City of Houston, Texas
Airport System
Subordinate Lien Revenue Refunding Bonds
Series 2021A (AMT)
Investor Presentation
MAY 28, 2021
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The Investor Presentation you are about to view is provided as of May 28, 2021, for a proposed offering of the City of Houston, Texas Airport System Subordinate Lien Revenue Refunding Bonds, Series 2021A (AMT) Subordinate
Lien Revenue Refunding Bonds (the “Bonds”). If you are viewing this presentation after that date, events may have occurred that could have a material adverse effect on the financial information presented. Neither the
Underwriters mentioned in this presentation (the “Underwriters”), nor the Financial Advisor, nor the City of Houston, Texas Airport System (“The Issuer”) has undertaken any obligation to update this presentation. The information
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This Investor Presentation is provided for your information and convenience only. Any investment decisions regarding the Issuer’s Bonds should be made only after a careful review of the complete Preliminary Official Statement
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The achievement of certain results or other expectations that may be contained in such forward–looking statements involve known and unknown risks, uncertainties and other factors which may cause actual results, performance
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Except where noted, the information provided in the Investor Presentation is derived from the Preliminary Official Statement and the appendices thereto.
DISCLAIMER
MISSION, VISION
& HAS OVERVIEW
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MISSION AND VISION
HOUSTON AIRPORT SYSTEM (HAS)
4
MISSION
We exist to connect the people, businesses, cultures
and economies of the world to Houston.
VISION
Establish Houston Airport System as a 5-star global air
service gateway where the magic of flight is
celebrated
OVERVIEW
HAS
George Bush Intercontinental (IAH)
159 Destinations: non-stop service to 108
domestic destinations and 51 international
destinations (June 2021)
Supports more than 141,000 local jobs and
contributes more than $27.3 billion to the
local economy
2
nd
busiest of United Airlines’ principal
domestic airport hubs, the world’s second-
largest airline
14
th
busiest airport in the United States
based on enplaned passengers in CY2019
(per FAA)
William P. Hobby (HOU)
64 Destinations: service to 59 domestic and
5 international destinations within U.S.,
Mexico, Latin America and the Caribbean
(June 2021)
Supports more than 36,000 local jobs and
contributes more than $5.8 billion to the local
economy
1
st
airport in Texas to have biometric entry
and exit
7
th
busiest airport in Southwest’s network
36
th
busiest airport in the United States
based on enplaned passengers in CY2019
(per FAA)
Ellington (EFD)
Active general and private aviation airport that
became home to the nation’s 10
th
licensed
commercial spaceport in June 2015
Astronauts from the world-renowned Johnson
Space Center receive ongoing space training at
EFD
Supports more than 13,000 local jobs and
contributes more than $3.3 billion to the local
economy
Home to Axiom’s planned 400,000 sq. ft. facility
to be used to build and launch the world’s first
commercial space station module in late 2024
Home to Collins Aerospace’s planned 116,000
sq. ft. manufacturing laboratory and accelerator
space facility
Supports operations of U.S. Military, Homeland
Security, NASA and general aviation
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Jobs and economic financial contribution data come from a study performed for HAS by ICF in September 2019.
Flight data from HAS and DIIO.
The Houston Airport System is an enterprise system of the City of Houston and is currently comprised of the following facilities, each of which the City
manages, owns and operates through the Houston Airport System: George Bush Intercontinental Airport/Houston, William P. Hobby Airport and
Ellington Airport.
RECOVERY & RESILIENCE
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IMPACT OF COVID-19 PANDEMIC - REVENUES
HAS
7
(in millions) FY19
(Actual)
FY20
(Actual)
FY21
(Projection)
Airline Revenues $269.3 $286.1 $194.8
Non-Airline and Other Revenues $248.9 $205.4 $125.9
Gross Revenues $518.2 $491.5 $320.7
Operating Expenses $315.2 $314.0 $303.3
Days Cash on Hand 562 495 606
HAS’s goal of 450 or more Days Cash on Hand, as set in our Strategic Plan, is met in our
short-term projections
HAS airline use and lease agreements charge airlines based on a compensatory cost
allocation, whereby airline fees equal HAS’s operating and capital costs allocable to the
airlines based on aircraft landed weights, enplaned passengers, deplaned passengers and
area occupied within the airport. Therefore, airline revenues increase or decrease based on
changes in operating and capital costs rather than changes in passenger enplanements and
did not change due to the COVID-19 Pandemic.
