IAADFS adds its plea for concessionaire relief as airlines seek $50 billion U.S. bailout to survive coronavirus turbulence

A bipartisan coalition of governors and mayors from across the country joined with the entire U.S. aviation industry in a joint letter last Thursday to U.S. Congressional leaders in the Senate and House of Representatives urging the Administration and Congress to work swiftly to provide financial stability for the U.S. airline industry.

The International Association of Airport & Duty Free Stores supports the request and is working to make sure that the duty free and travel retail concessionaires are included in any relief packages, IAADFS President and CEO Michael Payne tells TMI.

Airlines for America, the trade group representing the carriers, is asking for $29 billion in federal grants, with $25 billion for passenger airlines and $4 billion for cargo carriers. The airlines are also seeking up to $29 billion in low-interest loans or loan guarantees, and they want federal excise taxes on fuel, cargo and airline tickets to be suspended through the end of next year.

Washington, D.C.-based IAADFS sent its own letter on Thursday, both to members of Congress, and to its airport partners throughout the region.

The letter requested that airports suspend guarantee payments that are based on minimum passenger numbers for the duty free and travel retail stores that operate in the airport, resulting from the “rapid freefall in passenger numbers” from the unprecedented global health emergency caused by the COVID-19 pandemic.

The IAADFS requested the suspension be effective March 1, 2020 until the end of the national emergency.

“Clearly these are historic and unprecedented times during which we need to come together as a global business community to address the rapid decrease in passenger retail traffic that is the lifeblood of both the airports’ and Duty Free operators’ businesses,” Payne said, adding that thousands of jobs are at stake as well as the solvency of the duty free industry.

The IAADFS letter went pre-dominantly to U.S. airports, says Payne, along with some in Latin America, to make sure that the duty free/ travel retail channel is part of any relief package that is enacted, he explained.

“This is a very complex issue, and this is a process. We are trying to cover all the bases in these early days and get some provision in this early draft of this bill. The bill will go to the Senate first, and then to the House. We wanted to get in early and get a stake in the ground.”

Payne said that the IAADFS’ efforts are in addition to those of its individual members, who are themselves connecting to the airports as well.

“We needed to stake out our position in a more public way, both to the airports and to congressional contacts.

“For us, the immediate impact within the U.S. is trying to get some relief through some of these congressional bills,” he notes.

The IAADFS is taking a three-prong approach, said Payne.

“Number 1, we clearly support the general funding request from ACI-NA for a multi-billion relief package. And that relief comes in a number of forms – bond relief, bond extensions, breaks on interest, block grants to help fund operations. This activity has been underway for a couple of weeks and we are supportive of this.

“In addition, the IAADFS and the other two airport organizations that were recently formed (The Airport Restaurant and Retail Association –ARRA and the Airport Minority Advisory Council -AMAC) have had lengthy discussions, and when we talk to senatorial offices – especially now that the bill is originating in the Senate—we are looking for very specific language that would tie any of the relief provisions to the duty free/travel retail,” said Payne.

“If the airports end up getting block grants – which is where they are headed – we want to be part of that formula,” Payne continued.

“And thirdly, we are trying get language supporting and recognizing the issues impacting the duty free/travel retail shops across the country; language supporting these companies.”

Payne notes that the goals are slightly different they are all inter-connected and going on at the same time.

“We are taking a broad brush approach to cover all sorts of support.”

While the majority of the Association’s efforts is directed to U.S. airports right now, he says that the premise is the same outside of the U.S. and could be expanded.

Some airports have already taken steps to assist concessionaires. These include, but are not limited to:

 

Atlanta – Hartsfield-Jackson Atlanta International Airport

The city of Atlanta suspended the minimum annual guarantee payment obligation for concessionaires and rental car companies at ATL for a four-month period ending June 20. The legislation is designed to allow companies to use four months of rental funds to pro-vide relief to employees experiencing reduced hours and lost wages as a result of the COVID-19 health threat, said the official announcement.

The city may extend this Temporary Emergency Rental Payment for an additional 30-day period if the COVID-19 pandemic is still active.

Once the emergency rental payment term expires, concessionaires will be required to resume normal rental payments.

 

Denver International Airport has “proactively implemented policies” to give key tenants relief, allowing airlines to defer their rent for April, May and June until later this year. DEN also changed concessionaire fees from a minimum annual guarantee (MAG) to a rent percentage rent based on total monthly sales for the next three months, and is allowing rental car companies to defer three months of rent, until later this year.

“We are doing everything necessary today to protect the airport for the long term and will emerge from this healthy and ready for the next wave of growth when this passes,” said the DEN statement.

 

Dallas- Fort Worth International Airport recommended at a March 3 meeting of the Board to eliminate the minimum annual guarantee amendment to duty free Con-cession leases in Terminal D impacted by sales falling below the anticipated sales threshold, and is assessing options to pay a percentage of sales versus the minimum annual guarantee rent through the fiscal year ending September 30, 2020 for other categories.

 

Miami International Airport

The Miami-Dade Aviation Department has allowed concessionaires to temporarily close some locations at MIA or reduce their hours of operation, and in the case of dining locations, reduce their menus, while still maintaining concession service in each concourse for the reduced numbers of passengers traveling.

“We are considering various forms of relief for the concessionaires and are taking into consideration how similar airports are responding. Ultimately, any recommendation by the Aviation Department must be approved by Miami-Dade County Mayor Carlos Gimenez and the Board of County Commissioners before it can be implemented,” Greg Chin, Communications Director, told TMI.

 

San Francisco International Airport (SFO).  

The Airport Commission last week approved a lease modification for DFS Group (SFO’s duty free operator).

Doug Yakel, Public Information Officer at San Francisco International Airport tells TMI: “We are offering the forbearance of rent and fees to concessions at SFO, and last week our Airport Commission approved a lease modification for our duty free vendor to allow a temporary suspension of the MAG and an adjustment of the base rent calculation for the remainder of this year.”

In addition, SFO has postponed the opening of the next phase of Harvey Milk Terminal for public use for at least four weeks. The Airport remains open for essential travel, however.

 

Los Angeles International Airport: On Thursday, the Los Angeles Board of Airport Commissioners (BOAC) held a special meeting to discuss LAWA’s response to COVID-19. BOAC President Burton shared a public statement regarding LAWA’s actions to combat the spread of COVID-19 and how it is preparing for the economic realities facing our industry. After President Burton’s statement in open session, the Commission went into closed session to discuss various negotiations surrounding the economic impacts facing LAWA, and its partners (DFS Group was on the agenda).

BOAC says it will have additional special meetings to develop solutions for addressing these economic impacts, all of which will be conducted remotely to comply with public health guidance regarding social distancing.

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