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Airport authority illegally tried to terminate Pittsburgh's airmall lease, complaint alleges

Ariana Shchuka/Post-Gazette

Airport authority illegally tried to terminate Pittsburgh's airmall lease, complaint alleges

The operator of Pittsburgh International Airport’s popular airmall was forced to go to court last week to prevent the termination of its lease after it claimed its employees were booted from the terminal.

In a complaint filed Thursday in Allegheny County Common Pleas Court, Fraport Pittsburgh Inc. charged that it received a letter at 8 a.m. Wednesday from the county’s Airport Authority terminating its tenancy immediately.

At the same time, Airport Authority representatives accompanied by two armed county police officers met Fraport personnel and instructed them “to gather their personal belongings and depart under armed guard immediately,” the complaint alleged.

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In addition, the Airport Authority, which oversees Pittsburgh International, sent an email to most of the airmall’s concessionaires telling them that it would be managing their subleases “despite the fact that the ACAA is not a signature to any of” them.

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The incident prompted Fraport to file for an emergency preliminary injunction Thursday to prevent the authority from “wrongfully evicting” it from the airport.

In response, Judge Christine Ward issued a special injunction that barred the authority from terminating Fraport’s lease and “any further contract or interference” with the airmall concessionaires pending resolution of a preliminary injunction hearing to be scheduled.

Judge Ward also restored Fraport employees’ access to the airport’s terminal and required the authority to return any Fraport property that had been seized.

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In its complaint, Fraport charged that the Airport Authority’s attempt to terminate its lease was the culmination of a yearlong campaign to try to force it out after a 30-year run that has included numerous accolades and high marks from travelers.

The lease doesn’t expire until the end of 2029.

“The ACAA’s illegal conduct jeopardizes the safety of the airport’s operations, has resulted in the conversion and retention of Fraport’s property, and has exposed Fraport to substantial liability from its contractual partners,” it stated.

In a statement, Jeffrey Letwin, the Airport Authority’s solicitor, disputed all of the allegations raised in the complaint.

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“Safety and security are the top priority at Pittsburgh International Airport and cannot be compromised. Over an extended period of time, Allegheny County Airport Authority has documented a steady decline in responsible management from our long-term concession operator, Fraport Pittsburgh,” he said.

“A pattern of unsatisfactory performance regarding numerous issues required ACAA to take steps to replace the operator. This was not a decision taken lightly and is the result of multiple discussions and many meetings to resolve these issues.”

He declined further comment, citing the pending legal matter.

Fraport and its predecessor, BAA Pittsburgh, pioneered the airmall concept at the airport with the opening of the midfield terminal in 1992. The airmall was a departure from other airport concession programs at the time, with retailers and restaurants required to charge the same prices for food, beverages and goods as they would at their non-airport locations.

It proved to be extremely popular with travelers and even non-travelers, who sometimes would visit the airport just to shop before the Sept. 11, 2001, terrorist attacks promoted more stringent security requirements.

Over the years, Fraport’s original contract has been extended four times, the most recent instance being in December 2012.

But according to the complaint, relations between Fraport and the authority began to unravel in the summer of 2021 when Eric Sprys, the authority’s chief financial officer, offered the operator a “take it or leave it” $5 million to “walk away” from its lease.

After declining the buyout, Mike Mullaney, CEO of Fraport’s parent company, met with authority CEO Christina Cassotis in September 2021, according to the complaint.

During that meeting, Ms. Cassotis told Mr. Mullaney that “there isn’t a contract that the county can’t get out of. Not one.” She said had been able to cancel every contract the authority did not want, and that Fraport would be next, the complaint claimed.

“Her only ‘offer’ was that if Fraport left voluntarily, the ACAA would message the departure in a positive fashion — an overt threat that if Fraport did not go quietly and on the ACAA’s terms, she would seek to undermine Fraport in other markets or projects unrelated to PIT,” it stated.

The “declaration of commercial war,” as the complaint called it, resulted in “nine months of efforts by the ACAA to find something, anything, that would give them any semblance of cover or pretext to unlawfully terminate the master lease, evict Fraport, and assume direct control over the concessions program at PIT.”

That included repeated attempts to “misrepresent minor operational issues as material defaults warranting termination of the master lease.”

Early on, they included grievances about some concessionaires not returning to normal operating hours during the pandemic; a cook cooking without a mask on; Fraport not conducting daily inspections as required; and Fraport being unreachable to handle a late-arriving flight from Greece.

In response, Fraport stated that the authority itself had declared “irregular operations” due to COVID-19; that it had conducted daily inspections; and that it had arranged within 15 minutes to handle the Greece flight.

Others included claims that Fraport had not come up with a plan to collect delinquent rents, although it maintained it did try to communicate with the authority on a plan only to get no response, and that non-Fraport concession personnel had committed 14 security violations. Fraport responded by saying that most of the violations involved people who had forgotten security badges and that the issues were addressed.

The cycle of grievances, the complaint maintained, continued through 2021 and this January, when the authority claimed “certain rent” was due, that certain “security” issues had occurred, and that Fraport had failed to maintain accurate records.

Four days later, Fraport responded by making nearly $3.5 million in rent payments, by saying the security concerns had been remedied, and that it was maintaining the records, the complaint stated.

The January communication, it added, was the last Fraport heard from the authority until last week’s episode.

Fraport also charged that Pittsburgh International was “the only major airport in the country that did not provide rent relief” for concessionaires after COVID-19 hit and reduced airport traffic by as much as 95%.

Only after a second federal COVID relief bill was passed, with some funds earmarked specifically for concessionaires, “did the ACAA finally provide the bare minimum of relief,” according to the complaint.

“The ACAA steadfastly refused to engage in any workout negotiations or discussions to assist financially troubled or delinquent subtenants. On multiple occasions, the ACAA stated its preference to throw operating subtenants out on the street, rather than engaging in commercially reasonable discussions,” it stated.

Among the allegations, Fraport is accusing the authority of three counts of breach of contract, a breach of duty of good faith and fair dealing, and intentional interference with existing and prospective economic advantages.

Mark Belko: mbelko@post-gazette.com or 412-263-1262.

First Published: June 20, 2022, 8:57 p.m.

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