Lawmakers consider Lotte-airport contract extension amid DFS consent

Lawmakers are reviewing a proposal that would mandate the A.B. Won Pat International Authority to extend its existing airport concession contract with Lotte Duty Free, whose lease expires in just a handful of months.  This as rival competitor DFS agreed up to a three-year extension at the request of the governor, though airport officials admit they have yet to negotiate with the current duty-free operator.

A bill drafted by the Guam Economic Development Authority could require the airport to extend its existing concession contract with Lotte Duty Free for three years, instead of moving forward with a new competitive bid. GEDA CEO and administrator Christina Garcia said, "We were very concerned about the concession revenues being lost during this period and we sought an urgent request to possibly get this bill done."

This comes as Lotte’s lease at the airport expires in just five months, on July 20. 

In a surprising move, longtime rival DFS Group agreed to a limited waiver under a prior settlement agreement to allow the extension, in response to the governor’s request. In a letter to the governor, DFS said the agreement was to support a seamless transition and the long-term interests of Guam’s tourism sector. 

Governor Lou Leon Guerrero responded in writing that she accepted DFS's agreement and would forward it to the Airport Authority and Lotte for review. Airport officials were made aware of those memos on Monday just before a joint public hearing. 

Airport executive manager John Quinata told lawmakers the airport has not yet formally communicated with Lotte about an extension, noting, "At this time, we have not communicated with the current vendor because this is still fresh and we’re trying to make arrangements to meet because there’s– it’s a three party agreement that has to happen."

Quinata said the airport was ready to put out a request for proposal in this week, saying, :"With this memo here, we have to make sure now we have to go back and ensure that we don't give an unfair advantage to anybody else." 

Meanwhile, Garcia said moving forward with the RFP now could create uncertainty and cause a bond notice. 

"If an RFP was issued today, it could trigger some concern because are you looking at leaving that space open until you get a new vendor? Or as long as it takes which again, could take three months, six months or a year as we’ve seen," said Garcia.

She warned about potential financial consequences on all of Guam’s credit if Lotte were to exit this summer. 

Garcia added, "The impact on our hot bonds could be seen. The impact of the general government could feel some of the repercussions."

Committee chair Senator Jesse Lujan raised concerns about potential legal issues with the extension, saying, "I don't want to spur another legal battle at the airport. Like you said, with an unfair advantage with the current vendor that's there, because if an RP goes out, everybody has to start from the same starting line."

In the meantime, the discussion comes as the duty-free sector on Guam is undergoing transition amid slow tourism recovery from the COVID-19 pandemic and Typhoon Mawar. 

DFS is also planning to end operations in Tumon by March 31.