BEN GURION TEL AVIV AIRPORT
IAA tenders 7-year Tel Aviv Duty Free contract worth $1bn-plus
The Israel Airport Authority (IAA) is tendering its new seven-year duty free contract at Tel Aviv Ben Gurion International Airport and several operators are certain to bid ahead of the fast-approaching deadline date of 9 August, 2017. Doug Newhouse reports.
T
el Aviv Ben Gurion Airport’s current duty free departures and arrivals shop contract
expires on 31 December 2017, with the incumbent JR/Duty Free (James Richardson) expected to vigorously defend this business – worth well in excess of $1bn over seven years. Starting on 1 January 2018 the new
contract covers perfume, cosmetics, alcohol, tobacco, chocolate and pharmaceuticals and includes a potentially attractive three-year optional extension – subject to mutually-agreed revised terms. The winner is also obliged to
offer a pre-flight online pre-order purchasing service for passengers. Trading more recently as JR/Duty
Free, Richardson has run the Israel Airports Authority-owned business for 29 years (since 1988). Last time around it won again offering $169m a year, or over $1.1bn over seven years. This represented around 47.5% of
all fees expected over the seven-year contract, based on IAA’s calculation that the business was generating around $1m a day at that time. Seven years on and JR/Duty Free
was busily preparing to open its new 500sq m T1 duty free store in late June as part of its ongoing contractual obligation to the IAA, complete with special opening ceremony. This shop will then be added in
with all the others as part of the new duty contract package set to be tendered next January. This covers both T1 and T3, with
a very senior IAA spokesperson confirming that bidders can tender for one, or both of these locations. IAA has also confirmed that the
world’s top DF&TR operators are already showing interest – including several with annual sales turnovers in
JULY 2017
excess of €2bn ($2.23bn). The IAA spokesperson said:
“Retailers can bid for [Terminals] one or three, or both concessions together if they wish. Also, James Richardson will open their new store according to the contract with IAA this month, as they are obligated.” The IAA spokesperson added that
T1 is expected to handle around 1.5m international departing passengers next year, while T3 ‘will be around 8.2m’ or slightly more, with all of the initial signs pointing to ‘very good interest’ from international retailers. One of the prime contenders will,
of course, include the incumbent, although JR/Duty Free has made no secret of its wish to form a joint venture with Gebr. Heinemann to rebid for this business.
Increasing low-cost factor One big change between this new tender and all previous ones is the changing mix of airlines, with the IAA noting that seven years is a long time with many more low-cost carriers now offering several new routes. As a result, bidders will doubtless
consider this when T1 fully opens for Tel Aviv’s low-cost operators, since the passenger mix will obviously change at the same time. In addition to low cost, there
are also additional routes now to Singapore and the wider Far East, with the IAA shortly expecting Cathay Pacific Airways to commence operations at Tel Aviv. However, the bottom line remains
that passenger spending is still good, according to the IAA spokesperson. “Spending levels are still very high,
although they may be down by a few dollars because of the economic situation,” said the spokesperson.
JR/Duty Free and Gebr. Heinemann sought permission from the Israeli Antitrust Authority to bid jointly for this business last February. JR/Duty Free has been operating duty free shops in Israel since 1988.
In the past we have been generating around $1m a day, although in 2016 it was actually more.” This is entirely consistent with
previous spend-per-head levels at Tel Aviv Ben Gurion with JR/Duty Free. For example, the last time the IAA
looked at tendering the business in 2013, a senior IAA director told TRBusiness that the concession was generating $364m in annual sales. Management was also not tempted
to split the business between two operators, believing an average airside dwell time of just 45 to 60 minutes was too short and just might dilute rather than expand sales. What is new this time around is
IAA’s decision to double the duty free commercial areas in the boarding areas, so providing passengers with even more retail options while they wait for their flights at the gates. «
“In the past we have been generating around $1m a day, although in 2016 it was actually more.”
Senior spokesperson, Israel Airport Authority.
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