ATÜ Americas is to exit its Houston George Bush International Airport duty free concession when the Terminal D stores close on 31 March 2019 (at the earliest) due to continued operating losses among other elements.

An agenda item seen by TRBusiness, for a Houston City Council (HCC) meeting which took place on 25 September, recommended an ordinance to be enacted approving and authorising the compromise and settlement agreement between the city and ATÜ Americas regarding the closures.

The Concession Settlement Plan (CSP) was ultimately approved a day later (26 September).

Confirming the approval of the CSP to TRBusiness, Ahmet Kotenhe, Chief Strategy Officer, Strategy & Business Development, ATÜ Duty Free said: “We are very pleased that this matter could be successfully concluded with Houston and appreciate the City Council’s decision.”

TEN-YEAR CONTRACT WIN

As reported back in 2015, Houston Airport System selected ATÜ Americas for one of two 10-year duty free contracts. The other went to Dufry-owned World Duty Free Group. The former was selected ahead of other bidders, while the latter obtained the most points in the evaluation process.

The company, part of ATÜ Duty Free, which is based in Turkey has already closed its Terminal A and Terminal B operations on 19 July having notified the HCC at the beginning of the month. This is because it does not believe the situation will improve throughout the duration of the 10-year contract.

A Request for Proposals will be issued by the HCC ahead of a new tender for the stores in Terminals A, B and D, which are under the current ATÜ concession agreement.

ATÜ will pay a reduced concession fee of 22% for all merchandise categories (effective 1 September to closing). The previous concession fee was between 24% and 42%. The rental reduction does not apply to the Chanel store in Terminal D which remains at 14%.

Under the terms of the CSA it must also ‘assist with a smooth transition to the new operator.’

WITHDRAWAL DECISION

The decision to withdraw stems from alleged operating losses ‘with no expectation of material improvement’ over the term of the concession agreement.

According to the agenda item, this is due to lower enplanements and United Airlines operational reallocation of passenger traffic (following the opening of Terminal C North and Terminals B and C South). This sparked an overall decline in passenger traffic.

Other contributing factors include the HCC’s assignment of certain concession facilities to United Airlines, higher than average percentage rental rates and various negative trends in travel and duty free sales.

ATÜ further alleges the HCC is partly responsible for the conditions affecting ATÜ’s financial performance.

HCC RESPONSE

In the meantime, the HCC disputes responsibility for lower than projected financial performance on the concession agreement. This is because it made no guarantee of any level of enplanements, plans for the development of Terminal C North was public knowledge and disclosed in the RFP, it had no advance knowledge and/or control over United’s change in operations and because ATÜ is responsible for the management of its facilities.

This includes choice of concept, brand, proposed percentage rental rates and pricing.

The agenda note read: “The HCC disputes any connection between its assignment of certain concession facilities to United and ATÜ’s financial performance. United’s operation and reallocation of passenger traffic was motivated by its desire to leverage the capabilities of the new Terminal C North and consolidate its regional carrier operations.”