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Worldwide squares off with airport

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by Karen E. Culp

SBJ Staff

Worldwide Aircraft Services wants to remain in operation at the Springfield-Branson Regional Airport, and the company would like to remain at its current location in the airport's Hangar One. The airport needs that space for expansion of its terminal, however, and airport officials say the company's lease expires in December.

Worldwide officials say they think they have more time than that; they believe their lease agreement extends until 2001, and that it has an option for extension until Dec. 31, 2006, said James McClean, president of Worldwide Aircraft Services.

After months of conversations with the airport board and airport officials, the company filed July 16 a petition for declaratory judgment with Greene County Circuit Court Division II.

At press time, the city of Springfield and the airport, named jointly as defendants, had not filed a response to the petition.

Worldwide Aircraft has been doing business in Springfield since 1988, McClean said. He co-owns the business with David Dunham, who is vice president. Worldwide Aircraft employs about 45 people at its airport operation, and is in the business of contract maintenance for aircraft and aircraft repair.

A subsidiary business, which is not located in Hangar One, is Springfield Aircraft Charter, which is the largest charter operator in Springfield, McClean said. Springfield Aircraft Charter also offers a flight school and is involved in general aviation maintenance.

The lease agreement currently in dispute originated with another company, Air Midwest, which entered into the lease with the city for Hangar One beginning in 1984, according to the petition for declaratory judgment.

The lease, which was for the term of Sept. 1, 1984, through Dec. 31, 1986, had a clause which stated "lessee shall have an option to renew said lease for three additional terms of five years each on the same terms and conditions, except that rental rates and charges at the end of the original term shall be adjusted by negotiation."

Air Midwest extended the lease to Dec. 31, 1991. Air Midwest then transferred its interest in the lease to Trans States Airlines, which in turn transferred the lease to Worldwide May 1, 1991. Prior to 1991, Worldwide had been operating from another site at the airport, McClean said.

In 1991, a modification was made to the lease that raised the number of times the lease could be extended from three times to four, the result being that Worldwide "shall have the option to extend the term of the lease for an additional period of five years to Dec. 31, 2006," the petition states.

In 1991, Worldwide extended the lease for one five-year period, and in January 1997, another modification was made to the lease.

The 1997 lease modification extended the lease to Dec. 31, 2001, under the condition that Worldwide install approximately $20,000 worth of improvements to the leased property during 1997. Rent was established only for 1997 and 1998, while in the previous renewal it had been established for each of the five years.

Rent for each year was to be $50,000. The lease also contains the following statement: "(a)t the end of this initial two-year lease period, lessor and lessee will negotiate the rental rates and charges for calendar years 1999, 2000 and 2001, or renegotiate for a replacement facility."

The modification also contains a paragraph explaining that Worldwide understood that the airport was conducting an evaluation to determine how it would expand and use its terminal area in the coming years and "such evaluation plan may have an impact on the continued use of the leased premises by lessee."

McClean said the negotiations for a renewal of the lease in 1997 were tough: The company was operating on a month-to-month lease in January of 1997 when an agreement was finally reached.

"When we finally got an agreement on Jan. 14, 1997, it only set rental rates for two years," McClean said.

In the spring of 1998, Worldwide and the city began negotiations on the remainder of the lease term.

Rob Hancik, director of aviation, sent a letter to the company stating that the airport would need the Hangar One facility for its terminal expansion, at that time explaining that the existing lease would be extended until Dec. 31, 1999.

During May, the city also issued a lease modification that contained the Dec. 31, 1999, termination date, and established a $50,000 rental rate for the year 1999.

The modification also states that the "lessee understands that it must vacate the leased premises and return possession of the leased premises to lessor at the end of the above lease term," the petition states.

The airport plans to use the facility beginning in January of 2000, the lease stated.

What the judge will determine when approving or denying this petition is whether Worldwide has the right to an extension of the lease until December 2001, whether the language in the lease renewal option is too vague and whether the company has the right to extend its option until December 2006, which would be the final renewal option under the original lease agreement.

The airport has been negotiating with Worldwide on a replacement facility to relocate the company at the airport when Hangar One is no longer available.

The cost of leasing a new facility, however, is prohibitive for Worldwide, McClean said.

"The airport has said it would build a replacement facility for Worldwide, but the question posed to us is 'how much are you willing to pay?' The first time we heard a number, it was said that it would cost $4.5 million to replace this facility. When we put a pencil to that, we figured out that it would be a 242 percent increase in our rental rate," McClean said.

McClean said it is his understanding that there are already contracts let for the beginning of the renovation of Hangar One in 2000.

Hancik said the airport has been saying for two years that it will need that space for terminal expansion.

"The language is very specific: we will need that space in 1999 for a terminal expansion. We're already in great need now of an expanded baggage claim and a roadway that is adequate to handle the amount of traffic in the area," Hancik said.

The airport also needs space to begin building its ground transportation facility, for which it has accepted federal transportation funds.

Worldwide at one time proposed the idea of its taking over retail fueling at the airport as a means of generating the additional revenue it needed to afford the increased rent of a new facility.

"We have to keep our costs competitive. People don't bring us jobs because Worldwide is quick and easy to get to or because Springfield is known for this type of work. They bring us jobs because Worldwide can turn those jobs around quickly and economically. We can't go from being a Wal-Mart to a Saks Fifth Avenue," McClean said.

Worldwide had said it would build its own facility if granted the right to retail fueling.

"We haven't made any progress with that. It was pointed out to us that retail fueling was not an issue to be discussed," said David Vorbeck, assistant to the president for Worldwide.

Hancik said retail fueling is "not an issue. The airport has, since day one, retained its right to do all fueling on the airport ... since 1945," Hancik said.

"That is one of the ways we generate revenue and maintain our position of staying off the tax rolls," Hancik added.

Right now, Worldwide is wanting some answers, and it hopes a judgment on its petition will grant those.

"We have seen several documents with the termination language of 1999 in it, but it is now our understanding that according to the airport board our lease is over in 1998," Vorbeck said.

Hancik said he is also hoping a judgment will "tie this all together."

"We've entered into this situation jointly; we understand that this is the best route for getting our differences of understanding worked out. This is a problem for which we have not come up with a solution, and this is one way of getting one. We need some interpretation on what the lease terms say and what they mean," Hancik said.

Worldwide has made a total investment of $80,000, not including general maintenance and upkeep, in Hangar One: $20,000 was part of its last lease agreement, and an additional $60,000 investment was made when the company first took over the facility, McClean said.

If the company does not get an agreement comparable to what it has now, it will look at moving the operation away from Springfield, McClean said.

"This is a valuable operation to the airport. Our people are here when there's a problem with a plane; we're here to take the call when TWA or another airline needs a repair quickly. Who else is going to provide that service?" McClean said.

McClean said the Joplin airport is a promising relocation site.

Hancik also said that the rental rate Worldwide now pays, equal to about$1.25 a square foot, is "well below market, even for warehousing space in Springfield."

The new facility would require a rental rate of about $7 to $10 per square foot, he said.

PHOTO CAPTION:

David Dunham, David Vorbeck and James McClean are in litigation over their company's lease of space at the airport.[[In-content Ad]]

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