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Peter Fithian

Tuesday, June 24, 2003


Airport rent-relief
veto unfair to
concessionaires


On June 6, Governor Lingle vetoed Senate Bill 44, which would have given Hawaii's public airport concessionaires with long-term contracts some rent relief. The concessionaires were disappointed not only with the veto, but also with the message's unfair characterization of the situation we face.

The governor portrays airport concessionaires as "a single special-interest group" (Star-Bulletin, June 7), with the implication that we have asked for special favors. That certainly is not a fair portrayal of the unique role concessionaires have played in the financial well-being of Hawaii's airports for more than 40 years.

Our businesses cannot be compared to nonconcession retail businesses. Our leases guarantee the state huge minimum rents and large percentage rents, in some years more than $200 million. In normal years, concessions produce more than half of all airport operating income. We are not a special interest; we are the critical financial backbone of Hawaii's airports, paying far more than the airlines pay.

The catastrophic decline in visitors to Hawaii as a result of 9/11, then the Iraq war and now SARS has completely changed the landscape at Hawaii's airports, especially Honolulu International Airport. Concessions dependent on departing customers -- the only customers they can sell to -- has declined by as much as 50 percent, yet the large annual rent guarantees remain unchanged. Concessions that count on local customers have seen that market disappear, since now only customers with boarding passes can pass through security. The basic business assumptions upon which these contracts were bid have been shattered by events beyond our control.

The fundamental fairness of our position was supported by the state Legislature, which in the 2002 and 2003 sessions endorsed relief to concessionaires. We spent hours briefing legislators on our situation in meetings and in hearings. They heard us and acted in the best interest of the people of Hawaii.

The concessionaires repeatedly asked to meet with Lingle and her staff to work out a compromise. Lingle met with us just once, after the legislative session, to tell us of her intention to veto SB44. Her key advisors waited to meet with us until just two hours before the final conference committee vote on SB44 to tell us of their own bill, which would have guaranteed no relief.

We have received far less relief than Hawaii's airlines have received. During the Asian financial crisis, concessions were offered rent deferrals; the airlines received 100 percent landing-fee waivers for two years -- $76 million in relief -- while concessions received no relief. After 9/11 and through March 2002, the airlines received 100 percent waiver of all landing fees, while concessionaires received only a discount on their rents.

The governor's message doesn't mention that about 15 businesses at the airport aren't seeking relief because they don't have to -- their permits are revocable with 30 days notice. Permit holders don't have requirements for annual rent guarantees, huge percentage rents, fixed bond guarantees or the proviso that would keep them from holding another state contract for five years if they terminate. The concessions that need relief, on the other hand, have long-term contracts and must contend with these onerous provisions.

The governor fails to point out that none of the relief airport concessionaires are seeking comes from taxpayers' money. All the relief is readily available in the huge $575 million surplus already in the airport system. Much of that surplus can be traced to more than $2.5 billion in payments made by concessionaires.

Lingle's veto message ignores the contributions concessions make to the finances and service levels of the airport system. It ignores the fundamental fairness of giving help to long-term concessions as is now available to permit holders and has been provided to airlines.

Our only remaining hope is that the state will, as Lingle has promised, be fair in its relief negotiations with each of us. We trust she will be true to her word that the state will be reasonable in the negotiations and that it has no desire to put any concessionaire out of business.


Peter Fithian is chairman of the Subcommittee on Relief and Legislative Affairs, Airport Concessionaires Committee.

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