USA. ATÜ Americas will exit its ten-year duty free concession contract at Houston George Bush Intercontinental Airport in March 2019. The retailer had been awarded the contract in 2015.
The ATÜ Duty Free subsidiary has entered into a Compromise, Settlement, and Release Agreement with airport operator Houston Airport System and the City of Houston. The parties had been in dispute over contract issues but the agreement offers a full resolution.
Houston Airport System will now launch a Request for Proposals process for a new duty free operator in terminals A, B and D, with ATÜ Americas continuing to operate its duty free store in Terminal D until at least 31 March 2019.
That timeframe could be extended by mutual agreement between Houston Airport System and ATÜ. The retailer is now paying a reduced 22% concession fee (which previously was between 24% and 42%) as of 1 September 2018 until closing, except for merchandise in the Chanel store in Terminal D which will remain at 14%.
ATÜ closed its duty free stores in terminals A and B on 19 July 2018.
ATÜ Duty Free is a joint venture between TAV Airports Holding and Unifree Duty Free, in which Gebr. Heinemann is principal shareholder.
“We are very pleased that this matter could be successfully concluded with Houston and appreciate the city council’s decision,” said an ATÜ Duty Free spokesperson.
The dispute between the parties revolved around the development of United Airlines’ new Terminal C North at George Bush Intercontinental.
ATÜ said that it was operating at a loss with no expectation of material improvement over the life of the ten-year contract as a result of lower enplanements following United’s operational reallocation of passenger traffic to the new facilities.
The retailer also noted the impact of a 2015 agreement between the City of Houston and United in which certain concession facilities at Terminal C South were assigned to the airline, to be managed under its contract with Westfield for concession management.
In April 2016, United opened the new Terminal C North and transitioned its concession manager from Westfield to OTG. OTG has since developed additional concession facilities in the United-operated areas of Terminal B South, Terminal C (North and South), and Terminal E.
ATÜ also cited higher than average percentage rental rates and various negative trends in travel duty free sales as contributing factors. The retailer alleged that the City of Houston was responsible in part for the conditions affecting its financial performance.
The City of Houston disputed responsibility for the lower than projected financial performance. It said it had made no guarantee of any level of enplanements and that the plan for the development of Terminal C North was public knowledge and disclosed in the RFP.
Further, the City of Houston said it had no advance knowledge and/or control over United’s change in operations; and said ATÜ was responsible for the management of its facilities including choice of concept, brand, proposed percentage rental rates, and pricing. The City of Houston disputed any connection between its assignment of certain concession facilities to United and ATÜ’s financial performance.
All parties concluded that signing the settlement agreement was in their best interests “to provide uninterrupted first-class retail services and high-quality products to travellers and airport users and to avoid the uncertainties, expenses, and delay of litigation of this dispute”.
Under the terms of the agreement, ATÜ will assist with a smooth transition to the new operator, including leaving in place its investment in the facilities. The City of Houston will use “commercially reasonable” efforts to negotiate a buy-in from the company selected to take over the facilities, “to compensate ATÜ for its forfeited unamortised investment”.
ATÜ also closed its Hugo Boss and Paul & Shark stores in Terminal C in May 2018 (which were under contract with OTG).
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