IAADFS in industry coalition seeking targeted funding from US Congress

By Luke Barras-hill |

Capitol-US-airportrelief

Industry associations are requesting $5 billion to enable airport concessionaires to survive the coronavirus (Covid-19).

The International Association of Airport Duty Free Stores (IAADFS) and other industry associations have called on Congress for a life raft worth at least $5 billion to support airport concessionaires.

IAADFS, the Airport Restaurant & Retail Association (ARRA), National Parking Association (NPA), American Car Rental Association (ACRA) and Airport Minority Advisory Council (AMAC) have co-authored a letter to lawmakers in Capitol Hill.

The letter requests dedicated support for businesses running retail and duty free shops, restaurants and car rental and parking operations via a combination of grants and loans to help concessionaires avoid bankruptcy, begin rehiring staff and gradually resume operations.

The three-page letter is addressed to Nancy Pelosi, Speaker, House of Representatives; Mitch McConnell, Majority Leader, Senate; Chuck Schumer, Minority Leader, Senate; and Kevin McCarthy, Minority Leader, House of Representatives.

RENT DEFERRALS ‘NOT ENOUGH’

In the letter, the associations point to the ‘disproportionate impact’ on industries associated with the travel sector such as airport concessionaires – many of which are contracted through the Airport Concessions Disadvantaged Business Enterprises (ACDBEs) programme – that rely on passenger traffic.

Legislators are reminded of the significant benefits that concessionaires bring to the air transport ecosystem, contributing nearly $8bn annually to airports via rent, fees and other income and accounting for approximately 40% of total airport revenues.

In addition, retail and duty free shops, restaurants, car parking and car rental industries generate more than $50bn annually in sales and employ around 320,000 workers, providing a vital boost to local and national economies.

Letter-Congress-Associations

As reported, while a wave of US airports have been awarded capital grant funding under the $10 billion CARES Act to help offset revenue declines, cover operational expenses and service debt, concessionaires are yet to receive a dedicated funding package.

Although airport concessionaires have achieved some success in securing guaranteed payment relief [click here to watch an interview with IAADFS President and CEO Michael Payne for more detail], the letter judges temporary aid such as rent deferments as not ‘nearly enough’ to help concessionaires survive.

“While we appreciate the airports that are offering such deferrals, they do not address other airport concessionaire costs and expenses, the sales and revenues they are losing every day or the predicted timeline until air travel rebounds to at least 80 percent of pre-pandemic levels.

“Since these companies operate in a highly restricted and federally regulated airport environment, they will live or die based on government policies, travel restrictions, airline schedules and other factors over which they have no control—and whether the Congress appropriates targeted relief funding.”

It continued: “The airport concessions business is very much a cash flow business that operates on slim margins, with high capital investment requirements uniquely dependent on airline passenger traffic. Within weeks of the onset of the pandemic, airline travel and consequently concessions sales plummeted by as much as 95%, depending on location.

Miami-Airport-birdseye

Miami International Airport was a beneficiary of the Coronavirus Aid, Relief, and Economic Security (CARES) Act grant funding. Source: MIA/mdad5lores.

“As the pandemic spread and air travel virtually ceased, more and more concessionaires were compelled to furlough valued employees, drastically reduce operations, and close some locations.

“Unlike other restaurants and retail operators, airport concessionaires cannot conduct business with the general public outside the airport environment, and thus have not been able to sustain any business through drive-thru or carry-out sales—they are totally captive to the number of air travellers at the airport.

“Most airline executives and industry experts do not expect passenger traffic and business revenues to return to pre-pandemic levels for some time—most projections are 18-36 months, or longer.”

The associations add that while the policy objectives of the Paycheck Protection Progam (PPP) are ‘admirable’, they do not provide the requisite support needed by concessionaires.

“Even with the extension of time to 24 weeks under the PPP Flexibility Act, air travel will not return to anywhere near normal fast enough to allow them to hire back many employees or resume full operations.

“Nor will the funds be sufficient to help cover their high non-payroll expenses, such as rents, debt, inventory, vendor obligations, and capital investment needed to operate in the new Covid environment.”

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