W.H. SMITH AWARDED CONTRACT EXTENSION FOR LAX RETAIL CONCESSIONS

(Los Angeles, California -- May 7, 2002) The Los Angeles Board of Airport Commissioners today approved an amendment to a retail concession contract with W.H. Smith, Inc., providing a three-year extension with two one-year extension options and requiring the firm to undertake $8 million in capital improvements at its stores at Los Angeles International Airport (LAX). The contract calls for LAWA to receive a minimum annual guarantee of $15,684,500 or 17 percent of gross sales, whichever is greater.

W. H. Smith operates the gift and news concessions at 40 locations throughout LAX with gross sales of $68 million in 2001. W.H. Smith currently manages 19 locations directly while its disadvantaged-business enterprise partners operate 21 locations. Four additional locations are authorized under this contract extension. The retail concepts under this agreement include traditional gift and news shops, kiosks, bookstores and specialty merchandise. This contract extension requires W.H. Smith to invest $8 million to refurbish completely 13 stores and to perform cosmetic upgrades and resignage on the remaining 27. New concepts, such as high-end cosmetics, leather goods and gourmet foods will be introduced at five of the refurbished stores. In addition, four new retail locations are authorized.

This contract provides a significant source of revenue to LAWA, requiring W.H. Smith to pay the current minimum annual guarantee of $15,251,000 or 17 percent of gross sales, whichever is greater, plus an additional minimum annual guarantee of $433,500 upon completion of the four new retail locations -- for a total guarantee per year of $15,684,500 or 17 percent of gross sales, whichever is greater.

The company also commits to increase its staffing from October 2001 levels, as passenger enplanements increase. W.H. Smith also will abide by a Concession Performance Measurement Program. This program will require an independent third party to rate their performance and report directly to LAWA. Consistent ratings of "unsatisfactory" or worse may subject W.H. Smith to early termination.

"This contract extension serves as an alternative to the general rent relief program worth $1.5 million approved by the Board on December 4, 2001," said Rick Janisse, LAWA deputy executive director for properties and concessions. "These are challenging times for the concession industry at LAX. We believe the negotiated terms are very beneficial to LAX while the industry returns to pre-Sept.11 passenger levels."

W.H. Smith's current contract began June 4, 1994, and was scheduled to expire May 31, 2002. LAWA Concessions Management staff spent more than a year preparing a comprehensive retail business plan for LAX, which included a competitive Request for Proposal (RFP) process to ensure the highest standards of merchandise and customer service and to maximize the financial return to LAWA. However, the plans for an RFP were placed on hold as a result of a decline in passenger travel and precipitous drop in concession revenues following the tragic events of Sept. 11, 2001.

LAWA officials determined that the current business climate is not opportune for the release of an RFP that undertakes a major overhaul of the airport's retail concessions program. LAWA officials also determined that prospective retail concessionaires would propose only modest investment levels and offer lower minimum annual guarantees than LAWA currently receives.