Relief for US airport operators deemed insufficient despite US$800m increase

By Andrew Pentol |

US airport concessionaires will now receive US$1 billion in relief from minimum annual guarantees and rents.

Industry stakeholders and representatives in the US have welcomed the recent passing of a Covid-19 government bill which allocates an additional US$8 billion to airports including US$800 million in relief from minimum annual guarantees and rents for airport concessionaires.

Despite reacting positively to the increased funds for airports and concessionaires, industry representatives believe the total relief on offer remains insufficient.

The allocation of further funds for airport concessionaires follows the awarding of US$200 million under the Coronavirus Response and Relief Supplementation Appropriation Act.

Signed into law on 27 December 2020, the Act allocates nearly U$2 billion to eligible US airports and concessionaires which will assist them in their response to the coronavirus (Covid-19) pandemic.

Funds will be distributed by the Federal Aviation Administration (FAA) which has established the Airport Coronavirus Response Grant Program. The FAA will make grants to all airports that are part of the national airport system, including all commercial service, reliever and some public-owned general aviation airports.

ADDITIONAL RELIEF WELCOMED

Primary commercial service airports with more than 10,000 passengers boarding flights annually will share US$1.75 billion. Allocations are based on the number of passengers flying each year.

Airports will provide relief to each concession based on its proportional share of the total annual rent and minimum annual guarantees for the airport. At least $640 million is available for eligible small airport concessions or joint ventures.

Under the new government bill, airports were required to provide relief from the date of enactment (March 11) until they have provided relief equaling the total grant amount.

The total amount of relief now available for US airport concessionaires still falls short of what was jointly requested by various industry associations in June 2020.

While the awarding of an additional US$800 million in relief for airport concessionaires (total relief for airport concessionaires now amounts to US$1 billion) is welcomed and appreciated, it still falls short of the US$5 billion requested by the International Association of Airport Duty Free Stores (IAADFS) and other industry associations back in June 2020.

As reported, IAADFS, the Airport Restaurant & Retail Association, National Parking Association, American Car Rental Association and Airport Minority Advisory Council co-authored a letter to lawmakers in Capitol Hill.

The letter requested 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.

Michael Payne, President and CEO, IAADFS told TRBusiness: “We are delighted that our collective concessionaire coalition efforts have resulted in an additional $800 million in financial relief.

“Combined with the $200 million approved back in December, this provides a billion dollars of financial relief for concessionaires.

“While less than the original request and recognising more help is needed, we are nevertheless grateful and appreciative of this assistance from the Congress and Biden administration.”

Michael Payne, President and CEO, IAADFS is ‘grateful and appreciative’ of the assistance received.

His words are echoed by Alex Anson, 3Sixty Duty Free, Chief Operating Officer, whose company will be among those to receive a portion of the $800 million.

He told TRBusiness: “This is an important milestone as it is one of the few government relief programmes, I am aware of in the industry which directly targets concession operators in airports.

“There have been lots of generic relief programmes and furlough support programmes around the world, be it in the UK, Singapore or elsewhere, but I believe this is one of the few travel retail concession operator-specific relief packages that have been approved.”

He added: “It would be great if other governments around the world would recognise how much travel retail has suffered during the pandemic — not just the airlines and not necessarily just the airports — but us as an industry and concession operators within the industry in these locations.”

US$800 MILLION ‘NOT SUCH A BIG NUMBER’

Despite the awarding of the additional funds for airport concessionaires, Anson is refusing to get carried away in terms of what this might mean for 3Sixty Duty Free. “While $800 million as part of a $1.9 trillion package sounds like a big number, by the time that is allocated to all operators — food and beverage, car rental and retail — it won’t be such a big number.”

Using one unnamed airport as an example, with which 3Sixty is in constant dialogue and has a strong relationship Anson said: “The sum total of the $800 million when converted to one airport and to 3Sixty Duty Free would mean around a third of one month’s minimum annual guarantee rent.

“This is versus the conversation we have been having with airports around abating minimum annual guarantees throughout the last year.”

Summing up his thoughts on the awarding of further funds for airport concessionaires, he concluded: “I just want to contextualise. It is good to have the relief and it is important that the industry has been recognised, but the materiality of it in the end in terms of what it means for an operator like 3Sixty in a US airport, is only about 5% of our rent obligations in a year.”

US Airport operator 3Sixty Duty Free welcomes the additional relief for airport concessionaires from an industry perspective, but suggests it will have minimal impact.

Further reacting to the passing of the Covid-19 relief bill, ACI-NA President and CEO Kevin M. Burke said: “We applaud the work President Biden and Congress have done to provide airports with an additional $8 billion in critical funding to continue safe and efficient operations.

“Over the last year, the Covid-19 pandemic has forced shutdowns across North America and around the world. While airports quickly mobilised to protect travellers and workers, the significant drop in passenger traffic has decimated airport finances.”

He continued: “The pandemic is projected to cost US airports more than $40 billion by March 2022 — a number that will grow if the pandemic drags on.

“Despite these challenges, American airports remain committed to ensuring the health and safety of the traveling public and airport workers by deploying enhanced sanitation procedures and adopting new technologies to limit the spread of Covid-19.”

 

 

 

 

 

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