Friday, August 14, 2009

Shame on you DFW Airport Part 3

Follow up email from Ken Kundmueller:

The CEO of D/FW has responded (http://www.freedomparkdfw.com/response.aspx#Fegan) to the volume of email and phone calls generated by my recent email to FreedomPark customers wherein I express concern over measures taken by the airport affecting valet parking. Mr. Fegan has a challenging job balancing the concerns of the airlines, the commercial partners of D/FW Airport, and the air travelers who support the public institution that he is entrusted to oversee. Sometimes decisions that benefit the interests of one group may compromise the interests of others. It has been my observation and experience that Mr. Fegan has done an excellent job navigating the mine field of problems and conflicting interests that attend his position as the head of the third largest airport in the nation.

However, as one of the most powerful public figures in North Texas, Mr. Fegan also has a fiduciary duty to you and all D/FW patrons to be factual when responding to an issue that generates as much passion as the one I shared in my email. I also have that same obligation to you to state the facts without abridgement.

Mr. Fegan uses terms such as 'misinformation', 'incomplete picture', and 'mischaracterization' when referring to the content of my email to FreedomPark customers. He's partially correct. I did indeed evaluate the facts and characterize the situation. It's my job as the head of my business to look at facts and draw conclusions, and then respond to those conclusions. When I see gray clouds and hear thunder, I roll up the windows on my car. Whether or not I mis-characterized it is a matter of opinion. His opinion. I think you, the FreedomPark customer, are intelligent enough to draw your own characterization from the facts.

So I have prepared a FACT sheet (http://www.freedomparkdfw.com/valetfactsheet.aspx) for you, without any characterization. Nothing in this fact sheet can be disputed by D/FW Airport. You decide for yourself whether or not I mischaracterized the situation, or the CEO of D/FW did.

It is important to note before you read further, that FreedomPark does not object to competition from the airport. We do object to unfair competition. It's hard enough for a small, local company like FreedomPark to compete against a large public institution that has combined forces with a company that has 160 parking operations in California. But it's another thing to try to compete against a different set of rules, a different fee structure, and a couple of lobbyists working the Board on behalf of PCI (why do they need lobbyists anyway).

It is also important to note that we do not object to the privilege fee. We never have objected to it. We just object to an increase in imposed fees when our competitor is afforded a decrease in contractually agreed fees.

But speaking of misinformation, mischaracterization, and giving an incomplete picture, I'd like to respond to a few of the representations that Mr. Fegan made in his release.

Fegan: "First, in narrowly defined circumstances due to the recession the Airport Board has approved temporary contractual adjustments for on-airport concessionaires."

Incomplete picture: recently approved a policy that grants only relief from the Minimum Annual Guarantee for struggling concessionaires, not for the percentage rent paid according to their contract. PCI was the only concessionaire given both MAG relief and a reduction in percentage rent, even though PCI did not qualify under the guidelines of the new policy.

Fegan: "A decision was made to forego a percentage fee increase due to the unique nature of the service provided by an on-airport concessionaire, which is a separate business segment and service for our customers from off-airport parking."

Incomplete picture: the board did not 'forego' and increase, as represented here. Mr. Fegan even acknowledges in this same response that the contractually 35 percent fee had been in place for 3 months and that the Board voted to "return PCI's percentage rent to 22 percent rather than 35 percent where it had been for a period of three months per the terms of the contract. The proper characterization of a rate that is already in place and then reduced would be 'rollback'.

Fegan: "In no way does the Board's decision on PCI represent a "bailout." No "taxpayer" money was lost."

Incomplete picture: The D/FW Airport Board charter specifies that any budget deficit that cannot be made up through higher fees to the airlines will be made up by tax money from the owner cities, Dallas and Fort Worth. So in that respect every dollar coming into or going out of the airport is 'tax dollars' since the owner cities, and their taxpayers, are ultimately on the hook for what happens financially at D/FW Airport.

Fegan: "It is also important to note that from 2001-2007, off-airport valets paid no privilege fees to the Airport whatsoever, while deriving over $25 million in revenue from their airport operations during that period. Off-airport valet is one of the largest non-aviation commercial users of Airport infrastructure, yet during this period of time they reimbursed DFW nothing for their utilization of Airport assets."

Misinformation: FreedomPark and the off-airport valet companies, contrary to this statement, did reimburse DFW Airport for its use of the infrastructure by paying the same entry and exit tolls that the public and many other commercial users pay to drive a passenger vehicle into and out of the airport.

Misinformation: FreedomPark and the other off-airport valet companies derived $14.5M during the period 2001-2007, not the $25M as stated in Mr. Fegan's response.

Mischaracterization: D/FW Airport is a public facility according to its charter. There are thousands of businesses that leverage the assets of public infrastructure (highways, etc) for the benefit of their business without paying a privilege fee to do so. Specifically, at DFW Airport, there are approximately 25 hotels with airport shuttle service, and whose occupancy is largely driven by passengers to and from D/FW Airport. Yet those hotels pay nothing for a privilege fee as required of the off-airport parking companies. All they pay is an entry and exit fee for their shuttle buses. So it is a mischaracterization to suggest that off-airport valet companies are somehow commercially exploiting DFW Airport.

Mischaracterization: FreedomPark does not, and has never, objected to the privilege fee.

Fegan: "It is important to note that in 2008 PCI paid more fees to DFW than all off-airport valet companies COMBINED. The question of who is receiving a subsidy is certainly an appropriate one to consider."

Incomplete picture: The complete picture is that during the term of PCI's first year in operation FreedomPark paid $650K in privilege fees, and the other two valet companies paid approximately $250K in fees. Additionally, The off-airport valet companies and their customers paid an additional $600K (by the airport's own estimate) in entry and exit tolls, which PCI customers are exempt from paying. PCI paid $800K in fees compared to $1.5M in fees and tolls paid by the off-airport valet operators. This is a financial fact the Mr. Fegan and his staff are very familiar with because the off-airport valet companies were denied a request to have the entry and exit tolls waived for their customers as they are for PCI customers.

Furthermore, besides receiving operating privilege for their fees, PCI also received a 1300 space parking facility and offices in two locations on the airport (by comparison FreedomPark paid $900K last year for 975 spaces and offices), and $250K in marketing expense paid for by DFW Airport. Ignoring the value of the parking facility and just deducting the marketing expenditures of the airport on behalf of PCI, the complete picture is that the airport netted $550K from PCI and $1.5M from the off-airport valet operators.

Fegan: "A decision was made to forego a percentage fee increase due to the unique nature of the service provided by an on-airport concessionaire, which is a separate business segment and service for our customers from off-airport parking."

Mischaracterization: the only unique nature of the on-airport service is the fact that they are allowed to take new customers without a reservation. FreedomPark asked to have this privilege included in our permit and were denied. Fegan replied: "It's not the deal that we sold them (PCI)." Ironically, we are permitted to accept existing customers without a reservation. So any uniqueness about the on-airport service is arbitrarily imposed and against the consent of the off-airport valet operators. Furthermore, the on-airport valet service can, by no stretch of the truth, be considered a separate business segment and service from off-airport parking.

To use Fegan's own terminology, the question of who is mischaracterizing, giving misinformation, and and incomplete picture, is certainly one to consider.

You decide.

Ken Kundmueller
CEO, FreedomPark

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