges and agrees 

to the terms of Section 96 of the Terminal C Facility Lease, with respect to its Reletting Rights (as defined 

in the Terminal C Facility Lease) as Leasehold Mortgagee (as defined in the Terminal C Facility Lease) 

and its rights and obligatfons with respect thereto, including' wiihout limitation its rights and obligations to 

perform the Leasehold Mortg'agee's Foreclosure Period Obligations (as defined in the Terminal C Facility 

Lease) and to pay to the Port AuthoritY the Leasehold Mortgagee's Foreclosure Period Payment;·, the 

Foreclosure Period Extension Fees and the Deferred Reletting Fee Ceach as defined in th~ Terminal C 

Facility Lease) as set forth in such Section 96. 

D-22 
Deemed Mortgagee. Upon the Bankruptcy Rejection Date (as defined in the Terminal C Facility 

Lease), the Trustee, as Leasehold Mortgagee, sha.ll be the "deemed Lessee" under the Terminal C 

Facility Lease with respect to Concourse C-3 and shall simultaneously with the service of its Reletting 

Election_Notice (as defined in the Terminal CFacility Lease) pay the Leasehold Mortgagee:s Foreclosure 

P<lriod Commencement Payment (as defined in the Terminal C Facility Lease) and shaJI·satisfy all of the 

Leasehold Mortgagee's Foreclosure Period Obligations. · . 

THE GUARANTY 

Obligations Guaranteed 

Under the Guaranty, Continen;al wili unconditionally guarantee' to the Trustee, for the benefit of the 

owners of the Bonds, the full and prompt payment of the principal of, and premium, if any, on the Bonds 

when and as the same shall become due and payable as provided in the Indenture, whether at the elated 

maturity thereof, by redemption, acceleration or otherwise, the full and prompt payment of the interest on 

the Bonds when and as the same shallbecome'due ·and payable as provided in the Indenture and the full 

and prompt payment of the purchase price of any Bonds required to be tendered pursuant to the terms of 

the Indenture. · · 

The obligations covered by the Guaranty are intended by the parties to be independent of those set 

out in the Lease Agreements and to be enforceable without regard to the validity or 'enforceability of the 

Lease Agreements or any obligation of Continental contained therein. In the event a bankruptcy case 

were filed with respect to Continental, a bankruptcy court could determine that the Trustee's claim under 

the Guaranty is limited to the same extent as the claim that the Trustee would have under the Lease 

Agreements. 

Events of Default and Enforcement 

An "Event of Default" shall exist under the Guaranty if any of the following occurs and is continuing: 

(a) Continental defaults in any payment under the Guaranty referred to under ''-Obligations 

Guaranteed" above and such default continues for more than two business days after written notice 

has been given to Continental by the Authority or the Trustee of the occurrence of an event of default 

under the Indenture or any other Bond Document; 

(b) Continental fails to observe .and perform any covenant, c.on<]ition or agreement (other than 

as referred to in paragraph (a) above) of the Guaranty and such default or failure continues for more 

than 30 days after written notice of such default or failure has been given to Continental by the 

Authority or the Trustee unless Continental is proceeding with reasonable diligence to cure the 

failure; 

(c) any material warranty, representation or other statement made or given by or on behalf of 

Continental to .the Authority, the·Trustee or the initial purchaser of the Bonds contained in the 

Guaranty or in any of the other Bond Documents is false, misleading or incorrect. in any material 

respect as of the date made; 

(d) Continental ( 1) applies for or consen.ts to the appointment of or the taking of possession 

by a receiver, liquidator, custodian or trustee of itself or of all or a substantial part of its property, 

(2) admits in writing its inability, or is generallY unable, io pay its.debts as such debts generally 

become due, (3) makes a general assignment for the benefit of its creditors, (4) commences a 

voluntary case under the federal Bankruptcy Code (as now or hereafter in effect), ( 5) files a petition 

seeking to take advantage of any other law relating to bankruptcy, insolvency, rehabilitation, 

reorganization, winding-up, or composition or adjustment of debts, (6) fails to controvert in a timely 

or appropriate manner, or acquiesce in writing to, any petition filed against itself in an involuntary 

case under the federal Bankruptcy Code (or' under any other laws referenced in clause (5) above)', 

D-23 
' ' 

J\l.liihes any action. for ,.the purpose of effecting any. of the foregoing, or (8) is. adjudicated a 

.'; ,,,bankrupt or ir)Solven.t by any court of competent jurisdiction; or 

·. ·· ·•·. ·• 

1 (;, ), a proceeding or case is commenced, ;,ithout the application or ~on sent of Continenta{lii 

·,,f)ny, cou~,pf.co'iripe)e,it jurisdiction,. seeking ( 1 ) liquidation, reorganization, dissolution, V!inding-up 

or-coriiposiiion or adjustment of debts, (2) the appointment of a trustee, receive(; liquidator', 

custodian or the like of Continental or of all or'any substantial part-at its assets, or (3) similar relief 

under any law relating to bankruptcy, insolvency, rehabilitation, reorganization, winding-up, or 

composition or adjustment of debts, and such proceeding or case shall continue undismissed, or an 

order, judgment or decree approving or ordering any of the foregoing shall be entered and continue 

unstayed and in effect, for a period of 60 days; or Continental consents in writing to any of Jhe 

foregoing; or any order for relief against Continental shall be entered in an involuntary case under the 

· -fecterai.san~ruptcy c.octe. · · · 

._; ., ;:cr~· : ·· . . . , = .·· · · .. . • . - . 

. Upoo. an event of default under the Guaranty, the Trustee will hav~ the right to proceed against 

,Co~jine~tal under the Guaranty. All moneys received bythe_Trustee pursuant tci any right given or action 

taker\ J.inder.t.he provi.sions qf the Gwiran.ly will be.deposited by.the Trustee in the funds established 

under !he ·lndentti're for the benefit of the Bondholders and applied by the Trustee ·1ri accordance with ihe 

terms of the Indenture. · 

'< ·-

.:T~e Trustee. will be under no obltga(ion to institute any suit or to take any remedial action under the 

Guaranty,, or to e9ter any appearance or iri any way defend in any suit in which it· may be made a 

defendant, or to take any stepsjn the enforcement of any rights and. powers under the Guaranty until the 

Trustee is indemnified.to its satisfaction against any and all liability (including, without limitation, 

reasonable compensation for services, costs and expenses, outlays, and counsel fees and expenses and 

other disbursements) not due to its gross negligence or willful misconduct. 

Covenants Relating to Corporate Existe~ce 

Continental. !las. covenanted in the Guaranty that it will maintain its corporate existence, will not 

dissolve or otherwise. disp ~e of all or substar:>tially all of its assets and will not consolidate with or merge 

into another entity or permit one or more other entities to consolidate with or merge into it; provided, that 

Continental is permitted to consolidate with or merge into another entity, ex to penmit one or more other 

enf1ties to consolidate with or merge into it, or to sell or otherwise dispose of all or substantially all of its 

assets:as·an entirety'and thereafter dissolve, provided, it Continental is not the surviving corporation, the 

surviving;' resulting or transteree.corpotation, as the case may be, 

(a) assumes in. writing all Continental's obligations under the Guaranty; 

(b) qualifies or is qualified to do business in the State of New Jersey; ':"d 

(c) obtains an opinion ot nationally recognized bond counsel to the effect that such consolida-

. lion, merger, sale or other disposition does not adversely affect the tax exempt status of the Bonds. 

Amendments 

. The Guaranty may be amended by Contine~tal and the. Trustee only' .in accordance with the 

f?'?Vi~ions oi ihe lridenfure .. 

Beneficiaries 

. ,··The Guaranty is en.tere.d into by Continental solely for the benefit of the Trustee, the owners of the 

Bonds.;1nd any.successor t;ustee or trustees under the Indenture., 
THE INDENTURE 

Pledge of Revenues · 

Pursuant to the lndentu(e, Continental's obligation to pay Facility Rent and its payments of Facility 

Reni under the Lease' Agreements will be pledged by the Authority to the Trustee to secure the payment 

of the principal~ purchase price and redemption price, if any;'of and interest on the Bonds. The Authority 

will also pledg<i and assign io the Trustee all its rights, title and interest under the Continental Sublease 

(other than the "Reserved Rights" as hereinafter defined, the right to receive payment of certain cOsts 

and expenses of the Authority, the right to indemnification by Continental, the· right to speCiiic 

performance and the right to approve assignments of the Lease Agreements,· tenants of any part of the 

Project and those actions of Continental described under "THE LEASES- The Concourse A-2/ C-1/ C"2 

Le"-~.8. _Agr<:>ement- Continental's Obligation to Maintain Corporate Existence" an9 "-The Concour~e C-3 Lease Agreement- Continental's Obligation to Maintain Corporate Exisience"), imd will 

pledge to the·Tr~stee all moneys a~d. obligations deposited or to be deposited in the funds established 

wiUi Jhe Trustee (other than the Rebate Fund and the Bond Purchase Fund) : · · ' .. , .' -_ . . ._ ·-:_. ·-' . . 

"Reserved Rights" means th·e rights of the Authority to (a) release and indemnification, (b) receive 

payment of certain costs and expenses, (c) enforce certain public purpose covenants undertaken by 

Continental pursuant to the Lease Agreements, (d) receive certain notices and reports or obtain 

information pursuant to the Lease Agreements, and (e)· exercise certain rights and remedies, including, 

without limitation, the· right to require an extraordinary mandatory redemption of the Bonds. 

Application of Proceeds 

Proceeds from the sale of the Bonds, other than interest accrued on the Bonds to the date of 

delivery, will be deposited in the Construction Fund and Capitalized Interest Fund established with the 

Trustee. Accrued interest, if any, will be deposited in the Debt Service Fund. See "APPLICATION OF 

BOND PROCEEDS" in this Official Statement. 

Construction Fund 

Moneys on deposit in the Construction Fund will be applied to payment of certain costs of acquiring, 

improving and equipping the Project, including reimbursement to Continental for certain costs paid or 

incurred.by Continental prior to.delivery of the Bonds and certain costs and expenses· incident to the 

issuance and delivery of the Bonds. The Trustee will disburse moneys· in the Construction Fund in 

accordance with the Indenture and the Lease Agreements. All proceeds of the Bonds deposited into the 

Construction Fund and any investment earnings thereon in the Construction Fund (except for punch-list 

items, amounts needed to pay costs:of construction for the Project which are not due and payable or if 

due and payable are not paid, amounts to be deposited in the Rebate Fund and amounts to be used for 

additional capital projects selected by Continental and eligible to be financed with the proceeds of the 

Bonds) (the "Surplus") shall be used (a) to purchase Bonds in .the open market for delivery to the 

Trustee, as a paying agent, for cancellation in the amount that will retire all nonqualified bonds within the 

meaning of Treasury Regulations Section 1.142-2(e) or '(b) to cause an ·extraordinary optional 

redemption of the Bonds. 

Capitalized Interest Fund 

A Capitalized lnterest'Fund is.established and maintained with theTrustee under the Indenture. The 

moneys deposited in the Capitalized Interest Fund shall be held: in trust by the Trustee and shall be 

transferred to the Debt Service Fund on each Interest Payment Date and applied as a credit against the 

Jnterest then due and payable on the Bonds. On November 1 , · 2002, any moneys on deposit in the 

Capitalized Interest Fund shall be transferred to the Construction Fund and applied as Surplus as 

described under the caption "-Construction Fund" above. 