RECOVERY AND RESILIENCE - ENPLANEMENTS
HAS
HAS projects it will approach pre-pandemic traffic levels in FY24
Our Preliminary Capital Improvement Plan for Fiscal Years 2022 – 2026, which we anticipate will be proposed for City Council
consideration later in June 2021, has been reduced by over $1 billion to minimize the use of unrestricted cash to fund capital
projects and to allow for the recovery of passenger traffic prior to commencement of large expansion project
HAS currently intends to complete a feasibility study before seeking to materially increase our Capital Improvement Plan
8
FY2022 RESPONSE TO COVID-19 PANDEMIC - FINANCIAL
HAS
Completed refinancing in 2020 that decreased debt
service expenditure in FY2022 by $38M
$161M
$38M
$34M
$31M
USE OF CRRSA and ARPA
ACTS TO FUND CERTAIN
EXPENSES
CRRSA and ARPA Act grants will be used to fund
Parking Contract expense
FEDERAL STIMULUS
BALANCE FY2022 YEAR END
Will use CARES and CRRSA Act funds ($105M) and
PFC’s ($56M) to reduce debt service requirement to
zero
USE OF CARES & CRRSA ACT
WITH PFC’S TO REDUCE DEBT
SERVICE REQUIREMENT TO $0
PROVIDING RELIEF TO
CONCESSIONAIRES
THROUGH CRRSA AND ARPA
As allowed in the CRRSA and ARPA acts, eligible
concessionaires will be allocated grant funds to offset
their costs
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2020 REFINANCING OF
OUTSTANDING DEBT
$156M
HAS expects to have approximately $156 million in
remaining ARPA grant proceeds available to draw down
at the end of FY2022, which can be used for any lawful
airport purpose
AIR SERVICE
UPDATE
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AIR SERVICE OVERVIEW
HAS
11
29
15
23
Pre-Covid (Jan. 2020) Peak Covid (May
2020)
Current (May 2021)
COVID Impact - Airlines Serving
Houston
116
93
113
66
10
51
Pre-Covid (Jan. 2020) Peak Covid (May 2020) Current (May 2021)
COVID Impact - Destinations
DOM INTL
• United Airlines at IAH has recovered 69% of pre-Covid seat capacity (May 2021 vs. May 2019)
• Southwest Airlines at HOU has recovered 79% of pre-Covid seat capacity (May 2021 vs. May 2019)
• Airlines have initiated new service in Houston since the pandemic:
• Allegiant Airlines (HOU, June 2020), Southwest Airlines (IAH, April 2021), Sun Country Airlines (IAH, May 2021)
Source: DIIO flight schedule
IAH NON-STOP DOMESTIC DESTINATIONS
HAS
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PRE – Covid Snapshot (May 2019)
Current Snapshot (May 2021)
Source: DIIO flight schedule
• Slow recovery in non-stop long haul international destinations with 14 fewer destinations (May 2021 vs May 2019)
• Australasia and Canada have not returned as of May 2021
IAH NON-STOP LONG HAUL INTERNATIONAL DESTINATIONS
HAS
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PRE – Covid Snapshot (May 2019)
Current Snapshot (May 2021)
Source: DIIO flight schedule
• Mexico, the main international travel destination, increased by 1 destination (May 2021 vs May 2019)
IAH NON-STOP DESTINATIONS - MEXICO
HAS
14
PRE – Covid Snapshot (May 2019)
Mexico
Current Snapshot (May 2021)
