HIGHFILL -- Northwest Arkansas National Airport officials agreed Friday to amend agreements with some tenants slammed with a 95% loss of traffic related to the covid-19 pandemic.
"We are trying to help our tenants and partners with some relief that gets them through this crisis intact so we can be sure we are able to offer all services to passengers when business resumes," Aaron Burkes, chief executive officer, explained. "Most of our tenants are too big to benefit from some of the federal programs like the Paycheck Protection Program. The airlines, of course, received separate federal help, but they are struggling with very low passenger activity and huge overhead costs."
Alphabet soup
• Minimum Annual Guarantee (MAG) is a base amount businesses pledge to pay the airport each year, based on set percentages of projected sales.
• Customer facility charge (CFC) is a user fee imposed by an airport operator on each rental car user and collected by rental car companies. CFC revenue is generally used for capital and financing costs of rental-car-related projects, such as consolidated rental car facilities, parking decks and related roadway systems.
Source: NWA Democrat-Gazette
Board members have refused to abate rents, rates and charges but are agreeable to deferments and other changes to help the tenants survive until traffic resumes to at least some degree. Staff were directed last month to work out changes in the airport's agreements with airlines, rental car companies, and food and beverage providers.
Three airlines -- American, Delta and United -- will have their rates and charges for April, May and June delayed until the first quarter of 2021.
"What we are doing is a waiver with recoup," said Andrew Branch, economic development officer at XNA. "So, this would settle all the requests from the airlines, we believe."
Allegiant, which has a very small footprint at XNA, has not requested an amendment. Frontier came in last June and, per its agreement, is rent-free until the end of June this year.
Rental car companies will be allowed to use customer facility charges, which are fees each rental car customer pays, to pay rent to the airport for parking spaces and counter space until monthly traffic returns to 85% of what it was in the same month in 2013.
Airport officials said if traffic doesn't return to 85% by September, the new agreement calls for XNA to take about $1.1 million from the customer facility charge account and move it to the unrestricted general fund, which the airport could then use for whatever it needs. There's more than $4 million in the customer facility charge fund.
The rental car companies had asked for full abatement of terminal and parking space rent and asked that they pay only 10% of what the companies generate from renting cars, which is down significantly.
An amended agreement with Paradies, the food and beverage provider in the terminal, has not been completely ironed out yet, but the term of the agreement is expected to be shortened considerably from the current 2028 expiration date. Options, including waivers, are also expected to be added involving future capital improvements promised in the existing contract.
Paradies, which has laid off 70 of its 75 employees during the slowdown and has been bringing in less than $200 a day, told airport staff they can't meet their contractual obligations under the current conditions. Paradies pays XNA $51,000 per month.
"Their operation at the airport currently is down to one location with three managers kind of keeping everything staffed, usually a staff of one at a time," Branch said.
Board members said shortening the agreement to 2023 with a couple of options to extend would be acceptable. At the end of the contract, Paradies could leave or opt to try to reach a new agreement. Airport officials will be free to look at keeping a single vendor or approaching potential franchisees on an individual basis.
The board also agreed to take over and complete renovation work started last year by American Airlines, including changes to office, baggage handling and operational areas. American stopped the project in March.
In April, American asked XNA to consider paying for the remaining balance on the work, not to exceed $547,325. That would complete the construction portion of the project. Repayment will take place with monthly rental payments beginning at the end of the second quarter of 2021 and will be spread over 5 years. A balloon payment option will be available at any time for repayment at American's discretion.
NW News on 04/25/2020