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Air Service DevelopmentNavigating Through Turbulent Times

Houston Association of RealtorsSeptember 2012

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Agenda• Evolution of Air Service (past +/- 15 years)

• Jet Fuel’s Impact on Air Service

• Houston Air Service Development

• Houston Airport System (HAS) Real Estate

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Evolution of Air Service in U.S.

<2001

2008Present

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Three Airline TypesUltra-Low Cost

CarrierLow Cost Carrier Legacy Carrier

Fully decouple product Hybrid model Business traffic focusSingle fleet type Single fleet type Multiple fleet types

Minimal infrastructure Growing infrastructure to meet hybrid model

Infrastructure to meet multiple client base

Examples

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United Airlines (United – Continental)Atlantic Immunized Joint Venture• Air Canada• LufthansaPacific Immunized Joint Venture• All Nippon Airways

Continental Airlines• Newark• Houston• Cleveland

Mega Carriers Systems

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Airlines Highest Cost

$0.00

$1.00

$2.00

$3.00

$4.00

$5.00

$6.00

201220112010

Dol

lars

Per

Gal

lon

Sources:US Energy Information Agency

2011 peakApr 08, 2011

$3.38

Sept to Sept, change, 6.9%

Sept 18, 2012$3.18

2012 PeakFeb 24, 2012

$3.33

Jet Fuel Price

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New Technologies Impact on ASD

• Composite materials

– Interior

– Exterior

• B787

• A380 / B747-8

• B737 MAX / A320 NEO

Pratt & Whitney geared turbofan

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Hobby International

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ASD Top Targets

Passenger Service• Asia• Europe

Cargo Service• Asia• Europe• South

America

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IAH-DFWIAH-ORDIAH-LASStarts: Sep-12

IAH-LOSStarted: Nov-11

IAH-ACC-LOSStarted: Oct-11

IAH-MANStarted: Mar-12

IAH-ISTStarts: Apr-13

IAH-DOHStarted: Nov-11

Cargo

A Few Recent Wins

IAH-MIA-MAO-VCP-GIG-BOG-BAQ-IAHStarts: Sep-12

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HAS Real Estate• Houston Airport properties

– Intercontinental Airport Houston

– Hobby Airport

– Ellington Airport

– West Side environment mitigation (Katy area)

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Regulatory Oversight

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Most Common Question #1• How can I buy or sell

airport property?

– No direct sales

• Offer to other city departments

• Offer to other governmental agencies

• Issue a bid invitation

– Not very common

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Most Common Question #2• Can I get a 99 year lease?

– Lease term maximum is 40 years• Must be approved by City Council

– Required to be fare market value– City charter requires city property appraisals

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Most Common Question #3

• Airport Concessions / Restaurants / Retails

– Currently full

– Request for Proposal (RFP) process

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Ellington Pipeline Corridor• Neighboring pipeline corridor

is at capacity

• HAS is creating and managing a new 50-foot wide, non-exclusive pipeline corridor along SH- 3 to accommodate market needs

• Common carrier pipelines destined for Gulf Coast refineries may locate within this corridor

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Thank You