D-25 
<' ' ' 

Debt Service Fund 

A Debt Service Fund is established and maintained with the Trustee under the Indenture. The 

amounts with respect to the payment of principal of and interest on the Bonds derived under'the"lease 

Agreements and certain other amounts specified in t.he lndentwe will be deposited in the DebLService 

Fund: While the Bonds are outstanding, moneys in the Debt SerVice Fund will-be used solely for the 

paymen~i of the principal and redemption price, if any, of and interest on the Bonds as the same become 

payable. Any.amounts: remain'lng ·In the ,Debt Service. Fund after payment in full of the.principal and .· b ... .· . - . . . • . .. 

redemption price,. if any, of and interest. m, the _Bonds (or provision for the payment thereof), .shall ,be 

paid to, Continental. - · · - · · · · · · 

Leasehold Mortgage Reserve Fund . '.·;-

Th.? Indenture estabJishes a Le~~enold M~rtgage Reserve Fu~c( for tlie benefit of the irusl~e' an(f·j~e Bondholders" to be used in the event that a foreclo'sure undecthe Lea'sen'Oid Mortgage be¢ome~ 

necessary ~arid the Trustee !~curs· payment o~ligations to the Pcirt 1\~thority pursuant to the Leasehoict 

Mortgage to preserve its effectiveness while a Qualifying Successor "Tenant "is bein.g secured, or to pay 

debt service on the Bonds in the event that the Trustee determines that, it is not in the best interests of 

the holders.,<;Jf the Bonds_ to foreclose on the Leasehold Mortgage. Upon completion of- the Project, 

Continental is required under the Concourse C-3 Lease Agreement to fund-and maintain the Leasehold 

Mortgage Reserve-Fund.with a cash deposit or direct pay letter of credit or· surety bond with a value equal 

to $9,600,000. Upon withdrawal of any.moniesJrom or ,any_drawingon any letter of credit or surety bond 

on deposit in the Leasehold Mortgage Reserve Fund, Continental shall be obligated to replenish any such 

mon·les or to have any such letter of credit or surety bond reinstated to the initial. amount required under 

the Concourse C-3 Lease Agreement, but only to the extent it cures the event(s) giving.rise to th.e 

Leasehold Mortgage Event of Defaultprior.to the earlier of (a) the end of the Foreclosure Period or 

(b) the date that the foreclosure occurred: . • · 

Investments 

Any moneys held as a part of the funds established under the Indenture shall be invested in 

Investment Securities (as defined below) by the Trustee, at the direction of Continental, as prbvide2(in 

the Indenture; provided that all money received by the Trustee or the· .Tender Agent as remarketing 

proceeds shall be held uninvested in the applicable account of the Bond Purchase Fund by the Tender 

Agent in trustfor the benefit of tendering Bondholders, separate and apart from and not commingled with 

any other money held· by the Tender Agent, to be used solely for the payment of the purchase price: Any 

such investments for any fund shall be held by or under the control.of the Trustee and shall be deemed at 

all times a part of such fund. The interest and income received upon; and any profit or loss resulting from, 

the investment of moneys in a fund shall be credited to or charged to such fund, subject, however (a)· to 

the provisions of the Indenture. relating· tO'defeasance .and (b)' in, the case of. the Leasehold Mortgage 

Reserve Fund, all investment earnings shall be transferred ori each In teres! Payment Date (as defined in 

the Indenture) to the Debt Service Fund. 

'·-· ;:1 

"Investment Securities;' means any of the following obligations 'or se~urities: - ' c - • • • ~ '··· '· 

(a) Governmental Obligations (as defined below); '.·:..:, 

(b) interest bearing deposit accounts (which may be represented by-certificates of deposit) in 

national, state or foreign commercial banks (which may include the Trustee and other fiduciaries) 

whose outstanding long· term debt is rated at least A by Standard & Poor's Rating Services ( "S&P") 

and at leas! A by Moody's Investors Service, Inc: ("Moody's"); · .. :. ,:. -

(c) bankers' acceptances ·drawn·. on and. accepted _by, any domestic or toreign commercial 

_ bank_s (which may include the Trustee and other fiduciaries) whose outstanding long term debt is 

rated at least A by S&P and at least A by Moody's;. 

D-26 
(d) (1) direct obligations of, (2) obligations the principal of and interest on which are 

unconditionally guaranteed by and (3) any other obligations the interest on which is excluded from 

gross income for federal income tax purposes issued by, any state of the United States, the District 

of Columbia or the Commonwealth of Puerto Rico, or any political subdivision, agency, authority or 

other instrumentality of any of the foregoing, which are rated at least A or the equivalent by S&P and 

Moody's; 

(e) commercial paper issued by any corporation which is rated aU east A-2 or the equivalent by 

S&P or at least P-2 or the equivalent by Moody's; 

(f) instruments issued by investment companies having·a portfolio 95% or more of'which 

consist~ of the securities described in (a) through (e) .above; 

·(g) repurchase agreements with banking institutions· and securities dealers recognized as 

primary dealers by the Federal Reserve Bank of New York whose outstanding long term and short 

term debt is rated at least A or the equivalent by S&P or Moody's (which may include the Trustee 

and other fiduciaries); 

(h) money market funds (including·; w'1!hout limitation, those for which the Trustee or any 

affiliate thereof receives compensation with respect to such investment), the assets of which are 

obligations of, or guaranteed by, the United States of America and which funds are rated in one of 

the two highest rating categories of money market funds at the time of purchase; 

(i) certain qualifying guaranteed investment contracts; and 

(j) corporate bonds that are rated at least A or the equivalentbyS&P.and Moody's and mature 

within two years from the date of acquisition; · -

provided, that each of the investments described in clauses (g) and (i) above shall contain a provision 

for th'e immediate unwinding of such investment if the long term or short term debt rating of the bank, 

primary dealer or other financial institution, as the case may be, providing such investment falls below A 

or the equivalent by S&P or Moody's or such entity defaults on the payment of any of its obligations to 

Continental, unless such investment is immediately collateralized with Governmental Obligations in an 

amount equal to 102% of the face amount of such investments. · 

"Governmental Obligations" means any of the following which are noncallable and which at the time 

of investment are legal investments under the laws of the Slo.le for the moneys proposed to be invested therein: · · · · . 

(a) direct obligations of, or obligations the payment of principal of and interest on which are 

unconditionally guaranteed as to full and timely payment by, the United States; 

(b) direct obligations of, or participation certificates guaranteed by; the Federal National 

· Mortgage Ass,ociation, Government National Mortgage Association, or Federal-Home Loan Mortgage 

Corporation so long as such entities shall be federally chartered or any other comparable federal 

agency hereafter created to the extent that said obligations i:ir certificates are unconditionally 

guaranteed by the Unitea States; 

(c) obligations of any state of the United States, any political subdivision thereof or any agency 

or instrumentality thereof, if such obligations are secured by direct obligations of, or obligations the 

principal and interest .on whis;h 01re fully or unconditionally guaranteed by, the United States, and the 

principal of and interest on which will be sufficient to pay as due the principal of and interest on such 

obligations; or · ·· 

(d) prefunded obligations rated MA by Moody's or Aaa by S&P of any· state of the United 

States, any political subdivision thereof or any agency or instrumentality thereof, if such obligations 

are secured by direct obligations of, or obligations the principal and interest on which are fully or 

D-27 
. - .. . -- - -· ' · .. 

. _ ---· -------~----'-'"'~~"~~=-"'· ""·=-~-.,··"'-'z"'M'"&'"'· . .,.,_:;:;"":;;;"'-("';"4_..,:,·?,-,¥ .. ~~"'\:"'ix"'~t-""·&a .. -\"'~;~ .. ;s.. ;¥i"'¥"'4~ .. 1~.,~~ .. ~5 .. ~ir~ .. ~a:,.~ .. $f .. :£< .. -~ .. 1;.,.::..~ .. ,:a'l,.~-i-~ .. :4,.£:r,.~t .. -~k .. -;;;~; .. ;f0'"'1~ .. ::;j..,i"':~"'5.~'"-~4-~l 

unconditionally guaranteed by, the United States, and the principal of and interest on which will be 

sufficient to pay as due the principal of and interest on such obligations. 

Defaults 

The Indenture provides that each of the following events will constitute an "Event of Default" 

thereunder: 

(a) default in the due and punctual payment of interest on any Bond after such payment has 

become due and payable; provided, that no defaulf in the payment of interest shall occur until five 

Business Days after such payment is due; 

(b) default in the due and punctual payment of the principal or premium, if any, on any Bond .• 

whether at the stated maturity thereof, upon redemption, or upon acceleration thereof; provided, that 

no default in such payment <>hall occur until five Business Days after such payment is due; 

·(C::) an ·"event of default" under the Guaranty; 

(d) default in the due and punctual payment of the purchase price, if any, of any Bond 

tendered or deemed tendered for purchase on any Tender Date; or 

(e) a Leasehold Mortgage Event of Default 

During the continuation of an Event of Default under (a), (b) or (d) above, the Trustee may, and 

upon the written request of the Bondholders of not less than 51% in aggregate principal amount of 

outstanding Bonds and satisfactory indemnity shall, declare the principal of all outstanding Bonds and 

the interest accruecHhereon immediately due and payable, and such principal and· interest will thereupon 

become and be immediately due and payable. If there is a declaration of acceleration, the Trustee must 

establish the date, which will be the earliest practicable date upon which the payment of the principal of 

and the interest· on :an outstanding Bonds is to be made; provided, however, that interest on the 

outstanding Bonds will cease to accrue upon the date of declaration of the acceleration. The Trustee will 

give notice by first-class mail, postage prepaid, of such declaration of acceleration and of the fixing of the 

date for payment to all holders of outstanding Bonds. Upon any declaration of acceleration, the Authority 

and the Trustee will immediately declare an amount equal to all amounts then due and payaible on the 

Bonds to be immediately due and payable under the Lease Agreements, the Trustee will cause 

Continental to pay accrued interest and principal on the Bonds and the Trustee shall deposit into the 

Bond Redemption Fund created under the Indenture all amounts remaining in the Construction Fund, with 

notice to the Auttioriiy and Continental ·of sucli action. 

The provisions of the preceding paragraph, however, are subject to the condition that if, after the 

principal of the Bonds has been so declared to be due and payable, and before any judgment or decree 

for the payment of the moneys due has been obtained or entered, the Authority causes to be deposited 

with the Trustee a sum sufficient to pay all matured installments of interest upon all Bonds and the 

principal of any and all Bonds vyhich shall have become due otherwise than by reason of such declaration 

(wiit1 interest upon such principaL and, to the extent permissible by law, on overdue installments of 

interest, at the rate per annum specified in the Bonds) and such amount as shall be sufficient to cover 

reasonable compensation and reimbursement of expenses payable to the Trustee, the Tender Agent, and 

the Remarketing Agent and certain other expenses and all Events of Default under the Indenture other 

than nonpayment of the principal of Bonds which shall have become due by said declaration shall have 

been remedied; then, in every' such case, such Event of Default shall be deemed waived and such 

declaration and its consequences rescinded or annulled, and the Trustee will promptly give written notice 

of such waiver, rescission or annulment to the Authority, the Paying Agent and Continental and shall give 

notice thereof to all holders of outstanding Bonds; but no such waiver, rescission or annulment shall 

extend to or affect any subsequent Event of Default or impair any right or remedy consequent thereon. 

Subject to the· limitation on interests, rights and remedies described under "THE LEASESConsent of Port Authority" and to the terms of the Indenture, upon the occurrence of an Event of Default 

D-28 
under the Indenture, the Trustee may pursue any available remedy at law or in equity to enforce the 

payment of the principal, purchase price and redemption price, if any, oLand interest on the outstanding 

Bonds and to enforce compliance with the covenants under the Indenture. The Trustee may also, or 

instead, pursue payment under the Guaranty and I or allowable remedies. under the Leasehold Mortgage. 

If an Event of Default under the Indenture shall have occurred and be continuing and if requested to do so 

by the Bondholders of not less than 51% in aggregate principal amount of outstanding Bonds and upon 

being indemnified to its satisfaction, including, but not limited to, indemnity for environme·ntalliability, the 

Trustee shall be obligated to exercise such one or more ofthe rights and powers conferred by the 

Indenture as the Trustee, being advised by counsel, deems most expedient in the interests of the 

Bondholders. · . . 

No Bondholder shall have any right to institute any suit, action or proceeding at law or in equity for 

the enforcement of the Indenture, unless an Event of Default under the Indenture has occurred of which 

the Trustee has been notified or is deemed to have notice as provided in the Indenture unless the 

Bondholders of not less than 51% in aggregate principal amount of outstanding Bonds have made written 

request to the Trustee and have offered it reasonable opportunity either to proceed to exercise the 

powers therein granted or to institute such action, suit or proceeding in their own name or names, nor 

unless they also have offered to the Trustee satisfactory indemnity as provided in the Indenture, nor 

unless the Trustee thereafter fails or refuses to exercise the powers therein granted, or to institute such 

action, suit or proceeding in its own name. However, nothing contained in the Indenture shall affect or 

impair the right of any Bondholder to enforce the payment of· the principal, purchase price, and 

redemption price, if any, of and interest on any Bond at and after the maturity or tender thereof, or the 

·obligation of the Authority to pay the· principal, purchase price and redemption price, if any, of and 

interest on each of the Bonds. 

