Title
Phoenix Sky Harbor International Airport Concessionaire Financial Relief (Ordinance S-46708)
Description
Request to authorize the City Manager, or his designee, to amend multiple Phoenix Sky Harbor International Airport (PHX) concession leases to provide temporary financial relief to concessionaires by charging percent rent only in lieu of Minimum Annual Guarantees (MAG) from April 1, 2020 through June 30, 2020. This financial relief will be provided to all food and beverage, retail, terminal advertising, valet, and passenger amenity concessions at PHX.
Report
Summary
Due to the COVID-19 national pandemic airline passenger travel is down by over 90 percent at PHX. In direct correlation to the reduced passenger activity, concession sales have plummeted for PHX's concessions. As a result, established rents are unsustainable for the concessionaires in the Terminals. The Aviation Department (AVN) is requesting to provide some level of financial relief for concessionaires that includes prime operators and Airport Concession Disadvantaged Business Enterprise business partners to mitigate the effects of the decrease in passenger activity related to COVID-19.
All concessionaires who receive this financial relief will be required to adhere to specific requirements as follows: passing financial relief on to all joint venture partners and sub-concessionaires, recall and reemployment of furloughed or laid off employees, two months of medical benefits for furloughed or laid off employees, work with Community Economic Development on other relief and employment opportunities, submission of weekly sales reports, providing notice of any Coronavirus Aid Relief and Economic Security Act relief. All other terms and provisions of the leases will remain in effect.
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. In keeping with the spirit of the FAA’s guidance and to ensure that continued assistance to our concessionaires does not threaten PHX’s financial viability, the Aviation Department Director is authorized to extend the financial relief in 90-day increments based on the enplanement statistics and other relevant sales data. The Aviation Director will seek input from Council and city management prior to extending the financial relief terms for concession leases.
The concession contracts that will be amended to allow for temporary financial relief are Contract Numbers 116300, 116653, 127576, 131410, 132907, 133475, 133475, 135006, 143718, 143719, 143866, 143867, 144047, 144322, 144323, 144324, 145872, 145873, 145977, 146077, 146163, 146458, 146459, 146614, 146676, 147232, 147258, 147279, 147350, 147461, 147735, and 150683.
Contract Term
Financial relief to allow percent rent only in lieu of MAG will occur beginning April 1 through June 30, 2020.
Rental car food and beverage/retail concession lease will be extended for two years.
Terminal 3 concession leases will continue to pay percent rent through Aug. 31, 2020.
Financial Impact
AVN estimates that the proposed financial relief to concessionaires will result in approximately $7 million in reduced rental revenue to PHX from April 1 through June 30, 2020.
Location
Phoenix Sky Harbor International Airport
Council District: 8
Department
Responsible Department
This item is submitted by Assistant City Manager Deanna Jonovich and the Aviation Department.