Off-airport companies pay up to 8% of gross revenue from their airport-related car rentals. Rent abatement should be tied to the changed circumstances caused by the public health emergency and done in accordance with Grant Assurances 22 and 24, as well as related statutes. $100 million is distributed to general aviation airports in accordance with categories established by the National Plan of Integrated Airport Systems (NPIAS). Airlines, while they may be able to reduce some operating costs associated with vacated premises, must still cover all their fixed and operating costs associated with the vacated space. While the model has primarily been used for duty free concessions, it has worked equally well for other types of concessions. Hence, a fairer methodology for establishing a MAG is to base it on an absolute value per exposed passenger. There are means of counting passengers who pass a concession location, but few airports have installed such technology. Concessionaires are, in general, seeking some manner of rent relief from their airport partners. FBOs may collect the landing fees for GA aircraft or charge them a fuel-flowage fee on behalf of the airport. Calculating MAG based on traffic in a larger area (e.g., the concourse or terminal) is one possible answer. To ensure that the program is performed in accordance with law. Airport vendors typically pay a portion of their revenues to the MAC, and those payments can't fall below the minimum annual guarantee. The Federal Aviation Administration (FAA) . 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. Below are some considerations for airport sponsors to keep in mind. Airport concession contracts for the full panoply of concessions, including rental cars, parking and retail, usually contain a minimum annual guarantee (MAG). Products and services both fall into the concessions category. At least $7.4 billion is allocated to commercial service airports, allocated based on enplanements, debt service, and unrestricted reserve ratios. MAC details long-term relief proposal for airport bars, restaurants and Many airport agreements allow for a suspension of MAGs in the event of a severe enplanement decrease. Having been hit particularly hard, airports are searching for answers to problems on a scale that simply wasnt imaginable six months ago. That may limit the ability for new entrants, as well as making some concession opportunities less attractive to vendors. Up to $2 billion apportioned in accordance with the per-passenger apportionment rules of 49 U.S.C. which guarantees that the tenant will pay the airport a minimum amount annually. Airlines have a significant stake in the quality of the concession program because of its impact on the passenger experience. 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, Hrmes) are given the ability to design and operate their mini outlets. Save my name, email, and website in this browser for the next time I comment. Like their partners in the airline industry, airports have been dramatically affected by the slowdown in flights and passenger traffic associated with COVID-19. Tenants at airport get break on debts - Arkansasonline.com SFO to launch rent relief programme for airport concession tenants No one is sure how long recovery will take. With the new economic and industry realities, capital access may be an even greater hurdle. 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. Airports would also have to establish supply lines for products that they have not procured in the past. It varies based on the size, capacity, and operations of the airport. The CARES Act roughly triples the amount of money flowing from the federal government directly to airports for 2020. Minimum Annual Guarantee or " MAG " means the minimum Privilege Fee due the Authority annually from the Operator set forth in Section 5.2. Nichols wrote to the County Board of Supervisors that $12.1 million of the money will be used to finalize airport agreements that waive contractual minimum annual guarantee rents for airport . A MAG, as currently developed, is unsustainable in anything but relatively normal times. This . The Trinity model can be considered an extension of the joint venture model. Concessions Development - Airport University 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. Hawaii Aviation | Kona International Airport at Keahole If the metric for rent resumption is comparing the current period to the same period in the previous year, by the time the world reaches year two of recoveryeven if the improvement is only slight and slowthe contract may reinstate the original MAG. DOCX Airport Rescue Grants Airport Concession Certification for XYZ Airport Each contributes its expertise, capital, and support to result in a uniform, consistent, and superior customer experience throughout the passengers journey. When one partner tries to do too much, it will lessen the benefits of the joint venture. We use cookies on our website to give you the most relevant experience by remembering your preferences and repeat visits. It is mandatory to procure user consent prior to running these cookies on your website. In North America, airports tend to look at MAGs as the least amount of acceptable rent. While some of these answers require more information from the federal agencies, there are 10 burning questions we can answer now. That $7.4 billion is divided in half and distributed in two ways: 50% is allocated among all commercial service airports based on each sponsors calendar year 2018 enplanements as a percentage of total 2018 enplanements for all commercial service airports., 50% is allocated among all commercial service airports based on an equal combination of each sponsors fiscal year 2018 debt service as a percentage of the combined debt service for all commercial service airports and each sponsors ratio of unrestricted reserves to their respective debt service.. There are means of counting passengers who pass a concession location, but few airports have installed such technology. CREDIT UPDATE Prior to the pandemic, Terminal 4 was observing strength in its operational performance with enplanements reaching 10.8 million in 2019, the leader across all terminals at JFK. PDF Concession Policy 1. Overview 1 While it may never be business as usual again, the airport and its business partners need to adjust to a new normal. The airport operator also brings knowledge of how to do business