How does the Airport Authority charge rent? The joint venture lease must be similar to those given to other concessionaires, and enforcement of the airports rules and performance requirements must be uniform.
Review Journal | Legal Notices | NOTICE OF INTENTION TO ENTER I Tallahassee, FL 32310 . Paid parking went into effect at . 47114 (as modified by the CARES Act), then the remainder is distributed in the same manner as the $7.4 billionbased on a mixture of enplanements and debt service. Airport sponsors should carefully review their bond covenants and indentures, with a particular focus on pledge of revenues and flow of funds. In North America, airports tend to look at MAGs as the least amount of acceptable rent. Unlike earlier phases of stimulus, Phase 4 has the potential to include a significant infrastructure focus. Given the current state of the economy, Congress has turned to working on the next comprehensive economic relief package, which is being referred to as CARES 2.0. It is Minimum Annual Guarantee. I certify that Airport Concessions Inc. has not received a second draw or assistance for a covered loan under section 7(a)(37) of the Small Business Act (15 U.S.C. While it may never be business as usual again, the airport and its business partners need to adjust to a new normal. Terminal Closure and Footprint Reductions. There are means of counting passengers who pass a concession location, but few airports have installed such technology. If the basis for a MAG is what the airport thought it should be earning, the amount may never be supportable even if a concessionaire signed the contract. Given the sharp reduction in revenue that these concession vendors are now facing, they may not be able to meet their MAGs. To level the playing field so that DBEs can compete . Receive perspectives on the industries and issues that matter. Because this rate base is not related to passenger numbers, it is equally as inflexible as a MAG set by any other means in the event of significant changes in enplanements. Option 6: The airport as concession operator. Wealth Management. Airport sponsors must certify compliance with the CARES Act employment requirements at the time of grant execution and report employment totals quarterly on June 30, Sept. 30, and Dec. 31, 2020.
Fuelling Airport Recovery Via Non-Aeronautical Revenue | WSP - WSPglobal In addition to the detailed guidance in the Revenue Use Policy, the CARES Act makes clear that the funds may not be used for any purpose unrelated to the airport. Test. Another advantage of this model is that it may provide a means to improve the levels of involvement of smaller and local businesses. First championed by Martin Moodieone of the stalwarts of the concession industrythis model has airports, retailers, and suppliers cooperate in developing concession operations. This essentially flips the rent risk from being entirely on the vendors (in a MAG-based model) to being entirely on the airport.
Minimum Annual Guarantee - How is Minimum Annual Guarantee abbreviated? First, and most important, the recently enacted Coronavirus Aid, Relief, and Economic Security Act (CARES Act) contains a supplemental appropriation of $10 billion to be made through Grants-In-Aid for Airports. That $10 billion is divided into the following categories: Any airport that receives money under the CARES Act must continue to employ, for the remainder of 2020, at least 90% of the number of employees that airport had as of March 27, the date of the enactment of the Act. PFCs have been set at $4.50/passenger since 2000, and increasing the PFC maximum has been a priority of the airport industry for some time. 116-94). In a 6-to-3 vote on Monday, June 8, the council approved temporarily revising the Minimum Annual Guarantee, which is a fixed amount restaurants guarantee they will pay the city to do business at . The April 4th FAA guidance permits this: In coordination with airport sponsors, airlines, the Transportation Security Administration (TSA), and other entities, closing gates or sections of terminals is likely to be acceptable if the closure is executed in response to reduced passenger volumes and operations, is not discriminatory, and does not provide an unfair competitive advantage to one operator. Delta will pay market rates to lease these three additional Delta-preferred gates with a minimum annual guarantee (MAG). Given that we are considering a new paradigm, airports and concessionaires may wish to consider three other business structure options. Concessionaires could avoid minimum annual guarantee payments for a third quarter as the MAC develops a long-term relief plan. As such, most airports should stay out of active management of the concession location, leaving that to the expert partner. Regardless, this shifting of risk may not be acceptable to airports. Page 3 of 61 - Non-exclusive On-airport Rental Car Concession - Proposal documents 3. There are a few limitations, however, that make this a less than optimal solution. Minimum Annual Guarantees. Senior Living Development Consulting (Living Forward), Reimagining the future of healthcare systems, National Plan of Integrated Airports System, tax alert comparing COVID-19 employer tax incentives. With a MAG based on enplanements, the airport accepts the risk of failing to deliver enough enplanements. Current generally accepted accounting principles suggests that entities should establish a policy that defines operating revenues for enterprise funds and use it consistently. Where abatement results in shifting costs between various classes of airport tenants and users, the airport sponsor is encouraged to consult with all affected parties. Each contributes its expertise, capital, and support to result in a uniform, consistent, and superior customer experience throughout the passengers journey. At least for the immediate future, there will be reduced demand for concession services.
