Minimum Annual Guarantee means the minimum amount of money that is due annually and payable monthly to Authority from Concessionaire, as provided in Article 5 of this Agreement. Duty Free Americas Miami offered a minimum annual guarantee to the airport of $20 million -- topping the $18.5 million offered by Dufry Miami Retail Partnership and about $9 million more than two . This category only includes cookies that ensures basic functionalities and security features of the website. COVID-19 Considerations for Airports and Airport Sponsors MAC details long-term relief proposal for airport bars, restaurants and 87, Leases by a full 18 months, resulting in June 30, 2022 year-ends to be the first to implement the significant new leasing standard. The joint venture model allows the airport to supply capital, likely at a lower cost than its business partners. A by-location per passenger MAG may be too complicated for widespread implementation at this point. Because this rate base is not related to passenger numbers, it is equally as inflexible as a MAG set by any other means in the event of significant changes in enplanements. Option 6: The airport as concession operator. Airport concession program in order to maximize non-aviation revenue, increasing sales per enplaned passenger at a rate higher than passenger . them from immediately acquiescing to their advertisers' perfectly justifiable requests is the cold draught of the minimum annual guarantee (MAG). The competitive landscape may beby necessityaltered. The Revenue Use Policy document defines permitted and prohibited uses of airport revenue. Summary: The Metropolitan Washington Airports Authority is seeking competitive bids from all responsible and qualified companies desiring to manage and operate rental car concessions from on-Airport facilities at Ronald Reagan Washington National Airport. [1]https://www.law.cornell.edu/cfr/text/49/part-23 jQuery('#footnote_plugin_tooltip_333_1_1').tooltip({ tip: '#footnote_plugin_tooltip_text_333_1_1', tipClass: 'footnote_tooltip', effect: 'fade', predelay: 0, fadeInSpeed: 200, delay: 400, fadeOutSpeed: 200, position: 'top center', relative: true, offset: [-7, 0], }); The entire premise of the DBE program is based on: The writers of AirportU do so not for recognition, rather for learning, sharing, and empowering others. By clicking Accept, you consent to the use of ALL the cookies. As such, most airports should stay out of active management of the concession location, leaving that to the expert partner. This suggests that the best way to ensure an outstanding customer experience would be for this Trinity (or Trinity Plus, including the supplier) to work together. The city of Atlanta suspended the minimum annual guarantee payment obligation for concessionaires and rental car companies at Hartsfield-Jackson Atlanta International Airport (ATL) for a four-month period ending June 20. From layoffs to business closings, social distancing to shopping only on days that correspond to the first letter of your last name, we have all seen and felt the impact. This financial shock has created a number of legal and financial issues. Will this have an impact on airline and concession agreements? For example, TSA has reduced lanes or consolidated passenger screening checkpoint operations in numerous airports in response to the reduction in originating passenger volume.. Two ground handling service providers selected for Chennai airport's If flights do not return to their pre-pandemic levels, then the airport will not be able to recover former passenger levels. Airport concession fees in the era of COVID-19 | ICF Opinion: Airport concession fee strategies in the coronavirus era The Airports Authority of India (AAI) has kick-started the process of appointing ground handling agencies for 83 state-run airports for a . Signatory carriers may exercise significant control over an airport's capital budgeting process under provisions in a use agreement known as. 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. Created by. Denver International Airport refundings to ease debt-service schedule Passengers have needs while at airports. February 2, 2021January 28, 2021 | AirportU. First, and potentially most important, the FAAs position on rent abatements has gone from NO to: A decision to abate rent (including minimum annual guarantees and encompassing fees) is a local decision. It varies based on the size, capacity, and operations of the airport. 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. Airports would also have to establish supply lines for products that they have not procured in the past. Concessionaires need to understand this new business reality when they ask for relief. By one industry estimate, airports have nearly $100 billion in collective debt, with $7 billion in bond principal and interest payments due in 2020. The Federal Aviation Administration (FAA) . Percentage Rent - In addition to the MAG, Concessionaires shall pay percentage rent but only to the extent that percentage rent exceeds the monthly installment of MAG, Percentage (privilege) Fees - 10% of gross revenue from airport related car rentals, or a minimum annual guarantee, whichever is greater. 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 . A payment called a Minimum Annual Guarantee will be waived for the months of March, April and May last year. 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. This is especially true for leases that incorporate the minimum annual guarantee (MAG) mechanism or fixed rent clauses. For example, TSA has reduced lanes or consolidated passenger screening checkpoint operations in numerous airports in response to the reduction in originating passenger volume.. 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. Given the sharp reduction in revenue that these concession vendors are now facing, they may not be able to meet their MAGs. 636(a)(37)) that has been applied toward rent or minimum annual guarantee costs. Concessions Development - Airport University It may be necessary for an airport to close concession locations as they may close portions of the airport to reduce their operating costs. 4.1.2 Minimum Annual Guaranteed Concession Fee Payment. How Airports Handle Non-Aeronautical Revenue | Aviation Pros Airports should carefully consider how they structure deals and their business modelsto ensure more flexibility to respond to potential future shocks. There are numerous ways to frame a contract without a MAG. Similar to a third party option, an institutional operator can reduce risk while also reducing proceeds to the airport operator. The future of airport concessions in a post-COVID-19 world - Duty Free A different methodology is required to ensure that vendors are allowed to earn a fair return on their investments, are able and willing to reinvest to improve and grow, and still provide a reasonable return to the airports. These MAGs are usually based on some percentage of the prior year's revenue and are intended to provide the airport sponsor with a revenue floor from these . Minimum Annual Guarantee listed as MAG. Like their partners in the airline industry, airports have been dramatically affected by the slowdown in flights and passenger traffic associated with COVID-19. Were here to help! Project. For aviation, global recovery to 2019 levels is projected to take several years, into 2023 for markets with significant domestic air . . MAG: Each Respondent shall indicate payment of a Minimum Annual Guarantee ("MAG") of $_____. Airport Boards approve financial relief plans for concessionaires and Meet the Woman Stockpiling Cash to Sue San Francisco Over Housing Deadlock, Loeb Secures Defense Victory for the State of California and the California State Lands Commission, Loeb Lawyers Recognized in 2023 Edition of Best Lawyers in America, American Conference Institutes (ACI) 37th International Conference on the Foreign Corrupt Practices Act, $500 million, which can be used to fund any grant made under the FY20 Appropriations Act (P.L. The actual process is the easiest for the airport sponsor since there are minimal contracts. Airports would have to offer benefit packages to these employees in line with those provided to other employees of the airport. The FAA has issued additional guidance on airport concession fees, some of which reverses earlier policies. 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.