At the Westchester County Airport, Michael W. Dolphin expects a major drop in revenue and major downsizing in space and staff next year for the general aviation services company he heads. That will result from a decision by Westchester County legislators that he expects at their board meeting tonight (March 23). Convinced theirs is an already lost cause with county officials, Dolphin and his company have taken their fight for business survival to a federal court and “the court of public opinion,” he said last week.
Dolphin is president and CEO of Jet Systems, or 41 North 73 West Inc., which does business from Hangar E at the county airport as Avitat Westchester, an ExxonMobil general aviation fuel dealer. Jet Systems, started by John J. McMullen, the late naval architect and marine engineer better known to the public as the former Houston Astros and New Jersey Devils owner and George Steinbrenner”™s more silent New York Yankees partner, has leased hangar space at the county airport since 1993. His son, John J. McMullen Jr., now is the private company”™s majority owner and Dolphin is a partner.
At Hangar E-1, one of two county-owned spaces leased by Avitat Westchester, the company provides hangar space for five jets of corporate clients: Morgan Stanley, Metropolitan Life Insurance Co., Ernst and Young, The McGraw-Hill Cos. and Madison Square Garden L.P., whose jet flies the New York Rangers and New York Knicks teams. But those companies could be looking elsewhere for space by April 1, 2010, when Westchester County Executive Andrew J. Spano has proposed to turn over the approximately 40,000-square-foot hangar and its 15,000-square-foot office space to JPMorgan Chase Bank with a long-term lease that the corporate tenant could opt to extend to 30 years. The new tenant would pay about $1.1 million in first-year rent.
The proposed lease deal would leave Avitat with a 25,000-square-foot hangar and adjoining office, reception and cafe space at Hangar E-3, where the company did a sleekly modern $9 million renovation and expansion in 2006. “It would cut our business by 50 percent,” Dolphin said there last week. With reduced jet fuel sales and aircraft parking fees, “We”™d go from a $25 million company to a $12.5 million company in one fell swoop.” Half of the company”™s 60 employees would be out of work, he said. And Avitat Westchester”™s ranking as ExxonMobil”™s second largest general aviation fuel dealer worldwide “will get creamed if we lose this lease.”
“We grew a great business from $5 million a year to $25 million a year and these guys are going to rip it up and throw it away,” Dolphin said of county officials, four of whom are individually named in the complaint filed last fall by Avitat Westchester in U.S. District Court. The company says it is seeking damages from the county for violating its constitutional rights to equal protection, due process and free speech during the lease renewal process and wants a trial jury to stop the county from denying Avitat a long-term renewal of its E-1 lease that began in 2006, four years after Avitat began managing the 1950s-vintage hangar space for former tenant General Electric Co.
Dolphin thinks the JPMorgan lease is a done deal with county officials. “The legislature has no conscience nor does the county executive,” he said. “It”™s just a machine. The machine moves at Andy Spano”™s whim.”
Spano, in a letter to legislators attached to a proposed local law authorizing the JPMorgan lease, said JPMorgan”™s proposal was “in the best interests of the county” of the four proposals received from companies that included Avitat.
JPMorgan as a corporate tenant operates its own fleet of aircraft ”“ four in Westchester ”“ unlike a management company that licenses space to users “operating aircraft of unknown quality,” Spano wrote. With a corporate tenant, the county will have approval over subtenants, unlike its current arrangement with Avitat. JPMorgan is a “high-quality corporate citizen” with more than 1,000 employees in Westchester and has an established record as “a reliable tenant of the airport,” he wrote.
JPMorgan”™s tenancy also would be best for the environment, Spano indicated. The company is a four-time winner of the county”™s annual award for operating the quietest fleet at the airport. And the company”™s planned $18 million in hangar improvements ”“ three times the renovations spending initially proposed by Avitat ”“ includes a state-of-the-art “green” building.
Countering Spano, Dolphin said that one Avitat tenant alone, Morgan Stanley, employs about twice as many workers in the county as does JPMorgan. As for the county”™s concern about aircraft quality, “In this industry, at this level, people don”™t own questionable fleets,” he said. Regarding the county”™s desire to have corporate activity at the hangar, “It already is a corporate facility,” a multi-tenant one, he said.
Dolphin said a vegetable garden on the hangar roof planned by JPMorgan won”™t be allowed by the Federal Aviation Administration (FAA) because it would attract birds to the flight area. And he questioned the need for an $18 million renovation when a $6.6 million to $7 million investment would produce “a nice building” that was green-certified. “They put in the $18 million and they get to enjoy a showcase,” he said of the prospective corporate tenant. “It doesn”™t do anything for the county.”
Dolphin estimated $16.3 million more in fuel pumping fees would flow into county coffers from Avitat than JPMorgan over the 30-year term of the lease.
“Once they got JPMorgan, they didn”™t negotiate with anyone else,” Dolphin said. “It became a JPMorgan-Sal Carrera thing,” he said, referring to county Office of Economic Development Director Salvatore J. Carrera, who was named in the company”™s federal lawsuit. “He locked everybody else out, locked up JPMorgan and said, let”™s go.”
Dolphin and the company in its lawsuit contend county officials”™ handling of the lease renewal was retaliation against Avitat for filing a complaint in 2006 with the FAA regarding what Dolphin said were “lease disparities” between the county airport”™s three fixed base operators (FBOs) that include Avitat and its two light general aviation companies (LGAs). The latter companies pay $60,000 a year in rent while Avitat pays $1.6 million a year, Dolphin said.
Dolphin claimed Avitat was pressured by county officials to effectively subsidize one airport tenant, Paramount Flight Service, through steeply discounted fuel prices. The arrangement “cost us $84,000 a year and it lasted seven years” through 2008, he said.
The county also has allowed LGAs into a jet-fuel pumping market usually restricted to full-service fixed-base operators such as Avitat with much higher operating costs. “We get a lot of price pressure from these guys on that low-end market,” Dolphin said.
FBOs at the airport “have collectively lost over $20 million to support these two (LGA) entities and the saga continues.”
Dolphin said the FAA rejected Avitat”™s complaint because the company did not raise the issue with the county when it renewed its other hangar lease in 2005. The decision is being appealed.
“I think they believe we”™re dealing with a very genteel atmosphere out here,” he said of FAA officials. “This is the Wild Wild West in politics. These guys are gunslingers. This is not Mr. Rogers”™ neighborhood. Inside this airport fence, there”™s a new set of rules, and it runs by its own rules.
“They”™re not used to being challenged in any way, shape or form,” Dolphin said of county officials. “It”™s not just this administration; it”™s been like this forever.”
County officials in a prepared statement said they “will be happy to discuss” alternatives with companies displaced from the hangar if the JPMorgan lease is approved. Deputy County Executive Susan Tolchin last week did not return a call for further comment.
