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Officials seek to replace BWI vendors

THE BALTIMORE SUN

Travelers at Baltimore-Washington International Airport will soon be able to shop in name-brand stores and eat in well-known restaurants before getting on an airplane, say Maryland aviation officials who are seeking this week to replace the concessionaire there.

Their intent is to boost quality and variety, as well as airport income. But the change has sparked sharp questions from political and business leaders about why a lucrative contract at one of the nation's fastest-growing airports produced just two bidders and left other feeling left out, including the 30-year incumbent at BWI.

Bethesda-based HMSHost Corp., which ran its own souvenir shops and food courts at the airport in Linthicum, is being ousted.

It might be succeeded by BAA USA Inc., the U.S. offshoot of a British company that owns and operates London's Heathrow International Airport and six others. Airport officials chose BAA to take over the job in May. The state Board of Public Works, which has the final say, is scheduled to vote on the matter Wednesday.

BAA's plan is to bring mall-style shopping to the airport in a matter of months.

"We think we'll bring in about 70 or 80 companies vs. the handful that are there today," said Mark Knight, a regional director for BAA. "The competition will spawn better service and better prices."

Long-term airport concession contracts rarely come up for bid, making the BWI contract a huge coup for the winner. Airports that have sought changes over the past decade have tended to hire several concessionaires to foster competition and greater variety.

Nationwide, officials are seeking new revenue from and amenities for travelers, who are spending more idle time in airports since the terrorist attacks of Sept. 11, 2001, led to major security upgrades.

The Maryland Aviation Administration officials who run the public airport were drawn to BAA's mall style and wrote a request for proposals that targeted that type of operation. Under the BAA model, spaces are leased to stores well-known to consumers. The store rents are split between BAA and the airport.

In the first two years, BWI would get 55 percent of the rent income. In the subsequent 10 years, it would get 70 percent or a guaranteed minimum, whichever was greater. That "developer" model is uncommon at U.S. airports.

More typical is the "prime" model that BWI seeks to replace, in which a manager operates all of the airport stores and employs the workers.

HMSHost has brought a handful of name-brand shops to BWI in recent years through licensing agreements but runs them itself.

The airport expects more revenue from the pending arrangement. BAA estimates that the airport would receive $131 million over 12 years, about $11 million a year. HMSHost paid the airport $7.2 million last year based on sales.

David Milobsky, a spokesman for HMSHost, noted that the airport is doubling its retail space, to about 120,000 square feet from about 60,000 square feet. His company also could have brought in significantly more revenue if it had more space, he said.

His company has unsuccessfully challenged the process that produced two bids, from BAA and Westfield Concession Management Inc., a Virginia subsidiary of an Austrian company.

"There is no documented evidence of the airport ever having had any problem with us," said Milobsky, whose company operates at about 60 other U.S. airports.

"The process was deeply flawed. It targeted a very narrow set of choices and excluded many others in a time when BWI, the fastest-growing airport in the country, should have attracted many bidders."

Others also questioned the narrowly drawn request for proposals. Del. Michael E. Busch, speaker of the Maryland House of Delegates, and the Maryland Chamber of Commerce sent letters of concern to Gov. Robert L. Ehrlich Jr. State Comptroller William Donald Schaefer also questioned the number of bids in a letter to the governor, with whom he serves on the Board of Public Works.

Airport officials altered their request during the process to reduce guaranteed rent payments. Their purpose was to make the request more attractive to bidders, but the move could cost the public airport millions of dollars. The officials also lifted a requirement that the new concessionaire reimburse the current one for about $2 million in investments it made in the airport, putting the burden on the state to pay.

"We have questions on what kind of deal the state is going to get, and whether there is ineptness or impropriety we'll see," said Del. Peter Franchot. The Montgomery County Democrat chairs a House transportation subcommittee and plans to hold a hearing on the contract and other transportation-related procurements.

"They got only two bids," Franchot said. "That's pathetic."

An airport spokesman noted that the last time the concession contract was put out to bid, a decade ago, there were also two bidders. HMSHost retained the contract that time, but that was before Southwest Airlines arrived at BWI and made it the region's busiest airport.

Jonathan Dean, an airport spokesman, said reasons beyond revenue compelled change at BWI: The new concessionaire would make it easier to attract name brands and local businesses that have had a hard time getting their own space inside the airport.

"Choices are obviously an important part of this," Dean said. "The primary goal of the new contract is to continue BWI's momentum in providing world-class service and amenities to passengers."

David S. Stempler, president of the Washington-based Air Travelers Association, an information clearinghouse, put it more bluntly. BWI's concessions have become a "little stodgy and outdated," he said.

"Travelers don't know who the concession operator is," Stempler said. "But they know when the only food behind the security gate is fast food at a counter."

While BAA has been operating airports and concessions in Europe for decades, it has operated concessions in the United States for about 12 years - with mixed reviews.

Pittsburgh International Airport's Airmall, which BAA took over in 1992, is often noted as a model. The airport has a Brooks Brothers, a Gap and other nationally known shops. Sales are higher than at many area shopping malls and customers report satisfaction, said JoAnn Jenny, an airport spokeswoman.

But BAA's contract was not renewed at Newark International Airport in New Jersey in 1991. Managers declined to say why, but media accounts at the time said the company did not add enough new shops and restaurants.

BAA runs all or some concessions at airports in Indianapolis and Boston, in addition to Pittsburgh.

At Baltimore's airport, representatives of the unionized concessions workers said BAA is too untested in the United States and could threaten the jobs of airport workers.

About 500 workers sought a union last year as a means to increase their pay and benefits, but contract negotiations with HMSHost have been delayed by the proposed change.

The workers have been staging protests at the airport, including one last week at which they called on airport officials to secure their jobs.

"We want a contract, and if a new company comes in, we want them to honor that contract," said Alexandra Graves, a 22-year-old waitress at CK's restaurant who protested last week with about two dozen other workers.

"Many people have worked here for 20 or more years with no guaranteed raises and health insurance we can't afford to buy," she said. "Now we hear we'll have to reapply for our jobs. None of this seems fair, especially considering how well everyone says the airport is doing."

BAA said it expects to triple the number of jobs at the airport and that the current workers, who have security clearances, will have the first opportunities to apply at new businesses there. But it cannot guarantee that the shops and restaurants will hire them.

Pauline Armbrust, publisher of Airport Revenue News, a monthly magazine published in Palm Beach Gardens, Fla., that focuses on airport revenue, said BAA is seeking to make more inroads at other U.S. airports but has faced culture and management issues.

In Europe, BAA often manages the entire airport and not just the concessions.

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