Proposed laws would allow Uber, Lyft pickups at Seattle airport and PDF Agreement for Operation of Valet Parking Services Concession San Were here to help! Where abatement results in shifting costs between various classes of airport tenants and users, the airport sponsor is encouraged to consult with all affected parties. Without this expertise, the concession will almost certainly fail to operate at an optimum level. One-twelfth of the MAG shall be due in advance on the first day of each month While the airport might invest capital in the joint venture, it must be involved in a management committee overseeing the business. How involved the airport gets in the day-to-day operation is the option of the airport and their partner(s). Necessary cookies are absolutely essential for the website to function properly. This option would give the airport operator the ultimate control over its concession program as it takes on full responsibility for all business aspects. To ensure that firms meet the requirements of DBE qualification. NOTICE OF INTENTION TO ENTER INTO FOUR SEPARATE CONCESSION LEASE AGREEMENTS WITH THE DAY ONE GROUP LLC NOTICE IS HEREBY GIVEN, to all interested parties, that the Clark County Board of Commissioners intends to enter into four separate Concession Lease Agreements (Agreements) for the operation of 5 specialty retail concessions with The Day One Group LLC (Company) serving Harry Reid . Most airports are not prepared to be on a constant hiring cycle for entry-level hourly employees. Performance. A payment called a Minimum Annual Guarantee will be waived for the months of March, April and May last year. 84, Fiduciary Activities. The develop pays the amount due to the airport through the lease agreement and pockets the rest. We did not review solicitation or award of concession agreements in this audit. For years 2, 3, 4, and 5 of the Term of the Agreement, the Minimum Annual Guarantee shall be 85% of the Concessionaire's previous year's concession fees paid to County or the Minimum Annual Guarantee bid for the first Madang, Papua New Guinea - Madang (Airport Code) MAG: Mainzer Aufbaugesellschaft mbH: MAG: Mission Assurance Guidelines: MAG . Airports are left with four basic responses: do nothing, suspend minimum annual guarantees (MAG), defer rent, or rent abatement. Sea-Tac airport may allow Uber, Lyft and Sidecar to start picking up passengers if new rules are passed.
Denver International Airport refundings to ease debt-service schedule Many airport agreements allow for a suspension of MAGs in the event of a severe enplanement decrease. Airports maintain goals of working with Disadvantaged Business Enterprises or more commonly referred to as DBEs.
CARES Act funding: Ten things airports need to know The additional funds appropriated by the CARES Act were largely intended to help airport sponsors meet their debt service and bond obligations. The CARES Act roughly triples the amount of money flowing from the federal government directly to airports for 2020.
Concessions FAQs - Raleigh-Durham International Airport These MAGs are usually based on some percentage of the prior year's revenue and are intended to provide the airport sponsor with a revenue floor from these . The same rules govern the use of CARES Act funds that govern the use of all airport revenues. You also have the option to opt-out of these cookies. Concessions and retail often fill that need. 9.
