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The Honolulu Advertiser

Posted on: Friday, January 11, 2002

State considering rent relief for airport retailers

By Johnny Brannon
Advertiser Staff Writer

Gov. Ben Cayetano is reviewing whether to forgive millions of dollars owed by retailer DFS Hawaii and other airport concessions that suffered major business losses after the Sept. 11 terrorist attacks.

Contracts with the state Department of Transportation require the companies to pay guaranteed minimum amounts, plus a cut of profits above certain levels, in exchange for airport leases and marketing rights.

The department will present Cayetano today with a list of companies that have asked the state to suspend the guaranteed payments under special powers granted to the governor by the Legislature in October, department spokeswoman Marilyn Kali said.

DFS Hawaii, by far the largest of those seeking relief, pays the state $72 million per year under four contracts, company vice president Sharon Weiner said. DFS Hawaii operates airport retail stores in Honolulu, Kona and Kahului, and holds the exclusive duty-free concession to sell untaxed luxury items to international travelers in Hawai'i.

The company did not make its $15 million quarterly payment on Dec. 1, Weiner said, because the Transportation Department assured it that the state intended to adjust the contract formula. DFS Hawaii makes the quarterly payments in advance, and will owe nothing for this quarter if relief is retroactive to the date of the attacks, she said.

"We have very special and anomalous circumstances in Hawai'i right now," Weiner said. "Right now they're painful for everyone."

Neither she nor Kali could say how much in total the company had deferred paying the state under its contracts. But Weiner said DFS Hawaii's revenue stream has been half what it was before Sept. 11.

Payments from concessionaires normally account for two-thirds of all airport revenue and represented $181 million of $283 million in airport revenue for fiscal year 2000. Kali could not say which other companies had sought relief, or how much they had deferred paying since Sept. 11.

"We realize that many of our concessionaires had a severe drop in business since 9-11, and we don't want to lose them, so we want to find ways to accommodate them," Kali said.