Domestic air travel continues to rebound strongly, as vaccination efforts progress and the public has demonstrated a willingness to travel again. That could not come soon enough for airport concessionaires, who have suffered greatly from depressed passenger levels through the pandemic.
Even though passenger levels are now rising dramatically, in the absence of governmental relief funding, it would be most challenging for airport concessionaires to recover from pandemic losses.
Congress passed several acts over the past year in response to the COVID-19 pandemic that provide relief to airports, a portion of which benefits concessionaires:
- Around $10b under the Coronavirus Aid, Relief, and Economic Security Act (CARES Act), H.R. 748, Public Law 116-136 signed into law on March 27, 2020;
- Around $2b under the Coronavirus Response and Relief Supplemental Appropriation Act, 2021 (CRRSAA), H.R. 133, Public Law 116-260, signed into law on December 27, 2020; and
- Around $8b under the American Rescue Plan Act of 2021 (ARPA), H.R. 1319, Public Law 117-2, signed into law on March 11, 2021.
The benefits from each of these acts are indirect to airport concessionaires, in that Congress appropriated the relief funds, the FAA distributes those relief funds to airports through specific grant programs (each of which has a specific funding allocation), airports apply for and receive the funds from FAA, and concessionaires seek relief from the airports. Included below is an overview of the airport concessionaire COVID-19 pandemic relief programs established under the CARES Act, CRRSAA, and ARPA, with the focus on the two most recent acts, which contain funding allocations specifically for airport concessionaires.
The CARES Act provided funds to increase the federal share to 100 percent for Airport Improvement Program (AIP) grants and supplemental discretionary grants already planned for fiscal year 2020. Some of those funds flowed to airport concessionaires in the form of rent waivers and other assistance, and some of the funding was unallocated and carried over to CRRSAA.
CRRSAA / Airport Coronavirus Response Grant Program
Congress provided additional relief, some specific to airport concessionaires, through CRRSAA. To distribute those funds, FAA established the Airport Coronavirus Response Grant Program (ACRGP). Under ACRGP, the FAA is making available three buckets of funds, in addition to the earlier CARES Act funding:
- $1.75b to primary commercial service airports (those with more than 10,000 annual passenger boardings) based on the number of annual boardings (similar to how AIP funds are allocated);
- $200m to primary commercial service airports to provide relief from rent and minimum annual guarantees (MAG) to on-airport car rental, on-airport parking, and in-terminal airport concessions; and
- $45m to non-primary commercial service and general aviation airports.
The FAA is distributing ACRGP concessions relief funds to individual primary airports based on the proportion of each airport’s passenger enplanements relative to total passenger enplanements during 2019. Airports are the grant applicants to the FAA for ACRGP funds (not the concessionaires directly) and may retain 2% of concessions relief funds for administration of the program. Funds are allocated on a per-airport basis (even if multiple airports are operated by the same airport system).
Under ACRGP, airports must provide relief from rent and MAG obligations to each eligible concessionaire (including airport car rental, on-airport parking, and in-terminal airport concessions) in a proportional share of the total amount of rent and MAG of all eligible concessions at the individual airport. Only concessionaires paying rent for occupancy or commercial-service activity after December 27, 2020, can receive ACRGP relief.
Airports must prioritize concessionaire relief to ACDBE and other minority-owned businesses. Each airport is responsible for calculating each concessionaire’s appropriate proportional share, using an appropriate baseline time period. The baseline time period should be relevant to the expected duration of relief to be provided, but in no case after the 1st quarter of 2020.
An airport may use ACRGP concessions relief funds to cover concession rent relief that it decided to provide before December 27, 2020, but only to the extent that such relief covers forgiven payments of rent or MAG for periods of occupancy and/or commercial-use after December 27, 2020, and only to the extent that the relief among concessions at the airport is proportional, as described above. Each airport is expected to consult with its concession community, generally, to gather suggestions and preview its plan; and to conduct one-on-one consultation with ACDBEs.
To be eligible for relief, a concessionaire must certify that it: (1) has not received a second draw or assistance for a covered loan under section 7(a)(37) of the Small Business Act (15 U.S.C. 636(a)(37)) [so-called ‘Second Draw Paycheck Protection Program Loans’] that has been applied toward rent or MAG costs; and (2) will not apply for a covered loan under section 7(a)(37) of the Small Business Act (15 U.S.C. 636(a)(37)) for rent or MAG costs.
Airports may bargain for certain obligations by a concessionaire in exchange for rent relief, provided that such bargained-for approach is equitably applied to all concessions at the airport. Airports may also include phased re-opening schedules and cooperation obligations with respect to varying levels of service during periods of changing demand during pandemic recovery. However, airports are not supposed to impose or induce lease terms unrelated to enhancing the coordination of operations during the pandemic and recovery from it.
ARPA / Airport Rescue Grants
Most recently, the FAA established the Airport Rescue Grant program to administer ARPA funds. This grant program is very similar to ACRGP. Of those additional funds, FAA is making three buckets of funding available:
- $6.5b to primary commercial service airports based on the number of annual boardings (like ACRGP, similar to how AIP funds are allocated);
- $800m to primary commercial service airports based on the number of annual boardings, for airports to provide relief from rent and MAG to eligible in-terminal airport concessions; and
- $100m to non-primary commercial service and general aviation airports.
Like ACRGP, airports may include phased reopening schedules and expect cooperation with regard to varying levels of service during periods of changing demand. Airports may also provide rent relief to a concession that is in arrears for rent, if the concession is providing minimum acceptable services, or demonstrating that it is ready, able, and available to provide minimum acceptable services, and the airport sponsor elects to provide forbearance. However, any relief provided under an Airport Rescue Grant must be for rent or MAG due after March 11, 2021.
Airports will provide this relief to each concession based on the concessionaire’s proportional share of the total annual rent and MAG for the airport. ARPA funds may not be used for the same purposes that have been covered under another Federal program, so each airport concession must provide the certifications like those described above.