Milwaukee, Wisconsin General Mitchell International Airport Car Rental Percentage (privilege) Fees - 10% of gross revenue from airport related car rentals, or a minimum annual guarantee, whichever is greater. CREDIT UPDATE Prior to the pandemic, Terminal 4 was observing strength in its operational performance with enplanements reaching 10.8 million in 2019, the leader across all terminals at JFK. The company, which . Some larger airports take a percentage of every sale. The FAA issued an extension of limited waiver (PDF) through October 29, 2022 of the minimum-slot-usage requirement for international operations at John F. Kennedy International Airport (JFK), LaGuardia Airport (LGA), and Ronald Reagan Washington National Airport (DCA).Additionally, the FAA extended through October 29, 2022, our . Concessions are typically leased with a percentage type lease so that a specific percentage of gross sales are given to the airport as part of their lease agreement. 2023 Plante & Moran, PLLC. This category only includes cookies that ensures basic functionalities and security features of the website. What this option does do is change the distribution of risk. . These supplier relationships are unlikely to have the same economies of scale as those of national concessionaires, which means the costs of operation may be higher. These MAGs are usually based on some percentage of the prior years revenue and are intended to provide the airport sponsor with a revenue floor from these concession contracts. The FBOs lease space from the airport sponsor to be able to provide those services. A MAG is guarantees the airport sponsor a minimum amount of money from the concession, in the event they do not generate much revenue. That will, in turn, harm the concession program. 4.1.2 Minimum Annual Guaranteed Concession Fee Payment. A different methodology is required to ensure that vendors are allowed to earn a fair return on their investments, are able and willing to reinvest to improve and grow, and still provide a reasonable return to the airports. Depending on the level of the sales decrease, the resulting increase in space rental rates may lead to concessions being no longer economically viable. Minimum Annual Guarantee. This strategy is particularly applicable for a hub airport where the hub airlines brand expression is likely already an important part of the airports perceived brand. Meanwhile the company maintained a resilient retail margin of above 60%, helped by minimum annual guarantee waivers to airport landlords of $1.2 billion. Tax. "This is to offset rent and minimum annual guarantee requirements of those tenants in the face of a severe decline in their customers (passengers) during the continuing COVID issue." Airport . Airports would also have to establish supply lines for products that they have not procured in the past. To go along with that, concessions are often subject to Minimum Annual Guarantees (MAG). The additional funds appropriated by the CARES Act were intended, in large part, to help airport sponsors meet their debt service and bond obligations. The airport human resources function is likely not ready to handle that, as the annual turnover of concession employees often approaches 150%. "We've already . If you have questions about COVID-19s impact on your business, please reach out to your Loeb relationship partner or email us directly atCOVID19@loeb.com. By clicking Accept, you consent to the use of ALL the cookies. The Secretary of Transportation may waive this workforce retention requirement if they determine that the sponsor is experiencing economic hardship as a direct result of the requirement, or that the requirement reduces aviation safety or security. While the vendor still has some risk to pay for its investment and employee wages, rent is solely dependent on sales.
PDF DENVER INTERNATIONAL AIRPORT (DEN) - Denvergov.org .
MAC details long-term relief proposal for airport bars, restaurants and Attention: Finance & Administration Division . Airlines have a significant stake in the quality of the concession program because of its impact on the passenger experience. Airport sponsors should carefully review the maintenance and operation (M&O) expense allocation methodology in their terminal leases to confirm the method for allocating costs for vacated space. The Trinity model is particularly applicable to duty-free concessions, where it is practical to divide a store into departments wherein vendors (e.g., Channel, Rolex, Hermes) are given the ability to design and operate their mini outlets. Airports should consider alternative methodologies for managing and operating their concession programs for concessions to remain viable business options. These three options do not change the underlying airport-concessionaire relationship. In other parts of the world, MAGs are the airport's exact expected rental payments. There are numerous ways to frame a contract without a MAG. Match. This Minimum Annual Guarantee must exceed $100,000. The city of Atlanta suspended the minimum annual guarantee payment obligation for concessionaires and rental car companies at Hartsfield-Jackson Atlanta International Airport (ATL) for a four-month period ending June 20. To remove barriers in participation of DBEs. As such, most airports should stay out of active management of the concession location, leaving that to the expert partner. This leads to another possibility: to eliminate MAGs and tie airport payments to sales only. Having been hit particularly hard, airports are searching for answers to problems on a scale that simply wasnt imaginable six months ago. Additionally, car rental companies will usually be required to pay the airport a Customer Facility Charge (CFC).
The future of airport concessions in a post-COVID-19 world - Duty Free Under one version of an infrastructure plan floated by House Democrats (the Moving Forward Framework), airports and airspace improvements would be funded, in part, by an increase in PFCs. See how we support our people, protect the planet, and give back to communities. In other parts of the world, MAGs are the airports exact expected rental payments. The policies and procedures are available for review here. 1, their minimum annual guarantee was superior to anybody . As someone who's sat on all four corners of the airport advertising negotiating table - media owner, airport operator, media agency and client - I have a degree of sympathy with all parties.
