THURSDAY 15 DECEMBER 2005

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FAST, FACTUAL, FREE PERSONALITY OF THE WEEK

In my home country of New Zealand Wellington is known as the windy city. Flying into its airport, jutting out into the often stormy waters of Cook Strait that separates the country’s two main islands, can be an uneasy experience. But there’s a gale of a different kind blowing up down under, as the city’s airport owner and its duty free concessionaire argue bitterly about the tendering of a contract four years before its expiry date. That tender was issued last May through The Moodie Report. Essentially it meant that the winning bidder will trade from temporary premises in competition with incumbent Duty Free Stores New Zealand from early to mid 2007 until 30 June 2009. At that point the winning bidder would become the exclusive duty free retailer until June 2014 in enlarged premises. Duty Free Stores New Zealand was not impressed, and has taken legal action. The retailer of 18 years standing in Wellington claims – with some justification – that if a similar situation had arisen at a glamour airport such as Changi, the industry furore would have been deafening. Operations and Marketing Manager Grant Archibald told The Moodie Report: “If this is some sort of model for concession planning, then the industry really will have issues going forward. You would have to go a long way in the industry to find an insider who thinks that having two operators sharing 290,000 potential customers a year is a great idea.” But there are two sides to every story, and Wellington International Airport Limited says the decision to go to tender was forced on it by a frustrating inability to conclude terms on a contract extension. Now it’s all in the hands of the Wellington High Court, which is considering the retailer’s injunction against any rival award. Airports and concessionaires in court – pardon me, but haven’t I heard that tune before? Wherever your sympathies lie in this complex case, it is disappointing to see yet another contractual relationship turn sour. The ruling, expected in February, will be an intriguing one. And its repercussions are likely to be blown on those strong Wellington winds all around the travel retail world.

THE MOODIE REPORT

DATA ROOM – TRAVEL & TOURISM NEWS

JAPAN.

The terrorist bombings in Bali in early October and the continuing rift between Japan and China deflated overseas travel sales at major travel agencies in October, according to Travel Journal International (TJI) Online. TJI cited figures from the Ministry of Land, Infrastructure and Land (MLIT), which reported that consolidated sales – overseas, domestic and inbound – grew by just +1% year-on-year to ¥518.8 billion. MLIT said the continuing political controversy between Japan and China over Japan’s war past has kept travel to China at levels below those of a year ago. This contributed to the overall -0.2% dip in overseas travel sales. It added that the October bombings in Bali also contributed to weakened travel demand. The drop in overseas travel sales came as a disappointment after September had seen a return to growth. The summer months of July and August both recorded weaker sales compared with a year earlier.

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Mahendra Patel, the Chairman and CEO of Fijian duty free retailer Motibhai Group (right), was this month given the Lifetime Achiever Award at the 2005 Fiji Tourism Excellence Awards. Mahendra has given 35 years service, transforming a ‘hole in the wall’ operation into an international class retail offer. And he has done it with style and grace. QUOTES OF THE WEEK

“My team is very focused and energised, and will use every ounce of its creativity and experience in this market in order to be part of a new era at Sydney Aiport.” The Nuance Group CEO Australia & New Zealand Christian Strang tells The Moodie Report of his determination to retain the Sydney duty free contract in the face of white-hot competition. “I have stayed in the Carlton Hotel on many occasions and again this year (at a nightly rate of €1,150) and was upset to hear that my morning cup of coffee and toast had to be charged at the full breakfast price of €30.” Dubai Duty Free Managing Director Colm McLoughlin on the vexed question of Cannes’ value for money. Lucky he only had the one cup.

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The Moodie Report

Selected traffic numbers reported in the past week Country/Region Airline/Airport

Nov ’05 vs Nov ’04 (%)

China Canada China China China Chile Estonia Finand Germany Germany Germany Germany Hong Kong Latvia Netherlands Peru Russia UK USA USA USA USA USA USA

+13.8 (total pax) -1.8 (international) +3.1 (international) +50.7 (total pax) -6.0 (total pax) +13.1 (international) +44.5 (international) +3.7 (total pax) +2.5 (total pax) +6.3 (total pax) +3.6 (total pax) +6.2 (international) +8.1 (total pax) +58.7 (total pax) +3.9 (total pax) +10.9 (total pax) +28.9 (international) +12.0 (international) +29.2 (total pax) +8.0 (total pax) -50.7 (total pax) +11.2 (total pax) +23.6 (total pax) +11.4 (total pax)

Air China Ottawa International Airport Air China China Southern Airlines Hainan Meilan Airport LAN Airlines Tallinn Airport Finnair Group (three airlines) Frankfurt International Airport Hannover Airport Lufthansa Munich Airport Cathay Pacific airBaltic Amsterdam Airport Schiphol Lima Airport Moscow Domodedovo Airport Newcastle International Airport AirTran Airways American Airlines ATA Airlines Hawaiian Airlines jetBlue Airways Southwest Airlines

Thursday 15 December 2005

Note: The Moodie Report works closely with Travel Journal International Online, which is the pre-eminent provider of information on the Japanese travel industry. To subscribe, go to http://tji/tjinet.co.jp/

POLAND.

