# Luis Muñoz Marín

International Airport (SJU)

Public- Private Partnership Airport Project December 20112 

# Executive Summary  

### SJU is the busiest airport in the Caribbean with 4.2 million enplanements in FY 2011*.  

### SJU is a critical infrastructure asset for the economy of Puerto Rico and job creation on the Island.  

### SJU is facing serious challenges:  Deteriorating infrastructure;  Decline in traffic;  Lack of financial capacity;  Absence of managerial continuity; and  Strong competition from neighboring countries 

### .  

### SJU can have a positive transformation by establishing a public - private partnership (P3) with a 

### strong private consortium (P3 Project).  

### The objective of this meeting is to brief you on the P3 Project for SJU, gather general support and start an open dialogue as we approach the final phase of the P3 Project.

_______________ * Fiscal years in Puerto Rico are periods of twelve months starting in July and ending in June of the following year.3 

# Background  Opened with a capacity for 665,000 passengers and permitted the development of a tourism industry and overall economy.  Puerto Rico became a preferred destination.  Gates were expanded. Eastern Airlines became the dominant carrier and occupied Terminal B. 

### 1955

2000-09 1980s 1990s Original structure of the SJU International Airport in San Juan, Puerto Rico .



### Present  After Eastern Airlines closed, American Airlines became the dominant carrier. SJU became a

hub for American Airlines.  Other Caribbean destinations became more competitive. Puerto Rico looses its international interconnectivity capacity due to 9/11 attacks.  The Dominican Republic, Mexico and Jamaica consolidate as tourism destinations.  Miami and Panama City are now the new “doors” to Latin America.  SJU is no longer a hub and funds for capital improvements are scarce .  Lack in continuity in the management of SJU and underutilized terminal space.

# The Need for Transformation

45 

###  

## Restore infrastructure investment and world class standards.  

## Driver of economic growth and competitiveness .  

## Re-establish the financial stability of the PR Ports Authority.  

## Deteriorating infrastructure and 

## need for O&M best practices.  

## Weakened position of Puerto 

## Rico as a destination and adverse effect in economic growth.  

## Ports Authority without credit 

## capacity and nearly insolvent.



# Objectives of P3 for SJU  

# Situation Objective6 

# Need to Restore Investment in SJU Deterioration Parking Lot

Parking lot stairways 

### Safety Concerns

Leaking roofs

2007 2008 2008 2009 Junk Credit Rating 

## Aaa A3 Baa3 Baa3 Puerto Rico Ports Authority Credit Rating

In 2010, Moody's determined a negative outlook on it’s ratings and the GDB had to redeem the bonds of the PA. In 2010, GDB* provided additional funds to PRPA due to a negative watch from Moody’s and a real risk of downgrade. Moody’s Credit Ratings

_______________ * GDB = Government Development Bank for Puerto Rico. Pipe Lines7



# Need to Increase Traffic and



# Create Jobs  

### The passenger base at the airport has been the "same" for 20 years.  

### The number of enplanements has remained in the range of 4 -5 million passengers since 1990.  

### Increasing the number of visitors by 400,000 would have a significant impact on the local economy*:  Increase Puerto Rico’s gross product by $276 million.  Create 3,772 new jobs.  Increase government revenues by $34 million. 

### Trend in Total Enplanements In millions 4.60 5.10 5.20

0.0 1.0 2.0 3.0 4.0 5.0 6.0 7.0

1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 Fiscal Years Annual average since 1990: 4.7 MM Annual average for 2000-2010: 4.8 MM 4.2

_______________ * Source: Luis Muñoz Marin Airport P3 Project Desirability and Convenience Study, P3 Authority, www.p3.gov.pr.

# Benefits of the P3 for SJU

89 

# Positive Change for all Stakeholders
 Preferred destination connectivity: Caribbean Region, USA and global routes.  Increased economic activity: more passengers, cargo logistics, long-term investments.  Fiscal restructuring: restructuring of the PR Ports Authority.



### Airlines General Public (Passengers) 

### Puerto Rico

 Travel experience: enhance travel experience and customer service.

 Clear focus: convenience, efficiency, safety, and high quality services.  World -Class Operations: application of best practices and clear operating standards.
 Rates and charges: significant value due to savings and greater transparency.  Holistic approach: comprehensive Use Agreement and equal set of rules.  Aligned interests: better alignment of commercial interests.10 

# Airline Participation

 Air Transport International  Gulf and Caribbean Cargo  Expressjet Airline  Pace Aviation  Tradewinds Aviation 

### Supporting airlines and discussion participants

American Eagle 

### Potential parties to be involved Puerto Rico achieved the 65 % consensus to support a P3 process, as required by the Pilot Program of the Federal Aviation Administration on metric weight carried (MAGTOW). This consensus was crystallized by signatures of a non - binding MOU.

* MAGTOW = Maximum Allowable Gross Take off Weight.

AirTran American Airlines

 USA Jet Airlines  Vieques Air Link  Amerijet International  ABX Air  Arrow Air  Cape Air  Spirit Airlines Delta Federal Express UPS JetBlue US Airways United/Continental11 

### 1. Concession Terms: 2. Capital Improvements: Keep moderate term below 50 years and as short as feasible. 

# Snapshot of the Airport P3*

Require immediate improvements to rapidly enhance conditions and allow for long-term life-cycle upkeep.
3. World Class Standards: Require operating standards that integrate world class levels and best practices. 4. Route Development: New air transit routes, an increase in air traffic and global connections. * Private- Public Partnership’s basic elements . Terms are subject to change .12 

### Preferred of 

### Bidder FAA Final Review 

# Projected Timeline*
 RFQ Due Date: August 8, 2011  Shortlisted bidders: 6 shortlisted out of 12 potential bidders
 Issued Request for Proposals (RFP): Oct 2011  Draft Transaction Documents: Nov 2011  Site Visits, Due Diligence, Technical Meetings: Nov- Jan 2011  Bidders meetings with FAA and Airlines: Dec 2011 - Jan 2012
 Selection of preferred bidder in accordance to P3 Act  Commercial Close
 Submission of final application to FAA Pilot Program  60 days of review before final approval by FAA 

# 
In Progress
Next Completed

Next 

# = Request for Proposals and Tender Process 

### Bidder Qualifications (RFQ)

_______________ * Subject to change and revision.13 

# Conclusion  

### P3 for SJU is based on the right reasons:  Economic growth;  Competitiveness; and  Financial stabilization.  

### Achieve a world class P3 project with a solid transparent process.  

### Support for the process can be key in achieving this much needed economic development measure:  Facilitating understanding of benefits to airline industry; and  Facilitating understanding of the benefits to other stakeholders (industry leaders, general public, passengers, organized lab or, investors, airport operators, and others).

# Appendix

1415 

# General Approach to 

# SJU P3 Project
Tourism Company

P3 Authority and Government Development Bank Department of Economic Development Ports Authority 

## Luis Muñoz Marín Airport World Class Airport • Airport as a central driver of positive change. • Focus on economic development objective. • Strong tourism platform. • Long-term partnering with Puerto Rico and PRPA. • Financial and contract monitoring expertise to ensure compliance.

 

### E nsuring Success  

### Holistic Approach for Global Connectivity