The Trustee shall waive any Event of Default underthe Indenture and its consequences and rescind 

any declaration of acceleration of principal upon the written request of. the Bondholders of (a) not less 

than 51% in .aggregate principal amount of all outstanding Bonds in respect of which default in the 

payment of principal or interest, or both, exists or (b) not less than 51% in aggregate principal amount of 

all outstanding Bonds in the case of any other Event of Default under the Indenture; provided, however, 

that there shall not be waived any Event of Default under the Indenture in the payment of the principal of 

or interest on any outstanding Bonds unless, prior to such waiver or rescission, all arrears of principal and 

interest (other than principal of or interest on the Bonds which became due and payable by declaration of 

acceleration), and all fees and expenses of· the Trustee in connection with such Event of Default shall 

have been paid or provided for·;.and provided further that there· shall not be waived any Event of Default 

under the Indenture caused by a violation of a public purpose covenant of Continental contained in one. or 

both of the Lease Agreements without the prior written consent ot the Authority, which consent may be 

withheld in the Authority's sc)le.discretion. 

··,: 

Modifications and Amendments -,;' 

The Authority and the Trustee may, without consent of, or notice to, any of the Bondholders, enter 

i~to an indentureor indentures supplemental (a "Supplemental Indenture") to the Indenture for any one 

or more of the following purposes, provided that the prior consent of the Trustee, the Paying Agent, the 

Remarketing Agent, the Tender Agent and the Registrar shall be obtained for any amendment affecting 

their respective rights or obligations under the Indenture: 

(a) to cure any ambiguity or formal defect or omission in the Indenture; 

(b) .to grant to or confer upon the Bondholders or the Trustee for the benefit of the Bondholders 

any additional rights, remedies, powers or authorities that may lawfully be granted to or conferred 

upon the Bondholders or the Trustee; 

(c) to subject to the Indenture additional revenues or collateral; 

D-29 
_,_.__J( 

(d) to modify, amend or supplement the Indenture or any Supplemental Indenture in such 

manner as to permit the qualification thereof under the Trust Indenture Act of 1939, as amended, or 

any similar federal statute hereafter in effect or to permit the qualification of the Bonds for sale under 

the securities laws of any of the states of the United States; 

(e) to evidence the appointment of a separate or co-Trustee or the succession of a new 

Trustee thereunder; 

(f) to make any other change iri the Indenture which does not materially adversely affect the 

Trustee or the Bondholders; ·· 

(g) to secure or maintain the rating for the Bonds; 

(h) to cure any defects in the Indenture which would, if not cured, cause the interest on the 

Bonds to be included in gross income of the holders thereof for federal income tax purposes other 

than for a person who is a "substantial user" of the Project or a "related person" within the meaning 

of Section 147(a) of the Internal Revenue Code; 

(i) to issue any series of additional bonds on a parity with the Bonds; and 

(j) to enter into an amendment or amendments described in the first paragraph of"- Amendments to the Lease Agreements, the Leasehold Mortgage or the Guaranty" below. 

Except for Supplemental Indentures permitted as described above, the Bondholders of not less 51% 

in aggregate principal amount of the outstanding Bonds which would be affected thereby shall have the 

right, from time to time, to consent to and approve the execution by the Authority and the Trustee of such 

other indenture or indentures supplemental thereto as shall be deemed necessary and desirable by the 

Authority for the purpose of modifying, altering, amending, adding to or rescinding, in any particular, any 

ot the terms or provisions contained in the Indenture or in any Supplemental Indenture; provided, 

however, that nothing in the Indenture shall permit, or be construed as permitting, without the consent of 

the holders of all Bonds outstanding, (a) an extension of the maturity of the principal of or the interest on 

any Bond, (b) a reduction in the principal amount or purchase price ot, or redemption premium on, any 

Bond or the rate of interest thereon, or a change in the terms of redemption or tender of the Bonds, (c) a 

privilege or priority of any Bond or Bonds over any other Bond or Bonds, (d) a reduction in the aggregate 

principal amount of the Bonds required for consent to Supplemental Indentures or any. modification or 

waiver of the provisions of the Lease Agreements, (e) the creation of any lien ranking priOr to or on a 

parity with the lien of the Indenture on the trust estate pledged under the Indenture or any part thereof, 

except as expressly permitted under the Indenture or (f) the deprivation of the Bondholder of any 

outstanding Bond of the lien created on the trust estate; provided further that the prior consent of the 

Trustee, the Paying Agent, the Remarketing Agent, the Tender Agent and the Registrar shall be obtained 

for any amendment affecting their respective rights or obligations under the Indenture. 

No Supplemental Indenture shall become effective unless and until Continental shall ,have consented 

to the execution and delivery of such Supplemental Indenture;_ provided, however, that if Continental is in 

defa~lt with respect to a payment required under the Lease Agreements, the consent of Con)inental shall 

not be required. 

Amendments to the Lease Agreements, the Leasehold Mortgage or the Guaranty 

The Authority and the Trustee may without the consent of or notice to the Bondholders consent to 

any amendment, change or modification of the Lease Agreements,· the Leasehold Mortgage or the 

Guaranty as may be required: 

(a) for the purpose of curing any ambiguity or formal defect or omission in either of the Lease 

Agreements, the Leasehold Mortgage or the Guaranty; 

D-30 
(b) so as to more precisely identify the Project or to add additional rights or interests in 

property acquired in accordance with the provisions of either of the Lease Agreements; the 

Leasehold Mortgage or the Guaranty; 

(c) to enter into any Supplemental Indenture to the extent so permitted' under the Indenture; 

(d) in connection with any other Qhange therein which does not materially adversely affect the 

Trustee or the Bondholders (including, without limitation, any change in the descript'1on of the 

Project}; or · -

(e) to cure any defects in either of the Lease Agreements, the Leasehold Mortgage or the 

Guaranty which would, if not cured, cause the interest on the Bonds to be includable in gross income 

for federal income tax purposes other than with respect to a person who is a "substantial user" of 

the Project or a "related person" wHhin the meaning of Sect'1on 147(a) of the Internal Revenue 

Code; provided that the prior consent of the Trustee, the Remarketing Agent, the Paying Agent, the 

Registrar and the Tender Agen't shall be obtained for any amendment affecting their respective rights 

or obligations under the Indenture, ·the Guaranty, the Leasehold Mortgage or either oi the Lease 

Agreements. 

Except for the amendments, changes or modifications described above, neither the Authority nor the 

Trustee shall consent to any amendment, change or modification of either of the Lease Agreements, the 

Leasehold Mortgage or the Guaranty without the written approval or consent of the holders of not less 

than 51% in aggregate principal amount of the Bonds.at the time outstandin'g that wou-ld be affected 

thereby, provided that the consent of the holders of all Bonds outstanding is required for'any amendment, 

change or modification of either of the Lease Agreements, the Leasehold Mortgage or the Guaranty that 

would permit the termination or cancellation of either of the Lease Agreements, the Leasehold Mortgage 

or the Guaranty or a reduction in or postpon_ement of. the rental payments under either of the Lease 

Agreements, guaranteed obligations under the Guaranty or security under the Leasehold Mortgage or 

any change in the provisions relating to payment of rent under either of the Lease Agreements; provided 

further, however, that the consent of the holders of not less than 75% in aggregate principal amount of 

the Bonds at the time outstanding that would be affected thereby shall be required to make any 

concessions under the Concourse C-3 Lease Agreement or the Leasehold Mortgage in connection with a 

foreclosure thereunder or a reletting of the Concourse C-3 Leased Premises. 

Discharge of Indenture . . 

The Indenture provides that when the prinCipal d,and premium, if any, ol,'and interest on the Bonds 

have been paid, or provision has been made-for their payment and if all amounts due uricjer the Indenture 

have been paid, the right, title and interest of the Trustee shall cease and the Trus1ee will release the lien 

of the Indenture. If payment or provision for payment is made for less than all of tlie Bonds, tlie particular 

Bonds (or portion thereof) to be deemed paid shall be selected as provided in the Indenture, and the 

Trustee shall release the Indenture with respect to such Bonds. 

Bonds shall be deemed to have been paid within the meaning of the Indenture if (a) payment of the 

principal of, the premium, if any, and the interest on such Bonds to the due date thereof (whether such 

due date is by reason of maturity or upon redemption) either ( 1 ) shall have been made or caused to be 

made in accordance with the terms of the Indenture or ( 2) shall have been provided for by irrevocably 

depositing in the Bond Redemption Fund moneys sufficient to make such payment and I or Governmental 

Obligations (excluding those specified in paragraphs (b) and (c) of the definition of such term). 

maturing as to principal and interest in such amount and at such time as will insure the availability of 

sufficient moneys to make such payment and (b) all necessary and proper fees, compensation, liability 

and expenses of the Authority, the Trustee, the Tender Agent, the Remarketing Agent and the Registrar, 

Paying Agent and Co-Paying Agent, if not the Trustee, pertaining to the Bonds with respect to which 

such deposit is made shall have been paid or the payment thereof provided for to the satisfaction of the 

Trustee. At such times as a Bond shall be deemed to be paid under the Indenture such Bond shall no 

D-31 
longer be secured by or entitled to the benefits of the Indenture, except for the purposes of any such 

payment from such moneys or Governmental Obligations, 

Upon the release and discharge of the Indenture, the provisions of the Indenture relating to the 

redemption and the tender of the Bonds shall no longecbe of any force or effect. 

The Trustee, the Tender Agent and the Remarketing Agent . 

The Indenture provides that the Trustee shall not be answerable for the exercise .of any discretion or 

power under the Indenture or for anything whatsoever in connection with the trust created, except only its 

own willful misconduct, bad faith or negligence. The Trustee may in good faith buy, sell, own and hold any 

of the Bonds and may join in any action which any owners of Bonds may be entitled to take with like effect 

· as if the Trustee were not a party to the Indenture. 

, The Trustee may resign and be discharged by written resign_ation iiled with the Authority, Continental, the Paying Agent, the Remarketing Agent and the, Tender Agent not less than 30 .days before the 

da.te.when such resignation is. to take effect. Th.e Trustee. may be rem.oved at any time by:continental 

except during the continllarice of an Event of Default under the Lease Agreements, or at any time by the 

registered holders of not less than 51% of the outstanding Bonds by filing with the Trustee an instrument 

in writing appointing a successor. Such removal shall be effective ;'lO days (or such longer period as may 

be set forth in 'such instrument). after delivery of the instrument appointing the successor; provided, 

however,. that. no such removal shall be effective. until (ii) <'II outst<1nding Trustee··s fees and expenses 

shall have. been paid. and (b) the successor Trustee appointed· under the. Indenture shall execute, 

acknowledge and deliver to the Authority. and Contiri;'>ntal an instrument accepting such appointment thereunder. · · . . · . · · 

The Tender Agent may resign and be dischiirged on 60·diiys' notice to the Authority, Continental, 

the .Trustee and the Remarketing Agenl and m·ay be removed by Continental at any time upor1 notice to 

the. Tender Agent, the Trustee and the Remarketing Agent. 

The Remarketing Agent may resign and be discharged· on 30 days' notice. to, the Tender Agent, 

Continental and the Trustee or may be removed by Continental at any ti'me · upon notice to the 

Remarketing Agent, ihe Te.nder Agent and the Trustee. In either case, a replacementRemarketing Agent 

must be appointed prior to the effectiveness of such resignation or removal. 

The Trustee, the Tender Agent, the Remarketing Agent, the Paying Agent, any co-paying agent or 

the Registrar shall have a lien prior to the lien of the Bondholders for the payment of its indemnity,.its 

compensation and the reimbursement of its expenses and any advances made by it, upon the moneys 

andsecurities·helci tiy the Trustee or the Tender Agentunder the Indenture, except moneys or securities 

held for the redemption or payment of Bonds that are deemed to be paid in accordance ;,ith the 

Indenture ancifllnds held in.the Rabat~ Fund and the Bond Purchase Fund. ,- . - . . . . 

0-32. 
AppendixE 

ANALYSIS OF POTENTIAL GATE DEMAND 

Continental Airlines Global Gateway Development 

Newark International Airport 

Prepared for: 

Continental Airlines, Inc. 

and 

New Jersey Economic Development Authority 

Prepared by: 

Leigh Fisher Associates 

August 20, 1999 
.'"<'"-=·"'-'---~~--·~- __ .r..U ;;_ 

[THIS PAGE INTENTIONALLY LEFT BLANK] 
LEIGH FISHER ASSOCIATES 

Consultants ft> Airport lvlllllllS:!'IIIc>lll 

Posr Office Box 8007 

San Francisco lmernarional Airporr 

San Francisco. CA 94128~8007 

Tel650-57l 7722 

F"' 650-571 522o August 20, 1999 

Continental Airlines, Inc. 

