Next at AUS: South Terminal Suit

Travelers mill about Austin-Bergstrom International Airport on July 28 (photo by Jana Birchum)

After its early summer of public relations turbulence, Austin-Bergstrom International Airport saw less chaos in recent weeks, not counting the fire alarm that forced evacuation of the entire Barbara Jordan Terminal at 7:30am on Aug. 10. (There was no fire, just a water line break outside the terminal that led to a false alarm.) That's despite the fact that on Aug. 1, Lonestar Airport Holdings – which operates the airport's South Terminal – filed a scorching, if not entirely ­airworthy, lawsuit seeking a halt to AUS's attempt to condemn that agreement under Texas eminent domain law, which is apparently not that far-fetched.

Lonestar, a New York-based LLC backed by major private equity firms, also seeks to hold the city and AUS to what it says are obligations under the 2016 lease to offer Lonestar the opportunity to participate not only in further public-private deals to expand the South Terminal, but also the construction of any "New Facilities" anywhere at the airport – that is, AUS's entire Airport Expansion and Development Plan, including the 12-gate midfield concourse that would displace existing taxiways, which AUS and the Federal Aviation Administration say will need to be rebuilt where the South Terminal is. Hence the need to quickly remove Lonestar from what had been a 30-year lease with two five-year extensions to get going on the multibillion-dollar construction projects to expand the airport ASAP, which are already several years behind schedule due to COVID-19.

Lonestar CEO Jeff Pearse alleges that AUS has really been trying to steal the firm's successful business for itself, going back to the 2019 retirement of Austin's aviation director Jim Smith (who opened the airport 20 years earlier) and his succession by current AUS CEO Jacqueline Yaft. Under the new regime in November 2019 (about the same time the airport began to ask that we not call it "ABIA" anymore), Yaft wrote Lonestar's Chairman James Burchetta that the city "is not inclined to approve any expansion of the South Terminal facility [and rather] wishes to acquire the leasehold interest of the South Terminal to regain local control." From that point on, the lawsuit alleges, the city engaged in various kinds of underhanded skullduggery, or tortious interference, or deprival of Lonestar's right of "quiet enjoyment" of its airport terminal, to reduce the value of Lonestar's business itself – the "going-concern" value, which can be considered a taking requiring compensation when, as here, there's nowhere else for that business to relocate and still be in business.

The somewhat Trumpish cast of the Lonestar filings – fulminative, braggadocious about how great the South Terminal is, highly aggrieved and prone to conspiracizing – is identical in tone to the similar epic essay Pearse tried to insert into the environmental review process for the AEDP, and really to all his public statements; he is convinced that he is the victim of a great wrong here and that the city's malignity knows no bounds. What isn't as clear is what legal recourse Lonestar has to do anything other than haggle over the price of its eventual buyout. (The city had offered $10 million in 2019, was rejected, and now is offering under $2 million – the value of the South Terminal real estate, not the business that operates there.) Under Texas eminent domain law, assuming everyone is cool with equating Lonestar's leasehold interest (which is clearly a thing of value) to actual real property – which this lawsuit does not challenge – "quick take" provisions would allow AUS to cut a check for whatever the court decides that leasehold is worth and repossess the South Terminal before Lonestar could even protest the price offered, let alone what it says here is the violation of its Fifth Amend­ment rights. The city's response to Lonestar's filing is due Sept. 12.