Customer is the loser in LGA FBO brawl

 - March 16, 2007, 9:07 AM

Management teams at Signature Flight Support and Fort Lauderdale Jet Center are locked in a war of words over the right to operate the sole general aviation FBO at New York La Guardia Airport (LGA), and it’s the airport operator that looks to be the only winner. Close to the heart of the matter are statements made by former New York Sen. Alphonse D’Amato, whose firm was hired as a consultant by Signature midway through the controversy. Jet Center claims D’Amato acted as a lobbyist, contrary to bidding rules, using his political influence in Signature’s favor. Business tycoon Donald Trump, on the other hand, has weighed in on the side of the Jet Center team.

After a controversial bid process that lasted more than two years, all current submissions have been thrown out, and a new request for proposals was released last month. The final decision on who wins the bid will come from the airport operator, the Port Authority of New York and New Jersey. A complex collaborative body operated jointly by both states, the Port Authority also operates New York JFK Airport and Newark Liberty International (EWR) and Teterboro Airport (TEB) in New Jersey. The massive authority is also responsible for administering bridges and tunnels, as well as bus, rail and shipping terminals that serve the New York City area.

The controversy over the lease at LGA has been brewing since shortly after 9/11, and has recently come close to the boiling point.

Signature has had the lease at the airport since the company was formed in 1992. Before that, Signature’s corporate ancestors, Butler Aviation and then Page Avjet, had held the lease at LGA. In all, the incumbent corporate structure has been doing business on the site for more than three decades.

But all leases eventually come up for renewal, and most airport authorities have an open-bid process that allows for competition. If ever a bid process were doomed to confusion and controversy, the LGA situation would rank at the top of the list.

According to a timeline supplied to AIN by Signature, original pre-qualification dates for the current bid were due Aug. 27, 2001, two weeks before the 9/11 terrorist attacks on New York and Washington, D.C. The main offices for the Port Authority were located in the World Trade Center, and a number of its employees were killed in the attacks. In the ensuing confusion, responses to the pre-qualifications for bidding on the LGA contract were officially postponed indefinitely.

Signature filed its pre-qualification bid for the four-year lease to the Port Authority on Oct. 19, 2001, and a mandatory pre-bid conference and inspection took place on November 15. According to Signature president Beth Haskins, Jet Center was not represented at the required November 15 meeting. Dec. 4, 2001, is the date listed on Signature’s timeline as the due date for final responses to the invitation for bids.
Following a series of lengthy delays in the process, Signature submitted its final response on Jan. 31, 2003, the final revised due date for an invitation to bid.

According to Haskins, Signature’s bid included a proposal to pay a concession fee of 18 percent of its gross sales after taxes–a significant increase over the 9-percent figure of the existing lease. “We bid high,” she told AIN. “The location has a low profit margin, but we, nevertheless, considered La Guardia an important location for us.” Haskins said Mercury Air Centers was the only other bidder that she was aware of at the time, and offered a concession fee of 13 percent.

Haskins said she was surprised to hear on March 18 last year that Frederika Watson, staff property representative for the Port Authority, had provided an inspection tour at the LGA facility for Ed Zwirn, a former Signature employee and one of three current minor-equity owners of the Jet Center Group. Zwirn’s company operates three FBOs in south Florida, with locations at Fort Lauderdale/Hollywood International (FLL), Daytona Beach International (DAB) and Orlando Executive (ORL) Airports. The company also has a commercial fueling permit at Miami International (MIA), but no terminal facility, as well as a lease to build a new FBO at Jacksonville International (JAX).

It didn’t soothe Haskins any to hear that, during his inspection tour at La Guardia, Zwirn had made comments to LGA Signature employees about his plans to add staff and make other changes to the facility after Jet Center took over. “Signature was in the midst of labor negotiations at La Guardia and awaiting ratification of a proposed new collective-bargaining agreement,” she said. “Under the circumstances, Zwirn’s comments were not appropriate.” Another Signature official called them inflammatory.

The Saga Continues
Zwirn told AIN that he first became involved in the bidding for the La Guardia contract when one of his customers told him he ought to bid. He said, “We conducted an internal survey of our customers asking them where they thought we ought to look to expand. One of several locations that came up was La Guardia. We wrote to the Port Authority and asked if we could bid on opening a second FBO on the airport.” When Jet Center found that was not possible, it also learned that Signature’s lease was about to expire.

Though Zwirn knew he was too late to meet the deadline for bids, he sent a series of letters to the Port Authority asking to be allow- ed to bid anyway. In a letter dated January 8 last year, Andrea Roitman, manager of the Port Authority’s purchasing services division, wrote, “I am very pleased to inform you that we will allow your firm to participate in the pre-qualification process.”

Signature’s Haskins was surprised to hear that the Port Authority was entertaining a bid from Jet Center when neither she nor Mercury Air Group president Joe Czyzyk (the other bidder) had heard anything about bids opening up again.

