SOUTHWEST AIRLINES CO. ‘ie Present Properties April 27, 2010 ‘The Honorable Tom Leppert Mayor of Dallas Mary Suhm Dallas City Manager Dallas City Hall 1500 Marilla Street Dallas, TX 75201 Re: Love Field Concession contracts (Addendum items 1-4) Dear Mayor Leppert and City Manager Suhm: As the primary underwriter of the cost of Love Field, no one has more at stake in the success of the Love Field Modemization Project (LFMP) than Southwest Airlines. When the Wright Amendment restrictions are finally dissolved in 2014, a gleaming new passenger facility will be in place to weleome more visitors to our city. This marks the first chance in perhaps five decades for the City of Dallas to remake Love Field, including new, expanded, and better concessions. ‘Together, we've come too far not to get this right Customers come to an airport for one reason: to fly. While there, they have other needs. ‘The quantity, quality, and variety of airport concessions in the modern world of aviation are not “amenities” they ate essential for Customer satisfaction. Frequent flyers demand good concessions as a part of an enjoyable airport experience. Lead by Southwest, the airlines at Love Field have structured an agreement with the City of Dallas that covers all operating and capital expenses for the airport at no cost or risk to local taxpayers. A successful concessions program underpins the financial structure for the LEMP. For these reasons, Southwest must express concem with the current proposal before the City Council, which locks in the award of half the concession space allotted under the LFMP for the next twenty years, in the absence of better information. Southwest is neither for nor against any potential bidder or operator of concessions at the airport. We do favor a process resulting in the best value, product delivery and customer service at Love Field. We want what’s best for the citizens of Dallas, our passengers, and our Employees. Doing the right thing also includes adhering to the letter and spirit of policies regarding participation by minority and women owned businesses.‘The Honorable Tom Leppert and City Manager Mary Suhm April 27, 2010 Page Two In the airport development world, we are aware of situations where a negotiated concessions contract is better than a competitive bid process. ‘The reverse is equally true. In this instance, we simply don’t know enough about the deal on the table to know whether it is the best one attainable by the City of Dallas. We remain uncertain about the substance and the reasons for some of the specific addendum proposals. For example, some of these issues are: ‘+ The contract extensions to concourse opening modify the percentage fees upon first closure of existing facilities. Is this “modification” an increase or decrease, and why? The water sales provisions of the addendum are puzzling, and appear to be a holdover from the last concession contract. We believe the best way to handle bottled water sales is to provide for sales at the locations preferred by passengers, without an economic carve-out such as is proposed. Entering into new contracts with such terms will both limit progeam flexibility and reduce cash flow to the City. ‘* Extension options should be at the option of the City rather than at the option of the operator At the very least, the City should be able to reject exercise of an option for cause. ‘+ The decision to split the concessions is related to the idea of awarding incumbents similar footprints to existing operations. Given the complexities of security and the limitations of dock space and support facilities, we believe that single bids with one operator for food and beverage and one operator for news and gifts to be the most efficient plan from a space and operations perspective. Additionally, given enplanement risks that have been evident over the last 10 years, one operator will be more likely than two to have the critical mass necessary to weather hard times. We do not understand why this issue is being fast-tracked through the Council. The first phase of the new passenger facility will not be operational for another three years. The final build-out of all the concession space that is being reserved in the design will not occur for several years after that, at best. We have time to study the best outcome to meet Love Field’s concessions needs and ‘what is best for Love Field’s patrons No one is betting on a resurgent Love Ficld more than Southwest, which is committing hundreds of millions of dollars to back that bet. We are proud to partner with the City of Dallas to make Love Field a national showpiece and want our flagship airport to be the best it can be. It has taken many decades to get us this far. It is worth taking a little more time to ensure that this unique opportunity realizes its full promise.‘The Honorable Tom Leppert and City Manager Mary Suhm April 27, 2010 Page Three Southwest urges the Manager and Members of the Council to defer action on the airport concessions addendum items this Wednesday until such time as a more considered judgment can be rendered based upon a full vetting of all the options available ‘Thank you for your consideration. Sincerely, AL Bob Montgomt Vice President — Properties CC: Members of the Dallas City Council Assistant City Manager A.C. Gonzalez