1600 Smith Street, 32"" Floor 

Houston, Texas 77002 

New Jersey Economic Development Authority 

P.O. Box990 

36 West State Street 

Trenton, New Jersey 08625 

Re: Analysis of Potential Gate Demand, Continental Airlines Global Gateway 

Development, Newark International Airport 

We are pleased to submit this report documenting our anaJysis of potential gate 

demand in connection with the proposed financing of the Continental Airlines 

Global Gateway Development at Newark International Airport. 

Purpose of Report 

The New Jersey Economic Development Authority, on behalf of Continental 

Airlines (Continental), plans to issue bonds to finance part of the .costs of new 

terrriinal and related facilities for Continental at Newark International Airport 

(Newark), referred to herein as the Global GatewayDevelopment. The Global 

Gate:way Development includes construction of a new Terminal C concourse, with 

capacity for up to 19 aircraft parking positions (gates), connected to a new Federal 

Inspection Services (FIS) facility to process arriving international passengers. 

The purpose of the report is to analyze the potential demand for gates at Newark 

and at the two other major airports serving the New York region, John E K:ennedy 

International (Kennedy), and LaGuardia Airport (LaGuardia). Specifically, we 

analyzed gate demand under the hypothetical assumption that Continental 

Airlines ceases or substantially reduces service at Newark. We assessed the 

. potential replacement of Continental service by other airlines and the resulting 

demand for the terminal facilities being constructed in the Global Gateway 

Development under various hypothetical scenarios. · 

E-1 
LEIGH FISHER ASSOCIATES 

Cnns1tltants tt1 Airport }villllll;(:t~IIC/11 

Mr. William D. Dodson 

August 20,1999 

Scope of Analysis 

In analyzing potential gate demand at the three major New York airports, we 

considered: 

• 

• 

• 

• 

• 

• 

Economic and demographic trends in the New York region 

Recent historical trends and forecast growth in passenger traffic at the 

New York airports · 

Demand patterns and other characteristics of Continental's hub at 

Newark 

Facilities to be provided by the proposed Global Gateway Development 

Existing and forecast supply versus demand relationships for gates at the 

New York airports 

Scenarios relating to potential demand for Terminal C gates in the , . 

hypothetical event that Continental were to cease or substantially reduce 

service at Newark 

We did not analyze and offer no opinion or other form of assurance regardingt):le 

contractual or business arrangements under which the facilities to be provided by 

the proposed Global Gateway Development might be used or leased by' any ' 

successor airline or airlines, or the feasibility of implementing such arrang~nients. 

·-=·. 

Conclusions 

Using assun:iptions that we believe are reasonable, the primary conclusions of our 

analysis are: , 

1. Aggregate demand for gates at the three major New York area airports as 

of August 1999 is estimated to amount to approximately 87% of aggregate 

gate capacity. 

2. Considering likely future growth in passenger demand and planned 

additions to gate capacity, most gates at the three airports, including those 

being constructed in the Global Gateway Development, will be required 

during peak operating periods. 

E-2 

' 

I i' 
LEIGH FISHER ASSOCIATES 

Co-nsultmzt5 to Airport A1anognlll'11/ 

Mr. William D. Dodson 

August 20, 1999 

3. If Continental were to cease or substantially reduce service at Newark, 

under various hypothetical scenarios described in our report, there would 

be demand for most or all of the gates being constructed as part of the 

Global Gateway Development. 

The attached report docufuents'otii analysis and. conclusions~ The attachment 

should be read in its entirety for an understanding of the basis for the conclusions. 

* * * * * 

The analyses, projections, and conclusions presented in the attachment were 

prepared using the information and assumptions described. While we believe that 

such assumptions provide a reasonable basis for the projections, inevitably, some 

of the assumptions will not be realized and unanticipated events and circumstances may occur. Therefore, there are likely to be differences between the 

projected and actual gate demand, and those differences may be material. We 

have no responsibility to update this report to reflect events and circumstances 

occurring after the date of the report. 

We appreciate the opportunity to prepare this report in support of the Global 

Gateway Development. 

Respectfully submitted, 

~.ftt4~J LEIGHFISHE~TES 

E-3 
[THIS PAGE INTENTIONALLY LEFT BLANK] 

E-4 
.-/ ' . 

Attachment 

BACKGROUND, ANALYSIS, ASSUMPTIONS, AND RATIONALE FOR THE 

STUDY CONCLUSIONS 

. Continental Airlines Global Gateway Development 

Newark International Airport 

E-5 
~,.- ~-~~- - - ···-- --·-- . 

[TillS PAGE INTENTIONALLY LEFT BLANK] 

:E-6 
CONTENTS 

Page 

New York Area Airports·'····································· ..................................................... . E-ll 

Airport Service Region ... , ..................................................................................... . E-12 

Historical Growth in Passengers ........................................ : ................................ . 

Airport Passenger Characteristics ....................................................................... . 

Airline Shares of Passengers ..................................................................... , .......... . 

. Projected Passenger Demand ............................................................ : ................. . 

E-14 { E-16 

E-18 .; 

\ 

E-19 t 

r 

'{,: 

•' Continental's Hub Operation at Newark. ...................... ::.: .. ;: .................................. . E-20 1 . Terminal Facilities at Newark .............................................................................. . E-20 · 

Newark's Role in Continental's Route System .............................. : .................. . E-20 

. Service Pattern ....................................................................................................... . E-21 

Share of Origin-Destination Passengers ............................................................. . E-24 

Implications: Demand for Continental's Terminal Facilities ......................... . E-25 

Continental's Global Gateway Development Project .. : ......................................... . E-26 

Project Components ....................................................................... , ...................... . E-26 

Cost per Enplaned Passenger .............................................................................. . E-27 

Implications: Demand for Continental's Terminal Facilities ......................... . E-28 

Analysis of Current New York Area Airport Gate Demand·······················'········· E-29 

Scheduled Flight Activity ..................................................................................... . E-29 

Estimated Gate Capacity Utilization .................................................................. . E-29 

Analysis of Future Gate Supply and Demand ........................................................ . E-33 

·Assumed Future Gate Supply ........................................ : .................................... . E-33 

Assumed Future Gate Capacity ......................................... , ................................. . 

Projected Gate Demand .................................... : .................. : ........................... : .... . 

E-34 

E-35 

Potential Demand fo~ Newark Concourse C3 Gates .............................................. . E-36 

Key Assumptions .................................................................................................. . E-37 

Scenario 1-Replacement of Hub bing Airline at Newark .............................. . E-37 

Scenario 2-Replacement of Hub bing Activity at New York Area Airports E-39 

Scenario 3-Replacement of Origin-Destination Traffic ........................ , .......... . E-40 

Scenario 4--International Airline Consortium .... : ............................................ . E-42 

Conclusions .................................................................................................................. . E-43 

E-7 
1 

.2 

3 

4 

.5 

6 

7 

8 

9 

10 

11 

12 

13 

14 

15 

16 

17 

18 

19 

20 

21 

I 22 

l 

I 

l 

I 

TABLES 

Page 

Total Passengers by Airport ................................................. , ...... : ..... "............... E-12 · 

1997 Local Trip Origins-Top 5 Counties/Boroughs ................................... E-13 

Projected Economic Growth-1997-2005 ....................... ,: ............ , .......... : ...... E-14 

Historical Passenger Data .................................................................... , ........... , · E-16 

Passenger Characteristics .................................................... : .... : .................... ;-.... E-17 

1998 Airline Shares of Passengers .... : ........................................... ,.................. Ec 18 

Projected Passenger Demand .......................................... ;c .................... :: .. : ... , .. · E-19 

Continental Airlines Service at System Hubs ...................... : .............. ,;......... E-21 

Continental's Seat Distribution at Newark .................................................... E-21 

Airline Service in New York-Top 5 Airlines ............................................... E-22 

1998 Airline Shares of Origin-Destination Passengers ... , .. :.: .................. :,· .... E-24 

Airlines with 10% or More of Scheduled Seats in Top 10 OriginDestination Markets .......................................................................................... E-25 

Continental's Existing and Future Gate Facilities at Newark ..................... E-27 

Average Cost per Enplaned Passenger. ..................................................... , .... E-28 

Scheduled Daily Flights per Gate .......................................... : ... ,..................... E-30 

Estimated Gate Capacity-1999 .... , .................................................................. E-32 

· Projected Gate Supply ......................................................................... o .. c .. ,....... E~34 

. Projected Gate Capacity-· 2010 .................... , ................................. , .............. ,,. E-35 

Current and Projected Gate Capacity Utilization .............. : .... , ......... : ......... :: E-36 

Scenario 1-Projected 2010 Gate Demand..................................................... E-38 

Scenario 2-Projected 2010 Gate Demand..................................................... E-39 

Scenario 3-Projected 2010 Gate Demand..................................................... E-41 

E-8 
FIGURES 

Page 

1 AirportServiceRegion: NewYorkArea ....................................................... E-11· 

2 Drive Times......................................................................................................... E-15 

3 Route Map ........................................................................................................... E-23 

4 Hourly Jet Aircraft Arrivals-New York Airports ....................................... E-31 

E-9 
~·] 

.:~ . . 

[TillS PAGE INTENTIONALLY LEFT BLANK] 

E-10 
NEW YORK AREA AIRPORTS 

The locations of the three major airports serving the New York region, Newark 

International Airport (Newark), John F. Kennedy International Airport (Kennedy), 

and LaGuardia Airport (LaGuardia), are shown on Figure 1. 

New York 

New Jersey 

Figure 1 

AIRPORT SERVICE REGION 

Newark International Airport 

Connecticut , :' ' 

E-ll 

10 10 20 

Graphic: Scale in Miles 
"""-~-~"~----~'·-~-~-~--" '-------------

H.D 

As of 1998, these three airports served 97.1% of the passenger demand in the 

New York region, as shown in Table 1: 

Table 1 

TOTAL PASSENGERS BY AIRPORT 

New York Region 

1998 

Percent 

Passengers of total 

Newark 32,521,000 36.5% 

Kennedy 31,044,000 34.9 

LaGuardia 22,849,000 25.7 

Subtotal 86,414,000 97.1 

Islip 905,000 1.0 

Stewart 737,000 0.8 

White Plains 940,000 ___u 

.Subtotal 2,589,000 2.9 

Total 89,003,000 100.0% 

Source: Port Authority of New Y ark and 

New Jersey, April1999. 

This report deals only with Newark, Kennedy, and LaGuardia (referred to herein as 

the New York area airports). 

Airport Service Region 

Although the three major New York area airports are located in close proximity, 

they each serve distinct areas. Table 2 presents data from a 1997 Port Authority 

survey on local trip origins by passengers using each airport. The following points 

are of interest: 

L Manhattan (New York County), with its central location and large 

population, accounts for the highest percentage of trip origins for each 

airport. 

E-12 
Table 2 ' h,-

1997 LOCAL TRIP ORIGIN5-TOP 5 COUNTIES/BOROUGHS 

Newark Kennedy LaGuardia 

%of %of %of 

Rank total Rank total Rank total 

Manhattan (a) 1 18% 1 42% 1 47% 

Other New York 

Queens 2 11 3 10 

Nassau 3 10 2 12 

Brooklyn 4 9 

Suffolk 5 6 

Westchester 4 7 

New Jersey 

Bergen 2 11 

Essex 3 10 

Morris 4 8 

Middlesex· 5 6 

Connecticut 

Fairfield 2 _'I 

Top 5 Counties 53% 78% 83% 

Other Counties 47% 22% 17% 

(a) New York County. 

Source: Compiled by Leigh Fisher Associates from survey data 

reported by the Port Authority of New York and 

New Jersey. 

.!•· 

2. For Newark, the next 4 counties, comprising 35% of passenge~s surveyed,. 

are all in New Jersey, while none of these counties is a top origin point for · 

Kennedy or LaGuardia. 

3. The top 5 counties account for 53% of Newark's passengers, compared to 

78% for Kennedy and 83% for LaGuardia, evidencing that Newark's market 

area is more geographically diverse, extending into the western areas of 

New Jersey. 

E-13 

1 i 

l t 

H 

if 

q 

ll t1 

I! \R 

~~ 'l tl 

" 

H " 

11 '' 

q 

II 

!I 

!I 

1: 
I 

According to NPA Data Services, an organization that prepares county-level 

economic forecasts, the region west of Newark is expected to experience faster 

economic growth than the area east of Newark, as summarized in Table 3. 

