Fairhope Airport Authority in standoff with general aviation tenant

It’s hard to tell when the tension in the relationship started, but the $600,000 grant opportunity last year probably didn’t help.

Continental Aerospace Technologies or its predecessors have served as the fixed-base operator (FBO) at Fairhope’s H.L. Sonny Callahan Airport (KCQF) since 1995, subject to a 50-year lease last amended in 2018. The landlord, the Fairhope Airport Authority, owns the hangars and other real property where Continental serves the general aviation community with storage space, repairs and perhaps most importantly, fuel.

But last year, the Authority applied for a $600,300 grant from the Alabama Department of Transportation to build a new fixed-base operator on the opposite, east side of the airport where eventually, it intends to offer similar-but-competing services. Then, just as inflation was ramping up last summer, the Authority voted to add a 2 percent surcharge for goods sold or services rendered by airport operators, of which Continental is the largest.

At the Aug. 10 Authority meeting, a Continental employee notified the Authority it was moving engine reclamation operations to a hangar where it had existing storage agreements with eight aircraft owners, and those tenants would have to find other arrangements. Six days after the meeting, Authority attorney Josh Myrick sent Continental a 30-day notice of termination if certain lease deficiencies were not resolved. Specifically, Myrick cited deficiencies within Continental’s environmental liability insurance, the maintenance and insurance of its fuel farm, the construction of a 10,000-square-foot hangar aviation office and a provision requiring Continental to provide a flight training school.

That’s when things got truly weird.

Stephen R. Ginger, Continental’s executive vice president and general counsel, wrote back to Myrick, suggesting that after the lease was amended in 2018, the Authority had no right to enforce the provisions it cited, but also argued the Authority’s interpretations of those provisions were inaccurate. Still, without so much as an explanation, Ginger offered to voluntarily vacate the property, far short of the 50-year term of the lease.

“It appears the [Authority] no longer wishes to be business partners with us, and instead, wants to foster a private club atmosphere for the benefit of its pilot cronies,” Ginger concluded. “We are only interested in operating a business that services the entire general aviation community, not just a privileged few. We are committed to transforming our business at [Fairhope] into one the city of Fairhope can be proud of. It does not appear the board shares this aspiration. Accordingly, we will have no problem vacating the premises at KCQF by the close of business on June 30, 2022, if that is what the board wishes us to do.”

So, at the very next Authority meeting on Aug. 31, the Authority voted to accept Ginger’s offer.

But then, according to a lawsuit the Authority filed in late December, “[Continental] has now unilaterally announced its intention to remain on the airport premises as a holdover tenant, despite the agreement to rescind and terminate the lease.”

On Jan. 10, a new attorney representing Continental, Will Skinner of Los Angeles, sent a letter to Continental’s 30-plus tenants at the airport. In it, he said all storage agreements are terminated effective Jan. 31, unless the Authority drops its lawsuit by the close of business on Jan. 24.

“If the Airport Authority dismisses its lawsuit … Continental will rescind this notice, and will allow all customers to remain in their hangar space, subject to the terms and conditions of the applicable aircraft storage agreement,” Skinner wrote. “We strongly urge you to contact the [Authority] about this meritless lawsuit and make your voice known.”

On Jan. 12, Myrick wrote Skinner, calling the letter “either an extortion tactic in an effort to gain leverage in a lawsuit, or it is an outright threat to the safety of persons and property at KCQF.” The Authority made a threat of its own: Rescind the letter by Jan. 19 or Continental’s lease will be terminated immediately.

The next day, Skinner wrote to warn that Continental would “pursue all legal options available to protect its rights” under the lease. He further accused the Authority of violating the Alabama Open Meetings Act by not deliberating about the lease termination after an executive session. Continental then issued the final ultimatum: “If the Authority refuses to publicly acknowledge that its action was taken in violation of the Open Meetings Act and retract the vote by 5 p.m. on Jan. 18,” Continental will seek its own injunctive action.

Fairhope Airport Authority Chairman Don Lagarde, who is a member of an LLC that rents hangar space from Continental and who acknowledged he is personally affected by the relationship, said the grant opportunity will allow the Authority to build its own FBO, but does not infringe upon Continental’s existing lease.

“The current FBO is about the size of a shoebox; it’s sandwiched between two other hangars, it’s not always functional and it’s not acceptable as a welcome center to the city of Fairhope,” Lagarde said last week. “We want to bring a much higher level of service to the FBO and to the Fairhope airport.”

Fairhope City Councilman Jack Burrell, who is on the Authority but does not own an aircraft, said he understands if Continental is worried about a new FBO at the airport, but their tactics regarding the lease have been out of bounds.

“I am shocked they would include the people in the local aviation community, who are innocent in all this, as they are being used by Continental as legal pawns,” he said. “In their defense, I certainly think they would have concerns over [a new FBO], but it’s not uncommon for an airport to have multiple FBOs.”
Both Lagarde and Burrell denied Ginger’s accusation they were fostering a “private club.”

“Everybody that comes to us gets the same deal,” Burrell said about leases, and the only thing preventing the Authority from offering more is available space. “We have a list of 20 or more people who would sign a lease today if we had hangars, but the cost of construction has increased so much, we couldn’t charge enough rent to pay the note.”

The Airport Authority has called a special meeting Wednesday Jan. 19 at 5:30 p.m. at the Nix Center in Fairhope to discuss whether to terminate the lease and if so, to discuss the strategy and plan to move forward with a temporary FBO.