Key uncertainties include:
- Where the base passenger spend rate (PSR) is likely to settle under a full passenger recovery.
- What impact the move to a single duty-free operator will have on the PSR.
- How this will translate to Auckland International Airport revenue, noting Jarden’s understanding that pre-Covid revenue was supported by minimum annual guarantee (MAG) adjustments.
“At this stage, it is difficult to gauge where AIA’s retail outcomes will ultimately land.”
Last year the airport moved towards its single-operator model with LagardèreAWPL as its duty-free partner until a long-term operator is named in July next year.
Lagardère Travel Retail SAS trades as Aelia Duty Free at the airport, after winning an extension of its contract until mid-2025.
The Moodie Davitt Report specialises in covering airport and other travel-related consumer services. In its May edition, it said LagardèreAWPL has all the advantages of the incumbent and in March was awarded a key concession to operate five Relay travel essentials stores at Auckland Airport following an open tender.
Other possible contenders according to Moodie Davitt: Irish travel retailer ARI, which operated from 2015 to last year when it departed after losing out to Lagardère for an extension of its term; Avolta, which has duty-free operations in Australian airports; DFS Group, which used to operate at Auckland Airport and still has a presence in the city; Heinemann Oceania, part of a German retail powerhouse; Lotte Duty Free, of South Korea; and Ospree, a “highly ambitious” Indian company.
Pre-pandemic retail activity was mixed for Auckland Airport.
Jarden notes that in the 10 years to the 2019 financial year, retail revenues lifted from about $120 million to $226m (a 7.9% compound annual growth rate) and close to 30 per cent total revenue.
“However, our previous estimates suggest about $34m of that growth was driven by MAG top-ups, with real revenue per passenger broadly flat through the period.”
Reported spend rates trended down and were attributed primarily to changes in tobacco laws and duty-free allowances, alongside construction disruption from the international terminal upgrade.
Following the completion of the upgrade, the spend rate did lift about 7%, but remained below the 2012 financial year level.
The return of Chinese travellers is critical. With Chinese residents historically spending 2-2.5 times other passengers, Jarden estimates Chinese passengers comprised 13% of total spend at AIA in 2019.
Chinese volumes this year were down 50% on 2019, but there has been strong momentum over recent months and forward scheduling data shows the first half of 2025 having seat capacity at 95% of pre-pandemic levels.
“Whilst Chinese government initiatives to encourage domestic duty-free spending are likely to see a further decline in Chinese spend rates, we expect some short-term support to PSR as volumes return.”
Auckland Airport head of retail Lucy Thomas said its intention was to continue with the single-operator model.
“We’re really happy with how the current operator, Aelia, has embraced the move into the single-operator model. Anyone who has travelled internationally over the past 12 months will see how Aelia has taken the opportunity to improve the overall duty-free offer and experiences for our customers,” she said.
“The response and interest so far to the RFP (request for proposal) for the next licence period has been heartening. When we are evaluating those responses, we’ll be looking for someone who can bring a distinctively Aotearoa New Zealand offer that resonates with customers and places significance on representing both the best of New Zealand and the world.”
Thomas said there was still something magical and exciting about travel, and duty-free shopping was a part of that experience.
“We’ll be looking for an operator that can match that excitement by bringing something out of the ordinary for travellers.”
Grant Bradley has been working at the Herald since 1993. He is the Business Herald’s deputy editor and covers aviation and tourism.
