Delta continues to make progress on its project to modernize its operations at Los Angeles International Airport (LAX), United States, which plans to conclude in 2023.
The company initially executed a modified lease during 2016 with the City of Los Angeles, owner and operator of LAX, and announced plans to modernize, upgrade and provide a post-security connection to Terminals 2 and 3.
Construction is underway, which includes a new centralized arrivals and ticketing hall, a new security checkpoint, core infrastructure to support the city’s planned airport movement of people, ramp improvements and a connector post-security on the north side of the Tom Bradley International Terminal.
Given reduced passenger volumes as a result of the Covid-19 pandemic, Delta accelerated the construction schedule for this project in 2020.
Additionally, in 2020, the company enhanced the scope of the project to include a more customer-friendly design of Terminal 3, an expanded Delta Sky Club, and baggage system upgrades designed to increase the operating efficiency of the terminals in the future.
The company expects the project to cost approximately $2.3 billion.
A vast majority of the project costs are financed through the Regional Airports Improvement Corporation (RAIC), a California public benefit corporation, using a revolving line of credit provided by a group of lenders.
The credit facility was executed in 2017 and amended in 2020, and Delta has guaranteed the RAIC’s obligations under the credit facility.
Delta
The revolving credit line agreement was modified again in January 2022, increasing the revolving capacity from $800 million to $1.1 billion.
Loans made under the line of credit are being repaid with proceeds from the City of Los Angeles’ purchase of completed project assets.
Based on the lease agreement and subsequent approvals of project components by the City of Los Angeles Board of Airport Commissioners, the City of Los Angeles has allocated approximately $1.8 billion to date to purchase assets from the completed project, which represents the maximum reimbursement allowed by the City.
Delta currently expects net costs for its project to be approximately $500 million, of which approximately $250 million has been reflected as investing activities in its statement of cash flows since the project began in 2017.
In 2021, $487 million was spent on this project, with $450 million paid from the line of credit and $37 million paid directly by Delta.