Table3 

PROJECTED ECONOMIC GROWTH-1997-2005 

West of Newark (a) 

East of Newark (b) 

Employment Income 

0.9% 

0.2 

(a) West of Newark comprises the following 

counties in New Jersey and New York west of 

the Hudson River: Bergen, Essex, Hudson, 

Middlesex, Morris, Passaic, Richmond, 

Rockland, Somerset, and Union: 

(b) East of Newark comprises the following 

counties in New York and Connecticut east of 

the Hudson River: Bronx, Fairfield, Kings,· 

Nassau, New York, Queens, Suffolk, and 

Westchester. 

Source: NP A Data Services, 1998. 

Largely because of ground access constraints affecting Kennedy and.LaGuardia 

(particularly, tunnel and bridge crossings), Newark is more convenient for 

passengers west and northwest of Newark. 

LaGuardia, 

Figure 2 illustrates the areas within a one-hour drive of Newark, Kennedy, and 

using Maplnfo Professional data on average roadway travel times.· 

Historical . Growth in Passengers . . 

LaGuardia, 

Since 1980, passenger traffic at Newark has increased faster than at Kennedy and 

primarily attributable to the development of hub operations at Newark 

(first by People Express and then by Continental)., ~ ._ : _ _· •. 

E-14 
LEGEND 

Interstate highWay 

Other major highway 

Highly urbanized areas 

E-15 

One-hour drive 

fromEWR 

15 0 

One-hour drive 

fromJFK 

15 30 

One-hour drive 

fromLGA 

Graphic Scale in Miles 

Figure 2 

ONE-HOUR DRIVE TIMES FROM 

NEWARK INTERNATIONAL, 

JOHN F. KENNEDY INTERNATIONAL, 

AND LAGUARDIA AIRPORTS 

Continental Global Gateway Study 

Newark International Airport 

August1999 

LEIGH FISHER ASSOCIATES 

--~ 
I 

! 

-.... ,. 

Table4 ·---. HISTORICAL PASSENGER DATA 

Newark Kennedy LaGuardia Total 

Passengers (thousar{d.~) 

1980 '. 9,223- 26,796 17,459 53,479 

1990 22,255 29;794 -.. 22,765 74,814 

1998 32,521 ·- . 31,044 22,849 86,413 

Average annual' · 

,_ 

, growth rate,. ' -

1980-1998 73% 0.8% 1.5% 2.7% 

So1jtce: Airports Co,_;nci[ i:nternat:ibna]and Port Authority of New York and 

New Jersey. · i 

In 1998, according to Airports Council International, the airports were the eighth 

(Newark), eleventh (Kennedy), and twenty-second (LaGuardia) busiest in the 

United States in terms of annual passengers. 

Airport Passenger Characteristics 

Characteristics of the passengers at the three New York area airports inl998 are 

summarized in Table 5. 

E-16 
Domestic 

International 

Origin~destination (a) 

Connecting (a) 

·'-

Business (a) 

Leisure (a) 

Table 5 

PASSENGER CHARACTERISTICS 

1998 

Percentage of total passengers 

Newark 

· Continental ·Other Total Kennedy LaGuardia 

83% 74% 79% 43% 95% 

17 26 21 57 5 

70% 84% 76% 68% 92% 

30 16 24 32 8 

40% 42% 41% 25% 45%.· 

60 58 59. 75 55 

(a) Survey data collected between April1997 and April1998. 

Total 

70% 

30 

77% 

23 

37% 

63 

Source: Compiled by Leigh Fisher Associates from data reported by the Port Authority 

of New York and New Jersey. 

Continental's passenger traffic at Newark is 83% domestic, higher than the 70% 

New York area total, and 70% origin-destination, lower than the 77% New York area 

total. Continental's market profile at Newark in terms of business and leisure 

travelers is similar to the three-airport market profile. 

Although New York is a major international gateway and Continental operates a 

major connecting hub at Newark, the majority of passengers for both Continental 

(70%) and New York as a whole (77%) are origin-destination passengers~ 

E-17 

:'i 

' l 

i 

.f 

.'i 

~ 

' 

,: 

I"'· 

~ 

~ 

f 

-f 

f 

' ' 
Airline Shares of Passengers 

Continental enplanes the largest share of passengers at Newark and at the three 

New York area airports combined, as shown in Table 6. 

Table 6 

1998 AIRLINE SHARES OF PASSENGERS 

Newark Kennedy LaGuardia Total 

Passengers (thousands) 

, . Continental 18,096: 872 18,968 

··.American 2,314 6,817 3,814 12,945 

Delta 1,613 4,822 6,180 12,615 

'US Airways 951 6 6,379 7,336 

·United 2,601 1,998 1,764 6,363 

Trans World 341 3,782 727 4,850 

Northwest 1,177 281 989 2,447 

Other 5,428 13,338 2,124 20,890 

Total 32,521 31,044 22,849 86,414 

. Share of passengers 

Continental 56% --o/o 4% 22% 

American 7 22 17 15 

Delta 5 16 27 15 

US:Airivays 3 0 28 9 

United 8 6 8 

Trans World 1 12 3 

Northwest 4 1 4 

Other 16 ~ ~- 23 

· i~t;;r 100"/o. 100% 100% 100% 

Source: Compiled by Leigh Fisher Associates from data reported by the Port 

Authority of New Yorkand New Jersey. 

E-18 
Projected Passenger Demand 

F A.A. Forecasts .. :rlf~ most recent passengedorecasts for the three, New Y (Jrk'' ' 

area airports prepared by the FederalAviationAdministration (FAA), publishe~.il;l: 

1999, indicate an average annual growth rate of about 3% through 2010. · · · · · ~ 

Assumed Growth Rates. For purposes of this report, a more conse~~tlve 

projection of 1.9% average annual growth through 2010 has been adopted (s~~· , , 

Table 7). This more conservative growth outlook is used because, for purposes of 

this report, we have consideredconly currently.planned additions to. airport facilitieS, 

not potential future additions that could support higher demand, . 

."'- 'J '\ ,, ::, ~ ' ... -r-·' . 

Table7 · . '-/ 

PROJECTED PASSENGER DEMAND 

Passengers (th()usands) 

Newark Kennedy LaGuardia. Total 

1998 Actual · 

Domestic 25,700 . 13,300 2l,700' 60,700 

International 6,800 17,700 1,100 25,700 

Total 32,500 31,000 22,800 86,400 .. 

2010 Forecast 

··Domestic 31,400 '15,200 25,800 72,400 

Intemational 11,500 22,700' 1,400 35MO • 

Total 42,900 37,900 27,200 108,000 ._ ·:,_.;. . :' .. · . ; r: . •:;, 

Average annual 

growth rate · " ' .: ... •' 

Domestic .1c: 1.7% .. .' .. 1.1% . 1.5%. _,·,·:i ,1.5~/h, 

International 4.5 2.1 1.7 2.8 .-<.-

Average 2.3% 1.7% 1.5% 1.9% 

Source: Leigh Fisher Associates, August 1999. 

E-).9 

n 

I' 

j: 

I 

I 

I 

' 
,._• 

Passenger traffic at Newark is projected to grow faster'tlian: at the other two airports 

primarily due to: (1) projected economic growth in the region served by Newark, 

largeiy, west of the Airport, as described earlier, and (2) the development of 

Contii:lental service at Newark (discussed in the next section). 

CONTINENTAL'S HUB OPERATION AT NEWARK .. : 

Terminal FaCilities at Newark 

--_;-. c·_; . .-;. ,.: ·- ·- r- . , 

There ate currently three separate terll'!inal complexes at Newark:-·· Terminal.Ap •. , 

Terminal B, and Terminal C.t · ' ";. ~.: •· ''· 

Terminal A has. three.concourses, with a total of 27.domestic gates, leased by the. 

Port Authority to various airlines. Continental currently uses 4 gates in Terminal A. 

In the near future, Continental expects to enter into a lease arrangement for a total of 

5 gates in Terminal A. ,, . ,.,, ..•. 

. Terminal B has three concourses with a total of 24 gates. The 9 gates at 

Concourse Blare leased J:>y the. Port Authority to airlines other than Continental. 

• The 15 gates at Concourses B2 and B3 are the only international-capable gates at 

. Newark, and are operated by the Port Authority on a common-use basis. 

, Continental uses Terminal B for all its international arriving flights. 

Terminal C has a total of 42 domestic gates-40 gates on Concourses Cl and C2, and 

: 2 other gates in the area to be developed as the new Concourse C3. All Terminal C 

gates are leased exclusively by Continental. Continental's hub qperation at Newark 

. is primarily operated using the gates at Terminal C, with certain flights also using 

gates at Terminal A and Terminal B. . · · · 

Newark's Role in Continental's Route System 

·Newark is Continental's second largest hub in terms of daily arriving and departing . 

. seats, after George Bush Intercontinental Airport serving Houston; as shown in 

Table 8. · · . · .. \ 

,,.· .. '.-
Service Pattern 

Table 8 

. CONTINENTAL AIRLINES SERVICE AT SYSTEM HUBS 

August 1999 

Houston 

Newark 

Cleveland 

Other 

Percent of scheduled airline 

system seating capacity 

''45% 

37 

14 

__1 

100% 

Source: Continental Airlines, Inc. 

As of August 1999, Continental's daily nonstop seats from Newark by market were 

distributed as shown in Table 9. 

Table 9 

CONTINENTAL'S SEAT DISTRIBUTION AT NEWARK 

August 1999 

Destination 

International 

Transatlantic 

Latin America/ Caribbean 

Canada 

Transpacific 

Subtotal 

Domestic 

Northeast 

Southeast 

West 

Central 

Subtotal 

Total 

Percentage of seats 

13.4% 

6.6 

2.4 

0.7 

23.1%% 

20.4% 

24.8 

17.0 

14.7 

76.9% 

100.0% 

Source: Official Airline Guides, Inc., online database. 

E-21 
I 

r~· -·-' .. -'~--·· -· ----~-' .. ~~~--~~~c.c:..~~~· ·=·-· -.-,;.;._~~- -: . -·~: '-·<- ·.-,:,,:_.· .. _, ~ '~'v'--<- ::,;·:·::,.'.,c:>·ci,~-:.-:;;2~\:;.':~~~;-;.-~-~<i_i\~:.:;;<~;g?;{:j;&4;i:~~~;:c:~~j:~-;~_G'-i::§~i 

A map showing Continental's nonstop destinations to and from Newark is 

presented on Figure 3. 

Continental's service exceeds that of the other i:najor airliri.es serviri.g the New York 

area market, as shown below: 

Table 10 

AIRLINE SERVICE IN NEW YORK-TOP 5 AIRLINES 

August 1999 

Number of Number of 

daily arrivals cities served nonstop 

Domestic International Domestic International 

Air Carrier 

Continental 240 48 52 

Delta 140 20 22 

American 110 44 14 

US Airways 132 0 24 

United· 81 8 8 

Commuter 

Continental 116 7 31 

Delta 76 6 21 

American 70 7. 13 

US Airways 95 0 24 

United 42 0 4 

Source: Official Airline Guides, Inc., online database, for service at 

Newark, Kennedy, and LaGuardia. 

35 

19 

17 

0 

5 

4 

2 

1 

0 

0 

' 
TRANSPACIFIC 

\ Tokyo {Narlta), Japan I 

San Francisco 

'I' 

N 

w 

San 

• Honolulu 

LEGEND 

• Non-stop destination city 

EWR551 F-0003,fh8 

• Vancouver 

LATIN AMERICA 

Bogata, Columbia 

Caracas, Venezuela 

Cancun, Mexico 

Guatemala City, Guatemala 

Lima, Peru 

Mexico City {Juarez), Mexico 

Panama City (lntemational), Panama 

Rio De Janeiro (International), Brazil 

Sao Paulo {International), Brazil 

San Jose, Costa Rica 

San Salvador, E! Salvador 

Santiago (International), Chile 

Santo Domingo, Dominican Republic 

·;-•c.-· 

Nass'u 

Halifax

Berm~

San Jua

• 

NON·STOP 

C

CONTINENTA

Con

[] 

LEIGH 

_,,.~c.·; '-Y~?\"-?h"":<!•i'+'f:;:•c_,;•;-;»_":·:<n.,•"i >'·::?yf·"':i"-"'X·--:·- ~i
. -~. --· : .. -.. : . - : · .. ·-·--·,·:.,;. ' . - ' --- -.;:·;j-:.'d;-z;i;.'>a!J~-.~~ -.·.·:,;_.:; ,_-· ~~"- i>i;re<\~f;<;;t·· -~f:>:-:s-i~-~\{e~\:::,3:;'i,·\iftfi&~;;r;:_,· ;;"::.if-~' . ___ ~ 

Share of Origin-Destination Passengers 

An estimated 70% of Continental's passengers using Newark originate at or are 

destined for Newark; these passengers represent approximately 52% of allcirigin--

destjnation passengers at Newark and, when combined with Continental's • . · . _ 

pass~ngers at LaGuardia, approximately 20% of all origin-destination passengers at 

the three New York area airports, as shown in Table 11. 

