Allegheny County Airport Authority, company in legal battle over concessions contract

The operator of concessions at Pittsburgh International Airport has accused Allegheny County Airport Authority of using bullying tactics to try to get out of its lease with the company and then, when that didn’t work, illegally terminating the contract.

Fraport Pittsburgh filed a lawsuit against the authority in Allegheny County Common Pleas Court on Thursday, alleging breach of contract and other claims.

It also sought an emergency preliminary injunction that would preclude the authority from evicting the company from the airport and allow it to resume management of airport concessions. Common Pleas Judge Christine Ward granted the emergency request.

In a response filed Tuesday, the airport authority disputed the allegations by Fraport and said the company knew for months that it was in danger of having its lease terminated.

“Fraport could hardly have been surprised by the termination,” the authority wrote.

Fraport said in its lawsuit that company officials received a letter from the authority at 8 a.m. June 15 informing them that their lease had been terminated and all employee security badges disabled.

“The (authority) did so without a single conversation with Fraport regarding how it intended to safely and seamlessly transition the concessions program,” the lawsuit said.

According to the complaint, Fraport personnel were met on June 15 by two Allegheny County Police officers. They were told to gather their personal belongings and leave the airport immediately.

At the same time, the authority emailed tenants in the airport to tell them that the authority would now be managing their leases, the lawsuit said.

In the June 15 letter, airport authority General Counsel Jeff Immel wrote that there had been “serious and continuing defaults” by Fraport in its operations at the airport, and that the company had been “unable or unwilling” to address them and come into compliance with the lease.

“We regret that Fraport’s continuing defaults have left the authority with no alternative but to undertake these actions and assume operations of the concessions program,” Immel wrote.

The lawsuit alleges that the airport authority’s leadership had been attempting for months to contrive lease violations against Fraport — all after Fraport rejected a push by the airport authority to buy out the remainder of the lease, which runs through 2029.

The lease, signed in December 2012, allows Fraport to oversee all retail and food and beverage concessions at Pittsburgh International, including in the airside terminal’s award-winning Airmall, the lawsuit said.

The lawsuit said Fraport’s newly hired CEO Mike Mullaney met with the airport authority’s Chief Financial Officer Eric Sprys last summer. Sprys offered Fraport a “‘take-it-or-leave-it’” $5 million to “‘walk away’” from the airport lease, the lawsuit said.

At a follow-up meeting, Sprys “doubled-down on the threat by stating that ‘we are the county, and we do what we want,’” the complaint said. The lawsuit added that authority CEO Christina Cassotis told Mullaney in mid-September that “‘there isn’t a contract that the county can’t get out of. Not one.’”

“She further stated that the county had been able to cancel every contract that the (authority) did not want without consequence and that Fraport would be next,” the lawsuit said.

Cassotis told Fraport that if the company left voluntarily, the airport authority would “message the departure in a positive fashion — an overt threat that if Fraport did not go quietly and on the (authority’s) terms, she would seek to undermine Fraport in other markets or projects unrelated to (Pittsburgh International),” the lawsuit said.

When Fraport refused to accept the buyout, the lawsuit said, airport officials attempted to declare a “commercial war.” For nine months, the complaint said, the authority looked for anything that would give them pretext to unlawfully terminate the lease and evict Fraport to assume direct control over airport concessions.

Among claims raised by the authority, Fraport said it was told that some subtenants had failed to return to normal operating hours as air service began picking up following the height of the covid-19 pandemic and others had failed to open when they said they would. In other cases, the authority noted that a cook was working without a mask on, a kiosk was offline for a day, the authority found an unsecured knife on a counter and Fraport wasn’t conducting daily inspections, the inspection said.

“Review of the (authority’s) scattershot and ever-changing accusations reveals the (authority’s) true intent: to manufacture a default where none existed in order to terminate the master lease and deprive Fraport of the benefit of the full lease term,” the lawsuit said.

To terminate the master lease, the lawsuit said the airport authority must provide written notice after a period of 30 days in which Fraport has failed to follow its lease requirements. Fraport alleges that no one from the authority provided any substantive reasons for wanting to end the lease.

In its response filed Tuesday, the airport authority said Fraport’s interpretation of events painted a false picture. Instead, the authority’s attorney wrote, the parties had been engaged for months over the issues, including a formal notice of default sent on Sept. 3 and a final warning in January that a lawsuit would be filed if the defaults had not been cured.

The authority alleges in its filing that on at least 50 days since January 2021, no Fraport employee had properly scanned a security badge to have access to airport grounds, meaning they could not have met their obligation of a daily inspection on each of those days.

In addition, the authority’s filing lists several lease violations, including a closed but unsecured restaurant, alcohol left unattended, a wall display with solid metal rods and hooks that presented a potential security issue and unsecured shops and food vendors. The authority added that an inspection last week found unsecured hammers and screwdrivers accessible to the public, unsecured scissors at an unlocked retailer, unsecured chemicals and unsecured doors.

“While Fraport downplayed these security failings in its motion as nothing more than ‘minor issues,’ they are significant and serious security issues that put the flying public at risk,” the authority wrote.

In its filing, the authority said that Fraport’s financial interests do not “outweigh the authority’s crucial interests of ensuring airport security and public safety,” which are among the reasons the lease was terminated.

“Over an extended period of time, Allegheny County Airport Authority has documented a steady decline in responsible management from our long-term concession operator, Fraport Pittsburgh,” said authority solicitor Jeff Letwin. “A pattern of unsatisfactory performance regarding numerous issues required (the authority) to take steps to replace the operator. This was not a decision taken lightly and is the result of multiple discussions and many meetings to resolve these issues.”