PitCo, Atlantic agree to one-year lease extension while FBO contract continues negotiations

Just weeks away from the expiration of their lease, Atlantic Aviation and the Pitkin County commissioners agreed to a one-year lease extension to allow more time for contract negotiations between the two parties for Atlantic’s continued presence as the fixed-base operator (FBO) at the Aspen/Pitkin County Airport. 

“Everybody’s feet are to the fire, not just ours,” said Commissioner Patti Clapper, noting the timeline on which the emergency ordinance was brought to the commissioners. 

Pitkin County — the Federal Aviation Administration sponsor of the airport — implemented a formal procurement process and selected Atlantic Aviation in April from a pool of seven applicants to enter contract negotiations for the management of the FBO. 

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FBOs run fueling infrastructure, operate the general aviation terminal for their customers, and manage patio shelters and tie-downs for private aircraft. 

The existing lease, signed in 1993, will expire on Sept. 30. In 2006, Atlantic acquired the original lease holder, Trajen Flight Support LP, and assumed the rights and responsibilities of the current FBO agreement.

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Since April, the county and Atlantic Aviation have been in contract negotiations. But the negotiations hit snags related to the airport layout plan (APL), an FAA-required document that outlines future airport facilities and aviation demand. Airport officials expect to submit a completed ALP to the FAA in summer or fall 2024.

The county has been working with the FAA for months incrementally submitting components of a new ALP. According to John Ely, the county attorney, parts of the ALP that have not yet been settled are crucial to contract negotiations. 

“One of the steps that would be fundamental to a new leasehold agreement is defining the physical space that would be occupied by the lessee, and that isn’t quite possible now,” he said. “To go ahead with an agreement might implicate the county in unnecessary, unwarranted additional expenses if we have to change the configuration after a more permanent or long-term lease agreement has been executed.”

Three significant terms of the lease are:

1. The term of the Lease Agreement shall be extended for a period of one (1) year, to expire on Sept. 30, 2024 (the “extension term”).

2. Compensation paid to the County will be $13,750,000 in the form of $1,750,000 in base rent and $12,000,000 as a minimum annual guarantee for fuel flowage fees for the extension term.

3. If the County and the Atlantic come to agreement to a new, long-term contract during the one-year lease extension, the County will receive an additional payment of $6,000,000.

The $1,750,000 in base rent and $12,000,000 minimum annual guarantee for fuel flowage fees are significantly higher than what the county receives now as compensation from the FBO. 

Airport Director Dan Bartholomew said that currently, the FBO compensation to the county accounts for less than $1 million annually. 

Atlantic Senior General Manager Jonathan Jones said that jump in compensation is because the county agreed to that lower number 30 years ago with the existing FBO agreement, and the county could only change the terms of that lease by going through a procurement process, which is what they are doing now and have been doing in regards to the FBO. 

There was much discussion at the meeting on Wednesday on the $6 million payment from Atlantic to the county upon the signing of a contract. 

Commissioner Chair Francie Jacober worried that the money might arouse suspicion from the public. 

“I just don’t want to have the public come back to us and say if we reach an agreement with Atlantic, that we were influenced by this $6 million payout at the conclusion of our negotiation,” she said.

But Ely, County Manager Jon Peacock, and Jones all assured the commissioners that the $6 million is just a function of Atlantic’s proposal to the county — the proposal that beat out the other applicants to run the FBO. 

“Atlantic’s bid for the long-term lease has an $18 million MAG (minimum annual guarantee),” Jones said in an email through a PR representative. “A one-year extension is a very different financial prospect for Atlantic, however; Atlantic wanted to give the county a meaningful and substantial amount, which is $12 million (2/3 of the MAG), which is a huge amount. However, in the event Atlantic and Pitkin finalize the 30-year lease, we wanted to essentially count this as the first year of a 31-year lease and make the county “whole” on the $18 million (the amount in the proposal), which they would have received had the lease been finalized by (Sept. 30).”

Essentially, the $6 million is a backfill on the money promised to the county by Atlantic in their response to the request for proposals from 2022 should the county and Atlantic sign that multi-decade contract. 

All of the funds would return to the County’s Airport Enterprise, which means all money generated within the airport stays with the airport and does not fund other county activities. 

If needed, the contract could be amended to include another extension next year. And, as Ely noted, the commissioners maintain the power to direct staff to renegotiate or outright deny any contract brought to them through a procurement process. 

Public comment was offered at the meeting, but there were no respondents. Second reading with public comment is scheduled for October, though the exact date has yet to be determined.