Table 11 

1998 AIRLINE SHARES OF ORIGIN-DESTINATION PASSENGERS 

New York Airports 

Airline ,;· 

Continental 

Delta 

American 

US Airways 

United 

Others 

Total 

·.Estimated number of 

' . origin-destination 

passengers (thousands) 

13,433 

10,045 

. 9,950 

6,318 

5,565 

21,029 

66,340 

·Share of.· 

New York area· 

airport total 

20% 

15 

15 

10 

8 

32 

100% 

Source: Compiled by Leigh Fisher Associates from data.· 

reported by the Port Authority of New York and 

New Jersey . 

. : .. Continental has the largest percentage of origin-destination passengers in the busiest 

· travel market in the United States and has the leading share of seat capacity in the 

top 10 origin~destination markets from New York, as shown in Table 12. 

E-24 
--'.····. 

Table 12 

AIRLINES WITH 10% OR MORE OF SCHEDULED SEATS ... 

·IN TOP 10 ORIGIN-DESTINATION MARKETS 

.. 

New York Area Airports 

August 1999 

Number of markets with . 

10% or greater share 

Airline Domestic International 

Continental 10 8 

United 4 2 

· Ari:leri~~ · 5. 2 

USAii:Ways 3 0 

Delta 5 4 

Northwest 1 2 

Trans World 0 2 

. Sources: · U.S. DOT and Official Airline 

.,,, \Guides, Inc., June 1999 . 

. : ~ •. ': -- :'"I~ ' .... · 

Implications: Demand for Continental's Terminal Facilities 

~ .... 

The purpose of this report is to analyze demand for gates at Newark under the 

hypothetical assumption. that Continental ceases or substantially reduces its service 

at Newark The strengths of Continental's hub operation at Newark described 

above are positive indicators of potential replacement demand, as follows:. - . . ,. . . - . 

1. The local market area served by Continental at Newark is distinct from the 

Kennedy and LaGuardia market areas, due to the airport locations al).d tl;l.eir accessibility: ·.· · · · ·~ · · · · · · · · · · · · · · · , .. 

2. The majority of Continental's passengers are origin-destination, and · 

Continental's range and frequency of service have established a leading 

market share in New York's top origin-destination passenger markets. 

3. The availability of a large number of exclusive-use gates in a single terminal 

facility has facilitated Continental's development of service and market 

share in the New York area. 

E-25 
.rtf' .. · .... 

'CONTINENTAL'S GLOBAL GATEWAY DEVELOPMENT PROJECT 

The need for Continental's Global Gateway Development is driven by growth in 

. Continental's service at N:ewark;~p<,lrtict.ilai:Iy mte\'naHoila!~ Contiliental' s terminal · 

facilities at Newark are curi~ntly opefating:atcapacity and additional gate capacity . 

. is required to allow Continental to implement.plaiilled service increases. · 

Project Components 

Continental's Global Gateway Development at Newark js scheduled to consist of the 

· following components: .. , . 

• 

• 

Construction of a new Terminal C Concourse C3 v.Yifh 12 to 19 gates 

(depending on aircraft type), all but one capable _M handling arriving 

international flights. · · ·' 

Construction of a new Terminal C Federa) Inspection Services (FIS) facility, 

with capacity to handle 1,500 hourly arriving international passengers. 

• Rehabilitation and reconfiguiation of Terminal C Concourses C1 and C2, 

improving passenger fadlities and providing an airside connector that will 

permit passengers to transfer between all Terminal C gates without security u recheck·.,; . . . . . . . . .. - . . ... . ... - . . . . .. . .. . . 

• Renovation and expansion of landsidefacilities serving Terminal C. 

.... Rehabilitation of portions of Terminal· A; providing 5 gates for Continental. 

':< /: ., 

• · Port Authority investments in related roadway anqparking facilities. 

• Additional Continenti! investments in non~teimmal facilities such as cargo 

., · , . c'.' buildings and aircraft maintenance hangars,, "''' ,_. 

:c··"?:.~.·-_:-:·:··. -· .!! .. ' ·' ... :' -.. ""';!~-,'-: _.,.·-. .. •.'···- :,<:~",1~_-, •.· 

Table 13 presents Continental's existing and future gate facilities, at N,ewark. The 

diagram on page 9 of the Official Statement is an illustration of the ctirrent plans for 

the renovated and expandedTerminal G. , ., . .. .. __ , __ .· .- ·:"£.· ... 

'·'· 
Table 13 

CONTINENTAL'S EXISTING AND FUTURE GATE FACILITIES AT NEWARK 

After completion of Global 

As of1999 Gateway Development 

Newark Newark 

Continental total Continental total 

Terminal A 5 (a) 27 5 (a) 27 

Terminal B 7 (b) 24 7 (b) 24 

Terminal C 

Concourse C1 25 25 25 25 

Concourse C2 15 15 15 15 

Concourse C3 15 (c) 15 (c) 

Other 2 2 

Subtotal 42 42 55 55 

Total 54 93 67 106 

(a) Continental expects to lease 5 gates at Terminal A during 1999. 

(b) International gates on Concourses B2 and B3 in Tenninal Bare common use. 

An equivalent of 7 gates was allocated to Continental for purposes of analyzing 

gate use. 

(c) Number depends on mix of aircraft: capacity ranges from 12 widebody to 

19 narrowbody aircraft simultaneously. 

Source: Leigh Fisher Associates, based on inspections and information from 

Continental Airlines, June 1999. 

Cost per Enplaned Passenger 

' '' 

Based on information provided by Continent~!, it is estimated that the ~ve~~ge 'cost 

per enplaned passenger for Continental's Newark hub operation was approximately 

$8.60 as of 1998, as shown in Table 14. Included are only costs to rent and maintain 

terminal facilities, not other costs associated with airline operations. Based on the 

estimated debt service and other rental payments .associated with the Global Gateway 

Development, assumed inflation-related cost increases, and projected growth in 

enplaned passengers, it was estimated that the average cost per enplaned passenger 

might increase to approximately $11.80 by 2010. The higher cost for international 

passengers shown in Table 14 reflects (1) the cost of providing additional facilities 

only used by international passengers (e.g., sterile corridors and inspection facilities) 

and (2) the lower average facility utilization for international operations. 

E-27 
',-, 

Table 14 

AVERAGE COST PER ENPLANED PASSENGER (a) 

Continental Airlines at Newark 

1998 2010 

Domestic passengers $ 5.00 $ 5.50 

International passengers 26.70 29.20 

Overall average $ 8.60 11.80 

(a) Includes terminal rentals and maintenance 

costs only. . .. · 

Source: Leigh Fisher Associates, based on 

information provided by Continental 

Airlines. 

Official Statements for recent financings of new international terminals at Kennedy 

.report cost per enplaned passenger figures of (1) between $40 and $55 for international passengers and (2) between $10 and $15 for domestic passengers. ' ' 

The data on Table 14 and the comparable range for Kennedy cited directly above do 

not include aircraft landing fees. Jt is estimated from the PortAuthority's current 

landing fee rate that landing fees are the equivalent of $6.50 per enplaned passenger 

at Newark and $6.00 per enplaned passenger atKennedy. 

Data published by AAAE indicate that the overall average cost per ~nplaned 

passenger at the New York area airports is between $15.00 and $30.00, including 

landing fees. 

Implications: Demand for Continental's Terminal Facilities 

With regard to potential future demand for Continental's termina] faCilities at·. 

Newark, positive features of the Global Gateway Development include: · 

1. Terminal C will provide-the only exclusive-use FIS facility at Newark 

2.. Concourse C3 will be the only concourse at Newark designed and 

appropriately sized for widebody international flights 

3. Terminal C will be larger than ai'ly other existingsingle-airline,terminal 

complex, and similar in size to American Airlines', propos(\d development 

at Kennedy: · 

E-28 
·'"' 

ANALYSIS OF CURRENT NEW YORK AREA AIRPORT GATE DEMAND 

Current demand for gates at Newark, Kennedy, and LaGuardia was analyzed to 

provide a "baseline" for assessing potential future gate supply versus demand 

conditions, as described in the following sections. 

Scheduled Flight Activity 

Airline flight schedules published by Official Airline Guides, Inc., were obtained 

and summarized by terminal complex at each of the three airports, as shoWn in 

Table 15. As of August 1999 (August is typically the peak month ofthe year), 

Terminal Cat Newark is estimated to have the highest utilization,--in terms of daily 

arriving flights per gate--of all terminals. Although the average n.umber. of arriving 

• flights per gate at Kennedy is low relative to Newark and LaGuardia, airlines 

serving Kennedy use larger aircraft with greater passenger capacity: · 

Figure 4 illustrates arriving flights by hour of the day for each airport, showing that 

the afternoon is the peak operating period for each of the airports. 

Es~imated Gate Capacity Utilization 

The Leigh Fisher Associates Gate Management Model-a computer prqgram that 

matches airline flight schedules to available ,gate facilities, considering factors such 

as aircraft size, gate configuration, and airline lease arrangements-was used to 

analyze gate utilization of each of the New York area airports as of August 1999. 

The results of the Gate Management Model analysis were used to calculate percent . 

capacity utilization, i.e., the percent of available gates occupied during the peak 

operating period at each airport. The number of gates occupied during ·the peak 

period is greater than the number of arriving or departing flights in the peak hour 

because many flights (particularly widebody international flights) occupy a gate for 

more than 1 hour. · ·. 

The estimated percent capacity utilization at each airport was then applied to the 

estimated number of 1999 annual passengers and compared with the theoretical 

number of passengers that would be accommodated at 100%, utilization to calculate 

.the implied excess capacity. · · 

E-29 
Table 15 

SCHEDULED DAILY FLIGHTS PER GATE 

August 1999 

Newark 

Terminal A 

Terrrrii'lai B 

Terminal c 

Kennedy 

Terminal1 

Terminal2/ 3 

Terminal4 

Terminal 5 I 6 

Terminal? 

Terminal8/9 

LaGuardia 

Central Terminal 

Delta Terminal 

US Airways Terminal 

Daily arriving 

jet aircraft 

flights (a) 

113 

114 (b) 

259 (b) 

486 

15 

81 

49 

68 

19 

68 

300 

171 

96 

117 

384 

Gates 

27 

24 

42 

93 

10 

25 

12 

29 

12 

23 

111 

39 

16 

22 

77 

Note: Gates exclude apron hardstand positions. 

(a) Excluding commuter aircraft flights. 

. Daily arriving. 

flights per gate 

4.2 

4.8 

6.2 

5.2 

1.5 

3.2 

4.1 

2.3 

1.6 

. 3.0 

2.7 

4.4 

6.0 

5.3 

5.0 

(b) Continental's international flights arrive at Terminal Band depart· 

from Terminal C, and for purposes of this analysis are allocated 50%.'··· 

to each terminal. 

.. Sources: . Arriving flights-Official Airline Guides, Inc ... 

Gates-Leigh Fisher Associates; based on information froni 

Continental Airlines and various published reports. 

E-30 
· · NeWark International Airport 

50 

40 

"' 30 

~ .E 

c( 20 

10 

0 

Hour ending: 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16· 17" 18" 19 20 21 22 23 24 

John F. Kennedy International Airport 

50 ~-------------------------~---------------------------------------------------------------------------

40 -------------------

30 -----------------------------------------------------------··-----

20 

10 ------------------------

0 

Hourending: 1 2 3 4 5 6 7 8 

LaGuardia Airport 

50 

40 ---------··--- -------------------··--- ----.------.. ---------.. ------------- ---.--··-- .. ---------------

"' 30 ------------------------------------------------------------------------------·--- -- --------------

~ 

< '" 20 --··"----------------------------

10 -- _:__ __ --- --------------- ------- . 

OL... _______ _ 

Hourending: 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 

Source: Offical Airline Guides, Inc., online database. 

Data for'a typical peak day in August 1999, 

excluding commuter airline flights. 

E-31 

Figure 4 

HOURLY JET AIRCRAFT ARRIVALS 

NEW YORK AIRPORTS 

Continental Global Gateway Study 

Newark International Airport 

~ August1999 

~ LEIGH FISHER ASSOCIATES 
:-

)!, 

" 

I: 

,, 

I' 

1, 

·li 

Table 16 summarizes the results of the gate utilization analysis: 

Table 16 

.ESTIMATED GATE CAPACITY-1999 

Passengers in thousands 

· Newark . Kennedy LaGuardia 

Annual p~ssenger demand 

Available gates · 

Annual passengers per g'}te .. 

