By NEIL HARTNELL

nhartnell@tribunemedia.net

and NATARIO MCKENZIE

nmckenzie@tribunemedia.net

Rental car companies yesterday hit out at the Lynden Pindling International Airport’s (LPIA) operator over lease rates that they argued were “too high”, suggesting their resistance was behind its recently-launched search for new players.

Operators told Tribune Business that they had given the Nassau Airport Development Company (NAD) an “ultimatum” over proposed rate hikes, given that these would further cut into a business climate that was “not that hot”.

They suggested that their opposition to further rental rate increases and other charges were behind NAD’s decision to issue a Request for Proposal (RFP), which is seeking bids on ‘rental car concessions’ at LPIA.

Sidney McKenzie, principal at Hertz Rent-A-Car, said of NAD: “Their rates are too high, for one, and they don’t want to sit down at the table and discuss. We gave them the ultimatum that they had to decide what they wanted to do because we are not paying the fees that they are asking.”

Mr McKenzie added that the rental car industry’s stance was “the reason for the advertisement”, meaning the bid/tender document for a company to operate such ‘concessions’ at LPIA.

A briefing session with potential bidders is scheduled for tomorrow at LPIA, which was also referenced by Mr McKenzie.

“They [NAD] have a meeting on Friday, I believe, with the car rental companies to discuss the matter,” he disclosed. “They increased all of the rates at the airport and no one wants to pay.

“They can’t get anyone else to come there because they had a vacant space there for five years and no one wanted it. We want them to abide by the rates because business is not that hot. The business that they told us they were going to get never materialised, and now they want to increase the rates.

“They are advertising for interested persons, but I’m sure no one is interested because no one can afford these rates. They [NAD] want all the money for themselves.”

None of the other car rental companies, such as Avis and Budget, returned Tribune Business’s calls seeking comment. However, sources familiar with the situation said their views over the rental rates NAD is seeking, plus other charges, were consistent with Hertz and Mr McKenzie’s.

A copy of the rental car concession RFP, which has been obtained by Tribune Business, discloses that the successful bidder must pay a minimum annual rent of $42,000, or $3,500 per month, to NAD.

They must also pay NAD a “minimum percentage rental offer” of 9 per cent, which some sources have interpreted as a sum equivalent to 9 per cent of their gross incomes.

And, in addition, NAD is also seeking a “$4 per day per customer” car rental facility charge “up to four days”.

One potential bidder, speaking on condition of anonymity, described the lease/rental rates, and rental car facility charge, being sought by NAD as “too steep for our budget. How the hell can you afford it?”

NAD told Tribune Business earlier this year that it was mulling another $0.08 increase in the facility user fee that it charges passengers, as it seeks to generate revenues and cash flows to service the $409.5 million debt load taken on to finance LPIA’s reconstruction.

This came after NAD incurred a $15.1 million loss for the year to end-June 2015, with Vernice Walkine, its president and chief executive, suggesting there would be a “few more years” of losses.

Ms Walkine blamed 2015’s net loss on NAD’s debt servicing costs, which remained relatively flat year-over-year at $41.813 million. This was the key factor in wiping out the company’s $49.078 million in operating income, which was up 4 per cent.

“We experienced a net loss of $15.1 million for the period ending 2015, primarily as a result of interest ($42 million) due on our senior and participating debts,” Ms Walkine said. “As you are aware, the redevelopment cost of the airport was $409.5 million, which was financed by a loan from a consortium of lenders.

“We anticipate a net loss for the next few years as we repay this debt, which currently has an interest component that is significantly higher than the principal. As we continue to reduce the principal balance, the interest component is also reduced, and therefore interest expense will become less.”

NAD’s freedom to raise fees and charges “as necessary”, and without Government or political interference, is vital to its ability to service the debt financing (chiefly bonds) that it took on to fund LPIA’s $409.5 million redevelopment.

However, the concerns of the rental car companies will likely raise come concerns as to whether NAD, in its quest to turn a profit and meet its debt servicing burden, may be placing unsustainable financial demands on its tenants - which are mainly Bahamian-owned businesses.

The rental car RFP also appears to back Mr McKenzie’s suggestion that business “is not that hot”. It provides five years’ worth of gross revenue data on the industry’s operations at LPIA, covering the period 2012-2016.

It is unclear where the figures have been drawn from, but they show a sector whose top-line has remained relatively flat, and which was just $61,000 higher in 2016 than it was in 2012. Total car rental gross revenues for the year to end-June 2016 stood at $6.206 million.

The RFP also requires the successful bidder to “secure an international car rental franchise”, and operate from a dedicated 27,830 square foot Car Rental Centre that is located opposite the international arrivals terminal at LPIA.

“The successful proponents will be asked to operate an international rental car franchise within a 27,830 square feet Car Rental Centre adjacent to the airport terminal,” the document says.

Some have questioned, though, whether any car rental franchises are available, given that Avis, Budget, Dollar, Hertz and Thrifty are already operating at LPIA.