Auckland Airport's duty free retailers told to drop the hard sell

UPDATED: Auckland International Airport [NZX: AIA], the country’s main gateway, said it had talked to its two duty free retailers following what it called “over-zealous competition” at the airport.

The hard-sell tactics of the duty free retailers was raised by a shareholder at the airport’s annual meeting in Auckland today and comes as the company considers bids for the upcoming eight-year duty free concession tender.

Shareholder Neville Townsley said the most unpleasant part of any overseas journey through Auckland Airport was “having to survive a phalanx of quite aggressive people when I come through duty free on my return.

“They’re armed with little more than fake sincerity and I have a perverse reaction that I won’t buy anything at that point on principle,” he said.

The airport’s general manager of retail and commercial Richard Barker said New Zealand was unusual in that it had two duty free retailers whereas most airports had one, but the Commerce Commission had said there should be competition.

The two duty free retailers at the airport are JR Duty Free and DFS Duty Free Auckland which are both part of big global chains. JR Duty Free also has concession at Christchurch and Wellington airports while another company Aelia operates at Queenstown, although owned by the same parent as Duty Free Stores.

“At times there has been over-zealous competition between the two of them. I personally don’t like it. I’ve had anecdotal feedback that it has been particularly intense a few ago but they have since modified their behaviour,” Barker said.

The most egregious behaviour occurred when one of the retailers did a significant promotion earlier this year which saw a couple of staff members from its rival overstep the mark, he said.

“We had a word to them and it stopped,” he said.

There is already an existing code of conduct the duty free retailers are expected to follow including not stepping outside their retail area to directly approach passengers as they move through the arrival and departure areas. He said while most Kiwis don’t like being approached when they walk into a store, a lot of Asian customers preferred to be greeted and guided through what's on offer.

“We’re working with the retailers to read people’s body languages and to treat different people differently.”

There were originally 10 companies bidding for the duty free concession but Barker said five to six companies ended up making a formal bid. These will be considered in the next few months and a decision made early next year. The existing two concessions end in June.

He wouldn’t say what percentage of the duty free retailers’ turnovers went back to the airport.

Chairman Henry van der Heyden confirmed the company was likely to deliver an underlying net profit after tax of between $160 million and $170 million this financial year, in line with the guidance it gave in August. He said the result would be broadly in line with the underlying net profit it recorded in the June 30 2104 financial year.

One shareholder questioned why there was not likely to be an improvement in underlying earnings. Chief executive Adrian Littlewood said shareholders had to bear in mind increased interest costs associated with the debt taken on in order to pay shareholders a $454 million capital return in April and lower growth in passenger numbers at the start of the year.

Despite that slower start to passenger growth this year compared with last year, industry feedback suggests this upcoming summer will be one of New Zealand’s busiest ever, he said. 

Directors’ fees were increased by $54,742, or 3.6 percent, to $1.4 million, two years after the last increase. The chairman’s pay will rise to $227,000 while other directors will get a rise in their base fee to $106,296 per annum from $103,000.

(BusinessDesk)

EARLIER: Auckland Airport confirms earnings guidance

Auckland International Airport [NZX: AIA], the country’s main gateway, has confirmed it’s likely to deliver an underlying net profit of between $160 million and $170 million this financial year, in line with the guidance it gave in August.

Chairman Henry van der Heyden said at the annual meeting in Auckland today, his first address to shareholders, that the result would be broadly in line with the underlying net profit the airport recorded in the June 30, 2104, financial year.

Following a strong financial performance last year which included a $454 million return of capital to shareholders in April, the company said its main focus for this financial year was continuing to implement its business strategy – Faster Higher Stronger. The strategy involves growing travel markets, strengthening its consumer business, being faster and more efficient, and investing for future growth.

Despite a slower start to passenger growth this year compared with last year, industry feedback suggests this upcoming summer will be one of New Zealand’s busiest ever, said chief executive Adrian Littlewood.

The company has been opening additional retail, food and beverage stores including a new DB bar at the international terminal and Littlewood said it planned to open several more in the next 12 months. It’s also considering bids for the duty free concession tender with a decision due early next year.  In the first few months of the year online duty free sales have been eight times higher than they were in the previous year.

It has also started the 50 percent expansion of the Ibis hotel following growth in its hotel business in recent years and is planning for a third hotel at the airport.

Littlewood reiterated plans for its 30-year vision for the airport which will see build a long-delayed second runway on airport-owned land around 2025 to cater for an expected almost trebling of passenger numbers to 40 million by 2044. The second runway may also need to be extended in 30 to 50 years to meet the needs of the larger aircraft forecast to fly into Auckland in future, he said.

The first part of the vision - a 2,500 square metre expansion of the international baggage hall - is due for completion by the end of next month. The expanded hall, the first step towards a combined domestic and international terminal, will increase net lettable area for retail stores by up to 80 percent.

Work has also begun on a concept design to expand the international terminal’s departure area to handle the forecast higher passenger numbers. The airport did a $26 million upgrade of its domestic terminal building last year which Littlewood said gave it plenty of time to develop a planned new domestic terminal.

(BusinessDesk)