. Estimated percent <;apacity utilization 

·•'. __ ._._ ..... _-,·-_·_:-.:i~·:_' '• -<·.>_. ,.-.·~:~_:\''<· __ · .. ''4•"~.::_ ..... -, ': 

. Implied·capacitf(atlOO% utilization) 

Annual passengers (a) 

Annual passengers per gate (a) 

Implied excess capacity 

Annual passengers (b)· 

33,200 

93 . 357 

93~. 

····,-J;~~~~:- ;'{. " 

35,700 

384 

2,500 

31,700 

. 111 . 

286 

83% :::· ._., ~ .;_: , .. 

38,000 

343 

6,300 

23,300 

77 

303 

28,000 

364 

4,700 

Total 

88,200 

281 

314 

101,700 

362 

13,500 

(a) Calculated by applying the estimated peak period percent capacity utilization to 

. the estimated annual passenger demand. 

(b) Implied capacity less actual annual passengers. 

So\.lrce: L~igh Fisher Associates, June 1999. 

As sh()Wn in Table 16, Newar]sJs estimated to have the highest capaciryo.utilization 

(93%) of ali three airports; co:rlsfstent -0-itli'the relatively high average nun.'i.ber of 

arriving flights per gate (5.2, shown in Table 15) and confirming the need for · 

additional terminal development at Newark Continental's average utilization at 

Newark is estimated to be higher than the airport average, about 98%. 

The estimated capacity utilization at Kennedy (83%) is high relative to the average 

number of arriving flights per gate (2.7) because of the predominance of widebody 

international flights that arrive in a concentrated peak period and occupy gates for 

longer periods than narrowbody flights. The estimated capacity utilization for 

LaGuardia (83%) is low relative to the average number of arriving flights per gate 

(5:4) because of the predominance of narrowbody domestic flights that occupy gates 

for relatively short periods of time. · 

Overall, it is estimated that New York area airport terminals are currently operating 

at 87% capacity, implying a theoretical capacity to accommodate an additional .. 

13.5 million passengers at 100% utilization. However, in practice 100% utilization is 

not achievable because much of the available capacity is ih the form of a few spare 

gates atvariousterminals at certain times of the day, and not convenient or useable 

E-32 
by those airlines requiring it, particularly for significant expansion by a major 

airline. Given the practical realities of airline operations and the actual distribution 

of passenger demand among airlines, it is estimated that somewhere in the range of 

85% to 90% capacity utilization is the practical limit. This estimated range of 

practical capacity underscores the need for the planned major expansions by 

Continental at Newark and American at Kennedy. 

ANALYSIS OF FUTURE GATE SUPPLY AND DEMAND 

The baseline 1999 gate capacity utilization described in the preceding section was 

used to assess potential future gate supply versus demand conditions. For purposes 

of this analysis, 2010 was used as the benchmark year by which both the Global 

Gateway Development at Newark and the American Airlines expansion at Kennedy 

are expected to be completed. 

Assumed Future Gate Supply 

\ Table 17 shows the existing (1999) and projected (2010) gate supply at the three 

New York area airports. Major assumed changes include: 

• 

• 

• 

Completion ofthe new Terminal4 at Kennedy, for a net addition of 4 gates . 

Construction of American's 59-gate terminal at Kennedy (planned by 2006), 

for a net addition of 36 gates. 

Construction of Continental's Concourse C3 at Newark (planned by 2002), 

for a net addition of 13 gates. 

No other plans for gate expansion at the New York area airports have been 

announced. Potential future gate expansions not reflected in Table 17 include 

(1) redevelopm~t of Terminals 2/3 at Kennedy, (2) further expansion of Terminal4 

at Kennedy, (3) reconstruction and expansion of Terminals 5 I 6 at Kennedy, and · 

(4) construction of additional gates at Terminal A at Newark. There have been 

recent press reports that United Airlines and Delta Air Lines are in_ discussions with 

the Port Authority regarding potential future terminal development at Kennedy, but 

the scope and schedule of these potential projects are not known at this time. 

Although these potential expansions are not reflected in the analysis c!escribed 

herein, it is likely that the impetus for such projects would be the result of faster 

demand growth than that assumed for this report. Due to physical constraints, it isnot considered likely that there will be any material increase in the gate supply at 

LaGuardia during theforecast period. 

E-33 
Table 17 

PROJECTED GATE SUPPLY . 

Newark 

TerminalC Total Kennedy LaGuardia Total 

1999 gates :, .. 'M,,c, 

Domestic 42 78 43 77 198 

International 15 68 .. .83 

· Tofar ·_;: 42 93 111 77 281' .. 

. 2010 gates 

Domestic 40 76 57 77 . 210 

International 15 30 94 124 

Total 55 106 151 77 334 

1998-2010 increase 

(decrease) .. 

Domestic (2) (2) 14 12 

International 15. 15 26 41 

Total 13 13 40 53 

Source: Leigh Fisher Associates, August 1999, based on the assumptions described 

in the text. 

Assumed Future Gate.Capacity . 

"" • f- •- ' •- • •,· , •' > ' ,••, '' :" " :'c" ' " ' -:;~ ' ' ' ' '' ·: ;' ' • ", '· ' 

In the· future, average gate :capaCity at each airport, expressed in terms of annuaJ . 

passengers pet gate, will be i-tffected by <±tanges in gate supply, as follows: · · · -: . _,. . . . . . . . " . . . 

1. Newark-The new gates at Ter!ninal C:::· planned to be constructed as part of 

the Global Gateway Development are designed to have greater capacity (in 

terms of aircnift size accommodated) than the existmg gates. Based on ' . 

analy?is of the futUre mix of gates by aircraft size, it was estimated that the 

· average' gatecapa'city at Newark would increase from 384,000 annual . 

passengers in1999 to 419,000 m2010. . . . . 

2. Kennedy-Most of the assumed future new gates at Kennedy ate those 

planned for the redeveloped American terminal complex. According to 

published news accounts, a significant number of these new gates will be 

designed for regional jet aircraft, which carry far fewer passengers than the 

typical aircraft operated at Kennedy. Based on analysis of the future mix of 

E-34 
gates by aircraft size, it was estimated that the average gate capacity at 

Kennedy would decrease from 343,000 annual passengers in 1999 to 327,000 

in2010. 

3. LaGuardia-Because it was assumed that there would be no change in the 

gate suppiy at LaGuardia, it was also assumed that there would be no . 

change in the annual passenger capacity per gate estimated for 1999. 

Projected Gate Demand 

Estimated future gate supply and capacity characteristics were related to the 

·assumed pa:ssetiger demand: growth at each of the three airports to assess future 

demand versUs supply conditions, as shown in Table 18. 

Table 18 

PROJECTED GATE CAPACITY22010 

Passengers in thousands 

Annual passenger demand 

Available gates 

Annual passengers per gate 

Estimated capacity .. 

(at 100% utilization) 

Annual passengers per gate 

Annual passengers. 

Implied percent capacity utilization . - ' •. ' -, ' • • -- ',. - < ·' ' '_; ~-- ' 

Implied excess capacity · 

Annual passengers· 

Newark 

42,900 

106 

405 

419 

44,400 

97% .. 

·-;. 

Kennedy 

37,900 

151 

251 

327 

49,400. 

77% 

LaGuardia 

27,200 

77 

:353, 

364 _, -;: 28,000. 

97% _,:-· i::• 

. ·j ~~ ' 

Total or 

average 

108,000 

334 

323 

365 

121,800 

. 

(at 100% utilization) 1,500 11,500 800 1;>,800' 

Source: Leigh Fisher Associates, August'l999:' ,, 

As shown, Newark is projected to have a 97% capacity'titilization ratio in'20l0; The 

majority of the excess capacity at the New York airports in 2010 is projected to be at 

Kennedy, attributable primarily to the proposed Affierl'can terminal. · · ' 

E-35 

:l 

::, 

_,.. 

{ 

_J 

' ~· 

t 

' 
Table 19- presents a. comparison of the estimated gate capacity in 1999.and 2010. As 

shoWn, despite the assumed;increases in gate supply, the average capacity utiliza-· 

tion for the three airports is projected to increase from 87% in 1999 to 89% in 2010, as 

a result of increased passenger demand. 

Table 19 · 

CURRENT AND PROJECTED GATE CAPACITY UTILIZATION 

. Annual passengers 

Available gates 

New York Area Airports 

Passengers in thousanqs 

Estimated peak capacity utilization 

Implied excess capacity-annual passengers 

Source: Leigh Fisher Associates, June 1999. 

. ·- .-' "•' 

.Existing 

1999 

88,200 

281 

87% 

13,500 

.. < ___ , 

Projected 

2010 

. 108,000 . 

334 

89% 

13,800 

As mentioned previously, analysis of existing gate demand indicates that capacity 

utilization in the 85% to 90% range is the practical limit (as the remaining available 

gates are not available when and where required to meet specific airline needs), 

POTENTIAL DEMAND FOR NEWARK CONCOURSE C3 GATES · 

The analysis above demonstrates an aggregate demand for gates af the three . 

New York airports. The following specific scenarios were considered for the re~use , 

of Concourse C3 in the hypothetical event Continental were to cease·orreduce 

service:· 

1. Replacement hubbing airline at Newark .. .o:·.:. ·' . _, .. -

2. Replacement of hubbing activity at other New York area airports3. Replacement of origin-destination traffic only 

4. Consortium of international arrlines 

E-36 
' ' 

Key Assumptions 

The following assumptions were used in analyzing the potential demand for 

Concourse C3 gates: 

• The cost to replacement airline(s) to lease gates on Concourse C3 would be 

reasonable relative to the cost of gates at other New York area airports. See 

the earlier section in this report titled "Cost per Enplaned Passenger" and 

the section in; the Official Statement titled "Certain Bondowners' Risks" 

• Replacement airline(s) would already have or would receive route authority 

tq serve Continental's international markets. 

• The proposed contractual and administrative arrangements that would a ply 

to replacement airline(s) would be reasonable relative to those at other 

New York airport terminals, and would not adversely affect the potential 

demand for Continental's Newark facilities described in the hypothetical 

scenarios presented in this report. As noted earlier, consideration of such 

contractual and administrative arrangements was not within the scope of 

our analysis or report. 

Scenario 1-Replacement of Hubbing Airline at Newark 

In Scenario 1, a single airline would replace most or all of the airline service 

provided by the Continental hub at Newark. Candidates might be Northwest 

Airlines or United Airlines. 

Northwest, an alliance partner of Continental's, currently has a. relatively minor 

presence in New York and the northeastern United States. A New York hub would 

complement Northwest's existing route system. Vriiteddoes not have its own 

terminalat any of the New York area airports, and could be displaced by British 

Airways' growth at Kennedy. 

Table 20 presents projected gate demand at Newark in 2010, given the hypothetical 

replacement of Continental by a hubbing airline at Newark. 

The key assumptions and calculations summarized on Table 20 are explained as 

follows: 

1. Projected Continental Passengers at Newark-It was assumed that 

Continental's passengers at Newark would increase at an annual rate of 

3.6% from 1998 to 2010, faster than the average rate for Newark shown on 

the earlier Table 7 due to Continental's continued hub development and the 

future available capacity in the new Terminal C3. This assumed growth 

produces an increase in Continental's passenger market share at Newark 

from 56% in 1998 to 64% in 2010. 

E-37 
Table 20 

SCENARIO 1-PROJECTED 2010 GATE DEMAND 

Passengers in thousa~ds 

Scenario 1 

Base (a) · . Low (b) High (c) 

· Newark hub passenger demand · 

Gate capacity-annual passengers 

per gate 

27,500 . 26,200 33,100 

Required gates 

Assumptions: 

410 

67 

(a) Projected Continental passengers at Newark 

410 

64 

410 

81 

(b) Projected United or Northwest passengers at Newark plus 75% of 

Continental's passengers. 

(c) Projected United or Northwest passengers atNewark plus 100% of 

Continental's passengers. 

Source: Leigh Fisher Associates, June 1999. 

2. Projected United or NorthwesfPassengers-It was assumed that the 

existing (1998) number of New York area passengers carried by United and 

Northwest would increase at the projected annual rate of 1.9% for the 

New York area shown on the earlier Table 7. 