The International Air Travel Association (IATA) forecasts that during the years 2005 to 2009 the number of passenger flights in Poland will grow at +11.2% annually – the fastest pace in the world among countries servicing more than 2 million passengers a year. Poland is forecast to outstrip the Chinese market, while the Czech Republic is ranked third in the world. According to IATA forecasts, the number of passengers in 2005-2009 will grow at +5.6% annually, although airlines will continue to suffer losses. IATA expects a total world loss this year of US$6 billion, mainly due to high oil prices. American carriers are suffering the most.

Note: ‘total pax’ may include domestic traffic Source: ©The Moodie Report

Polish air travel is growing dynamically, thanks mainly to budget airlines. Some airports have already started investing in their terminals, and local governments in certain regions of the country are considering building new airports.

THE MOODIE REPORT DATA ROOM – TRAFFIC NEWS

DENMARK.

Copenhagen Airports has released mixed November figures for its three associated companies in Mexico, China and the UK. Grupo Aeroportuario del Sureste’s (ASUR’s) nine airports in hurricane-hit Mexico continued to feel the effects of October’s Hurricane Wilma, which decimated traffic to popular resort destinations such as Cancún. November passenger volumes at Cancún dived by -72.2% year-onyear to 207,320, while Cozumel was worst hit with a drop of -88% to 4,415 passengers compared to the year-ago period. Passenger traffic at all nine airports combined reached 530,320, a decline of -50.3% against November 2004. However for the year to date traffic at the nine airports totalled 12,497,539, a decline of just -2% compared with the same period in 2004. Meanwhile at Newcastle Airport in the UK international traffic climbed by +12% to 189,925 year-on-year, with total traffic rising by +7% to 345,554. For the year to date international numbers totalled 3,189,224, up by +10.6%, with total passengers reaching 4,906,803, also jumping by +10.6%.

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Selected traffic numbers reported in the past week (continued) Country/region Airline/Airport/Association Australia Australia Canada Germany Italy Italy Italy Italy Italy Italy Japan Japan Thaialnd Thailannd USA USA

Oct ’05 vs Oct ’04 (%)

Qantas +3.2 (RPM) VirginBlue +6.1 (total pax) Toronto Pearson Int. Airport +1.6 (international) Air Berlin +11.7 (total pax) Assaeroporti (37 airports) +8.1 (international) Bergamo Airport +16.3 (international) Bologna Guglielmo Marconi Airport -4.4 (international) Milan Linate Airport +1.9 (international) Milan Malpesa Airport +8.4 (international) Venice Marco Polo Airport +6.5 (international) Osaka Kansai International Airport -2.3 (international) Tokyo Narita Airport -2.1 (international) Bangkok Don Muang Int. Airport +4.6 (international) Thai Airways International -3.3 (total pax) Atlanta Hartsfield-Jackson Int. Airpt. -3.7 (international) Charlotte/Douglas Int. Airport +5.9 (international)

Thursday 15 December 2005

At China’s Hainan Meilan Airport, November 2005 passenger volumes fell by -6% to 6,251,000 compared to the year-ago month. For the year to date passenger numbers declined by -7.3% to 6,362,900.

GERMANY.

Fraport Group’s six airports welcomed a total of 5,138,961 passengers in November, down -6.9% from the same period in 2004. The airport operator said the main reason for the decline was the performance of Antalya Airport in Turkey, where Fraport’s passenger figures have declined since the opening of a second competing passenger terminal earlier this year. Antalya traffic dived by -82.9% year-onyear to 117,009 passengers last month.

Frankfurt Airport, however, registered peak traffic results for November. The number of passengers using Germany’s biggest airport increased by +2.5% to 3,940,558 compared to November 2004. From January to November Frankfurt Airport served 48,546,091 passengers, representing an increase of +2.2% year-on-year. Note: ‘total pax’ may include domestic traffic Source: ©The Moodie Report

Lima Airport in Peru recorded 452,277 passengers in November, up +10.9% on November 2004. Frankfurt-Hahn Airport, Fraport’s low-cost airport in the Hunsrück region of Germany, enjoyed +13.0% growth in traffic to 229,856 passengers. Saarbrücken Airport’s traffic dropped by -5.4% to 28,984 passengers, while Hannover Airport saw its traffic rise by +6.3% to 371,516.

INTERNATIONAL.

OAG’s latest weekly ranking of the world’s airports by international flight frequencies – for the week commencing 12 December – sees Paris Charles de Gaulle top the league in terms of international flight frequencies (4,062 flights) followed by London Heathrow (3,918), Frankfurt International (3,433), Amsterdam Schiphol (3,397) and Munich International (2,346). The top Asian airport in international flight frequencies was Hong Kong International (2,248). Toronto led the way in North America (1,808) and Dubai headed the Middle East (1,485). Among the top 100 airports, strong year-on-year moves can be seen from Hong Kong International (+14%), Dubai International (+10%), Kuala Lumpur International (+10%), Istanbul Ataturk (+12%), Hamburg Fuhlsbuettel (+10%), Birmingham International (+10%), Beijing Capital International (+20%), Doha (+13%), Nassau International (+25%), London City International (+20%), Antigua (+31%), Panama City Tocumen International (+16%), Bucharest Otopeni (+16%), Casablanca (+13%), Mumbai (13%), Delhi (+28%), Alicante (+12%) and Muscat Seeb International (+11%). For full results see Data Room at www.TheMoodieReport.com Note: OAG, a global management company specialising in travel and transport, works closely with The Moodie Report. OAG holds an impressive breadth of travel-related content and is best known for its airline schedules database. This includes flight details for 1,000 airlines and more than 3,500 airports and is updated continuously. If you need quick, reliable data on the air travel industry go to www.moodie.oag.com and register for your free trial of OAG Max Online. For further information e-mail Duncan Alexander at [email protected]

