US. Hartsfield–Jackson Atlanta International Airport management are seeking Atlanta City Council board sign-off to extend rent relief to airport restaurateurs and retailers for a further year, due to the continuing COVID-19 crisis.
The Atlanta City Council Transportation Committee debated an extensive range of relief measures last Wednesday (24 June) during a meeting conducted online. A final decision is expected soon.
“Suspending the MAG hopefully ensures that the concessionaires will come back [and reopen] sooner rather than later” – Hartsfield–Jackson Atlanta International Airport Chief Financial Officer Greg Richardson
In late March the Atlanta City Council approved a measure to suspend minimum annual guarantee (MAG) requirements for concessionaires until 30 June 2020, replacing them with a variable percentage of revenue formula.
The new initiative also includes plans to extend contracts for three years and to waive fees charged to concessionaires for parking, marketing and storage.
“We need to ensure that we keep the concessionaires that we have during this time” – Airport General Manager John Selden
Hartsfield-Jackson qualified for US$338.5 million in federal stimulus funding from the CARES Act — the most of any airport in the country — which will help the airport to shore up its financial position, according to airport Chief Financial Officer Greg Richardson.
Richardson said: “Suspending the MAG hopefully ensures that the concessionaires will come back [and reopen] sooner rather than later.”
Airport General Manager John Selden told the meeting: “With our passengers right now, we are down -80% from where we were in June of 2019. We were down as low as -97% in April. We have numerous concourses closed and because of that, we would like to extend the suspension of the MAG from July 1 of 2020 to June 30, 2021.
“In 2021 we expect a very slow recovery. And by providing this relief, we will help our concessionaires by just charging them the percentage rent, which will enable them to bring their businesses back in.” Over 300 stores (restaurants and stores) are currently closed, Selden told the Council.
When the MAG suspension is completed, the proposal recommends that the new MAG will be based on whatever percentage rent was paid by each concessionaire during the previous 12 months. Additionally, ten concessionaire contractors are currently on a payment plan, which was suspended at the same time as the MAG. When the MAG is reinstated, those ten companies will have to start their repayment plan.
Selden revealed that in April 2019 the airport received US$50 million in concessions rent; this April it generated just US$4.8 million.
Commenting on the proposal to extend current concessions for another three years, Selden said: “We need to ensure that we keep the concessionaires that we have during this time. The plan would be to put new concessions locations up for bid in two years, which may allow enough time to go through the contracting process and strike deals for new restaurants and shops before the three-year extension ends.”
He added: “We are proposing a three-year extension for numerous reasons. And many of them have to do with our inability to get concessionaires out on the terminal in the financial conditions we are in right now. We are down -80%. If you were to go ask for financing at a bank for a construction loan, I think you would find it very difficult.
“Secondly, we need to ensure that we keep the concessionaires that we have during this time. If their leases were expired and they left the facility, we would have a very difficult time getting out RFPs. One, because of the lack of passengers; two, because of the very difficult loan situation; three, we don’t expect our international traffic online for concourses E and F to be back for a minimum three years.”
City Council member Marci Collier Overstreet said that a full traffic recovery might take three years. Underlining the importance of the debate, she said: “This is not just the world’s busiest and most efficient airport, but it is our number one revenue generator for the whole state. And we employ the most people.”
The rent reduction is expected to drive a fall of over -57% in airport concession revenues to US$50.9 million over the next fiscal year starting July, Atlanta Journal-Constitution (AJC) reported. Following the one-year MAG suspension, the airport also plans to adjust future minimum rent requirements by basing them on percentage rent paid during the previous 12 months.
“This is a balancing act… going forward we will just have to see where traffic is,” Council member J.P. Matzigkeit told the meeting. “We need to consider certainly the concessionaires, but also the airport in this equation as well. I like the idea of scaling the amount of support to the amount of recovery and traffic that are in the concourse.”