Concessions covers more than what you think of served at a traditional concession stand. The MAC has already waived minimum annual guarantees three . Kona International Airport at Keahole is located on the western coast of the Island of Hawaii, approximately 10 miles from the town of Kailua Kona. Concessionaires need to understand this new business reality when they ask for relief. North American airports generally believe that if a vendor is paying a MAG, there may be a business problem. Given the focus on bottom line profits, the investment in variable costssuch as employees, training, maintenance, and product developmentrequired to earn additional sales may no longer make economic sense. SCOPE OF FEES TO BE PAID THE CITY BY CONCESSIONAIRES a. That $7.4 billion is divided in half and distributed in two ways: 50% is allocated among all commercial service airports based on each sponsors calendar year 2018 enplanements as a percentage of total 2018 enplanements for all commercial service airports., 50% is allocated among all commercial service airports based on an equal combination of each sponsors fiscal year 2018 debt service as a percentage of the combined debt service for all commercial service airports and each sponsors ratio of unrestricted reserves to their respective debt service.. The key will be ensuring that airline charges remain fair and reasonable. If flights do not return to their pre-pandemic levels, then the airport will not be able to recover former passenger levels. Notably, the GASB has deferred the implementation date of GASB Statement No. It is still unclear whether all of the CARES funding will be reported on the Schedule of Expenditures of Federal Awards (SEFA) . The FAA helped to level the playing field by allowing DBEs to compete for concessions contracts in airports. Out of these, the cookies that are categorized as necessary are stored on your browser as they are essential for the working of basic functionalities of the website. Terminal Rentals - Rent paid by car rental companies for ticket counters and office space in terminals. See how we help fast-changing industries succeed. New model commercial contracts will require a complete rebuild of the airport's financial model, along with revised relations with financiers. This is only for the passenger traffic, while for . Until a few weeks ago, your organization has likely been focused on implementing several new GASB standards, including GASB Statement No. The adjustment in Guaranteed Annual Rent may not, in any event, result in a decrease in the current amount of Minimum Annual Guaranteed Rent.. Any increase in Minimum Annual Guaranteed Rent shall be based upon an average increase in the index calculated over a period of 90 days prior to the end of the current five year term.
The future of airport concessions in a post-COVID-19 world These benefit packages may make the cost of employment significantly higher than the all-in employment costs for most concession operators. Option 5: The Trinity (or Trinity Plus) model. Calculating MAG based on traffic in a larger area (e.g., the concourse or terminal) is one possible answer. The intent of DBE programs is to increase the amount of business done with Minority Business Enterprises (MBE) and Women Business Enterprises (WBE). If you have questions. For example, TSA has reduced lanes or consolidated passenger screening checkpoint operations in numerous airports in response to the reduction in originating passenger volume.. Rent abatement should be tied to the changed circumstances caused by the public health emergency and done in accordance with Grant Assurances 22 and 24, as well as related statutes. Minimum Annual Guarantee (MAG). As is becoming evident, basing financial remuneration on an aspirational or required numberor even recent experiencecan fail. Supplemental Airport Grant-In-Aid Funding This option would give the airport operator the ultimate control over its concession program as it takes on full responsibility for all business aspects. The Federal Aviation Administration (FAA) . The fallacy of Minimum Annual Guarantee (MAG). There are several types of concessionaires that lease space to operate at the airport. Nichols wrote to the County Board of Supervisors that $12.1 million of the money will be used to finalize airport agreements that waive contractual minimum annual guarantee rents for airport . The joint venture model allows the airport to supply capital, likely at a lower cost than its business partners. There are numerous ways to frame a contract without a MAG.
PDF SCHEDULE OF RATES AND CHARGES - Talgov If, on the other hand, the airport sponsor decides to enforce the terms of a MAG, then it should carefully review the concession contract to determine the terms of enforcement and whether the concessionaire has any basis to refuse to pay the MAG. There will still be passengers, and the concession industry needs to be ready to serve them. The FAA released guidance for airport administrators, but questions still linger and issues have gone unaddressed. 49 CFR Part 23 requires airports to have a concessions-based DBE program. Regardless, this shifting of risk may not be acceptable to airports. This opportunity is for two available FBO leaseholds with a general aviation terminal, office space . A third party can absorb some of the liability and risk from the airport operator.
SFO to launch rent relief programme for airport concession tenants The airport operator also brings knowledge of how to do business in an airport environment while allowing the concessionaire to concentrate on what they do best: operate a highly successful restaurant or shop.
O'Hare and Midway concessionaires to get rent relief - Chicago Sun-Times A per enplanement MAG would be a strain on most airports accounting departments, especially if the footfall varies by location. Discover our insights for a sustainable, low-emissions future. With the new economic and industry realities, capital access may be an even greater hurdle. The current decline dwarfs those of the recent past, as enplanement levels have dropped by upwards of 90%. The fallacy of Minimum Annual Guarantee (MAG) In times of continued and prolonged growth, airports have learned to depend upon MAGs.
Airport Actions in Response to the COVID-19 Pandemic