Lagardère Travel Retail pledges “fresh start” for Auckland Airport duty-free offering

Flat gallop turns into a steeplechase but Auckland Airport lands a worthy winner

After Auckland Airport’s duty-free tender announcement in April 2024, The Moodie Davitt Report published an article (pictured below), dedicated in horse-racing style to the possible contenders.

At that point, most pundits would have rated at least five of our seven candidates as ‘likely’ contestants and only two, to return to racing parlance, as long shots.

Since that publication, however, the race between our seven-strong field of ‘Runners & Riders’ has turned into more of a steeplechase than a gallop on the flats, with some contenders scratched before the race, others falling and some ultimately refusing to jump. All of this is symptomatic of wider challenges in the global duty-free sector.

Lotte Duty Free, for example, seemed a sure-fire bidder in early 2024, given its regional prominence in locations such as Melbourne, Brisbane and Wellington airports. But its economic haemorrhaging back home in South Korea and struggles for profitability elsewhere put paid to those chances.

Gebr. Heinemann, long-term incumbent at Sydney Airport, seemed an even likelier contender, given its then-recent opening of two specialist stores at Auckland Airport, seen by many as a key ‘get to know you exercise’ for a later duty-free bid.

But the decline in Chinese spending on both sides of the Tasman has rightly vexed, even spooked, the German travel retailer and as that dynamic continued, the likelihood of the company bidding diminished.

Ireland’s ARI, a former Auckland incumbent under the subsequently scrapped and nonsensical dual-retailer model, ultimately weighed up the time and resources required for a bid against its chances of success and key priorities elsewhere. Its ultimate decision came as no surprise.

DFS Group, though still active in downtown Auckland at its historic Custom House location, has since gone public on its well-documented challenges elsewhere, so was a clear pre-race withdrawal.

Adani Airports, joint-venture partner in Indian travel retailer Ospree, did enter the fray as did (right into the finishing straight) GMR Airports, a growing force not included in our initial analysis.

Both are thought to have submitted compelling, forward-thinking offers but in the end the pre-race favourite Lagardère Travel Retail (minus its Australasian partner AWPL) won going away, as the racing commentators say, from GMR and a no-doubt disappointed Avolta.

Forsyth Barr Head of Research Andy Bowley, a regular commentator on Auckland Airport’s commercial revenues, opined that the nature of the new duty-free contract means the landlord will assume greater risk than the concessions (then plural) awarded in 2015.

“While we understand that minimum annual guarantees will remain a feature, Auckland Airport will share pax risk with Lagardère, similar to the current concession,” he wrote.

“Auckland Airport has provided no details on the financial implications of the new duty-free concession but continues to target a return of its retail income per total pax to FY19 levels.

“FY24 retail income per total pax was NZ$10.16/pax (US$5.91), -7% lower than in FY19,” he continued before adding optimistically, “AIA is unlikely to close this gap in FY26 given anticipated disruption from a full refurbishment of all duty-free stores, including a major transformation of departures, but should do from FY27.”

Lagardère Travel Retail will be doing everything in its considerable power to ensure that the latter prediction comes true and 2027 onwards turns into a prolonged annual victory lap following an exciting, at times dramatic, race.

TENDER ALERT 

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