Source: DIIO flight schedule
HOU NON-STOP DOMESTIC DESTINATIONS
HAS
15
Source: DIIO flight schedule
PRE – Covid Snapshot (May 2019)
Current Snapshot (May 2021)
• 8 new domestic destinations at HOU (May 2021 vs May 2019)
HOU NON-STOP DESTINATIONS - MEXICO
HAS
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Source: DIIO flight schedule
PRE – Covid Snapshot (May 2019)
Current Snapshot (May 2021)
• Cozumel is the new Mexico destination from HOU (May 2021 vs May 2019)
MONTHLY ENPLANED PASSENGER TREND
HAS
HAS’s projected enplanements of 18.2 million for FY22 are conservative when compared to FY19
The average monthly enplanement is 60% of FY19 through FY22
Passenger traffic has rebounded to this level in the 4Q FY21 estimate
*FY2021 Apr – Jun enplanements are estimates
Source: HAS data
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2.8
2.5
2.2
2.4
2.5
2.6
2.3
2.1
2.6
2.5
2.6
2.7
1.7
1.5
1.3
1.5
1.5
1.6
1.4
1.3
1.6
1.5
1.6
1.7
-
0.5
1.0
1.5
2.0
2.5
3.0
Jul Aug Sep Oct Nov Dec Jan Feb Mar Apr May Jun
Millions
FY2019 Act FY2020 Act FY2021 Act / Est FY2022 Bud
PASSENGER & REVENUE PROJECTIONS
HAS
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(in millions) FY19
(Actual)
FY20
(Actual)
FY21
(Projection)
FY22
(Projection)
FY23
(Projection)
FY24
(Projection)
Airline Revenues $269.3 $286.1 $194.8 $266.5 $296.8 $315.2
Non-Airline and Other Revenues $248.9 $205.4 $125.9 $169.7 $197.7 $238.6
Gross Revenues $518.2 $491.5 $320.7 $436.2 $494.5 $553.8
Enplanements (in millions) 29.8 21.8 13.8 18.2 22.8 28.7
FY21 and FY22 Airline Revenue are shown net of CARES Act offsets ($95M and $25M, respectively)
Non-Airline and Other Revenues are projected to grow at an annual rate of 24% from FY21 to FY24
Enplanements are projected to grow at an annual rate of 28% from FY21 to FY24 largely based on analysis released by IATA
(International Air Transport Association) on July 28, 2020
HAS continues to use relatively conservative enplanement projections for planning purposes
Gross Revenues are projected to return to pre-pandemic levels between FY23 and FY24
MAJOR PROJECTS
& CIP FUNDING
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MAJOR CAPITAL PROJECTS
HAS
International Terminal – Central Processor
Budget - $508M
Timeline – CY24
Construct new facility where all foreign flag airlines and United
international passengers arrive and depart
Baggage improvements and modifications
Arrivals/Departures curbside and roadway modifications
Enabling projects (demolition, utilities, roadways, etc.)
International Terminal – North Concourse
Budget - $530M
Timeline – CY23
Construct a new D-West Pier (to be completed in CY22)
Refurbish and re-life system in Terminal D
Construct arrivals corridor connecting the existing sterile corridors
Enabling projects (demolition, apron works, utilities, etc.)
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*Amounts presented reflect estimated total project costs and include amounts already spent and/or
appropriated prior to the Fiscal Years 2022-26 Capital Improvement Plan being proposed.
