First, and potentially most important, the FAAs position on rent abatements has gone from NO to: A decision to abate rent (including minimum annual guarantees and encompassing fees) is a local decision. This option would give the airport operator the ultimate control over its concession program as it takes on full responsibility for all business aspects. mwaa.com - RFP-21-26914: Fixed Base Operator, IAD The single factor most tied to concession success is the footfall past the concession locations. See how we help fast-changing industries succeed. Percentage Rent to the Board as set forth in Article 1 based on Concessionaire's Gross Receipts, subject to a Minimum Annual Guarantee (MAG) as set forth in Article 1, and as further provided below. Under the current process, minimum annual guarantee for the first year is the financial bid parameter for selection of bidder and the period of concession is 10 years from the commercial operations date. Meanwhile, Aena is forecasting that in the period to 2023, the minimum annual guaranteed rents and fixed rents, corresponding to contracts in force at 30 June 2020, will decrease. As a result, airports may wish to consider going a step further. Sea-Tac airport may allow Uber, Lyft and Sidecar to start picking up passengers if new rules are passed. This leads to another possibility: to eliminate MAGs and tie airport payments to sales only. Concessionaires could avoid minimum annual guarantee payments for a third quarter as the MAC develops a long-term relief plan. While the model has primarily been used for duty free concessions, it has worked equally well for other types of concessions. Duty Free Americas Miami offered a minimum annual guarantee to the airport of $20 million -- topping the $18.5 million offered by Dufry Miami Retail Partnership and about $9 million more than two . Two ground handling service providers selected for Chennai airport's The FBOs lease space from the airport sponsor to be able to provide those services. To meet aggressive congressional deadlines for request submissions, a new airport industry request is being made with three potential components: $13 billion in additional emergency assistance, a gap financing program for airports, and a touchless journey through security. The FAA will use the Office of Management and Budget (OMB) SF-424, Application for Federal Assistance, and provide a simplified grant agreement shortly after it receives an application. 5-16-C001: Rental Car Concessions, National Airport CARES Act funding: Ten things airports need to know It may be necessary for an airport to close concession locations as they may close portions of the airport to reduce their operating costs. Paid parking went into effect at . Car rental companies are concessionaires at the airport. There are a few limitations, however, that make this a less than optimal solution. 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. 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. Discover our insights for a sustainable, low-emissions future. "No. That is no longer possible. As a result, if concessionaires produce lower sales because there is no traffic, it will result in space rental rates increasing. The price tag is a whopping $440 per square foot. 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 . A by-location per passenger MAG may be too complicated for widespread implementation at this point. However, we recommend that you consider the underlying principles of Uniform Guidance and the terms and conditions of the FAA while administering the funds. Most simply, the airport and vendor could agree to a fixed percentage rent. At least $500 million is available to increase the federal share to 100% for grants awarded under the fiscal year 2020 appropriations cycle for FY20 Airport Improvement Program (AIP) and FY20 Supplemental Discretionary grants. The joint venture model allows the airport to supply capital, likely at a lower cost than its business partners. 636(a)(37)) that has been applied toward rent or minimum annual guarantee costs. HMS Host, the food and beverage concessionaire at Clinton National, is required to pay a minimum annual guarantee of $594,000, which works out to $49,500 monthly under the terms of its contract. . The Airports Authority of India (AAI) has kick-started the process of appointing ground handling agencies for 83 state-run airports for a . First championed by Martin Moodieone of the stalwarts of the concession industrythis model has airports, retailers, and suppliers cooperate in developing concession operations. Food worker shortage at Sacramento airport prompts closures | The The intent of DBE programs is to increase the amount of business done with Minority Business Enterprises (MBE) and Women Business Enterprises (WBE). Airlines value an attractive commercial program because it makes a better background for the expression of their brand. The single factor most tied to concession success is the footfall past the concession locations. 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. Concessionaires need to understand this new business reality when they ask for relief. A prepaid monthly "lease" to do business on the property. Airports should carefully consider how they structure deals and their business models to ensure more flexibility to respond to potential future shocks. Test. The Struggle and Payoff of Setting Up Shop in an Airport 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. Minimum Annual Guarantee Process Up to 3 years Or Up to $100,000 per year Direct negotiation with potential concessionaire Over 3 years and up to 5 (a) Annual Reconciliation. Minimum Annual Guarantee - How is Minimum Annual Guarantee abbreviated? Examples of Minimum Annual Guaranteed Rent in a sentence. This is especially true for leases that incorporate the minimum annual guarantee (MAG) mechanism or fixed rent clauses. . The fallacy of Minimum Annual Guarantee (MAG) In times of continued and prolonged growth, airports have learned to depend upon MAGs. All rights reserved. Fixed Based Operators or FBOs, are service providers to many GA and corporate aircraft. However, it is unlikely that most airport operators have staff with specific expertise in concession operations and management. However, there is no relief of the obligation to withhold and remit the corresponding employee share. Rates and Fees are adjusted annually based on the Airport's fiscal year, from October 1st through September 30th. Most airports already calculate a PSF rent amount in their airline rates and charges (e.g., office space with passenger access) that applies to concession-type spaces. While this methodology is feasible, it does not get to the actual number of passengers who see a concession location. The entire concessions space is typically leased out to a single company who is responsible for subletting the spaces. President Donald Trump has already tweeted his support for such an infrastructure bill. ); that is, airport sponsors meeting statutory and policy requirements under this section, as well as those identified in the FAAs current National Plan of Integrated Airports System (NPIAS). This category only includes cookies that ensures basic functionalities and security features of the website. 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. The additional funds appropriated by the CARES Act were intended, in large part, to help airport sponsors meet their debt service and bond obligations. Proposed laws would allow Uber, Lyft pickups at Seattle airport and Airport vendors have you right where they want you trapped at the gate, drinking a $20 beer. - Suite 1 . These benefit packages may make the cost of employment significantly higher than the all-in employment costs for most concession operators. . For information on the business impacts of COVID-19, please visit ourCOVID-19 Resource Center, which we continue to update as the situation evolves. The Board of Airport Commissioners at Los Angeles World Airports has recently approved a recommendation by management to permit concessionaire relief measures, including moving all concessionaires with contracts based on Minimum Annual Guarantee fee payments to percentage rent-based agreements Airports would also have to hire and manage many additional hourly employees. 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. By way of comparison, in the past two fiscal years (FY19 and FY20), the federal government has appropriated approximately $3.35 billion in regular Air Improvement Program (AIP) spending and an additional $400$500 million in discretionary AIP grants. While the bulk of the $10 billion appropriated for airport sponsors can be used, if necessary, to make bond principal and interest payments, airport sponsors may be faced with difficult decisions about how to prioritize needs during the financial stress. Very hands off for the airport sponsor. Airports should consider alternative methodologies for managing and operating their concession programs for concessions to remain viable business options. This website uses cookies to improve your experience while you navigate through the website. Match. Airports provide the passengers, the retailers provide the services. From layoffs to business closings, social distancing to shopping only on days that correspond to the first letter of your last name, we have all seen and felt the impact.