Gavin McKechnie departs ADAC as MTB opening is pushed back to 2021

By Charlotte Turner |

Gavin Mckechnie

Gavin McKechnie has now left ADAC for the second time.

Prominent industry figure, Gavin McKechnie, has left his post as Senior Vice President, Commercial at Abu Dhabi Airports (ADAC), after returning to the company just two years ago. He completed his initial four-year term between 2012 and 2016.

 

The news of McKechnie’s departure follows a chaotic few years for ADAC, which failed to open its Midfield Terminal Building in 2017. Beset by numerous issues, the opening was delayed, forcing McKechnie to renegotiate all the commercial contracts first struck in 2014/2016, during his second spell with the airport operator (2018-2020).

 

In his words, McKechnie returned as SVP in 2018 on request of the Chairman of ADAC, and immediately took ownership of renegotiating all ‘unsustainable contracts’ signed for the delayed Midfield Terminal project, due to downsizing of Etihad Airways (2014/2016) and the consequential reduction in passenger numbers.

 

He spent 18 months rebuilding the team and re-doing what he had implemented in his earlier tenure.

 

He departs the company for the second time as his fixed two-year contract has come to an end (29 June), while TRBusiness understands that Bryan Thompson, Abu Dhabi Airports CEO, Maarten de Groof, CCO and Jerry Sparks, VP Retail Delivery MTB have also now left the company.

 

ADAC has been approached for comments, but is yet to respond to TRBusiness.

 

MTB at Abu Dhabi Airport ADAC AUH_

ADAC originally issued its commercial tenders for its Midfield Terminal Building project on 6 May 2014. These were relaunched the following year after ADAC was forced to amend dimensions of the project.

NEW MIDFIELD OPENING DATE; MID-TO-LATE 2021

While the project was finally meant to conclude in October of this year, as mooted back in January 2020, in an exclusive interview McKechnie tells TRBusiness that he does not envisage the terminal opening until mid-to-late 2021.

 

“The whole project has now sadly ground to a halt due to Covid-19,” McKechnie tells TRBusiness. “We lost a year within year. When I returned to ADAC in 2018 my job was to renegotiate all the contracts, because with Etihad Airways downsizing in 2015/2016 and passenger numbers consequentially plummeting, most of the contracts were unsustainable for Midfield.

 

“So, in my second term with ADAC, it was a case of coming back to renegotiate all the contracts for Midfield and keep the existing Southside contracts going [these were supposed to cease in 2017 when MTB was slated to open – Ed].

 

“That was my job and I’ve done that. But obviously – due to the significant impacts of the Covid-19 pandemic and another unfortunate delay to the opening – it’s all going to have to happen again. I couldn’t face another round of renegotiating contracts.”

001 aa adac gavin mckechnie

Gavin Mckechnie has been close to the MTB project since it was announced in 2012, in the role of Senior Vice President, Commercial.

McKechnie says he has put forward a potential solution to the ADAC commercial team; one that could be applied anywhere in the world currently.

 

RENEGOTIATING CONTRACTS

“This isn’t just a problem for ADAC,” he says. “Other airports will have to renegotiate their contracts during this recovery period, which could last maybe three, even four years, depending on which part of the world you’re in. A different agreement is going to have to be made during this time.

 

“However, after the recovery period, the pre-existing or previously negotiated contract could come into force, triggered by a sufficient rise in passenger numbers. Once they reach the level they were at in say 2019, the clock could start again on those pre-Covid contracts.

 

“We’ve got a load of contracts that are sitting there, ready to go, for 200-odd units in Midfield. Now those will all have to be renegotiated unless someone does something like I have just suggested.”

 

Another upside to this solution is that effectively a concessionaire which currently holds a 10-year contract might end up with a 14 or 15-year contract – as their 10-year contract is only triggered once pax levels rise to pre-Covid levels.

 

“If there’s any compensation for delays or anything else, you push that on to the end of the contract,” he explains.

Lagardere-TR-AUH-hero

Ireland’s Aer Rianta International (ARI) and the French-Emirati joint venture company, Lagardère Capital, won the core 10-year duty free and travel retail concessions at the Midfield Terminal Building (MTB) of Abu Dhabi International Airport (AUH), back in 2015.

A NEW ‘WIN WIN’ SCENARIO

“If you think about the majority of the larger retailers with business in MTB, they are all listed companies; they all have shareholders, and their only assets right now are measured by the size of the contracts.

 

“So if their shareholders see that they have extended their contracts from 10 to 14 years with another year added on because of delays, that adds to the shareholder value, so it’s a win-win. This helps to de-risk the contract.”

 

It also means that in that recovery window, the airport and the concessionaires are still making money, albeit significantly less because of the lack of passengers.

 

“You’ve also rebuilt a relationship, which at the moment is shaky because we were slow to react [to the pandemic] and we were not the only ones.”

 

Abu-Dhabi-Lagardere-Le-Club

A rendering of Lagardère Travel Retail Le Club concept at AUH.

However, this is merely a suggestion right now. ADAC is currently in firefighting mode; as are the majority of airports around the world. When TRBusiness spoke to McKechnie, Abu Dhabi had closed its border with Dubai and travel between different cities in Abu Dhabi itself was also prohibited.

 

MAG AND SERVICE CHARGES WAIVED

However, the airport has now opened up following a visit and approval from the GCAA (General Civil Aviation Authority). ADAC has chosen to stay quiet on the subject though for the moment. “In the past we have often been victims of our own PR,” explains McKechnie.

 

 

“Such as announcing dates and then not being able to deliver on them. But the airport has reopened shops and restaurants to accommodate passengers on repatriation flights and staff.”

 

Whilst ADAC awaits for commercial flights to re-commence on a meaningful level, McKechnie reveals that the company has waived the MAG (Minimum Annual Guarantee) and service charges (aside from utilities) for its retail and F&B partners.

 

“Their only fee is the concession fee, which might also now have to be reduced. It just simply is not sustainable while there’s only 50 or so passengers coming through.”

 

McKechnie tells TRBusiness that in order to streamline costs during this extremely challenging period, the most expensive members of staff – often expats – are those that have been asked to leave first.

 

STAFF CUTS

“They haven’t furloughed anyone here; that doesn’t seem to exist in Abu Dhabi, so a number of people have been laid off while those that remain are working from home.”

 

However, aside from the roles of Head of the Project and CEO, a plan for refilling crucial positions, including McKechnie’s, is yet to be finalised.

 

“So, there are two sets of consultants who are going to be holding the fort until positions have been replaced,” he says. “Unfortunately, I don’t think (ADAC) knew exactly what was involved in what we did.

 

“But I believe it will sort itself, and it will probably sort itself in time for concessionaires to come back anyway. But the problem of renegotiating contracts remains.”

 

In part 2 of this exclusive interview, McKechnie discusses his plans for the future and how the industry can make changes now for a more compelling passenger experience.

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