MAJOR CAPITAL PROJECTS (CONTINUED)
HAS
Early Baggage Storage System for Terminals C and E to be installed by United - $64M
Timeline – Operational in first quarter of CY 2023
Meant to store bags arriving at the airport more than 2 hours before departure
Capable of storing and processing 3,300 bags
Will connect to baggage handling system via four conveyor belts, two in and two out
Facility will be multiple levels and will occupy about 73,000 sf
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PRELIMINARY CAPITAL IMPROVEMENT PLAN FUNDING SOURCES
HAS
CIP funding sources, as shown, are based on the Preliminary Capital Improvement Plan for FY 2022-2026 which we anticipate
will be proposed for City Council consideration later in June 2021. The plan was materially reduced from the FY2021-2025
Capital Improvement Plan due to conditions caused by the COVID-19 pandemic
Funding sources are preliminary and subject to change
The Houston Airport System will continue to monitor the level of appropriation and spending in FY22 and may reduce
further if traffic levels do not return to projected levels
The Houston Airport System engaged a firm May 2021 to prepare a feasibility study to identify opportunities to expand
the proposed Capital Improvement Plan as well as help determine the timing and size of future debt issuances
22
Funding Source*
FY2022-2026
($’s in millions)
Airport Improvement Fund $115.5
Renewal and Replacement Fund 2.3
Bonds/Commercial Paper 955.5
Pay-Go PFCs 100.0
AIP/FAA Grants 232.5
Total CIP Spend $1,405.8
*
CIP funding sources, as shown, are subject to approval and are subject to change based on the above mentioned items.
FINANCIAL
UPDATE
23
DEBT SERVICE COVERAGE RATIO TREND & PROJECTION
HAS
($’s in millions) FY17 FY18 FY19 FY20 FY21
Forecast
Airline Revenues $280.9 $287.9 $269.3 $286.1 $194.8
Non-Airline and Other Revenues $229.6 $234.5 $248.9 $205.4 $125.9
Gross Revenues $510.5 $522.4 $518.2 $491.5 $320.7
Operations and Maintenance Exp. $254.5 $326.9 $315.2 $314.0 $303.3
Net Revenues $256.0 $195.5 $203.0 $177.5 $17.4
Gross Subordinate Lien Debt Service
1
$175.0 $174.5 $176.3 $180.7 $154.3
Less: Passenger Facility Charges ($54.7) ($50.6) ($60.6) ($55.0) ($57.7)
Less: Grants ($14.2) ($96.6)
Net Sub Lien Debt Service $120.4 $123.8 $115.7 $111.5 $0
2
Debt Service Coverage Ratio 2.13x 1.58x 1.76x 1.59x N/M
2
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2 - Annual debt service requirement for Subordinate Lien Bonds, net of PFCs, will be paid by CARES Act, reducing debt service
requirements, as defined in master bond ordinance, to zero.
1 – There is currently no long-term senior lien debt service outstanding
USE OF $458M IN FEDERAL GRANT FUNDING
HAS
25
Houston Airports awarded an estimated $458M through CARES Act and
other grants approved by the federal government
FY20 - HAS used approximately $8M to pay debt service
FY21 – HAS expects to use approximately $125M to pay parking contract
costs and debt service expenditures
FY22 – HAS expects to use approximately $31M (specifically set aside
by the federal government to provide relief to concessionaires per
CRRSA and ARPA) to credit concessionaires operating during the
pandemic, approximately $104.5M to pay debt service expenditures and
approximately $34 million to cover parking contract costs
After FY22, HAS expects to have approximately $156M in grant proceeds
remaining to be used for any lawful airport purpose
Grants –
$458 Million
AVAILABLE CASH & DAYS CASH ON HAND
HAS
AVAILABLE CASH (in millions) DAYS CASH ON HAND
Cash available for operations decreased by $60 million FY19 to FY20, primarily due to airline payment deferrals caused by the
COVID-19 Pandemic
Cash available for operations expected to increase in FY21 due to use CARES Act grant proceeds and collection of deferred
payments
Days Cash on Hand declined in FY20 due to airline revenue deferrals and 4Q revenue impacts
Days Cash on Hand for FY21 is expected to increase significantly versus FY20 due to use of CARES Act proceeds and
collection of deferred payments
*Estimates and projections are preliminary and subject to change.
