Rates for each new fiscal year will be posted on this page after Board approval of the rates and fees. We also use third-party cookies that help us analyze and understand how you use this website. Here are some others. Airports would have to offer benefit packages to these employees in line with those provided to other employees of the airport. In addition to the detailed guidance in the Revenue Use Policy, the CARES Act makes clear that the funds may not be used for any purpose unrelated to the airport. Minimum Annual Guarantee - How is Minimum Annual Guarantee abbreviated? which guarantees that the tenant will pay the airport a minimum amount annually. If flights do not return to their pre-pandemic levels, then the airport will not be able to recover former passenger levels. While the vendor still has some risk to pay for its investment and employee wages, rent is solely dependent on sales. 4.1.2 Minimum Annual Guaranteed Concession Fee Payment. Airports around the country will soon receive their share of $10 billion in FAA grants provided in the CARES Act. The airport operator also brings knowledge of how to do business in an airport environment while allowing the concessionaire to concentrate on what they do best: operate a highly successful restaurant or shop. The price tag is a whopping $440 per square foot. Considering all the current changes in our business, this model may be a solution to sharing risk and encouraging a strong representation of critical brands in airports. Airports would have to offer benefit packages to these employees in line with those provided to other employees of the airport. North American airports generally believe that if a vendor is paying a MAG, there may be a business problem. Denver International Airport will price $925 million of refunding bonds to help ease its debt service burden during the pandemic-driven traffic decline . In times of continued and prolonged growth, airports have learned to depend upon MAGs. Given the focus on bottom line profits, the investment in variable costssuch as employees, training, maintenance, and product developmentrequired to earn additional sales may no longer make economic sense. The develop pays the amount due to the airport through the lease agreement and pockets the rest. Given that we are considering a new paradigm, airports and concessionaires may wish to consider three other business structure options. Rent abatement should be tied to the changed circumstances caused by the public health emergency and done in accordance with Grant Assurances 22 and 24, as well as related statutes. Until a few weeks ago, your organization has likely been focused on implementing several new GASB standards, including GASB Statement No. MAG - Minimum Annual Guarantee. As a result, airports may wish to consider going a step further. If you have questions. They will typically lease space for counter and office space and additional space for the vehicle storage. There are means of counting passengers who pass a concession location, but few airports have installed such technology. Because this rate base is not related to passenger numbers, it is equally as inflexible as a MAG set by any other means in the event of significant changes in enplanements. Most simply, the airport and vendor could agree to a fixed percentage rent. How involved the airport gets in the day-to-day operation is the option of the airport and their partner(s). Flashcards. If the airport sponsor determines that its in its best interest to defer the MAG, the revenue should still be recorded in the period earned, and the receivable should be considered for treatment as noncurrent depending on the new repayment terms. If FAA does not receive emergency approval, the economic recovery of the nation's air If the basis for a MAG is what the airport thought it should be earning, the amount may never be supportable even if a concessionaire signed the contract. Minimum Annual Guarantee (MAG) waived for concessionaires and rental cars -Targeted Operations & Maintenance reductions Implemented a hiring freeze and 8 furlough days Offered early retirement Focused on essential expenditures Summary: The Metropolitan Washington Airports Authority is seeking competitive bids from all responsible and qualified companies desiring to manage and operate rental car concessions from on-Airport facilities at Ronald Reagan Washington National Airport. This essentially flips the rent risk from being entirely on the vendors (in a MAG-based model) to being entirely on the airport. Passengers have needs while at airports. Calculating MAG based on traffic in a larger area (e.g., the concourse or terminal) is one possible answer. $100,000, 5%, 100% . First championed by Martin Moodieone of the stalwarts of the concession industrythis model has airports, retailers, and suppliers cooperate in developing concession operations. Without this expertise, the concession will almost certainly fail to operate at an optimum level. Its clear that fixed MAGs are unable to provide the flexibility necessary to deal with severe occurrences. Depending on the level of the sales decrease, the resulting increase in space rental rates may lead to concessions being no longer economically viable. Nichols wrote to the County Board of Supervisors that $12.1 million of the money will be used to finalize airport agreements that waive contractual minimum annual guarantee rents for airport . To meet aggressive congressional deadlines for request submissions, a new airport industry request is being made with three potential components: $13 billion in additional emergency assistance, a gap financing program for airports, and a touchless journey through security. If relief drives airline costs to a significantly higher level, thereby reducing airport cost-competitiveness, airlines may choose not to fly to the airport or to operate fewer services. That $7.4 billion is divided in half and distributed in two ways: 50% is allocated among all commercial service airports based on each sponsors calendar year 2018 enplanements as a percentage of total 2018 enplanements for all commercial service airports., 50% is allocated among all commercial service airports based on an equal combination of each sponsors fiscal year 2018 debt service as a percentage of the combined debt service for all commercial service airports and each sponsors ratio of unrestricted reserves to their respective debt service.. While this methodology is feasible, it does not get to the actual number of passengers who see a concession location. The Board of Airport Commissioners at Los Angeles World Airports has recently approved a recommendation by management to permit concessionaire relief measures, including moving all concessionaires with contracts based on Minimum Annual Guarantee fee payments to percentage rent-based agreements From layoffs to business closings, social distancing to shopping only on days that correspond to the first letter of your last name, we have all seen and felt the impact. Concessionaires are, in general, seeking some manner of rent relief from their airport partners. The FAA may retain up to $10 million to fund the award and oversight of grants made pursuant to the CARES Act. Airports should carefully consider how they structure deals and their business modelsto ensure more flexibility to respond to potential future shocks. Elsewhere, airports do not expect vendors to exceed their MAGs. The joint venture model allows the airport to supply capital, likely at a lower cost than its business partners. The current decline dwarfs those of the recent past, as enplanement levels have dropped by upwards of 90%. To promote the use of DBEs for federally funded projects. The repayment will occur over time, with 50% of the deferral being due by Dec. 31, 3021, and the remaining due by Dec. 31, 2022. This is especially true for leases incorporating a Minimum Annual Guarantee (MAG) mechanism or fixed rent clauses. In other parts of the world, MAGs are the airports exact expected rental payments. It may be necessary for an airport to close concession locations as they may close portions of the airport to reduce their operating costs. It may be necessary for an airport to close concession locations as they may close portions of the airport to reduce their operating costs. Greater of 30% or Minimum Annual Guarantee : Taxi Fees (annual contract fee) Pre-Arranged Transportation (per pickup) $6.00 . CARES Act grant recipients should follow the FAAs Policy and Procedures Concerning the Use of Airport Revenues (Revenue Use Policy), 64 Federal Register 7696 (64 FR 7696), as amended by 78 Federal Register 55330 (78 FR 55330). The Airports Authority of India (AAI) has kick-started the process of appointing ground handling agencies for 83 state-run airports for a . Airports should carefully consider how they structure deals and their business models to ensure more flexibility to respond to potential future shocks. Airlines value an attractive commercial program because it makes a better background for the expression of their brand. 4.1.1 Minimum Annual Guaranteed Concession Fee. Providing a product or service inside the airport environment is one of the key qualifiers for a concessionaire. The single factor most tied to concession success is the footfall past the concession locations. Airport concession program in order to maximize non-aviation revenue, increasing sales per enplaned passenger at a rate higher than passenger . 6 . See how we support our people, protect the planet, and give back to communities. Option 4: Airport-concessionaire joint ventures. It is still unclear whether all of the CARES funding will be reported on the Schedule of Expenditures of Federal Awards (SEFA) . While the bulk of the $10 billion appropriated for airport sponsors can be used to make bond principal and interest payments if necessary, airport sponsors may be faced with difficult decisions about how to prioritize needs while under financial stress. . Budapest Airport. A. With the new economic and industry realities, capital access may be an even greater hurdle. The joint venture lease must be similar to those given to other concessionaires, and enforcement of the airports rules and performance requirements must be uniform. Both were selected based on a global tender, and need to pay the Minimum Annual Guarantee of 31 crore each to the Airports Authority of India. Annual fee for the airport to perform snow removal at the Vehicle Ready/Storage Vehicle Parking Area and Service Building/Wash Bay Facility. Find out how our purpose shapes our culture, people, and mission-driven work. Minimum Annual Guarantee or " MAG " means the minimum Privilege Fee due the Authority annually from the Operator set forth in Section 5.2. A per enplanement MAG would be a strain on most airports accounting departments, especially if the footfall varies by location. Guarantee: 50% of Minimum Annual Guarantee. Delta will pay market rates to lease these three additional Delta-preferred gates with a minimum annual guarantee (MAG). . There are a few limitations, however, that make this a less than optimal solution.