Zwirn cited the following clause in the Port Authority’s standard information for bidders: “The Authority reserves the unqualified right, in its solid and absolute discretion, to reject all bids or to accept that bid, if any, which in its judgment will under all the circumstances best serve the public interest and to waive defects in any bid.”

Zwirn indicated that Jet Center’s late entry into the competition was the “defect” and the Port Authority chose to waive it. He acknowledged that the clause renders deadlines or other stated requirements moot, giving the Port Authority the right
to change the process at any time.“In dealing with airport authorities, that’s more typical than not,” he said.Haskins complained that, as far as she knew, the Port Authority had focused on the concession fee in evaluating the Jet Center bid. Usually, she said, large bids such as this one involve a “weighting” process that takes other salient issues into account. She said, “Typically, they will ask for documentation of the company’s fitness to do business, its experience doing business in the state and experience on like-size airports. This is the first time we can recall the bid process focusing solely on the concession-fee number.”

Apart from the tardiness of the Jet Center bid, Signature had another problem with its legitimacy. It came in at a mere quarter percent higher than Signature’s 18-percent figure which raised suspicion that information on Signature’s bid had been leaked to Jet Center.

After learning of the Jet Center bid, Signature engaged Park Strategies, operated by D’Amato and his son, Chris. The ex-Senator questioned the fact that one of Jet Center’s owners is related to Karen Kroeppel, the former general manager of Signature at LGA and the wife of Port Authority official Warren Kroeppel.

D’Amato minced no words. Quoted in The New York Times, he said, “You had a situation where people attempted to hijack the contract, and that is Jet Center and some people working at the Port Authority. It reeked. It reeked to the heavens.”

Jet Center maintains that Kroeppel did not participate in any talks related to the FBO negotiations, but Signature still contends that the Jet Center bid “did not pass the smell test.” Zwirn told AIN he calculated his bid numbers based on what he estimated Signature would bid, based on his experience as an employee of the company.

D’Amato raised his concerns with members of the Port Authority’s board of directors, leading the board to resolve on November 20 to throw out all bids and start over. According to The New York Times, the Port Authority’s general counsel, inspector general and an outside lawyer objected to the board’s decision, claiming that the bid process had not been compromised and that Jet Center ought to have won the competition.

Zwirn and Jet Center pointed to D’Amato’s links to powerful Republican state politicians and sent a letter to the Port Authority protesting that Signature had hired the ex-Senator as a lobbyist against Port Authority rules and should be prohibited from bidding on the new contract proposal. Jet Center also asked real-estate mogul Donald Trump, one of its customers, to speak out on its behalf in the controversy.
Trump ascribed the Port Authority board’s decision to D’Amato’s influence.

Zwirn told AIN, “Al D’Amato is very powerful, but he’s lost a lot of his power over this situation. We didn’t hire a lobbyist. Maybe we should have.” Calling on his experience as a former Signature official, he also said, “I know how they operate in these instances. Signature is a strong force in this industry, and that has allowed them to dominate in so many locations. Let the Port Authority ask the customers who they want to operate the FBO at La Guardia. See what they say.”

Chris D’Amato said of Park Strategies’ contract with Signature: “We were not hired to secure bids, but rather to advise them on a course of available legal and administrative actions that they could take to protest what they came to believe was a manipulated bid process.”

Haskins emphasized to AIN that the agreement signed with Park Strategies was a consulting contract, not a lobbying contract. Zwirn expressed skepticism over the distinction, noting D’Amato’s political connections. Haskins also said she did not understand the basis of why Jet Center was allowed to enter a bid in the first place, nor the basis by which Jet Center publicly claimed that it had won the bid before official results had been announced.

She told AIN, “Our bid was 18 percent and theirs came in a quarter percent higher? The inspector general at the Port Authority initially denied the Jet Center bid based on when it was filed, but the denial was overruled? Then someone at the Port Authority pointed out that Jet Center might not be financially qualified. That was overruled? All that didn’t wash. Finally, we told the Port Authority board that if they awarded the bid to Jet Center, we would sue.”

Haskins said she understood that the Port Authority had sent a letter to Jet Center indicating that Signature was blameless and would not be disqualified from bidding on the new request for proposals. The current RFP contains a new requirement for a minimum 23.25-percent concession fee, and pre-qualification applications are due March 19.

Asked if he would stay in the running for the contract, Zwirn was vague. He said, “At 23.25, that may be too rich for our blood. It could be that we’d be working for free, or at a loss, but we’ll wait until we have a chance to look over the paperwork before we decide whether or not to bid. I doubt anyone else in the industry will bid. In the end, the higher concession fees will be passed on as higher fuel prices, and the customers will be the losers.”

Despite all the mudslinging, Signature officials nevertheless expressed respect for Jet Center. “Business is business,” said one Signature executive. For his part, Zwirn said he has no animosity toward his former employer, pointing the finger, rather, at the Port Authority, which is the only player in the controversy that stands to benefit through the higher concession fees. He said, “If they shouldn’t have let us in, then they shouldn’t have let us in.”