AJC Investigation | Undersold ad space undercuts airport

Clear Channel has held exclusive rights for 30 years

Hartsfield-Jackson International Airport, the world’s busiest, should be the world’s most lucrative airport advertising venue as well, with 90 million passengers a year — a bigger audience than that of the last episode of “Lost.”

Clear Channel Airports, the company that has for three decades held the exclusive rights to sell space on 324 signs at Hartsfield-Jackson, reported that only 22 percent of those signs were used by paying customers from Jan. 1 through Aug. 31, according to an analysis of airport records by The Atlanta Journal-Constitution.

But most of the airport signs declared as non-paying or filler space are actually pitching credit card services, wireless networks, banks and exotic vacations abroad.

The unpaid advertising space is worth millions of dollars, money that could be used by the airport for everything from hiring more baggage handlers, reducing the costs of airport parking or beefing up security.

Neither Clear Channel nor City Hall officials would agree to be interviewed for this story. A spokesman for Mayor Kasim Reed said Reed would be “unavailable” regardless of when an interview could be scheduled. Officials with the Aviation Department, an arm of the mayor’s office, declined to review the data compiled by the AJC, although that department’s spokesman did respond to some questions.

The AJC hasn’t determined why Clear Channel’s ad sales have dropped at Hartsfield-Jackson or why Clear Channel would run ads that haven’t been paid for.

The AJC began looking at airport contracts this summer after an outside firm, Corey Airport Services, owned by Atlanta businessman Billy Corey, won a $17.5 million judgment against the city, Clear Channel and the company’s minority partner. Corey claimed that the city had blocked his bid for the advertising contract, even though he was offering a better deal. The city and the contractors have appealed the ruling.

Hartsfield-Jackson has been rocked over the years by financial scandals and accusations of cronyism and insider deals connected to City Hall. Clear Channel’s minority partner in the advertising deal is Barbara Fouch, a family friend of the late Maynard Jackson, one of the mayors for whom the airport is named.

Former Mayor Shirley Franklin, back in 2002, vowed to clean up the airport’s culture. Specifically, she said she would make sure that contracts were rebid in a timely manner to make sure that everyone had a fair shot at doing business at the airport. But an AJC review of current airport contracts found that more than a dozen of them have expired without being rebid and are being continued on a month-to-month basis.

The biggest and most lucrative contract is Clear Channel’s.

“It’s worth hundreds of millions of dollars” over the life of the contract, said Atlanta contract attorney Marien Kelly, who has been following the issue for years and once worked on Corey’s successful lawsuit.

“The only thing you can call it is a ripoff,” she said.

The contract controlling how much the airport should get in ad revenue was last successfully rebid in 1981. It expired in 1997. That deal offered the city 50 cents on every ad dollar earned.

A former airport general manager, Angela Gittens, said she pushed to get the contract rebid in 1998 and was forced out of her job for her trouble. The next general manager, Ben DeCosta, who held the job for a dozen years until he stepped down in June, never successfully rebid Clear Channel’s contract.

It was put out to bid in 2002, the year Corey put in his bid and was denied. He filed a protest in late 2002 and a federal lawsuit in 2004.

John Kennedy, a spokesman for the city Aviation Department, said that Corey’s suit prevented the city from entering into a new contract with anyone.

But at the same time, Kennedy said, the city was free to enter into a verbal agreement with Clear Channel on a month-to-month basis.

The only written authorization for a month-to-month deal was made by the City Council in September 2003. That ordinance had a six-month limit.

“There was not a new contract issued because of the ongoing lawsuit,” Kennedy said. “That stands. How does that relate to amending a month-to-month arrangement by mutual agreement?”

In spite of the 2003 ordinance providing that month-to-month deals be limited to six months in duration, Kennedy said that the city’s rules allowed the deal to continue for at least the next six years without any formal renewal.

Kelly, the attorney who once fought the city over the contract, says this is out of bounds and leaves the city open for abuse.

“The city isn’t a person, it’s an entity governed by ordinances,” she said. “The ordinances say you need a contract and you can’t go on without one. Without anything in writing, they [Clear Channel] could decide to pay the city nothing at all, and there’s no legal recourse.”

Compounding that, Atlanta doesn’t require a guaranteed minimum annual revenue from the ad contract, as other large airports do.

Records provided by the city don’t explain the current arrangement. But the ad space that brought in about $9.4 million a decade ago attracted barely $5 million last year.

Far below standard

In response to an open-records request by the AJC, the city provided a detailed inventory of airport billboard sales for 2010. But the city said no such record exists for any year prior to 2010. If true, that means that the city has no way to evaluate its relationship with Clear Channel for the past 30 years.

The AJC’s review of the records shows that for July, only 80 signs, or 25 percent, of Clear Channel’s displays at the airport were sold. Dozens of free ads went to Delta Skymiles, the airline’s frequent flier program, Verizon Wireless, Prudential, AT&T Wireless and other advertisers. An aggregate of reported 2010 ad sales and vacancies put the number even lower — at just 71 sold ads per month, or 22 percent.

The industry norm for large airports is about 70 percent of advertising sold each month, even in recession, said Shauna Forsythe, president and chief executive officer of the $20 million-a-year Las Vegas-based Alliance Airport Advertising & Alliance Target Media.

“There is no other airport in the world that has or would ever have such a lopsided deal that Atlanta has,” said Forsythe, “Atlanta is the biggest in the world, the cream of the crop, but it’s getting the worst deal.”

Airport spokesman Kennedy disputed the AJC’s calculations but offered no data to counter the newspaper’s conclusions.