in an airport environment while allowing the concessionaire to concentrate on what they do best: operate a highly successful restaurant or shop. As MSP airport develops long-term relief plan for shops and restaurants While this methodology is feasible, it does not get to the actual number of passengers who see a concession location. County of Muskegon Muskegon County Airport Minimum Annual Guarantee - How is Minimum Annual Guarantee abbreviated? Piedmont Triad International Airport in Greensboro gets $10 million in Examples of concessions within airports include: A direct concession lease involves the space being directly marketed, leased, and managed by the airport operator. Any funding received under the Assistance Listing 20.106, Airport Improvement program will be reported on the SEFA. The company, which . The funds are coming directly from the U.S. Treasurys General Fund to prevent, prepare for, and respond to the impacts of the COVID-19 public health emergency. Please read our Privacy Policy for more information on the cookies we use. Where do we go from here? Strategic agency for engagement and transformation. Alternatively, different percentages could be charged for varying levels of sales or by assigning either fixed or variable rates to different product categories (e.g., one percentage for food and non-alcoholic beverage and a separate percentage for alcoholic drinks only). Airports should carefully consider how they structure deals and their business models to ensure more flexibility to respond to potential future shocks. The Struggle and Payoff of Setting Up Shop in an Airport In this model, the airport takes on two roles: landlord and partner in the operation. The cost of design and construction for your space is going to be much higher. But opting out of some of these cookies may affect your browsing experience. This leads to another possibility: to eliminate MAGs and tie airport payments to sales only. COVID-19 Considerations for Airports and Airport Sponsors PDF Department of Aviation Concessions Management If, on the other hand, the airport sponsor decides to enforce the terms of a MAG, then it should carefully review the concession contract to determine the terms of enforcement and whether the concessionaire has any basis to refuse to pay the MAG. NOTICE OF INTENTION TO ENTER INTO FOUR SEPARATE CONCESSION LEASE AGREEMENTS WITH THE DAY ONE GROUP LLC NOTICE IS HEREBY GIVEN, to all interested parties, that the Clark County Board of Commissioners intends to enter into four separate Concession Lease Agreements (Agreements) for the operation of 5 specialty retail concessions with The Day One Group LLC (Company) serving Harry Reid . If the airport sponsor determines that it is in its best interest to waive the MAG, then these clauses can be replaced with an alternative fee structure, such as a simple percentage of sales or some other agreed-upon metric of performance. Airport concession contracts, including rental cars, parking, and retail, usually contain a minimum annual guarantee (MAG). Under one version of an infrastructure plan floated by House Democrats (the Moving Forward Framework), airports and airspace improvements would be funded, in part, by an increase in PFCs. The current decline dwarfs those of the recent past, as enplanement levels have dropped by upwards of 90%. However, we recommend that you consider the underlying principles of Uniform Guidance and the terms and conditions of the FAA while administering the funds. PDF Federal Aviation Administration Concessions FAQs - Raleigh-Durham International Airport The April 4th FAA guidance permits this: In coordination with airport sponsors, airlines, the Transportation Security Administration (TSA), and other entities, closing gates or sections of terminals is likely to be acceptable if the closure is executed in response to reduced passenger volumes and operations, is not discriminatory, and does not provide an unfair competitive advantage to one operator. The current decline dwarfs those of the recent past, as enplanement levels have dropped by upwards of 90%. The future of airport concessions in a post-COVID-19 world The intent of DBE programs is to increase the amount of business done with Minority Business Enterprises (MBE) and Women Business Enterprises (WBE). Given the focus on bottom line profits, the investment in variable costssuch as employees, training, maintenance, and product developmentrequired to earn additional sales may no longer make economic sense. The key will be ensuring that airline charges remain fair and reasonable. With the announcement by the GASB of a delay in the required implementation of these new standards, your organization will need to decide how to respond. The Revenue Use Policy document defines permitted and prohibited uses of airport revenue. Manchester Airport Group in the U.K. had started to operate a restaurant in their home airport before the pandemic, so there is precedent for this strategy. Meanwhile the company maintained a resilient retail margin of above 60%, helped by minimum annual guarantee waivers to airport landlords of $1.2 billion. February 2, 2021January 28, 2021 | AirportU. Tax. New non-aeronautical revenue streams are critical to airport recovery from the COVID-19 pandemic. A prepaid monthly "lease" to do business on the property. The concept is not uncommon. A master operator, or sometimes referred to as an institutional operator, serves as a master lessee and either provide or sublease concessionaires for the airport. Hence, a fairer methodology for establishing a MAG is to base it on an absolute value per exposed passenger. PDF Request for Proposals (Rfp) Non-exclusive On-airport Rental Car While passenger safety and well-being are paramount, the extreme reduction in passenger flow has rippled across the entire airport-airline ecosystem. 47114 (as modified by the CARES Act), then the remainder is distributed in the same manner as the $7.4 billionbased on a mixture of enplanements and debt service. Airports outside of North America are already experiencing the benefit of joint ventures between the airport operator and concession operators. Bond Covenants and Indenture Pledge of Revenues. "We've already . White Paper: Airport Concession Agreements - ACI World Store . That report and certification should include the number of full-time equivalent employees working at the airport as of March 27, 2020, as the baseline comparison.