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TheMoodieReport.com Duty free industry woes intensify amid terror alert; Dominican Republic stops sales; BA withdraws service; InterBaires hit – 11/08/06
Source: ©The Moodie Report
By Martin Moodie
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Enrique Urioste, CEO, Interbaires: Around 4-5% of sales are being lost daily by the banning of liquid or gel-related items on US flights
Photo by Salina Christmas
INTERNATIONAL. The impact of this week’s unprecedented terror alert in the UK on the duty free industry is intensifying around the world.

Luis Sansón of Tienda Ritana Duty Free in the Dominican Republic advised The Moodie Report that all sales of liquor and fragrances have now been banned for all flights, not just those to the US.

At Puerto Plata`s International Airport “cigarettes are the only item we sold yesterday” he said.

“Hopefully the ban, will be eliminated or reduced soon, as it has affected the sales of all the duty free stores operators,” Sansón said.

As reported earlier, British Airways has today withdrawn its entire duty and tax free range from all flights, preferring to give priority to serving passengers food and drink.

In Argentina, Enrique Urioste, CEO of airport retailer Interbaires said that around 4-5% of sales were being lost daily by the banning of liquid or gel-related items on US flights (affecting wine, spirits, fragrances and cosmetics). But the impact was actually much bigger than that he said, due to the growing “paranoia” among passengers using the airport.

"If we isolate US destination flights then it would only be 4-5% of sales because passengers on those flights usually buy more sunglasses and accessories. But the overall effect is much worse."
Enrique Urioste, CEO, InterBaires
“The impact on the business started yesterday. If we isolate US destination flights and the banned products then it would only be 4-5% of sales because passengers on those flights usually buy more sunglasses and accessories. But the overall effect is much worse,” he said.

“Yesterday non-American carriers going to the US added the restrictive measures as well.”

Urioste said the company is investigating various security measures that will allow it to sell to all passengers in future. He said he was anxious to talk to counterparts around the world about the way forward.

Other retailers have already begun discussions with national authorities and with airlines, in a bid to overcome the new regulations. At Dublin Airport, Aer Rianta Retail is examining how it might package duty free purchases and deliver them to aircraft for transport in the hold, to be collected by passengers on arrival at their destination.

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In the US, the International Association of Airport Duty Free Stores is urgently seeking clarification from the Transportation Security Administration (TSA) on whether it can alter the delivery process from airport stores to aircraft.

IAADFS Executive Director Michael Payne tells The Moodie Report: “The situation is very fluid and there is no consistent practice or enforcement of particular measures at the moment. It really depends on how the local authorities, operators and TSA people on the ground are working together. In those situations where they have the opportunity to sit down, talk and arrive at a workable solution, it seems the outcomes are satisfactory for the business.

“Some locations are allowing planeside delivery from the stores, some are even allowing cash and carry, but there is real variation in what is being implemented. There are even flights where crew are taking purchases and handing them to passengers onboard.”

“Our priority is to talk to the TSA and to get an accurate picture of how things are evolving. As an industry we need to reinforce the security of duty free, which is incredibly well regulated.”

"Canadian airside stores are prohibited from selling any liquids, including Canada’s most popular export, maple syrup."

HDS Retail, which operates more than 100 Relay airport shops in Canada and the US, reports that it is being hit hard by the restrictions. President and CEO Jean-Baptiste Morin says the ban on products allowed onboard has “been a major hit for us.”

He estimates losses of around US$30,000 a day in beverage sales, a business with annual revenues of US$10-15 million a year. Two of the group’s Fruits and Passions airport stores (one in Toronto, one in Montreal), which carry beauty items, have had to shut down, as most products contain liquid. Morin says each store sold approximately US$5,000 a day in sales.

Aside from the banning of beverages, health and beauty aids sold at the company’s stores are also left sitting on the shelves. Morin estimates the prohibited items make up 15% of Relay’s store stock.

Morin says the restrictions imposed by the Canadian authorities are even tighter than in the US, but adds: "What is a bit frustrating is there is no consensus on what measures must be enforced.”

He says beverages in some US airside stores can be sold, however, a sign warns passengers that they must be consumed before boarding. Canadian airside stores are prohibited from selling any liquids, including Canada’s most popular export, maple syrup. “In some cases, we’ve just removed stock from the shelves,” he says. Morin says maple syrup was “the top seller” in the gourmet and souvenir category.

When asked when he thought some of the restrictions might be lifted, he says: “Your guess is as good as mine. We are hoping for a more flexible situation.”

HDS is part of the same group as French travel retailer Aelia, which operates duty free stores at Paris Charles de Gaulle and Orly airports, among others. Aelia Vice-President Organisation and Development Ambroise Fondeur says: "The French authorities have banned the sales of liquor and perfumes on all flights going to the US, UK and Israel. We are obviously monitoring the situation very closely. We anticipate things will evolve in the coming days but have no visibility on how long it will last."

Fraport confirms to The Moodie Report that liquor and fragrances cannot be sold to passengers travelling to the US or to British Airways passengers travelling to the UK. US and UK passengers make up 20% of all traffic at Frankfurt so the airport is keen to see the situation ease.

Gebr Heinemann co-owner Gunnar Heinemann said in an interview with German weekly Der Spiegel on Friday: “This affects us quite severely. We can just be thankful that the plot was discovered in time.”

Should the restrictions be widened beyond US-bound flights, said Heinemann, it would provide a big headache for the business. Fragrances and cosmetics are 40-50% of Heinemann sales, he said, with liquor a further 20%.

But he also backed the industry stance that duty free remains a safe, secure environment. The business has long been used to special packaging and extra security measures imposed on its products, he said. “We have a security system that means nobody can tamper with products in our stores,” he said.

Click here for our overnight global round-up of the crisis' impact on duty free, constantly updated through the day.