Airport Restaurant & Retail Association

Tackling the MAG model and concessionaire costs (II)

#Fact 1: The current MAG model is unsustainable

“The model creates extraordinary, unnecessary risk for operators and does not achieve intended goals” – Airport Restaurant & Retail Association

ARRA notes that a lack of flexibility in Minimum Guarantees subjects concession businesses to “extraordinary, disproportionate risk”, despite having no control over a key factor of their revenue stream—the number of potential customers. MAGs have historically contemplated only a small fluctuation in passenger volume over the course of a year but no plan exists traditionally for “dramatic, immediate, and/or prolonged loss of passengers”. ARRA says that it recognises airports also have little control over the number of passengers and are subject to similar risk. However, in many instances, airports also enjoy a ‘backstop’ concessionaires do not: airline funding guarantees. In the political arena, both airports and airlines enjoy a ‘too big to fail’ status that affords each an effective government guarantee, it adds.

During volatile periods, tenants cannot pay rent that has no relation to passenger traffic says ARRA (Denver Airport pictured)

The white paper argues that the MAG model does not achieve its core goals of maximising sales, offering a way to compare competitive [bid] proposals or supporting airport bond financing. ARRA recommends that during periods of volatility, concessionaires cannot pay rent that is disproportionate to passenger volume. ARRA proposes adjustments to the MAG model which “address these deficiencies, protects against dramatic fluctuations in traffic, and ensures concessions operators can nimbly respond to market changes. “Our recommendations would allow for time-sensitive and efficient adjustments which move away from the fixed rent approach of the past to a variable rent structure and more equitable distribution of risk. Variable rent would return the MAG model to one that connects revenue to the airport to actual enplaned passengers at any point in time. With flexibility to respond to market changes, this would reduce revenue disruption to our airport partners.”

US Airport operating revenue sources 2019

Source: FAA CATS Report 127 for all commercial service airports

ARRA board members discussed the challenges for the concessions business during the Summit of the Americas, co-organised by The Moodie Davitt Report, ASUTIL and IAADFS

ARRA’s recommendations for short-term survival:

  • Continue MAG waivers until zone/terminal enplanements reach at least 85% of 2019 levels.
  • Apply federal relief funds to enhance and extend MAG waivers.
  • Suspend or reduce Common Area Maintenance (CAM), marketing, utility, and other incidental expenses proportionate to the decrease enplanements.
  • Include new variable MAG model in all future RFPs.

Recommendations for long-term prosperity:

  • Variable MAG that adjusts with terminal (zone where applicable) enplanement levels vs. prior year or base year. No MAG floors.
  • Suspend MAG once zone enplanements decline by 20% for two consecutive months.
  • Include new variable MAG model in all future RFPs.

The Moodie Davitt eZine Issue 297 | 21 June 2021

The Moodie Davitt eZine is published 15 times per year by The Moodie Davitt Report (Moodie International Ltd). © All material is copyright and cannot be reproduced without the permission of the Publisher. To find out more visit and to subscribe, please e-mail

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