Title
Ground Lease with Mesa Airlines, Inc. (Ordinance S-49599)
Description
Request to authorize the City Manager, or his designee, to amend Ground Lease Agreement 134356 with Mesa Airlines, Inc. at Phoenix Sky Harbor International Airport to extend the lease to Dec. 31, 2027, with three one-year options to extend the term.
Report
Summary
Mesa Airlines, Inc. (Mesa) has leased a corporate hangar and contiguous ramp space at Phoenix Sky Harbor International Airport (PHX) under the current ground lease since 2012. The ground lease is on its fourth and final extension and is scheduled to expire on Sept. 30, 2023. Mesa uses the hangar and ramp space for maintenance of their fleet of regional jets. Mesa currently flies regional jets through PHX on routes for American Airlines, but the air carriers are winding down their relationship within the next year. Mesa intends to allocate aircraft and pilots in a new partnership with United Airlines, Inc. Mesa has asked to extend the lease to Dec. 31, 2027, with three one-year options to extend.
Contract Term
The term will be extended, expiring Dec. 31, 2027, with three one-year options to extend that may be exercised at the sole discretion of the Director of Aviation Services.
Financial Impact
Annual rent for the first year of the extension for the hangar and apron will be approximately $414,879 and will be adjusted per the Phoenix-Mesa-Scottsdale Consumer Price Index (CPI) at the beginning of the calendar year for each year of the extension. Total anticipated rent from this lease over the term, if all options are exercised, will be approximately $3,007,872, not including CPI.
Concurrence/Previous Council Action
The City Council approved:
- Ground Lease 134356 (Ordinance S-38371) on Dec. 14, 2011; and
- Ground Lease 134356 - Amendment (Ordinance S-44612) on May 16, 2018.
The Business and Development Subcommittee recommended approval of this item on March 2, 2023 by a vote of 3-0.
The Phoenix Aviation Advisory Board recommended approval of this item on March 16, 2023 by a vote of 6-0.
Location
Phoenix Sky Harbor International Airport - 3949 E. Air Lane
Council District: 8
Department
Responsible Department
This item is submitted by Deputy City Manager Mario Paniagua and the Aviation Department.