So Your Airport Sponsor Is Trying To Dictate Your Rate Structure For Subtenants And Customers?

To that end, “Respondent has an obligation to ensure the Complainant has access on reasonable terms and without unjust discrimination and that the Complainant, in turn, provides its services on reasonable terms and without unjust discrimination.”

Interestingly, the Director ultimately held that Respondent KGEU was in violation of Federal Grant Assurance 22, but on a procedural rather than substantive basis. As such, the Director held that the process of determining and imposing the rental rate structure was in violation of Federal Grant Assurance 22, leaving open the possibility for the imposition upon Complainant of an otherwise valid rental rate structure.

As stated in Valley Aviation Services, “Airport sponsors do have a federal obligation to ensure airport rates are fair and reasonable, including rates charged by tenant service providers. A sponsor may impose rates, if justified, to comply with this federal obligation. There must however, be a reasonable basis for establishing the rates, and the rate requirements must be applied consistently and in a transparent manner to all similarly situated tenant service providers.”

In this case, a rate structure was imposed on one tenant without considering — or even knowing — the rate structure applied by others offering the same type of service on the airport.

Conclusion

So, yes, an Airport Sponsor may in fact impose a rental rate structure upon its tenants with respect to rates charged to subtenants and customers. That said, however, the tenant is not without recourse. In the event that a tenant is subjected to such a rental rate structure, it should pay close attention to the following:

• Was the imposition of the rental rate structure justified?
• Was the rental rate structure developed using data based upon comparable rates? To this end, the airport sponsor must be able to substantiate that the particular tenant is similarly situated (based upon evaluation of lease terms, ownership and financial investment interests, location of the airport, location and access on the airport of the comparative entities, and other terms/limitations of ground leases) to those entities relied upon in the airport sponsor’s analysis.
• Was the rental rate structure developed using data derived from publicly owned hangar landlords rather than private hangar landlords?
• Has the rental rate structure been imposed upon all other similarly situated tenants at the airport?

While an Airport Sponsor may lawfully pursue rent and rate control under certain circumstances, a Part 16 claim may nonetheless arise by virtue of the process used in developing and imposing the rental rate structure.

about the author

Paul A. Lange founded and leads the Law Offices of Paul A. Lange, LLC, with offices in CT and NY. The firm practices nationwide and internationally in various aviation related legal matters, including airport development, financing, regulatory enforcement matters, and disputes.

Megan Bryson is an attorney at the firm whose practice includes airport matters.

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