Kennedy said: “We have given this consideration and, although we truly appreciate the offer and opportunity to interpret them [the records] for you, frankly we don’t see the need to meet and examine your own, or the intermediaries’, findings and analysis.”

The AJC also asked the city’s contract compliance office, its concession manager and the mayor’s office to review the newspaper’s findings. None would do so.

No minimum guarantee

A recent walk through the airport shows almost all the billboards are lit up with ads. But a cross-check with the city’s inventory list shows that most of the ads (about 240) are listed as “filler” or unpaid ads for profit-making businesses such as banks, investment firms, insurance companies and travel providers.

As many as half of the Delta Skymiles ads and some ads for Verizon Wireless aren’t being paid for. A national homebuilder, S.S.J. Development, had as many as 16 billboards up for almost two years without paying for them. Those 16 ads were taken down in March after other vendors complained, according to e-mails entered as evidence in the Corey lawsuit.

Some ads are paid for when they are installed, but they stay up long after payment agreements expire, including five AT&T wireless ads.

There is nothing in the city’s contract with Clear Channel that says the company can’t give away ads. And while the airport has an official policy that requires unpaid ads to be taken down, that doesn’t happen and the city doesn’t have a policy on what is or isn’t designated as a filler ad, although that is an industry standard.

That highlights another issue that makes Hartsfield different from other large airports: The deal with Clear Channel doesn’t include a minimum annual guarantee of revenue.

Other large airports require such guarantees:

● San Francisco International Airport is guaranteed $5.7 million, public records show.

● Las Vegas McCarran International Airport handles half the number of passengers that Hartsfield-Jackson does and is guaranteed $5.4 million annually from airport advertising — roughly what Hartsfield-Jackson has made in recent years.

● Clear Channel’s current advertising contract with Boston’s Logan International Airport guarantees the city’s Massport Authority at least $3.5 million in revenue, Boston officials said.

“If I knew that we didn’t even get a MAG [minimum annual guarantee] I certainly would have pushed until we got some answers,” said Clair Muller, a former chairwoman of the City Council’s Transportation Committee in the late 2000s and longtime council member who left office in 2009.

Because the city has no detailed records, it’s unclear how long advertising at Hartsfield-Jackson has underperformed. But the airport’s revenue for the past five years from Clear Channel floated around a $5 million each year, city records show.

Forsythe noted that Clear Channel is the nation’s biggest billboard advertising company.

“They’re in every major market, and if they can’t sell an ad, then no one can,” she said.

A 30-year connection

Clear Channel, a subsidiary of Phoenix-based Clear Channel Outdoor Inc., has sold advertising at the airport for 30 years. The company’s contract was last rebid in 2002, five years past due, according to city records; that’s the bidding process that resulted in the Corey lawsuit.

Clear Channel was then operating on an expired 1995 contract, which authorized a month-to-month status for up to 12 months after expiration. After that, Clear Channel should have paid the city a penalty of 25 cents for each dollar of ad revenue it made. That money has never been paid, according to city officials. Corey’s attorneys have calculated the total owed at $15.7 million.

Clear Channel’s winning bid in 2002 offered the city 61.2 cents for each dollar of advertising it sold, more than its previous agreement, but less than the 70 cents Corey bid. Other large airports such as Newark Liberty International Airport get as much as 72 cents of ad money, according to Clear Channel records entered into the Corey lawsuit.

But, because of a protest of the bidding process and then the lawsuit, the new contract was put on hold.

Former airport manager DeCosta, who resigned in June, testified that he could have rebid the contract.

The contract hasn’t been rebid, but, as the Corey lawsuit moved through the courts, DeCosta did negotiate higher rates from Clear Channel. In 2007, he worked out a new deal with Clear Channel and minority partner Fouch, raising the city’s cut from 50 cents to 61.2 cents on the dollar.

He renegotiated Clear Channel’s deal again last year; starting Jan. 1, 2010, the company pays the city 65 cents. The company also agreed to pay the city about $1.7 million in back rent, calculated as starting from 2005.

DeCosta declined to talk to the AJC for this article.

Muller said she had long had questions about airport advertising but was told by city staff and the city attorneys that since the Clear Channel contract was the subject of an ongoing lawsuit, they couldn’t discuss it.

Now, said Kennedy, “The airport intends to issue a public solicitation for a third party to manage its advertising program in the near future.”

He couldn’t define when that would be, other than saying “soon.”

The man in charge now is Louis Miller, who has just become the airport’s new general manager. He wasn’t available for an interview.

How we got this story

After Atlanta-based Corey Airport Services won its long legal battle over advertising contracts at the city-run Hartsfield-Jackson International Airport, The Atlanta Journal-Constitution took an in-depth look into the airport’s advertising concession contract.

The work included reviewing thousands of pages of court depositions, billing and receipt records, contracts, minutes of City Council meetings and other public records, available under Georgia’s Open Records laws. The newspaper tallied a detailed month-to-month inventory of Clear Channel’s ads for 2010 to determine how many months an ad was paid for versus how many months it ran free of charge.

The AJC also interviewed current and former airport employees, airport advertising executives and legal experts.

The AJC sought to interview longtime airport general manager Ben DeCosta, as well as former Mayor Shirley Franklin and current Mayor Kasim Reed, without success. Current airport officials declined to review the city’s own records of Clear Channel’s detailed advertising inventory.

Other records, including a detailed inventory of the ads going back to 2000, were sought by the AJC but not made available.

-- AJC Database Specialist John Perry contributed to this report.

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