COVID-19 Solutions for Airport Concessionaires
COVID-19 has shaken the soul of America. Individuals across 49 states have been infected with the virus. Consequently, governors and mayors throughout the country have declared states of emergency. Curfews have been implemented, and schools, colleges, and universities have shuttered for the remainder of the year. Restaurants and bars are closing or limiting service, and most gatherings of more than 10 people have been banned. Amtrak has halted certain travel routes, and hotels have offered generous cancellations options. Major events and conferences have been cancelled, government and private organizations have restricted travel, and people in general are afraid to fly. To further amplify the seriousness of COVID-19, effective March 1, 2020, the President of the United States issued a proclamation declaring that the COVID-19 outbreak in the United States constitutes a national emergency.
Airports are already feeling the impact. Across the United States, airports are experiencing a steep decline in passenger volume, and airlines are reducing flight schedules because people are simply not flying. The significant loss of passenger traffic is having a devastating financial impact on airports as well as the small and large businesses that operate within the airport space. These airport concessionaires are among the hardest to be hit, as their lifeblood is passenger volume.
The business attraction to airports has always been the lure of the “captive audience,” also known as enplanements. The number of enplanements is part of an airport’s appeal in making their pitch to potential concessionaires. While there is no guarantee of success, it is the enplanement numbers, published by the Federal Aviation Administration, that form the basis of a concessionaire’s financial projections. For a concessionaire, large or small, to be successful, enplanements must remain stable, or in this case, they must exist.
Through no fault of these small and large businesses, the COVID-19 outbreak has temporarily derailed the promising future of new concessionaires and dimmed the hope of continued success for veteran concessionaires. Equally distressing, existing concessionaires are tied to contracts requiring the payment of Minimum Annual Guarantees (i.e., fixed rent) to the airports. The significant curtailment of air traffic and restrictions on gatherings make it impossible for these concessionaires to meet their contractual requirements.
The impact of COVID-19 on airport concessionaires is harsh, and the solutions aren’t easy. In light of the current disruption, it is recommended and advised that all concessionaires consider the following solutions:
(1) Review your contract agreements with airports looking for clauses (e.g., severe reduction in enplanements, compliance with laws/regulations, impossibility) that will help you negotiate modifications to your contractual obligations.
(2) Request your airport to release any letter of credit security that might be held in connection with your contract, as this will make available needed capital.
(3) Contact elected officials in your state and request their support to identify resources to help your business through this difficult time.
(4) In keeping with (3) above, the Small Business Administration (SBA) provides low-interest (currently 3.75%) disaster loans up to $2 million dollars with terms up to 30 years to businesses of all sizes. These loans are only available in those states that are Federally Declared Disaster Areas. The loans can be used for working capital to overcome the temporary loss of income, payroll, accounts payables, and other bills that can’t be paid because of the disaster’s impact on your business. Currently, the only states with counties eligible for these disaster loans are Arizona, California, Colorado, Connecticut, District of Columbia, Idaho, Maine, Maryland, Massachusetts, Nevada, New Hampshire, New Mexico, New York, North Dakota, Oregon, Rhode Island, Texas, Utah, Virginia, Washington, and Wyoming. If your state is not listed, please contact your local elected officials to have them communicate with the SBA to ensure your state is included. You can learn more about the disaster loans at: https://disasterloan.sba.gov/ela/Information/EIDLLoans.
(5) Contact the Airport Minority Advisory Council (AMAC), which is the only national, non-profit trade association dedicated to advocating on behalf of minorities and women in the aviation industry. You can learn more about AMAC at www.amac-org.com.
Author: Mareco Edwards, South River Partners