Title
Concessions Relief Update
Description
This report is to provide an update on concessions relief offered to tenants at Phoenix Sky Harbor International Airport (PHX) through Dec. 31, 2020.
THIS ITEM IS FOR INFORMATION AND DISCUSSION.
Report
Summary
The COVID-19 global pandemic created a downturn in airline passenger travel by over 93 percent at PHX. In direct correlation to the reduced passenger activity, concession sales plummeted for PHX's concessionaires. As a result, established rents were unsustainable for the concessionaires in the Terminals. On April 4, 2020, the Federal Aviation Administration (FAA) provided guidance to airport sponsors encouraging them to consider the business circumstances created by the public health emergency and assist tenants in staying solvent so they can resume normal operations when the emergency ends. The Aviation Department (AVN) requested approval to provide financial relief for concessionaires which included prime operators and Airport Concession Disadvantaged Business Enterprise (ACDBE) business partners to mitigate the effects of the decrease in passenger activity related to COVID-19.
On June 3, 2020, Council approved relief from paying Minimum Annual Guarantee (MAG) for concessionaires at PHX and percent rent only effective April 1, 2020 through June 30, 2020. On July 1, 2020, Council approved an extension of the percent rent only through Dec. 31, 2020.
All concessionaires that received relief were required to adhere to the following requirements:
- Pass financial relief on to all joint venture partners and sub-concessionaires;
- Recall and reemploy furloughed or laid off employees;
- Provide two months medical benefits for furloughed or laid off employees (applicable only April 1 - June 30, 2020);
- Work with Community Economic Development on other relief and employment opportunities;
- Submit weekly sales reports; and
- Provide notice of any Coronavirus Aid Relief and Economic Security Act relief received.
As a result of the pandemic:
- Travelex closed all operations in North America;
- XpressSpa closed all operations, furloughing 21 employees;
- Approximately 50 terminal advertising contracts were cancelled;
- Host furloughed 756 associates and has recalled 172;
- SSP furloughed 550 associates and will recall employees based on seniority; and
- Stellar furloughed 72 associates and has recalled 25.
As passenger loads have gradually increased, the Concessionaires have started re-opening closed units, extending hours of operation, and recalling furloughed personnel. Of the 136 total concessions operating out of PHX, 53 (39 percent) are currently open for business. This is up from 31 percent in May of 2020. While passenger traffic is picking up, it is not tracking at the same rate it was prior to COVID-19 and as a result, Food & Beverage and Retail gross sales remain down approximately 50 percent and gross revenue for Terminal advertising is down approximately 25 percent, compared to 2019.
Contract Term
Relief is effective through Dec. 31, 2020.
Financial Impact
Minimum Annual Guarantee (MAG) has been waived and tenants will pay percent rent based on their lease agreement.
Location
Phoenix Sky Harbor International Airport - 3400 E. Sky Harbor Blvd.
Council District: 8
Department
Responsible Department
This item is submitted by Deputy City Manager Mario Paniagua and the Aviation Department.