$485
$425
$540
$0
$100
$200
$300
$400
$500
$600
FY19 FY20 FY21 Est
562
495
606
0
100
200
300
400
500
600
700
FY19 FY20 FY21 Est
26
PROJECTED CPE BY AIRPORT
HAS
HAS made use of CARES Act proceeds to offset approximately $95M in costs to the airlines in FY21 primarily in the form of
capital project amortization expense with some O&M expense reductions
Absent the CARES Act proceeds offset, FY 21 CPE’s are estimated to be $23.84 for IAH and $12.84 for HOU
In FY22, approximately $25M in CARES Act proceeds will be used in an effort to keep the CPE for international passengers flat
versus FY21 as international passenger levels continue to lag domestic passenger levels in their recovery rate
*Estimates and Projections are preliminary and subject to change.
$9.13
$8.73
$9.57
$14.13
$16.21
$16.70
$-
$5
$10
$15
$20
FY2020 FY2021 Estimate FY2022 Projection
HOU IAH
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TRANSACTION SUMMARY
HAS
Financing Highlights
Subordinate Lien bonds
No Senior Lien Bonds are outstanding
Series 2021A: Approximately $345M of outstanding Senior Lien Commercial Paper Notes will be refunded as subordinate lien fixed rate debt (AMT)
28
Series 2021A (AMT)
Par Amount*: $295,000,000*
Pricing*: June 8, 2021*
Closing*: June 22, 2021*
Security:
The Series 2021A Bonds are special obligations of the City which, together with the Outstanding Subordinate Lien Bonds and any
Additional Subordinate Lien Bonds hereafter issued, are payable from, and equally and ratably secured by, a lien on the Net
Revenues of the Houston Airport System, subject and subordinate to the prior and superior lien of Outstanding Senior Lien
Obligations and Additional Senior Lien Obligations, if any, all as defined in the Ordinance, and certain Funds established pursuant
to the Ordinance
Use of Proceeds: (i) refund certain Outstanding Senior Lien Notes and (ii) pay related costs of issuance of the Series 2021A Bonds
Ratings: Moody’s: A1 / Kroll: AA-
Call Feature*: July 1, 2031* at Par
Interest Payments*:
January 1 and July 1, commencing January 1, 2022
Maturity Dates*: 2023 – 2048*
Tax Status: Tax-Exempt, Subject to AMT
*Preliminary, subject to change
CONCLUSION
HAS
29
Houston is the most populous city in Texas and the 4
th
most populous in
the United States
Second fastest growing MSA in the US
US energy headquarters and largest medical complex in the world
While COVID-19 severely impacted HAS operations, reaching a low in
May 2020, monthly activity through March 2021 shows that both IAH
and especially HOU are recovering with pre-COVID-19 levels expected
by FY2025
$458M of COVID related grant funding coupled with budgetary actions
and structured refunding savings has enabled the System to weather
the pandemic
Substantial liquidity position with days cash on hand for FYE21
projected at 606 days
PRICING SCHEDULE AND CONTACT INFO
HAS
30
Financing Timetable
Event Date
Release Series 2021 POS June 1, 2021*
Price Series 2021A Bonds June 8, 2021*
Close Series 2021A Bonds June 22, 2021*
Contact Information
Houston Airport System and City of Houston
J’Maine Chubb
Chief Financial Officer
Houston Airport System
Kenneth Gregg
Assistant Director FP&A
Houston Airport System
kenneth.gr[email protected]
Charisse Mosely
Deputy Controller
City of Houston
chariss[email protected]
Melissa Dubowski
Deputy Director
Finance Department, City of Houston
melissa.dubowski@houstontx.gov
Co-Financial Advisor: Masterson Advisors, LLC Co-Financial Advisor: The RSI Group
Trey Cash
Managing Director
trey.cash@mastersonadvisors.com
(713) 814-0565
Tina Arias-Peterman
Director
tina.peterman@mastersonadvisors.com
(713) 814-0564
Pam Mobley
Managing Partner
(713) 236-7745
Senior Managing Underwriter: Goldman Sachs
*Preliminary, subject to change
