Opinion ID: 187447
Heading Depth: 3
Heading Rank: 2

Heading: Other aeronautical uses of terminal space

Text: Although it approved of using FMV in theory, the DOT went on to hold the City may not base terminal rents upon a measure of FMV that takes account of what non-aeronautical users, such as retail merchants, would be willing to pay for terminal space. The City argues this limitation was arbitrary and capricious because the DOT failed to offer a satisfactory explanation for its disparate treatment of aeronautical and non-aeronautical uses. The DOT supported its position with the observation that airports have grant assurance obligations to operate the facility for aeronautical purposes. Id. at . In LAX II we upheld the DOT's decision to bar setting airfield rates based upon the opportunity cost of non-aeronautical uses, City of Los Angeles v. DOT, 165 F.3d 972, 977-79 (1999), because the City was legally obligated to use the airfield land as an airport. Id. at 976 (The Department ... concluded that it would be unreasonable for the City to recover compensation through its landing fees for a `lost opportunity' that does not lawfully exist). The DOT offers the same rationale to justify the prohibition against considering non-aeronautical uses for space inside the terminal. Although an airport is obligated to use non-airfield space to support airport services, the DOT does not suggest all non-airfield space must be dedicated solely to aeronautical uses, which would be to deny the obvious; these days commercial airports feature many retail vendors of food, clothing, toiletries, periodicals, and more. A commercial airport foregoes lost opportunities aplenty when it leases to an airline space it could lease to a non-aeronautical tenant. The difference between the airfield and the terminal is that aeronautical and non-aeronautical uses cannot coexist in the airfield; safety, among other reasons, precludes retail or other non-aeronautical operations on the tarmac or runways. In the terminal, by contrast, aeronautical and non-aeronautical businesses are compatible, perhaps even complementary. It makes no sense, therefore, to say the City may not rely upon the rental value of retail space in calculating the FMV of terminal space leased to airlines because airports have grant assurance obligations to operate the facility for aeronautical purposes. Final Decision, 2007 DOT Av. LEXIS 437, at . An airport does not cease to operate for aeronautical purposes because it also rents terminal space to a retailer. The DOT's decision to limit the City's use of FMV to the consideration of lost aeronautical opportunities is therefore arbitrary and capricious. We grant the City's petition in this respect and direct the DOT on remand, either to justify or to abandon its objection to the City's considering non-aeronautical uses when setting terminal rents based upon FMV.