Testimony begins in question of lease termination for Pittsburgh airport concessions operator

An Allegheny County Common Pleas judge on Friday heard the first part of testimony over whether the company contracted to oversee concessions at Pittsburgh International Airport can continue with its work.

Fraport Pittsburgh, which is contracted through 2029 with the Allegheny County Airport Authority to oversee its retail, and food and beverage concessions, filed a lawsuit against the authority last month, alleging breach of contract after it was evicted from the airport on June 15.

Common Pleas Judge Christine Ward granted Fraport’s initial request for an emergency injunction but now must decide if it should be continued.

She heard from two witnesses called by Fraport on Friday, and the case will resume on July 13. Airport authority attorneys have not yet presented any witnesses and reserved their opening statement for later in the case.

The airport authority said it terminated Fraport’s lease because the company failed to address a number of problems it had identified over a period of several months, including security concerns. They included Fraport employees failing to meet their daily inspection obligation, leaving an unsecured knife and metal rods and hooks accessible to the public, and a failure of Fraport employees to properly scan their security badges.

However, in his opening statement, Fraport attorney Thomas S. Jones said that for every concern raised by the airport authority, Fraport took corrective action.

“If the condition is remedied, it’s not a default,” he told the court. “Fraport believed the matters had been resolved.”

As for alleged security violations, Jones argued that Fraport is not a security company, and that the authority’s efforts to single it out as a “guarantor and scapegoat” of safety concerns is improper.

“The master lease barely mentions security at all,” Jones said.

He told the court that the security concerns from the authority only came to light after Fraport rejected a contract buyout offer of $5 million last summer.

Michael Mullaney, the CEO of Fraport USA, testified that in June 2021, he met with airport authority Chief Financial Officer Eric Sprys. Mullaney said Sprys told him that the authority wanted to end Fraport’s contract early and suggested a $5 million buyout price.

Mullaney said $5 million “wasn’t anywhere near a fair commercial investment.”

On cross-examination by authority attorney Joseph A. Valenti, Mullaney later acknowledged that he thought $20 million was a fair amount.

Mullaney spent much of his testimony talking about the impact the covid-19 pandemic had on revenue for businesses with locations at the airport since there was a 90% decline in travel.

“There were little to no passengers, and most employees weren’t there,” he said.

Although Mullaney said the airport’s passenger traffic is recovering, it is still down about 15% to 20% from 2019 numbers.

Despite the troubles tenants at the airport had during the pandemic, Mullaney testified that the airport authority has taken “a very aggressive approach” in collecting rent from them, asserting that if the businesses fail to pay, they should be evicted.

Further, he said the authority also refused to provide any rent relief to the tenants at the airport, even though Fraport did.

“We did provide direct and meaningful relief, while the airport provided nothing,” Mullaney said.

He also told the court that airport authority CEO Christina Cassotis has said she’d like to see a different tenant mix at the airport — similar to what travelers find in larger, global airports.

Pittsburgh International is the 48th largest airport in the country, Mullaney said.