USA. DFS Group is set to secure an additional year on its duty free contract at Los Angeles International Airport (LAX) as the results of delays and costs related to the revamped Tom Bradley International Terminal (TBIT).
The recommendation has been made by Los Angeles World Airport (LAWA) management and will go before the board for approval on 15 January.
As reported, DFS was awarded a ten-year (plus three one -year options) duty free concession at LAX in 2012, which is due to expire on 18 September 2023.
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DFS first revealed its updated brand identity at its impressive LAX stores |
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LAWA had invited bids from retailers to operate in excess of 37,000sq ft of commercial space across eight terminals at LAX.
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The largest, TBIT, involved about 25,000sq ft of retail following a major construction project that, crucially, transferred the duty free area to a post-passenger security position.
In order to meet the scheduled opening of gates in TBIT, DFS was required to build out the duty free concession space concurrent with LAWA’s base building contractor. The overlap of construction activities delayed delivery of space to DFS and caused significant increases in construction costs, which LAWA management estimated at US$1.02 million or +5.8% above original investment plans.
In its recommendation to the Board, LAWA said the contract agreement contemplated providing the successful proposer no less than 120 months to operate concession facilities and depreciate capital investments. “Due to the delay delivering space to DFS, unless amended to extend the term, the agreement will not fairly deliver to DFS what LAWA envisioned.”
LAWA said that the additional year’s contract would lock in a minimum US$33 million of additional guaranteed revenue over the one-year period and avoid a prolonged financial dispute.
