Two FBO Chains Seek To Buy Million Air Franchise at HPN

 - May 4, 2014, 4:40 AM

The FBO situation at New York’s Westchester County Airport (HPN) remains unresolved as Million Air vies with Signature Flight Support for the purchase of the Million Air Westchester franchisee location on the field, and the FBOs and the county wrangle over tax-exempt status.

Signature Flight Support agreed last year to purchase Million Air Westchester (a k a Westair Aviation Services) along with the independent Jet Systems (formerly Avitat) FBO at HPN, a transaction that would give Signature control of three of the five FBO leaseholds at HPN, one of New York City’s major business aviation gateways. Last year, Landmark Aviation doubled its operations there when it purchased the long-time family-owned and operated Panorama Flight Services, and if the deals go as Signature has planned, it will reduce the number of aviation service providers there to just two from five. Million Air, which claims right of first refusal to purchase any of its franchisee locations, has exercised that right and is currently negotiating for funding and lease terms for the facility.

Westchester Airport straddles several municipalities, and each claims a slice of the airport real estate for tax purposes, but not all FBOs there are required to pay taxes. Panorama and Westair held tax-exempt leases, on the grounds that the facilities provide public access and services such as flight lessons and aircraft rentals. Under that exemption, those two locations are also designated as light general aviation FBOs, restricted to handling aircraft weighing less than 50,000 pounds, effectively ruling out private jetliners and the largest corporate jets, and preventing them from fueling any aircraft outside their leasehold.

Several years ago, Jet Systems successfully argued that it too should have tax-exempt status, presumably setting a precedent. Not surprisingly, both Signature and Landmark have protested their own tax assessments–which cost the companies several hundred thousand dollars annually–and have filed suits against the local municipality.

Changes for Lease Agreements

The lease agreements for both the Jet Systems and Million Air (Westair Aviation Services) properties prohibit the assignment of their leases without written approval of the county, and in the case of Jet Systems will require a revision to the lease, which currently states that the county will not consent to its assignment to an FBO currently operating at the airport.

According to reports, the initial deal between Westchester County and Signature called on the FBO chain to drop its tax-exempt lawsuit in return for the amending of the leases and a yearly rent rebate.

Westchester County Airport had been fined by the FAA in the past for instances of revenue diversion, a violation of the agency’s grant assurances. In essence, for an airport to qualify for improvement grants, all airport-generated income must stay on airport, for use at the airport.

After discussion with its legal council, the county board unilaterally changed the terms of the Signature deal, to a simple lease reassignment instead, removing the provision for a rent rebate. “Every municipality is always sensitive to the possibility of revenue diversion, but I think in this particular case because we do have a history, we are particularly sensitive to that matter,” Westchester County legislator and board majority leader Catherine Borgia (D-District 9) told AIN in January. “Was that part of our consideration? Sure it was. We want to make sure that we do everything completely correctly and get the best deal possible for the county residents.”

The transaction was slated to be discussed and voted on by the board after a public hearing on December 16, but amid the heavy turnout from local community members seeking to speak against the proposed loss of tax revenue, should Signature achieve tax-exempt status, the matter was tabled for consideration by the newly elected county board this year. In a meeting held at the end of March, the county legislators voted to assign the Westair lease, first to Million Air, which is proceeding with its attempt to finance the purchase, and failing that to Signature.

Million Air president Roger Woolsey told AIN the discussions are continuing with the authorities as to whether his company would simply assume the existing lease on the property with its restrictions, or negotiate a new lease without such restrictions, allowing the FBO to service large-cabin aircraft. Undetermined as of press time is how such a change would affect the location’s tax-exempt status. Woolsey said he expects to close on the location in the second quarter, and Million Air is planning to construct a new 20,000-sq-ft terminal on the site, along with two more 20,000-sq-ft hangars, at a cost of approximately $18 million.

In its year-end financial report released in March, Signature’s parent company, BBA Aviation, said it expects to complete its acquisition of Jet Systems, reportedly for $38.5 million, in the first half of the year, with no mention of Million Air Westchester, but regardless, Signature is clearly still eyeing both locations should Million Air’s financing fall through. As determined at the March 24 Westchester County Legislator meeting, a new agreement would once again include language about Signature dropping its tax-exempt lawsuit in return for board approval to buy both locations and a rent rebate of $2.8 million over the remainder of the lease, should Million Air be unable to purchase the location. The decision has left some at the airport scratching their heads in confusion.