MSP dining deal dishes up risk

The routine is familiar to even infrequent fliers: killing time at a concourse restaurant or bar before rushing to the gate when their flight is called.

Minneapolis-St. Paul International Airport now is poised to take travelers in a different direction by swapping conventional gate seating for tables outfitted with iPads to order food and drink.

But the redesign comes with risks acknowledged by airport officials as they near a decision on the plan by Delta Air Lines and its concession partner to overhaul an entire concourse for the new gate areas.

A confidential memo to the Metropolitan Airports Commission (MAC) made public at the request of the Star Tribune describes a protracted bankruptcy case involving Philadelphia businessman Eric Blatstein years before he owned the concession firm. A court in that case found Blatstein had fraudulently moved money to avoid paying creditors.

Some commissioners referred to the memo while mulling a long-term deal that counts on the concession and Delta to pay for millions of dollars in improvements to Concourse G in exchange for lower rents.

"Where is MAC's liability if things go south?" Commissioner James Deal asked at a recent airport meeting. "I don't want to see a for-sale sign on Concourse G."

Still, the plan won the unanimous support of members of a key MAC committee that includes Deal. The full commission could vote on it Monday.

The concept envisions gate areas similar to those run by Delta and its concession partner at New York's John F. Kennedy and LaGuardia airports. Existing seating will be replaced with tables holding iPads for ordering food and drinks and surfing the Internet. Additional power sources will be installed for people using laptops.

Delta says it expects the concessionaire to configure the tables so that overall seating at a gate isn't reduced.

Another selling point is the plan to deliver food to the gates from notable local chefs, including Lenny Russo of Heartland Restaurant and Russell Klein of Meritage.

Battle for Concourse G

The advancement of the Delta plan demonstrates the influence of the airline, which is on the verge of acing out long-term Minneapolis-St. Paul concessionaire HMSHost in Concourse G.

The deal would pay the airport $3.7 million to $7.2 million less in rent over 10 years than the HMSHost plan or other alternatives.

But supporters say Delta and its concessionaire, OTG Management, have pledged improvements to the concourse over the 10 years that would more than make up for the losses.

Delta says it will reimburse the MAC $16 million for overhauling the roof, energy system and fire suppression for the concourse, more than it would typically. OTG has agreed to spend $25 million to retrofit the concourse for its concessions -- changes that could bring the airport more revenue.

But the deal also calls for Delta to hand over responsibility for the concession contract to MAC in 2016, prompting concern from some commissioners.

"When Delta is no longer sitting between us and OTG ... do we have confidence that OTG is willing to adhere to those terms?" Commissioner Don Monaco asked.

In considering Delta's proposal, the MAC hired a law firm to review OTG and Blatstein, whom the airport described as the principal owner of the concession.

The law firm's report said Blatstein filed for Chapter 7 bankruptcy protection in 1996 after his nightclub business in Philadelphia foundered. The MAC report noted that Blatstein's bankruptcy case "took nearly seven years to complete, which is much longer than the standard case."

"I had some business failures," he told the Star Tribune after a recent MAC meeting. "It was a very trendy business."

He said the failures and bankruptcy case are irrelevant to his operation of OTG.

"OTG is very financially healthy and is viewed in a very positive way," he said.

"It's the case that generated the most decisions to date in my 30-some-year career," Coren said.

The case eventually came before a federal appeals court that found Blatstein "fraudulently transferred his income to his wife in an effort to keep the money from his creditors." One judge said Blatstein "has systematically schemed to avoid his creditors."

The MAC report said the court found $1.5 million was fraudulently transferred, with the report calling it "concerning."

The case ended in a settlement that Blatstein honored. The MAC report said OTG said he was trying to preserve assets from IRS seizure so he could pay creditors.

The MAC report also listed several lawsuits involving OTG. It was sued in 2010 by a vendor over installation of the iPad food ordering system at JFK Airport. The concessionaire was accused of sharing the vendor's proprietary information with another firm. OTG denies it.

Also last year, OTG was sued in New York over allegations of age or gender discrimination in hiring at JFK and LaGuardia. The concessionaire says the claims are without merit.

The MAC initially cited attorney-client privilege in declaring the 20-page report confidential, but later released it citing "the unique circumstances of this situation."

The MAC's legal counsel Thomas Anderson told commissioners that any deal should protect the airport from a default. "Clearly that's a risk," he said.

Commissioners felt the risks of the venture are outweighed by the promised airport improvements.

"We've mitigated almost all the risk you can mitigate here," King said. "These are the kinds of improvements we've got to be more creative with, and try to bring more to our airport."