TOP 10 AIRPORTS: BEIJING CAPITAL INTERNATIONAL 5


Beijing Airport duty free contracts to safeguard retail revenue until 2025


Non-aeronautical revenue comprised more than 60% of total Beijing Capital International Airport Company Limited sales for the first time in 2019, as the airport registered a 29.2% increase in retail revenue. Andrew Pentol reports.


previous contracts. Wong says: “This will allow BCIA to reap rich rewards from China’s duty free spending growth once international passenger volume picks up.” Revenue from retailing at


Above: The Design Solution has been appointed by Beijing Capital International Airport to plan and redevelop the commercial footprint at Terminal 3’s international departure lounge.


B


eijing Capital International Airport Company Limited might have been under


pressure last year due to decreased air traffic volumes and a 23% drop in aeronautical revenue to RMB4,088,745,000 million ($584 million), but it did not fare too badly in terms of non-aeronautical revenue and retail performance. Decreased overall air traffic


volumes were driven by external influences and pressures associated with significant protective efforts, such as the maintenance of runways and surrounding environments. But amid all this, non-aeronautical


revenues for the company, which is engaged in the ownership and operation of Beijing Capital International Airport (BCIA), actually increased. The rise was driven by the


performance of new duty free contracts and the increased average


“The next couple of years will depend completely on the minimum annual guarantee revenue. This will prevent duty free revenue from dropping off as international traffic migrates to Daxing Airport.”


Denise Wong, Equity Analyst, Bloomberg Intelligence


purchasing power of passengers. New duty free contracts at BCIA Terminal 2 (China Duty Free Group) and Terminal 3 (Sunrise Duty Free - China), effective 11 February 2018 contributed to a non-aeronautical revenue increase of +12.9% to RMB6,721,739,000m ($960m) compared with the previous year. Non-aeronautical revenue actually


accounted for more than 60% of total company revenue for the first time.


Safeguarding retail revenue BCIA’s duty free contracts might well protect retail revenue at the airport until 2025, even if international passenger volumes remain low due to coronavirus (Covid-19) anxieties. The duty free businesses could also protect retail revenue amid the divergence of traffic to the new Beijing Daxing Airport. Denise Wong, Equity Analyst,


Bloomberg Intelligence, tells TRBusiness: “New contracts that took effect from February 2018 offered minimum guaranteed revenue of RMB3.03bn in the first year, representing 85% of BCIA’s retail revenue in 2019. “Retail may drive more than 40%


of revenue in 2020-21, buffering weakness in aeronautical income.” The new contracts also offer 44% average commission, double that of


32 TRBUSINESS


BCIA was actually up by 29.2% to RMB3,585,577,000m in 2019. This was mainly due to the aforementioned new duty free contracts, which resulted in a notable increase in the proportion of revenues from the duty free business in the first quarter. Growth in international passengers with high consumption abilities, along with duty free promotions also helped drive sales. Sunrise Duty Free represented


23.45% of total company revenue for the year ended 31 December 2019. TRBusiness estimates that DF&TR


sales grew by around 5% to reach $1.07bn in 2019. Last year, passenger throughput reached 100,011,438 at BCIA, representing a 1.0% decrease from the previous year. International


passenger


throughput rose by 2.7%. Liu Xuesong, Chairman, Beijing


International Airport Company Limited said in the company’s 2019 Annual Report: “The company recorded a notable increase in revenues from the duty free business. “It continued exploring the


potential of business operations by developing a precise marketing system, introducing international brands,


improving business


quality and conducting several commercial events.”


Road to recovery Looking ahead, Wong believes BCIA traffic will return to 80% of 2019 levels by 2023, following the impact of the pandemic. On the airport’s future duty free revenue prospects, Wong


AUGUST 2020


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