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RUSSIA. Moscow Domodedovo Airport’s international passenger traffic jumped by +23.5% on the year to 7.3 million in the period January–November 2005, management company East Line has reported. November international traffic amounted to 540,000 passengers, an increase of +28.9%. Total passenger traffic at Domodedovo – the leader this year for the first time in passenger traffic among the airports serving Moscow – climbed by +15.4% on the year to 12.97 million in the 11-month period, and during the month of November by +25.6% to 1.03 million. The airport saw the sharpest increase in services to Turkey’s Antalya, Israel’s Tel Aviv, Uzbekistan’s Tashkent and Egypt’s Sharm El-Sheikh. In 2004 the airport’s passenger traffic rose +30% on the year to 12.1 million.

UK. BAA’s UK airports handled a total of 10.4 million passengers in November, an increase of +2.2% year-on-year and an improvement on the +1% growth rate recorded in October. In November, all key markets, with the exception of European charter routes, recorded growth. North Atlantic passenger traffic rose +1% and other long haul routes saw a collective gain of BAA UK airport passenger numbers November 2005 +8.4%, helped by a substantial increase in November Change *Financial Change 12 months Change capacity and the num2005 on 2004 year to date on 2004 to date on 2004 ber of airlines serving Heathrow 5,208,200 +1.7% 46,750,200 +0.1% 67,684,700 +1.1% routes to India. Gatwick Stansted London area total Southampton Glasgow Edinburgh Aberdeen Scottish total BAA total

1,993,500 1,608,000 8,809,800 133,100 594,000 634,700 237,400 1,466,100 10,408,900

+1.9% +2.1% +1.8% +14.5% +1.3% +3.0% +9.1% +3.2% +2.2%

24,000,100 15,662,000 86,412,400 1,370,000 6,630,900 6,080,300 2,035,300 14,746,500 102,528,900

+2.7% +5.1% +1.7% +24.4% +2.5% +6.7% +8.4% +5.0% +2.4%

32,649,200 21,935,200 122,269,200 1,818,200 8,771,800 8,429,200 2,846,700 20,047,800 144,135,200

+4.5% +5.3% +2.7% +19.2% +2.9% +5.9% +8.3% +4.9% +3.2%

European scheduled traffic was up by +2.3% but reductions in seat capacity led to a -19.8% drop in charter traffic. Irish routes saw growth of +8.8%.

Each airport in the group reported an increase in November, the largest being a +14.5% year-on-year gain at Southampton. Traffic at Heathrow rose +1.7%, compared with a fall of -0.8% in October. Gatwick and Stansted recorded growth of +1.9% and +2.1% respectively. In Scotland, Glasgow showed a gain of +1.3% and Edinburgh a rise of +3.0%. *April to November 2005 Source: BAA; The Moodie Report

Aberdeen continued its recent strong run with a +9.1% increase in November. For the year to date, traffic is up by +2.4% on the same period last year, “reflecting a range of positive and negative influences”, BAA said. “The positives include higher seat capacity and strong growth in some markets. The negatives include a softening UK economy, the Gate Gourmet dispute, the London bombings, lower load factors in some markets and the impact of higher oil prices.”

THE MOODIE REPORT NEWS – RETAIL & COMMERCIAL SALES RESULTS

CHINA. The China International Travel Service Group (CITS) announced a turnover of CNY4.7 billion (US$582 million) for the first ten months of this year, far exceeding its CNY3.7 billion (US$458 million) income for the whole of 2004. Profits for CITS, of which China Duty Free Group (CDF Group) is a part, came to CNY90.4 million (US$11.2 million) for January to

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Thursday 15 December 2005

October this year. The company noted that profits could have been higher if not for high oil prices, the repegging of the Yuan and the corresponding higher product prices. A spokesman for CDF Group told The Moodie Report that for January to October the categories of fashion and cosmetics [which the retailer combines – Ed] posted the highest percentage sales growth of +52% year-on-year, while liquor and tobacco grew by +12%. At a board meeting of the CITS Group, Shao Ning, Vice-Chairman of the state-owned Assets Supervision and Administration Commission of the State Council, also announced that the CITS group had introduced external directors to its board, to conform with the new Company Law which takes effect on 1 January. Three external directors – Wang Kaiyuan, Shi Cuiming and Luo Shuqing – were added to the group. All three were previously senior personnel at other state-owned enterprises. By January the CITS Group will bring the total number of external directors to over half of the maximum of 13 board members. Previously, the company only had internal staff on its board, including the group’s Chairman Gai Zhixin, Vice-Chairman Zhang Beiying, Director Yang Jianyuan, Director and General Manager Zhang Jianhua, Director Yao Yuecan and Huang Chunwang. During the meeting in Beijing, the group noted that it had completed the integration of CDFG and CITS. As a group, the company said it had also redefined its strategies for the two member companies. The CITS business has developed from the core business of inbound travel to putting the CITS brand at the heart of its operations. Inbound, outbound and domestic travel are now all focuses of the company. While maintaining and expanding its market share of inbound travel, it is also developing the Chinese travel market. CITS has also moved into business travel, conventions and meetings, as well as e-commerce. For CDF Group the focus has been on raising the industry standing of the duty free business. The company has defined duty free, duty paid, supply and retail as the anchors of its business. Through various operational structures, including sole trading, joint ventures, co-operation and open tenders, the company is opening up avenues in airports as well as border and downtown stores, CITS Group said. CDF Group has also moved towards the development of souvenir products, Beijing 2008 Olympic Games products and the distribution of brands. “At the same time it is guided by international practices in pushing for arrivals stores, Chinese travellers’ rights to buy in China downtown stores and tax-back regimes, so as to expand the scope of the company’s potential business arena,” said the group.

