Very Big Bucks

The most lucrative contract in the history of Miami International Airport is about to be awarded to one lucky company

Greyhound's problems, however, were only just beginning. The county subsequently hired a Chicago-based firm, the Unison Consulting Group, to analyze the airport's restaurant and retail operations. The resulting report, delivered in early 1995, was extremely critical of Greyhound.

Besides contending that the company had done an inferior job marketing itself to passengers, Unison's report noted that in most airports, between 30 and 50 percent of all international passengers purchase something at a duty-free store, while only eleven percent of MIA's international passengers are enticed into a sale. In terms of actual dollars, Miami also lagged far behind in comparison to similar airports. For example, the average sale per international passenger in Los Angeles was $23.60; in San Francisco it was $14.41; and in Orlando it amounted to $12. Miami averaged only $6.72 per passenger.

Given the animosity toward Greyhound among certain commissioners, and the unflattering Unison report, a bidding frenzy among international duty-free firms seemed inevitable. This past March the county commission approved the general procedures under which they would select a new operator. Companies would first be ranked by a selection committee according to their qualifications. The top three firms would advance to the second round, during which each would submit a sealed bid stating the percentage of the operation's gross revenues they would be willing to pay the county.

As part of a competitive bidding process, commissioners normally are required to select the best bid, or highest percentage. In this case, however, they decided to give themselves a little political wiggle room. Under the terms of a proposal by Maurice Ferre, which was adopted, commissioners could select an inferior bid in this situation as long as it was within ten percent of the highest bid.

On April 3, 1995, county aviation officials held a pre-bid conference at the airport, and the response was overwhelming. Numerous firms requested documents. Representatives of organizations from Switzerland, England, and Brazil flew in personally to pick up materials and ask questions. It quickly became clear that the world's most experienced and profitable duty-free companies would be bidding. But within 24 hours, all that changed.

The next day, April 4, as the county commission's regularly scheduled meeting was about to adjourn, Commissioner Javier Souto introduced the Cuban cigar rule. His words steeped in Cuban patriotism, Souto declared it immoral to do business with any firms that indirectly lend financial support to the Castro regime. Placed in such an emotional context, the proposed rule was approved without much thought or discussion of its ramifications. But the pool of potential bidders shrank suddenly and dramatically.

For Robert Hendry, the Orlando-based chairman and CEO of Weitnauer America, a subsidiary of the Weitnauer Trading Group in Switzerland, Souto's amendment was a death sentence. "They've lost the opportunity to have the best in there, and in the long run that will cost the county money," he says. "I don't think the United States government should try and tell companies in other countries what to do. And I certainly don't think any American city or county should try to tell other countries and other companies what to do. It doesn't look good. It doesn't lend itself to Miami looking like the great international city that it is."

Hendry says his company's Swiss owners couldn't stop selling Cuban tobacco products right now even if they wanted to. Contractual obligations with various airports around the world require them to stock specific merchandise, including Cuban cigars. "We just can't tell our partners that because we feel this way about Cuba, you are going to have to suffer financially," he explains. "They would think we lost our minds."

Doug Newhouse, of the Duty Free News International, says other well-established companies found themselves in the same position as Weitnauer, including Aldeasa, the state-owned Spanish firm that operates duty-free shops throughout Spain and Latin America, and Allders International, which controls the contracts for Heathrow and Gatwick airports in London and serves more duty-free customers than any company in the world.

"These are serious guys," Newhouse says of the duty-free organizations excluded from the bidding. "Not to have them upping the ante is unfortunate. Allders has bid up to 50 percent for contracts in Europe. That's nothing to them if they want to establish themselves in an area."

Undaunted, Allders still hoped to qualify for the MIA bid process but was eventually rejected. An appeal to a local hearing examiner was unsuccessful, and company officials are now considering a lawsuit against Dade County. "What I resent," says Luis Lauredo, a Miami partner in the proposed Allders venture, "is how the ideals of elected officials and community leaders, sincerely working for a free and democratic Cuba, are sometimes manipulated by those who are simply pursuing a commercial interest, and whose only 'ideal' is making a buck." Lauredo's oblique comment refers to a widely held perception that has not diminished over time -- that the Cuban cigar rule was adopted not as a gesture toward Cuban freedom but rather to ensure that most duty-free competitors were eliminated from consideration.

Only three firms survived the Cuban cigar rule: Greyhound, whose airport duty-free operations are limited to Miami, Fort Lauderdale, and Chicago; Brasif Services, a Brazilian company that stated it was willing to stop selling Cuban cigars in its Brazilian airports if it won the contract; and a Miami subsidiary of Duty Free International (DFI), which claims not to sell Cuban products anywhere in the world.

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