A Federal Aviation Administration (FAA) official said Wednesday that airports that find concessionaires in default on leases, without attempting to work with those tenants to mitigate financial challenges using CARES Act money, are “on the wrong track.”
In the weekly “Survival and Revival” call hosted jointly by the Airport Restaurant & Retail Association (ARRA) and the Airport Minority Advisory Council (AMAC), FAA Associate Administrator for Airports Kirk Shaffer said the U.S. Congress clearly intended airports to work with stakeholders to jointly navigate recovery.
The federal Coronavirus Aid, Relief, and Economic Security Act (CARES Act), provided roughly $10 billion in relief funds for airports in the United States. In guidance issued last month, the FAA noted there were few limits on how airports could use the funds, but urged airports to consider the “changed circumstances created by the public health emergency,” among other factors, when making a decision to renegotiate rent terms with tenants.
Shaffer said a hypothetical situation in which an airport took CARES Act grant money, paid its bills, then put the remaining money in a reserve account rather than working to relieve tenants wouldn’t be using the money as Congress intended. “And beyond that… if they not only do nothing but then default somebody on their concession agreement or their lease or whatever the obligation happens to be, I’d like to talk to that airport sponsor because they’re on the wrong track,” Shaffer said.
Shaffer said Congress clearly intended that airports pay current operating expenses with the CARES Act grants, freeing up additional cash so they “can sit down at the table with their stakeholders and develop a plan for everybody to get through this together.
“I can’t force them to do that,” Shaffer continued. “I don’t run their airports. That’s not our job; that’s not our role in the system, but it’s clear on the face of the statute that that’s what Congress intended.”
In a follow-up call with Airport Experience News, ARRA Executive Director Rob Wigington said, “Most airports have been extremely helpful in working together as true partners to determine a path forward during this crisis, but we do have a few we hope will take a more collaborative approach.”
Notably, one airport issued default notices to its concessionaires. The airport was awarded significant relief funds from the CARES Act.
Pat Murray, executive vice president of SSP America, commented, “We received a default notice from one airport along with an amendment to our lease. The amendment requires us to remain in a state of existing default for not paying minimum (MAG) rent in April and May. The amendment also requires us to relinquish our property and other rights afforded in the current leases. The amendment, among many other things, allows the airport to arbitrarily and permanently close each location without any reimbursement of capital outlay for us or our minority business partner. We basically have a gun to our head.”
Murray and Wigington declined to publicly name the airport. AXN will continue to follow this developing story.
On the ARRA/AMAC call, Shaffer said no one – not airports or concessionaires or other airport tenants – will emerge unscathed. While $10 billion is “a ton of money,” when put in context of the overall airport system’s needs, “it’s clearly not enough money to do the job.”
“In an everyday manner of speaking, everybody’s going to take a haircut if we’re going get through this with everybody still solvent and still in operation,” Shaffer said, adding that he is particularly mindful of Airport Concessions Disadvantaged Business Enterprise (ACDBE) firms and other “mom and pop operations” because they typically have less access to operating capital.
“Focusing on the needs of folks that are trying to grow a business, trying to succeed in the airport environment, I think ought to bring anybody – whether it’s the airport director or the mayor or the county commission – into a focus that basically dictates that everybody is going to have to take care of everybody else,” Shaffer said.
“There’s going to have to be rent abatement, rent deferrals,” he continued. “There’s going to have to be a new way of thinking about how to operate an airport and all of its facilities, at least for at least for a temporary period here, in order for all of us to come out together on the other side.”