THE MOODIE REPORT

NEWS – LANDLORDS & CONCESSIONAIRES

ARGENTINA. InterBaires is closing out a strong year in style with a feast of innovative animations and special promotions at Buenos Aires Ezeiza Airport. “All of them are intended to bring a great travelling and shopping experience to our December passengers and also to increase sales,” CEO Enrique Urioste told The Moodie Report. “With Givenchy we are giving a motor boat as first prize. When passengers exit emigration they get a really big shock to see a big boat in the store.” InterBaires has enjoyed yet another strong year, with sales to the end of November running at +25.3% over last year on a passenger increase of +14.5%. Penetration rates are up by +5.8% and spend per passenger by an impressive +10.1%. In the tobacco category InterBaires is running a multi-brand roulette competition – anyone who buys two cartons of cigarettes is entitled to enter and everyone wins a prize, ranging from a cup to watches, cameras and video recorders. “This is intended to add +20% to sales in the category this month,” said Urioste. “It’s having an excellent effect on sales. It’s so rare to hear the sound of music and the sight of all this colour in the shops – it’s having an amazing impact.” For the full story and pictures, including Enrique’s Urioste’s unique ‘Santa girls’ see www.TheMoodieReport.com

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NETHERLANDS.

Amsterdam Airport Schiphol’s website (www.schiphol.nl) has been revamped with a clearer and easier-to-read homepage. Visitors can access the latest arrival and departure times on the homepage and get important travel information as well as the latest airport news. In addition, special offers on air tickets and holidays can be booked directly on the home page. Website visitors can browse special offers in the ‘See Buy Fly’ shops situated after passport control from a menu of options, or click through to corporate information on Schiphol Group, the owner and operator of Amsterdam Airport Schiphol. New colours are a feature of the website redesign. The new homepage was designed in association with Dutch IT company Lost Boys in Amsterdam.

PORTUGAL. Lojas Francas De Portugal, the country’s leading travel retailer, has launched a new web site (www.lfp.pt), Retail Operations Director Luis Carvalho told The Moodie Report. The bi-lingual (Portuguese/English) site opens with music and store and brand images and the words ‘O Prazer Comprar Connosco’ (Enjoy shopping with us). The impressively ambitious site includes details of the shopping offer in the airports of Lisbon, Oporto, Faro, the Azores and Angola as well as the company’s various inflight operations. The company is a joint venture between national airline Tap Portugal (51%) and The Nuance Group. This ambitious new website, which features some striking images and great local music, will be featured in The Moodie Report.com’s popular Website of the Week feature soon.

RUSSIA.

Runway Duty Free this month opened its tenth outlet at Moscow Domodedovo International Airport in the VIP lounge. Runway Duty Free VIP will offer high-end whiskies and cognacs, cigars, exclusive perfume and cosmetics travel sets, leather goods, scarves and ties geared to the airport’s discerning VIP passengers. Runway Duty Free General Manager John Moriarty told The Moodie Report: “We have had a showcase in the VIP lounge since early in the year, but we could not trade there as both departing and arriving passengers mix in the one area. But we now have this resolved with Customs and border guards, and have opened the unit in an area that is actually airside. “We expect the unit to be very popular as the VIPs can purchase in a quiet and suitable environment before they leave the area to board their flights. “Opening VIP is the culmination of a very busy year for us, having opened ten units in the past 13 months. We are concentrating on getting ready for the busy Christmas and New Year period which we expect to be huge as the first ten days of January are holidays here in Russia and we’ll have lots of passengers departing before and after the New Year”. Runway General Director Alexey Osipov commented that October and November have been very good months for business with the continued increase in passengers at Domodedovo plus the arrival of Thai Airlines. The retailer has also celebrated the first anniversary of its Swarovski store and recently opened the Runway Fashion unit. “Sales in our first year have exceeded all expectations,” said Osipov. “It goes to prove the strength of Swarovski as a brand, and also Russians’ interest in the product, predominately in the jewellery but also for collectors of the crystal figures.” Runway Fashion is located on the main Gallery area at Domodedovo. It is an extension of the retailer’s wide fashion and accessories range in the lower ground floor store. The range on offer in the new outlet is predominately bags, scarves and ties. Moriarty commented: “Bags have become such an accessory for Russians that we are doing big sales of both men’s and ladies’ bags.”

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THE MOODIE REPORT

Thursday 15 December 2005

TENDER & CONTRACT NEWS

AUSTRALIA. The Nuance Group is set to mount a robust and passionate defence of its duty free contract at Sydney Airport. Sydney Airport Corporation set a 7 December deadline for expressions of interest in its A$220 million duty free and tax free contract. It is Australia’s largest duty free concession and attracted intense interest from around the world. Last month Dufry CEO Julián Diaz confirmed that the Swiss travel retailer was entering the race. Other known candidates include James Richardson and Alpha, while other likely entrants include DFS Group, Aelia, Aldeasa and King Power. The Nuance Group CEO Australia & New Zealand Christian Strang told The Moodie Report: “The Nuance Group has very definitely expressed its interest in the RFP for the new concession. The new concession presents an opportunity to eliminate many of the constraints that currently exist and to look at the business in the context of today’s travel dynamics and industry dynamics. My team is very focused and energised and will use every ounce of its creativity and experience in this market in order to be part of a new era at Sydney Airport. “We have developed the concession significantly over the years but a key to our approach has always been that we always look ahead for the next quantum leap. The STAR project [a multi-faceted internal Sydney retail improvement programme] encapsulates principles which The Nuance Group advocated long before the Olympic Games and long before the airport was privatised. We relish the opportunity to make STAR a reality. “Regardless of the RFP process we are, today, still investing in new installations in the key stores at Sydney Airport. The process will not distract us from the immediate task...which is to continually improve the customer experience.”

NEW ZEALAND. Duty Free Stores New Zealand (DFSNZ) has outlined why it has sought an injunction against Wellington International Airport Limited’s decision to tender a new, additional duty free contract to the retailer’s own contract which expires in 2009. As reported, last May WIAL decided to offer a tender on the following basis:

Key Account Manager – Maxxium Germany Travel Retail We are looking for a Key Account Manager, based in our Travel Retail office in Wiesbaden, Germany Overall Responsibility and Purpose of Job Responsible for the Travel Retail sales (both duty free and duty paid) to Ferries, Shipchandling, Diplomatic and Military in the area of Germany, Austria and Switzerland. Define the strategic targets in co-operation with Sales Director. Responsibilities: ● Define sales budget and plan in liaison with Sales Director and Brand Partners ● Continuous sales analysis ● Development and implementation of key account plans and concepts ● Plan and Negotiate annual agreements ● Provide training and product knowledge to all customers as needed ● Implement brand building activities in liaison with Trade Marketing/Brand Managers ● Secure high level input in all to supply chain team.

Qualifications/Requirements ● Minimum three years’ experience in sales function, preferably Shipchandling and/or Military sales within Travel Retail/Duty Free ● A solid sales background with a proven track record ● Strong business planning, negotiation and presentation skills ● The ability to communicate fluently in English and German, both verbally and in writing

● The willingness and ability to travel frequently and extensively within the area ● Result orientated with proven account management and negotiating skills with a financial understanding of international business ● Good computer skills. ● A dynamic team player. Are you interested? Please send your complete application (including English CV) up to 21st December to: Maxxium Travel Retail Germany, Austria, Switzerland Söhnleinstraße 8 D-65201 Wiesbaden Germany or by e-mail to [email protected], quoting 'The Moodie Report'. Maxxium is the global sales, marketing and distribution partnership of The Edrington Group, Rémy-Cointreau, Jim Beam Brands, and V&S ABSOLUT Spirits. Its portfolio of premium wines and spirits includes The Famous Grouse, ABSOLUT, Rémy Martin, Jim Beam, Cointreau,The Macallan, Piper-Heidsieck champagne, Plymouth Gin and Highland Park. For more info visit us at www.maxxium.com

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Stage 1: From early to mid 2007, to 30 June 2009. The new duty free operator will trade alongside the existing operator [Duty Free Stores New Zealand trading as Duty Free Stores Wellington] from temporary premises. Stage 2: From 30 June 2009 to June 2014, in enlarged store premises, when the appointee will become the exclusive duty free operator at the airport. Soon after DFSNZ criticised the decision to invite rival bids, while saying it would participate in the tender in order to protect its business. The contract is understood to be down to a short-list, which besides the incumbent includes DFS, King Power in partnership with New Zealand company Aotea Souvenirs, and The Nuance Group. In October the retailer sought an injunction in the Wellington High Court against any rival being awarded the business. It claimed the introduction of a second operator would render its business a loss-maker “virtually overnight”. A decision is expected in February. DFSNZ Operations and Marketing Manager Grant Archibald told The Moodie Report this week that the company was “perplexed” by the chain of events. “If this is some sort of model for concession planning then the industry really will have issues going forward,” he said. He added: “As the sole, long-term duty free operator at Wellington International Airport, Duty Free Stores New Zealand has serious questions about the way the airport company is approaching its expansion. From our perspective, the Wellington Airport company seems to be following a very unorthodox concession planning strategy. We, like many others, question if the results could possibly justify the means. “Operators regularly lose contracts at airports in this industry. However I cannot recall any operator being advised they have lost their contract four years out from its expiry. Ordinarily we would have re-fit all our stores at Wellington Airport earlier this year to see out the next four years of our contract. “Now, as we are unsure of our tenure, we are not prepared to invest in the stores. Instead we face a sustained period of trading out of rapidly dating stores ahead of us. This must delight our competitors in Australia [Wellington’s duty free business is reliant on New Zealanders and Australians travelling the trans-Tasman route – Ed]. “Wellington Airport has been advising us of its option to put another operator in at Wellington for the last two years. We don’t believe they have the right to do that, hence our current legal proceedings. However, in light of its actions, we are placing a stronger and stronger focus on our off-airport business in Wellington and these sales are continuing to grow at a significant rate. It is a sad fact that these sales will negatively impact the airport’s rental income until these matters are resolved.” Archibald continued: “You would have to go a long way in this industry to find an insider who thinks that having two operators sharing 290,000 potential customers a year is a great idea. The airport is proposing to double its retail space to achieve what could only be a marginal growth in sales. In fact, it is likely that sales will decline as off-airport activity escalates and intense price competition serves to lower average prices without increasing volume in what is essentially an allowance-driven business. On top of this, the retailers suffer through an effective doubling of operating costs.” He said that the situation has been “a long and difficult time for us at Duty Free Stores New Zealand. It has become a painfully protracted exercise but we go into the arbitration with every hope that good sense will prevail in resolving these matters.” Archibald said that current trading conditions are not easy. “We experienced the worst November sales at Wellington Airport for the last five years as international passenger numbers crashed -10.5%.” WIAL CEO Simon Draper defended the position to local reporters at the weekend, saying that DFSNZ would retain the prime position in the departures lounge and that the current situation had arisen because negotiations with the retailer to extend the original contract on revised terms had proven unsuccessful. Additionally WIAL Manager, Retail and Development Katy Ellis told The Moodie Report: “We have not issued an official statement as we are currently still in the tender process that is commercially in confidence. “We obviously don’t agree with the claims and have many grounds, but we are not detailing this to the media as it would not be appropriate at this stage. We continue to have an open mind about DFSW and all of the tenderers and WIAL has been pleased with the field of tenderers that have submitted bids.”

SINGAPORE. The Civil Aviation Authority of Singapore has issued a tender for brand name western specialty The Moodie Report© is published by Moodie International. All rights reserved. Please send any comments or stories to [email protected]

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coffee concessions at departure/check-in hall, terminal 2, Singapore Changi Airport. Bids close on 4 January 2006. The main contract runs from 15 April 2006 until 23 July 2009 and is split into two parts. Concession A covers the Departure/Transit Lounge South in terminal two. It runs for three years from 15 April 2006 or the date of handover of the demised premises to the successful tenderer, whichever is later. Concession B covers the Departure/Transit Lounge North, also in T2. It has a three-year term effective from 24 July 2006. There will be no option for renewal at the end of the tenancy periods. The Money-Changing concession is for the Changi Budget Terminal, due to open early next year. Bids close on 3 January. The contract runs from 1 February 2006 until 31 January 2009.

THE MOODIE REPORT

GENERAL NEWS

DENMARK.

Macquarie Airports Copenhagen (MAp Copenhagen) has announced that its tender offer to the shareholders of Københavns Lufthavne A/S (Copenhagen Airports/CPH) is now unconditional and will be completed. MAp’s tender offer, which was made on 24 October, was unanimously recommended by the board of Copenhagen Airports. The European Commission approved the offer on 5 December. The tender offer expired on 9 December, at which time MAp Copenhagen owned or had received valid acceptances for 2,992,341 shares at DKK100 each. With the initial MAp Copenhagen shareholding of 1,119,676 shares (representing a 14.7% stake), this corresponds to 52.4% of the issued shares and voting rights of CPH. MAp Copenhagen is set to complete the tender offer on 19 December, when CPH shareholders will receive payment for their shares. CPH owns Copenhagen and Roskilde Airports in Denmark as well as stakes in several international airports in the UK (Newcastle), China (Hainan Meilan) and Mexico (ASUR’s nine airports). The Danish government owns around 39% of CPH but has in the past indicated that it is unwilling to sell that holding.

JAPAN. The Yen rose for a second day today [15 December], the biggest two-day gain since March 2002, amid speculation that the Bank of Japan will signal it is closer to ending a policy of flooding the economy with cash, Bloomberg reported. The Yen climbed to a three-week high versus the Euro and gained against all 16 most actively traded currencies. The Yen strengthened to 116.53 to the US Dollar in London today. A week is a long time in the currency markets – last week the Yen hit a 32-month low against the US Dollar of ¥121.40 – bad news for Japanese travellers abroad and those who retail to them. In the same week it also hit a 13-year low against the Canadian Dollar, an eight and a half year low against the Australian Dollar and a seven-year low against the UK Pound Sterling. The Euro had, until the past few days, also continued to gain against the Yen, aided by the European Central Bank’s rate hike on 1 December. Even given this week’s developments the situation is a sharp contrast from as recently as March this year when the Dollar was trading at just under ¥105 and currency experts were predicting a further weakening to ¥95 by early 2006.

SINGAPORE. Singapore’s terminal for low-cost carriers (LCCs) will open on 26 March 2006, the Civil Aviation Authority of Singapore (CAAS) said in a statement this week. It noted that costs have been kept low, so each passenger will be charged only S$13 (US$8) in airport tax, just over a third less than the S$21 charge at Changi Airport’s terminals one and two. “Airlines, retail operators and airport tenants at the new terminal will be able to reduce their operating costs, as airport charges such as rental of shops and office space are up to 50% lower than the existing charges at T1 and T2,” said CAAS. The terminal will not have travelators, escalators or aerobridges, but facilities such as money changers, Internet connection, duty free shopping and food and beverage outlets will be available. Tiger Airways is the only LCC which has so far signed up to use the 25,000sq m terminal. The terminal will initially have a capacity of 2.7 million passengers a year, but CAAS said there is scope for expansion should more carriers decide to use the terminal.

TAIWAN. The Taiwan government is studying the feasibility of privatising its 18 airports, including Taipei Chiang The Moodie Report© is published by Moodie International. All rights reserved. Please send any comments or stories to [email protected]

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Kai-shek, an official at the Ministry of Transportation and Communications said Wednesday. The official said the government is also considering allowing foreign companies to own stakes in the airports. The government would need, however, to revise the Civil Aviation Law, which does not allow private firms, including foreign ones, to own the island’s airports, she added.

THAILAND. Siam Paragon, a new US$366 million luxury retail complex in Bangkok, has urged the government to grant it duty free status to become a shopping paradise for affluent foreign tourists. At the opening of the upscale 500,000sq m shopping venue for Thai and foreign shoppers, the developer said that the department store had asked the government to grant it duty free zone status to lure foreign tourists, as well as the many local spenders who prefer going abroad for shopping. The plan is expected to be concluded early next year, according to Siam Paragon Development Co Marketing Executive Kriengsak Tantipipop. Siam Paragon is expected to attract 100,000 shoppers a day, with 70% of spenders estimated to be foreign tourists. The Tourism Authority of Thailand said that the new complex would boost the shopping season and give a big fillip to tourism, as shopping now accounts for 32% of total tourism revenue in Thailand – up from 27% over the past few years.

THE MOODIE REPORT

PEOPLE, EVENTS & NOTICES

EUROPE.

The annual ACI Commercial Trading Conference is being held at the Royal Lancaster Hotel, London between 27 February and 1 March. Themed ‘The Customer Experience: Challenging the Status Quo’, it looks like one of the strongest programmes to date. For details contact Sarah Lindsay, ACI Conference Unit at [email protected]

FIJI.

Mahendra Patel, one of the true statesmen of the international duty free business, has been awarded the Lifetime Achiever Award at the 2005 Fiji Tourism Excellence Awards. The award is the highest recognition bestowed on any individual for their sustained contribution to the country’s tourism industry. Patel received the Award from Hon. Laisenia Qarase, Prime Minister of the Republic of Fiji Islands, at a function held on 9 December at the Shangri-La’s Fijian Resort. Accepting the award, Patel said: “For me and for my company tonight is an exceptional and historic night. To be granted the Tourism Life Time Achievement Award – the highest accolade in Tourism – I am humbled and very touched by this wonderful recognition. In accepting this award I want to express my deep sense of gratitude to my company, my family and my country which has given me the opportunity to be able to contribute and excel in our field of endeavour.”

IRELAND.

TRT, organiser of the annual Inflight Sales Person of the Year (ISPY) Awards, is – in conjunction with Aer Lingus’s Joe Harvey – organising a meeting for “forward thinking people” involved in inflight retail and crew development on 12 January in Dublin, Ireland. The meeting starts at 10.30am and the first meeting will discuss the group objectives and how further meetings will be run and communicated. The ‘Gift Shop’ who run the Aer Lingus crew incentive programme will host a dinner that evening. Anyone interested in attending should contact Christine Martin of TRT by e-mail at [email protected]. TRT will facilitate the meeting. Airline personnel from inflight retail and crew training and motivation departments are welcome.

NORDIC MARKETS. The 2006 Nordic Travel Retail Seminar, themed ‘Changes in Consumer Attitude and Behaviour” will be held in, or on, a unique venue – onboard a MyTravel aircraft flying to Mallorca. New business cases from the Nordic region and fresh research on customer attitude and behaviour will be presented at the conference. The specially chartered aircraft will depart late afternoon on 3 May 2006, the seminar continues on 4 May in Spain and the return flight is at noon on 5 May. Said Erik Thomsen, Chairman of the Nordic Travel Retail Group: “The feedback from last year’s Nordic Travel Retail Seminar shows a great interest in an update of the AIM Nielsen Nordic Research Project from 2004. Consequently, a follow-up on the research project will be carried out before the seminar next year.”

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Thursday 15 December 2005

He continued: “The evaluation of the AIM 2004 Survey shows that a number of companies operating in the Nordic area have used the AIM Report to rethink or change their businesses. The most positive part of the evaluation is that the companies have indicated that they are ready to share the experiences and lessons learned.” The 2006 conference will be hosted by a local operator, charter carrier MyTravel Airways, at the Sunwing Resort in Cala Bona, on the east coast of Mallorca. The flight from Copenhagen to Mallorca will be on one of the airline’s newest aircraft – the 217-seater Airbus A321. MyTravel Airways said it would ensure that all participants are offered the opportunity to try the full charter airline experience, including the pre-order service which in a few years will celebrate its 25th anniversary. This year, an increased number of members can participate and a limited number of seats are still available. The price will be approximately €575, including the return flight from Copenhagen, accommodation and all meals, as well as participation in the conference. One complementary delegate per member is sponsored by the Nordic Travel Retail Group free of charge. MyTravel Airways was chosen as this year’s host after research showed that charter airlines’ share of Nordic travel retail sales exceeds 11%. Charter carriers are now recognised as an important part of the Nordic way of travelling, said the organisers. For details on the Nordic Travel Retail Group go to http://www.nordictravelretail.org or call the Nordic Travel Retail Group on +45 70 23 00 53.