· · 3: Newark Hub Passenger Demand-For purposes of this scenario, it was 

assumed that the average number of New York area passengers carried by 

United and Northwest (that is, the sum of the two airlines divided by two) 

would be combined with most or all of the Continental passengers at 

Newark. · 

4. Annual Passengers per Gate--It was assumed that the number of annual 

passengers per gate would be equivalent to the projected 2010 passengerper-gate capacit:f of Continental's Newark hub operation. 

5. Required Gates-The required number of gates was calculated as the 

animal passengers divided by the number of annual passengers per gate. 

· ' The required miniber of gates shown for the Base case is the same as 

' planned for Contiilental at Newark(55 at Terminal C,7 at Terminal B, and 5 ·· ··. at Terminal A). · 

E-38 
.,• . 

In conclusion, under Scenario 1,' a replacement hub operation at Newark would 

.likely require a number of gates exceeding the projected 55 Terminal C gates 

including the gates on Concourse C3. 

Scenario 2-Replacement of Hubbing Activity at New York Area Airports 

In Scenario 2, airlines that currently have a strong presence in New York would 

replace Continental's Newark service at other New York airports .. Facilities required 

by these airlines would .likely displace other airlines, in turn creating demand for 

terminal space at Newark. · 

Candidate airlines might be American Airlines or Delta Air Lines. American, the 

airline with the second largest passenger market share in New York, has recently 

lost market share to Continental and has plans for a major terminal expansion at 

Kennedy. Delta, the airline with the third largest passenger market share in 

New York, has developed Kennedy as a transatlantic hub, and has two adjacent 

connected terminals (Terminals 2 and 3) at Kennedy. 

Table 2lpresents projected gate demand at Newark in 2010, assuming hypothetical 

replacement of Continental's Newark hub bing activity at other New York area 

Table 21 

SCENARIO 2-PROJECTED 2010 GATE DEMAND 

Passengers in thousands · 

Scenario 2 

Base Low (a) High (b) 

Kennedy passenger demand 

Kennedy p~sse~ger capacity 

Excess demand 

Gate c·apacity-annual passengers per gate (e) 

Newark gate demand 

Assumptions: 

37,900 

49~400. 

58,500 

49,400 (c) 

9,100 

377 

24 

65,400 

42,000 (d) 

23,400 

377 

62 

(a) 75% of Continental's Newark passengers are accommodated at Kennedy. 

(b) 100% of Continental's Newark passengers are accommodated at Kennedy. 

(c) Assuming 100% of Kennedy's capacity is available. · . · 

(d) Assuming 85% of Kennedy's capacity is the practical limit. . 

(e) 10% decrease from average Newark capacity to reflect multiple airline operations. 

Source: Leigh Fisher Associates, June 1999. 

E-39 
I 

c 

.. , -~»-·" -~··sairports. Because it is projected that there will be little or no available capacity at 

LaGuardia by 2010, Scenario 2 is focused on the use of available capacity at 

Kennedy. 

The key assumptions and calculations summarized on Table 21 are explained as 

follows: 

l. Projected Kennedy Passenger Demand-The Base case shows projected 

Kennedy passengers for 2010 as presented earlier in Table 7. For the 

Scenario 2 Low case and High case, it was assumed that the Base case 

Kennedy passengers would be combined with most or all of the projected . 

Continental passengers at Newark. · 

2. Estimated Kennedy Passenger Capacity-For the Low case, it was assumed 

· that 100% of the estimated Kennedy passenger capacity (as presented 

earlier on Table 18) would be available to accommodate increased demand. 

For the High case, it was assumed that 85% of Kennedy's capacity is the 

practical limit, based on previously described gate occupancy analyses. 

3. Excess Demand-The excess demand is calculated as the difference 

. between forecast Kennedy passengers and estilnated Kennedy passenger 

capacity. This is the demand that is assumed to require gates at Newark. 

4. Annual Passengers per Gate-Because the excess demand is assumed to be 

accommodated at Newark, the annual gate capacity estimated for Newark 

is used. For. purposes ofthis scenario, it was.assumed that the annual gate 

capacity would be 10% lower than the Base case due to the likelihood that a 

combination of airlines requiring gates at Newark would not utilize gates as 

effiCiently as the single-airline Continental hub. 

5. Newark Gate Demand-The resulting demand for gates at Newark is 

calculated by dividing the excess demand by the gate capacity. 

· As shown in Table 21, it is estimated that Kennedy's available capacity in 2010 

would not be sufficient to accommodate replacement of the Continental hub bing 

activity, resulting in excess demand and demand for gates at Newark. 

The estimated range of excess demand compares with the projected 55 gates in 

Terminal Cat Newark. 

Scenario 3-. Replacement of Origin~Destination Traffic 

In Scenario 3, Continental's Newark projected origin-destination passengers, but not 

conrieding passengers, would be accommodated where capacity is available at other 

New York area airports. Candidate airlines for replacement might be Southwest 

Airlines, Delta Air Lines, or US Airways. 

E-40 
Southwest recently initi<Jted service at Long Island M<lcArthur Airport (Islip). Delta 

has a strong presence at Kennedy and LaGuardia. US Airways has a strong 

presence at LaGuardia. 

Table 22 presents projected g~te demand at Newark in 2010, given the replacement 

of origin-destination, but not connecting passenger traffic at New York area airports 

where capacity is available. 

.,, · · Tabie 22 

SCENARIO 3-PROJECTED 2010 GATE DEMAND 

·. Passengers in. thousands ' ·'· 

-·· .. 

·. Base . · Scenario3 --=-I..~ow~---'-:;Hi"'-"-=h:--o-.~ .... g ' 

Kennedy passenger demand 37,900 

... :Ke~edy passenger capacity 49,400 

Excess demand ' 

Gate <:apacity;_anriual passengers per gate 

Newark gate demand 

Assumptions: 

57,800 (a) 

49,400lb) 

8,400 ' 

356 (d) ' 

24 

57,800 (a) 

42,0QO (c) 

15,800' 

356 (d) ' 

,,44 

(a) Projected Kennedy passengers plus projected Continental Newark origindestination passengers. · · " · 

(b) Assuming availability of 100% of Kennedy capacity. 

(c) Assuming 85% of Kennedy capacity is the practical limit. 

(d) Reduced to reflect lower gate use for origin-destination operations. 

S9ur~e: : Leigh Fisher Associates, June 1999. 

• . < 

J?ekey ilsshillptions and calculations summarized orr Table 22 are explained 'as . · follows: · · · · ,, ,• 

1. • Projected Kennedy Passenger Demand-The Base case shows the projeded 

Kennedy passengers for 2010 as presented·earlier on Table 7. For the Low 

_and High cases, it was assumed that the Base case Kennedy passengers 

. ·would be combined with the projected Continentalorigin·-destination · _ 

passengers at Newark. For purposes of this scenario; it was assumed' tl\.a.t 

Continental's origin-destination passengers would account fat approximately 72% of Continental's total passengers, a:" slight increase from the . estimated 70% in 1998. · ·· · · ·· · ·, '· · 

E-41 

' I 
N 

l 

i 

' 

2. Estimated Kennedy Pdssenger Capacity..:.:::. The same a:ssum'ptiorts as' for · Scenaiio2:l ·'i .< ·- ~~---~ ; ... ··~- ...:_.·;-,·,:·--~>· ·,! · .~_,,_,~; 

3. Excess Demand-The difference between projected demand and capacity. ----;;; ::~_~,.. ·-· _.,, .... ·i·= :··; . .-;·_:·_ ,-.·- ·:: _,,~_&i·r;.__~··.-·:'·'f':r~:~- ...... -···. -·· ._.,_-· '_.-_- __ , -~ 

. 4.·. Aimual Passengers per· Gat~ As for Scenario 2; .reduced by.10% to reflect.· 

lower gate utilization for a multi-airline operation, and a further 10% to 

.. reflect lower-utilization origin-destination traffic. . 

5. Newark Gate Demand-Excess demand divided by gate capacity. 

r:·:.<1 ~-':'!.::;, .'-~·:": ' .- ·" -~ :-· ''";·y-·:·_.·-,_~-~ ---- ; : :~·~,-\~-.:---,::; As with Scenario 2, Scenario 3 is fo~used ·on,the available capaCity at Kennedy. 

Under the Scenario 3 assumptions, the projected' excess capacity at Kennedy could 

only accornrnodate.a portion of Continental's origin-destination passenger demand; 

; The estipv1ted range of ~xcess demand shown on Table 22 is somewhat less than the 

. projected 55 gates in Terminal C. . .. , ,-,-,-,, t~·· .. ,,, .. , ,·_, 

However, Scenario 3 i~ likely to lffiderstate the demand for gates at New~kbecause, 

given the market area'aata presented earlier, it is likely that Newark woi.ilifl:\ea 

preferred airport for airlines replacing Continental's current origin~destination 

passenger service. For example, the 19 ,90Q ,annual Coi\tinenta\migin,-destination 

· passengers assumed for Scenario 3 in 20io; if all accomrnodafec!'at Newark, ·~ould : 

require between 49 and 56 gates at Newark (estimated using a range of values ·for 

annual passenger per gate), which is similar to the projected 55 gates inTerminal C 

Scenario 4-lnternational Airline Consortium 

In Scenario 4, Concourse C3:>'vould be u~~d by a consortium~f,international airlines. 

· It was assumed for this scenario that Continental's international service at Newark · 

• would be ceas~d 0~ subst~i:iaiiy reduc~d, resulting in the availability of .. international gates on Concourse C3 and international passenger demand tci be' 

accommodated on other airlines. 

Mo~tinteJ,Tiational airlin(2S ~~rying .th~New Yqrk area are e~ther sub\I'J;t<Wts at • , 

u.s. airline terminals' or operate at common~use international termiml.is:. The. r~c~nf 

development of Terminal One at Kennedy by a consortium of Air France, Lufthansa, 

Japan A,ir l,jnes, and KoreaJ< Airlines is qn indication of the desirability of an 

exclusive internationaLten:nipal for a c;ohsortium.of inte~atipnal airlin~s. ,[ 

- ~. '1'' ;:'-"''. 

The estimated. ~ual pas~e!lger <:apa~itY of. COI]-CO~~se C3.is betwe~ 6 ~lion and 

7 mi!liqn. annual passengers, bas(2d on the analyses. desc;ribf;!<;l earlier.., This is 

equiyalel}ttobetween 17% \'nd 20°~ oftJ'\~projectec!.jnt~rl}ational passengE;rs at the 

New,Y ork area ai,rports:in 4010., It equid r~ason,al;>ly be assurr)gd, for purposes of 

this scenario, that a consortium of mtematl6nal airli!les.coUe~tively accounting for 

this level of activity would be intere.sted in occupying Concourse C3; particularly if 

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\, 

some or all of the activity represented replacement of Continental's international 

servtce. 

CONCLUSIONS 

The various scenarios presented above describe the specific circumstances under 

which other airlines might absorb the planned Terminal C gates, if, hypothetically 

Continental were to cease or substantially reduce service at Newark· The results of 

the various scenarios indicate that future market growth can be expected to create 

demand for the planned Terminal C gates, notwithstanding the development of 

additional gates at other New York airport terminals. 

There are certain risks to realizing the assumptions and results described in the 

scenarios. The most important of these risks, and associated mitigating factors, are: 

1. National and international economic conditions 

• 

• 

Risk: Economic slowdown reducing aviation demand 

Mitigating factors: Conservative passenger growth forecasts; most 

New York area airport terminals are at or near capacity 

2. Competing airports 

• 

• 

Risk: Competition for international gateway and connecting hub traffic 

fromnon-New York airports 

Mitigating factor: Size of New York passenger market 

3. Competing New York terminals 

• Risk: Additional development of gate capacity in New York 

0 Mitigating factor: Constrained airport sites at all three airports 

Considering the results of our analyses and the risk factors, our conclusions are: 

L Considering likely future growth in passenger demand and planned 

additions to gate supply, most gates at the three airports, including those 

being constructed in the Global Gateway Development, will be required 

during peak operating periods. 

2. If Continental were to cease or substantially reduce service at Newark, 

various hypothetical scenarios described in our report suggest that there 

would be demand for most or all of the gates being constructed as part of 

the Global Gateway Development. For a major operator, a complete 

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,..J.-

terminal, such as Terminal C, would likely be preferred to the alternative of 

using scattered available gates at various airports and terminals. 

3. Although the various demand scenarios would not necessarily create 

demand for all of Continental's Newark gates, it is likely that the newer 

facilities on Concourse C3, with dedicated FIS facility capacity, would be 

the first to be absorbed. Concourse C3 gates would be likely more 

marketable than gates at most other New York area airport terminals for a 

variety of reasons outlined earlier. 

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