The decision to end the duty free concession, taken by Judge Arthur Barcinas of the Superior Court of Guam, follows an appeal by DFS.
“With all due respect, Guam International Airport Authority [GIAA] strongly disagrees with Judge Barcinas’ decision,” said executive manager, Charles Ada II.
“The procurement for the airport specialty retail contract was an open, transparent and fair process for all the interested parties, including and most especially DFS, which was the exclusive incumbent operator at the airport for approximately 40 years.
"DFS, which came in third, was well aware of all the circumstances and terms it has complained to the court about, but protested only after the award to Lotte.”
GIAA and Lotte Duty Free entered into the duty free concession contract on May 18, 2013. Pursuant to the contract, Lotte has paid GIAA about $70 million of the $154 million in minimum rent it is obligated to pay over the term of the contract and has made $23 million in capital improvements at the airport.
Lotte’s minimum annual guaranteed rent is more than triple the $5 million that DFS was obligated to pay under its previous contracts with GIAA, reveals the airport.
It adds that the Lotte Duty Free contract has supported a $247 million airport bond issue, which was used to refinance debt and fund "much needed capital improvements", including the $110 million arrivals floor project, which is now under construction.
Ada continued: “GIAA’s staff, management and Board have a duty to get the best deal possible for the airport, and that is what happened here.
"The Lotte Duty Free contract is the most advantageous agreement the airport has ever had and has been the primary basis for the airport’s financial plan.
“We strongly believe the court got it wrong and all of us at GIAA stand by the integrity and fairness that was built into the specialty retail concession procurement that played out in 2012 and 2013.
“We created a level playing field for the proposers and Lotte was awarded the contract because they submitted the best proposal.”
Ada concluded: “Judge Barcinas agreed with DFS that GIAA used the wrong procurement process. Ironically, GIAA used this same process to award DFS’s last three contracts."