Panel OKs Extending LAX Food Contract

With little public discussion and no competitive bidding, the city Airport Commission on Tuesday approved a 2 1/2-year contract extension for Los Angeles International Airport’s major food and beverage provider.

The special arrangement for HMS Host Corp. benefits one of the airport’s biggest business interests, which also financially supported James K. Hahn in last year’s campaign for mayor of Los Angeles.

Although the lease extension received unanimous approval from the seven-member commission, the brief discussion exposed a growing rift between Airport Commission President Ted Stein and some other commissioners.

Stein bypassed the normal channels for contract extensions by personally negotiating the deal with the company. “I put the people together,” Stein said.

Some saw the arrangement as the latest evidence of the president’s domineering style, sometimes in favor of Hahn’s campaign contributors.

But Stein defended the deal as necessary to strengthen HMS Host, which suffered economic losses because of the sharp drop in air travel after the Sept. 11 terrorist attacks and delays in building facilities in two LAX terminals.

The deal will extend the politically connected firm’s contract to operate many of the airport’s food and beverage services at LAX until at least June 2008. Host manages many airport restaurants, including California Pizza Kitchen, Pizza Hut, Burger King and Starbucks.

The extension is even longer, until 2009, for food and beverage concessions at United Airlines’ Terminal 8 and retail stores in American Airlines Terminal 4. The airport received more than $8 million in revenue from Host the year before the terrorist attacks.

Stein called the package “a fair deal for the airport, for Host, and for some of the workers who Host will be required to hire back” as passenger volumes increase.

Security Measures Affect Restaurants

Like many airport businesses, Host has laid off workers because of the decline in air travel. Federally mandated security restrictions also have had an impact because only ticketed passengers are allowed beyond checkpoints, depriving most airport shops and restaurants of the “meeters and greeters” who once supplied much of their business.

But some skeptics at the airport see the extension as further evidence of favoritism for Hahn loyalists and of Stein’s heavy-handed stewardship of LAX.

Those concerns broke into the open Tuesday when commissioners expressed discontent with not being informed about pending business deals involving the world’s third-busiest airport.

At one point, commission Vice President Warren Valdry told Stein to “find a way to keep the seven commissioners in the loop” so that they “know what the heck is going on.”

That prompted this retort from Stein: “You don’t even know what’s going on.”

Commissioner Mahala Walter then chimed in: “I don’t have any idea what’s going on.”

Before that exchange, Commissioner Leland Wong had raised questions about the process that led to the lease extension.

“How did we pick Host? How are we determining who gets the 2 1/2-year extensions?” he asked. “I need to understand the rationale.”

The lease extension concept was raised by a Host representative at a Dec. 4 commission meeting in Van Nuys. That night, the commission unanimously approved a $9.5-million rent relief package for airport concessionaires hurt by the dramatic falloff in business after the attacks on the World Trade Center and the Pentagon.

“We clearly understand the tragic circumstances that we are facing is not your fault.... And I’m not here to ask you to make our company whole,” said Bruce Fish, general manager of Host operations at LAX.

But Fish went on to suggest that the company be given an extension of its contract to recoup its losses and recover its investment in facilities, and “time to participate in the growth and the upside the future may bring.”

Clarence Daniels, president of Concession Management Services, a minority subcontractor to Host, added that the rent relief being offered to other airport businesses would not help his operation. Instead, he said, “We would like the airport to consider some additional term.”

Rick Janisse, a deputy executive director of the city’s airport department, told the commission that some airport concessionaires, including Host, chose not to participate in the rent relief program from Oct. 1 to Dec. 31. That program allowed airport businesses to pay only a percentage of sales rather than previously agreed-to minimum monthly rents.

When the rent relief package was approved, Stein served notice that he was not inclined to support further rent reductions this year, despite pleas from some concessionaires.

Host Gave Thousands to Hahn Campaign

Instead, extension of often-lucrative long-term leases became the preferred approach for Host. The company and its employees contributed $15,000 to Hahn’s campaign for mayor. Fish declined to discuss the contract negotiations or the company’s political contributions.

Rather than considering lease extensions one at a time, Wong said, the airport needs to have some type of criteria for determining which concessionaires have been most affected by the economic decline since Sept. 11.

The discussion of the Host contract laid bare growing discord on the commission, which oversees the operations of Los Angeles, Ontario, Van Nuys and Palmdale airports.

Tension is the most pronounced between Stein, a lawyer, political fund-raiser and one-time candidate for city attorney, and Valdry, a businessman.

Valdry, first appointed to the Airport Commission by Mayor Richard Riordan, sent a stinging six-page letter to Stein, his fellow commissioners and airport officials, complaining bitterly about Stein’s conduct at a closed-door meeting last week.

“Your manner was confrontational, abrasive, disrespectful and uncivil,” Valdry wrote. He said Stein ordered him to leave a meeting with potential bidders on a contract to place commercial advertising throughout the airport because he had not been invited to attend.

Valdry said there is no policy prohibiting commissioners from observing interviews with potential bidders. He said he had received feedback from unidentified airport staff members about Stein’s “abusive and arrogant manner toward them.”

He criticized Stein’s autocratic leadership and suggested that the airport needs a board president who operates “with a quality of statesmanship.”

Stein would not comment on Valdry’s complaints.