Operator Of Austin Airport’s South Terminal Sues Over The Most Insane Eminent Domain Case Ever

Part of how the Austin airport has handled growth is opening a separate, privately-funded terminal for low cost carriers. They gave a 40 year lease to a company to build it, that company has invested tens of millions of dollars, and Allegiant and Frontier currently operate out of the terminal.

The South Terminal has only been open 5 years and the Austin airport has changed its mind. They want the land back to reconfigure how the airport works as part of a new expansion plan.

  • They offered less than $2 million to buy out the lease (!)

  • And they’re moving forward with eminent domain to take back the land (that they already own).

The city’s plan is to close the South Terminal in summer 2023 as part of their plan to build a midfield concourse with at least 10 more gates, connected to the Barbara Jordan Terminal via underground tunnel. This requires relocating the terminal’s taxiways, and using space currently occupied by the low cost terminal. They’ll also introduce a $77 million baggage system and new ticket counters.

Yet it’s the strangest eminent domain case. Eminent domain is supposed to allow government to forcibly take private property, with compensation, for a public use. Here they are trying to take public property that they already own.

In other words they want to use eminent domain to let them cancel a lease they signed. It basically makes the City of Austin untrustworthy as a counterparty. What private business would make large investments based on a lease with the city, if they can cancel the project after the business invests tens of millions of dollars even though the lease does not let them do this.

Unsurprisingly the company with the lease on the terminal has sued.

  • As a passenger out of Austin airport I want the airport to grow to meet demand
  • And I don’t want to fly out of the South Terminal (or, for that matter, fly Allegiant or Frontier)
  • But as a human being this is insane.

Unfortunately it’s par for the course here. Austin airport business reports up to the city council and is badly mismanaged.

The City of Austin should have had a better contract buy out option with the South Terminal. Now, if the best way to expand is to exit the deal they signed in 2015 (and that a business spent 8 figures in reliance of, and has an expected 40 year return) then they should pay to do so. But they’re probably envious of how the City of Dallas got away with turning the Love Field Legend Airlines terminal into a car dealership and not paying a penny for the taking.

Surely an attempt to take land already owned by the city has to be about the most insane use of the government’s eminent domain power in the past ten years?

About Gary Leff

Gary Leff is one of the foremost experts in the field of miles, points, and frequent business travel - a topic he has covered since 2002. Co-founder of frequent flyer community InsideFlyer.com, emcee of the Freddie Awards, and named one of the "World's Top Travel Experts" by Conde' Nast Traveler (2010-Present) Gary has been a guest on most major news media, profiled in several top print publications, and published broadly on the topic of consumer loyalty. More About Gary »

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  1. […] When it comes to travel bloggers, I will wager that we’re one of the few who have actually flown through Austin Airport’s South Terminal. While our Frontier flight was uneventful and we had an uninspiring shuttle ride to the main terminal to rent a car, the experience was what I’d expect flying a low-cost carrier. In 2017, the 12 million dollar conversion of an Air Force Base quickly added 3 gates to the rapidly expanding airport and took the pressure off until the main terminal expansion was complete. Now, Austin Airport is looking to expand and after only 5 years of a 40-year lease, wants the South Terminal back. So much that they’re claiming eminent domain over the land, which they own and is currently used by Frontie… […]

Comments

  1. Another example of the Austin airport mismangement (and political considerations) is their previous blocking of Chick Fil A opening a restaurant there which resulted in Chick Fil a telling them no thanks even after the airport backed down (under pressure from the governor and others). IMHO airports shouldn’t be held hostage to political parties (or try to govern by woke justifications). Agree with you that hopefully the lawsuit prevails and Austin airport has to not only stop this confiscation but also may a significant negligence or business interruption fee.

  2. That’s fine AC but an airport also shouldn’t have a concession that closed on the busiest travel day of the week every week.

  3. @AC, seems that Austin and San Antonio both had a reasonable objection (woke-ness notwithstanding) that Chic-fil-a does not operate on Sundays. I know that SAT has _very_ limited concession space and losing restaurant capacity a day a week is an issue.

