Airport Restaurant & Retail Association

Tackling the MAG model and concessionaire costs

‘Facing Facts III’ is the title of the latest White Paper from the Airport Restaurant & Retail Association, addressing the challenges facing concessionaires in the North American travel retail and dining market. We present the key highlights.

“Recovery—when it occurs—will not resolve systemic issues in the airport concessions business that were evolving before the pandemic.” That is among the headline messages from the Airport Restaurant & Retail Association (ARRA), which has just issued its third ‘Facing Facts’ White Paper, urging closer alignment of the economic interests of airports and their concession partners post-crisis. While traffic is beginning to improve, notes ARRA, it comes after a year in which concessionaires incurred billions in lost sales, with their survival under threat. So even with recovery on the way, it says, change is required to the prevailing business model – change that supports current “cost and operational realities” and ensures a sustainable business in future. Introducing the White Paper, ARRA says: “While devastating in its immediate impact, the pandemic crisis has also exposed fundamental flaws in the decades-old airport concessions business model, which prompts a reexamination of the business structure under which the industry has operated. It is clear that a more equitable and sustainable business model—in addition to continued relief efforts—is a requirement for a true, sustainable recovery of the airport concessions industry.”

Two previous white papers from the association underlined the effects of the pandemic on airport concessionaires and proposed ideas that could help the sector survive and recover. The latest paper builds on these while acknowledging the continuing severe impact on the business. ARRA says that airport retail and restaurant operators lost over 90% of their business early last year—following a decade of “increasing headwinds” from escalating capital and labour costs, and revenue and margin challenges. To survive, concessionaires large and small incurred vast debt and faced dramatically altered operating procedures, it noted. Now, even as US airport traffic reaches 70% of pre-pandemic levels, travel retailers and restaurateurs face “constantly changing flight schedules and capacity, slowly increasing, but uneven passenger levels, and a set of shifting airport dynamics that make planning and predicting operational needs nearly impossible—all the while challenged by a workforce reluctant to re-engage”. Fundamentally, says ARRA, the “business model which has defined the airport concessions industry for decades no longer serves it well. Pre-COVID-19, the model was misaligned with the financial and operational realities of doing business in airports: labour, construction, and airport costs were outpacing sales gains to squeeze profit margins. Since COVID-19, its function and feasibility is even more challenged: the cash impacts of fixed rents and operating restrictions endanger concessions businesses. Indeed, survival is questionable. However, in the absence of other viable solutions, the current business model has become the ‘default’ option for most airports. The positive news is the pandemic, though catastrophic, is also serving as the catalyst for evaluating alternative structures to ensure the future viability of airport restaurant and retail operations.”

While US flight traffic is edging back to previous levels, airport concessionaires remain deeply financially troubled

In a hard-hitting introduction to the paper, ARRA adds: “Our new debt reality must be acknowledged in order for the industry to move forward constructively. Moreover, the process of returning to positive cash flow is likely to be prolonged by several factors. Pre-pandemic debt remains outstanding; deferred rent remains outstanding; and new debt required to stay afloat during the pandemic has accumulated. “All the while, airports are anxious to get their concessions programmes up and running amidst positive vaccination news and an uptick in traffic. Yet, concessionaires face new operational challenges as they work to reopen, ranging from extreme difficulty re-staffing restaurants and stores due to the overall national labour shortage, supply chain disruptions creating shortages and higher costs, and a changing mix of passengers with different spending patterns.” The association highlighted “fundamental flaws” in the business model, with the white paper examining four key areas in particular: 1) Minimum Annual Guarantees (MAG) 2) Capital Investment 3) Labour Access and Cost 4) Operational Flexibility In these pages we take a look at each of the ‘facts’ laid out by ARRA in detail.


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

Share this article: