Guardian Unlimited Business | | Airport retailers face uncertain future

Guardian Unlimited Business | | Airport retailers face uncertain future: Airport retailers face uncertain future

Mark Tran
Friday August 11, 2006
Guardian Unlimited


New airport security measures in place following the disclosure of an alleged plot to bomb transatlantic flights pose severe challenges to retailers and airport operators, analysts said today.
WH Smith, a major airport retailer, today saw its shares dip 1.4% at 474.75p. The fall came amid fears that the measures - which forbid liquids, including bottled water, and books from being taken on flights - will hit sales.

Retail outlets are a lucrative source of revenue for airport authorities and shop chains because travellers are a captive market. Last year, outlets earned the UK airports operator BAA £800m and are its single greatest source of revenue.


Article continues

--------------------------------------------------------------------------------

--------------------------------------------------------------------------------

Heathrow, Gatwick and Manchester - all operated by BAA - are among the top 10 airports for duty free and travel retail sales.
Retailers selling alcohol and perfume face particular difficulties, at least in the short term.

According to Group Generation, which tracks the travel retail sector, worldwide sales of duty free shops totalled $27bn (£14.2bn) in 2005. Alcohol, cosmetics and perfume represented 50.5% of total sales.

"The uncertainty ... and the uneven enforcement of the ban could cause a 30 to 40% decline in sales at some stores," C Britt Beemer, the chairman of America's Research Group, told the Associated Press.

For the time being, US authorities have banned all liquids and gels from hand luggage.

While details of the alleged bombing plot remain sketchy, experts say several types of liquid explosives could have been involved.

It has been reported that explosive devices would have consisted of a liquid, a powder and an electronic detonator, possibly concealed in an iPod or mobile phone.

The setback to airport retailers follows periods of strong sales at airports. Increased security measures following the September 11 attacks on the US boosted business, with travellers forced to get to airports earlier and whiling away the extra time by shopping.

The paring back of free drinks and meals on flights also encouraged people to stock up on food and water from retailers before boarding.

Some experts expect only a short-term impact on retailers once the new regulations are clarified and shops adapt to them. For example, purchased goods could be transported to aircraft hold areas and then collected by passengers upon arrival.

"If I was WH Smith I wouldn't be too worried," said Neil Thompson, director of security at the security consultancy Red24, "there will be huge pressure from BAA and retailers to get things back to normal. Laptops and mobile phones will be allowed back on, but there will have to be second searches before you board the plane. Things will take longer, but people will accept that in these more dangerous times."