  4. Gary you of all people should not be surprised. No one in the rest of Texas would be. Austin has been off the reservation for several years. Keep Austin Crazy has just gone a little further, that’s all. That’what Dems/liberal government do, keep pushing, never satisfied until they break it. Just like a spoiled child. I bet the Californians that moved there are wondering, what in the hell did we do?

  5. Something tells me eminent domain does not apply to a contract the authority with eminent domain power signed. The federal government might get away with claiming “national security”, but an airport lease? Nope, you have to pay to break that, and at a price the other side agrees to. Guess who holds the cards here?

  6. Eminent domain in word (probably not practice) requires paying just compensation. I don’t think it’s an issue for Austin to cancel this lease so long as they pay what it’s worth today (which is presumably higher than what they leased it for).

  7. Those of you pointing out that CF is closed on Sundays, this has been known since they first opened, to me it wouldn’t be a deal breaker, they make up for it on the other 6 days. I also assume you must not have traveled recently seen the number of closed restaurants, limited hours, etcetera.

    Austin has been a mess for years.

  8. I imagine that CFA would be charged and pay the same lease/rent per square foot as any other vendor regardless of the days of operation so, they pay for seven days and use six days of resources. There are airlines that only operate on certain days of the week at airports all over the world but, people understand that is a business decision. Far less people realize that CFA’s Sunday closure is also a genuine business decision. Many people can’t or refuse to see that because they think that seven days would have to be more profitable than six but, it has worked and continues to work because their model is not just based on profits. I promise the owners of each CFA store know it works. I certainly realize the gates can be used by others when the infrequent flights aren’t operating but, the CFA decision was purely political. Maybe charge each vendor based on gross sales(maybe they already do, I have no idea) and CFA will pay more(gladly) in six days than most others in seven and their employees will continue to be happier as well.

  9. It’s going to end up in Texas courts, and given your crazy nut case tort reform laws (like every other crazy nut case Texas law), the lessor will likely end up with nothing.

  10. Just read up on this and checked with resident attorney – Austin can use eminent domain (it is for public use), but must pay “just compensation” (the remaining economic value of the lease). Two million is ridiculous. It’s an opening bid. This will be settled out of court if they want to move quickly. If Austin insists on cheaping it out, it’ll take forever, and they better hope they don’t get a change of venue to some part of the state unfriendly to Austin. The lease holder is stuck, they pretty much do have to sell, it’s just a matter of price. But they can argue about the price for a long time.

    FWIW, resident attorney said that if the lease contract didn’t address this from the start, it was a crappy contract. This is why you hire expert legal advisors. Termination provisions are where a lot of the negotiation centers on, both voluntary and involuntary, and in both directions. This was foreseeable.

    @bhcompy – Austin is known as the blueberry in the cherry pie for a reason.

  11. The people of Austin that voted for these clowns are the same ones that voted for the current administration in Washington. I have no pity on them. We reap what they sowed.

  12. For those that blame this on liberals in control of Austin, I have bad news for you. This is every city in Texas. Austin doesn’t have a monopoly on incomitance and ego. For sure, this is crappy planning by the authority in charge of the airport. How did they not know they were going to do this back in 2015 when they signed this lease for 40 years? And I’m wondering what they says, and its terms, that allow the city to break this lease? Simply stated, this is about money. The city did one smart thing, they had a terminal built with private money, thereby saving the airport money. But now they are going to undo all of that and spend $Millions to buy out that contract. Who pays for that? Likely the airlines using the fees. But it is a horrible waste of money that could have easily been prevented with some simple planning. You have to ask, who was doing the planning, and why did they sign this lease? Usually these things happen with a change of management, so current management is having to undo what the previous management did.

  13. Regarding CFA, the concession contract specifies a certain amount each restaurant has to pay the airport. CFA guarantees that amount even if they only operate 6 days. The city does not lose a penny if CFA operates in AUS or SAT. And travelers still have other options on Sundays. This has nothing to do with operating hours or profitability. It is all about wokeness against a Christian business.

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