SINGAPORE. Tax Free World Association (TFWA) said that after a “thorough and exhaustive process”, its Management Committee has chosen Singapore as the city to host the TFWA Asia Pacific and GATE ONE events in 2007, 2008 and possibly 2009. Participant feedback was fairly equally split between moving the events to a new location and staying in Singapore, TFWA said, but 85% of those interviewed said they would not favour moving to another city if it meant a greater than +10% price increase for exhibition space, related services and hotels. In addition, “given the strong interest in the Chinese duty free market”, TFWA’s Management Committee has given a mandate to the TFWA executive team to explore the possibility of hosting a conference in Shanghai in 2007, the association said. It claimed: “A number of key duty free and travel organisations in China and the region, including DFS Group, Sunrise and the Asia Pacific Travel Retail Association, have already expressed their strong support for such a venture. The project will be developed in the coming months.” GATE ONE and TFWA Asia Pacific 2006 will be held in the Singapore Suntec Centre on 15–17 May and 16–19 May respectively.

UAE.

Airports Council International, in association with the Department of Civil Aviation Abu Dhabi, is holding the second International Conference and Exhibition on ‘Airport Service Quality’. The event will take place at the Beach Rotana Hotel & Towers in Abu Dhabi from 5 to 7 March 2006. The conference theme is ‘Why excellent service pays off’. Speakers include Ylva Persson, Global Marketing Director, Bacardi Global Travel Retail; Mark Entwistle, Executive Partner, Pragma Consulting, ARC Airport Retail Consultants; Peter Mawson, Airport Commercial Manager, NCP Ltd; Mark Crowson, Head of Business Development, International Currency Exchange; Dr Evangelos Peter Poungias, Director, Commercial and Property Activities, Hochtief AirPort; Craig Bradbrook, Head of Safety, Security, Environment and Planning, Airport Authority Hong Kong; David Feldman, Managing Partner, Exambela Consulting and The Moodie Report Publisher Martin Moodie, plus speakers from influential figures in airport service quality from Asia and Europe. The Gala Dinner also includes the international 2005 AETRA Awards Ceremony recognising the top performers in airport customer satisfaction in 2005. An ‘early-bird registration’ fee is available until 31 December. Please visit www.aci.aero for full details.

UAE.

The third Middle East Exclusive luxury and duty free exhibition held in Dubai on 6–8 December attracted a +6.5% year-on-year increase in visitors to 2144, the organisers Channels Exhibitions said. an increase of 6.5% over last years. "Not only was this an excellent achievement, but many exhibitors also commented on how the quality of delegate had improved dramatically ensuring that only serious duty free and travel retail professionals were present," said a spokesman. Look out for a full pictorial report next week on Middle East Exclusive, the Middle East Duty Free Association Conference and the Dubai Duty Free World Golf Cup.

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The Moodie Report

THE MOODIE REPORT

Thursday 15 December 2005

LETTERS TO THE EDITOR

Dear Martin I note in recent issues of The Moodie Report the Readers’ Poll regarding the TFWA Exhibition, and the suitability of Cannes as its host city. I have read the letters [in defence of Cannes – Ed] from Erik Juul-Mortensen and Harry Diehl. I have also noted the poor rating that the poll respondents have given Cannes. I do not dispute anything that Erik or Harry have said. In fact, I think that Cannes is a fantastic city. I like visiting there. I have done so many times outside of TFWA Exhibition week. I must agree, however, with the poll finding that say Cannes is expensive. I have stayed in The Carlton Hotel on many occasions and again this year (at a nightly rate of €1,150) was upset to hear that my morning cup of coffee and toast had to be charged at the full breakfast price of €30. I am happy that your question of an alternate city included Dubai. The real purpose of this letter Martin is to congratulate you for having arranged the poll, and accordingly have given opportunity to all readers to express their opinion. I hope you continue to always highlight matters of concern within our industry. Yours sincerely, Colm McLoughlin, Managing Director, Dubai Duty Free Dear Martin I just wanted to say how much I enjoyed the MEDFA conference and in particular your interchange with Mark Riches of World Duty Free. Of all the sessions I found Mark’s the most engaging, in particular his request that you and fellow journalists become more critical of the retail executions, and I think in this respect it is incumbent on all of us in the trade to become more critical in a constructive way about all of our operations whether as airport owners, retailers or suppliers. In his presentation Mark also showed an absolute obsession with the consumer. This strikes a chord in our own organisation where we refer to the consumer as “our boss”. I hope the consumer focus debate has struck a chord with TFWA. Your recent survey on Cannes costs showed a significant number of seriously disgruntled consumers which in the main focused on the exorbitant costs associated with Cannes – let’s not forget that the people attending Cannes stay in locations all over the world, many equally or more exotic, many with equally pressing pressure on capacity etc. yet which offer value for money. Kind regards, Martyn Westbury, International Travel Retail Manager, Masterfoods

Editor’s note: The debate on the value for money offered by Cannes has now been well and truly aired and both sides have had a chance to express their opinions. The Moodie Report reserves its right to reflect trade concerns and to ask questions of any industry event or issue. This will always be done in a fair and balanced way, as underlined by the extensive space given to Erik Juul-Mortensen’s and Harry Diehl’s well-articulated views in previous editions.

Thank you for your readership and support of The Moodie Report.

Martin Moodie, Editor

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