Veto urged against waiver of airport fees

By Mike Leidemann
Advertiser Transportation Writer

The state Transportation Department is urging Gov. Ben Cayetano to veto a bill that would grant extended financial relief worth millions of dollars to concessionaires at Hawai'i airports.

DFS Galleria, which operates duty-free stores, is the largest of the concessionaires at Honolulu International Airport. Advertiser library photo • Aug. 30, 1996

Transportation officials say the bill goes too far and could undermine the department's ability to safely run the state's 14 airports, which depend on concession revenues for much of their operating and capital improvement budgets.

"We tried to warn lawmakers that this form of the bill would be unacceptable, but they passed it anyway," Transportation Director Brian Minaai told members of the state's advisory Transportation Commission last week. "We have to recommend the governor veto it."

In September, the Legislature authorized temporary relief for the concessionaires, and the Transportation Department granted rental waivers and other measures that saved airport businesses more than $26 million. Those waivers expired at the end of April.

Under the new measure, the Transportation Department would be required to waive guaranteed rent payments or allow reduced payments for an estimated 25 to 30 airport concessionaires.

Businesses at the airport said they continue to suffer Sept. 11-related losses and need the additional relief from the state if they are to stay alive.

"We're still hurting. We're doing a lot worse now than last year at this time," said Peter Fithian, president of Greeters of Hawaii, a firm that employs greeters who meet passengers at the gate and runs flower shops within the concourse. "You'd think they'd want to help us, since some money coming in is better than nothing coming in."

The bill stipulates that if a concessionaire cannot reach an agreement with the department that ensures operating at a break-even point, the department would be allowed to terminate its contract. However, the company would be allowed to recover its performance bond and security deposit and be allowed to rebid for the same contract, something that is barred under present law.

"That means they can walk away from a contract if they aren't making enough money, and take their bond with them and then come back to bid for the contract again in a few months," Minaai said. "It defies all bidding fundamentals, and we'd be left with no leverage with them."

Fithian said department officials don't understand the bill.

"We wouldn't be allowed to unilaterally walk away from a contract," he said. "Before it can terminate a contract, the department needs to have another concessionaire willing to pay at least 10 percent more. Then they'd have at least two bidders going for a contract, which means they'd end up making more money in the long run."

Payments from airport concessionaires usually account for two-thirds of all airport revenue, totaling about $181 million of $283 million in 2000. By far the largest of the airport concessionaires is DFS Galleria, which operates duty-free stores at the airports and has paid $2.5 billion to the state over the past 40 years.

Fithian said the airport concessionaires continue to be hurt by a downturn in travel and security restrictions that bar visitors inside the airport terminals.

"It's a hell of a time to go out and ask us to pay more money," Fithian said. "Most of the businesses are still down 25 percent over last year."

Minaai argues that the number of visitors has largely returned to normal, and some of the continuing business losses are no longer related to Sept. 11. He said Mainland visitors numbers are up over last year and Japanese visitors are almost back to normal levels.

"Some of the business problems are related to the exchange rate and a different type of tourist coming to Hawai'i," he said. "Those are normal costs of business they should be able to deal with."

Cayetano has not yet decided whether to veto the bill, spokeswoman Kim Murakawa said yesterday. He has until June 24 to decide.

The governor's decision may be complicated by another provision in the bill, which would allow the Transportation Department to begin charging a $4.50 departure fee for those leaving for the Mainland. The department said the fee could generate an additional $18 million a year to help rebuild the declining airport fund.

Reach Mike Leidemann at mleidemann@honoluluadvertiser.com or 525-5460.