Airports

Sylvester Turner’s plan to amend Houston’s airport concessions contracts criticized by Pappas Restaurants, mayoral hopeful John Whitmire

A proposed ordinance by Houston’s outgoing mayor would require city council approval to terminate the existing concessions agreements at Hobby and Bush Intercontinental Airport as the city faces an ongoing lawsuit filed by a Pappas-led group, which was a longtime Hobby concessionaire that lost a competitive bid earlier this year.

Pappasito's Hobby
Andrew Schneider/Houston Public Media
Pappasito’s Restaurant operated at Hobby Airport in Houston until April of 2023.

Houston-based Pappas Restaurants, which sued the city earlier this year after losing out on a lucrative concessions contract at Hobby Airport, is speaking out against a proposed city ordinance that would make it more arduous to terminate existing concessions agreements at Houston's two major airports.

The proposed ordinance, which outgoing Houston Mayor Sylvester Turner presented at this week's city council meeting, would amend four 10-year contracts – two at Hobby and two at Bush Intercontinental Airport – that are worth more than $1 billion in total. The director of the Houston Airport System currently has the authority to terminate the contracts at any time, with or without cause, by providing 30 days' written notice, and the proposed amendment would require the Houston City Council to sign off on any such terminations.

Each of the contracts was approved by the city council since August of 2022, with the most recent being a $470 million deal at Hobby with a joint venture group led by a U.S. subsidiary of Spain-based Areas. Areas beat out 4 Families of Hobby, a group led by Pappas, which had operated concessions at the South Houston airport since 2003.

The Pappas-led group subsequently sued Areas and the city, alleging the city violated state and local procurement laws and policies and asking a judge to void the contract. The lawsuit is ongoing, according to Harris County court records.

"As a Houston company with pending litigation against one of these concessionaires and the city, we oppose this unprecedented favoritism to a select group of airport concessionaires over the best interests of Houstonians and the traveling public," Pappas CEO Chris Pappas said in a statement. "This ordinance will make it harder for the airport director to manage vendors and adequately address performance issues – for a limited number of hand-selected airports concessionaires."

The proposed ordinance was tabled this week by at-large council member Michael Kubosh, meaning it will not be voted on at least until next week's council meeting. The proposal also has been criticized by Texas Sen. John Whitmire, who is vying to succeed Turner and is competing in a Saturday mayoral runoff election against U.S. Rep. Sheila Jackson Lee, who has been endorsed by Turner.

Turner, whose second and final term at City Hall concludes at the end of this year, has defended the city's procurement process and said the decision to go with the Areas-led group was based partly on a higher projected financial return for the city. Pappas claimed in its lawsuit that the city solicited bids for the recent Hobby contract three separate times beginning in 2019, with the Areas-led group not finishing with the highest procurement score until the final round of bidding.

Mary Benton, a spokesperson for Turner, challenged Pappas' position on the proposed new ordinance in a statement Thursday.

"Having council vote to terminate a contract approved by council, where termination results in the city paying significant unamortized investment costs, is not favoritism, but rather good government," Benton said. "The clause the city is amending does not exist in any other concession contracts at the airport."

According to the posted council agenda item, the proposed ordinance is in the interest of "continuity in essential passenger service and stable airport operations."

"Given the significant investments made by concessionaires and the importance of stable continued airport operations, it is recommended that greater oversight be exercised when a decision to terminate is contemplated, whether for convenience or for cause," the agenda item states.

Whitmire, who is considered the leading candidate to succeed Turner, is against the proposal and also has criticized the city's handling of the recent competition between the Pappas- and Areas-led groups as well as the city's procurement process in general.

"This proposal is just a diversion from the current conflicts of interest in the handling of airport concessions contracts," Whitmire said through his campaign spokesperson, Sue Davis. "Under the Whitmire administration, there will be a complete overhaul of the procurement system, which needs to be transformed so it can provide transparency to everyone."

Whitmire served as a legal advisor to 4 Families of Hobby in the 1990s, when it was pursuing an airport concessions contract, according to his campaign, which said the longtime state legislator "did not lobby, did not go to City Hall, did not do anything to help them get the contract."

Chris Pappas and another executive for the restaurant company were among those to donate to Whitmire's mayoral campaign during the last month, according to its latest campaign finance report filed with the city. Christina Pappas, the vice president of marketing for the company, said Turner's proposed ordinance "was not publicly known when these individuals made their contributions" and that "any support by an individual family member was their own personal choice." She also noted that Pappas family members have supported many political candidates over the years, including Turner.

"He's not working for the Pappas family. He wants it to be fair," Davis said on behalf of Whitmire. "He didn't see that the way it was handled before was fair, when you have to go through so many different bids to get the outcome that apparently someone wanted. This is not an attempt to give Pappas a contract. It's an attempt to make everything fair."