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“It was very clear in the tender documents and in the contract that the projections were merely indicative and not binding and that the bidders must prepare their own projections“ |
José Manuel Fernández-Bosch Director of Commercial Services & Properties AENA Aeropuertos |
SPAIN. Airport authority AENA Aeropuertos has flatly rejected an approach from World Duty Free Group (WDFG) for a renegotiation of the “˜Lot 1′ duty free contract covering Adolfo Suárez Madrid-Barajas Airport.
As revealed by The Moodie Report yesterday, WDFG is prepared to sue the authority and/or exit the contract if negotiations fail.
Already, though, the company appears to have run into a roadblock. Asked to comment on the WDFG position, AENA Aeropuertos Director of Commercial Services & Properties José Manuel Fernández-Bosch told The Moodie Report: “Yes, WDFG has sent a letter asking for renegotiation. Aena has declined to enter into a negotiation. The contract was awarded less than two years ago in a transparent public tender process.
“WDFG put a better offer than the competitors’ ones. We do not see any reason to renegotiate the contract.”
WDFG’s profitability was seriously eroded by the combination of a big hike in rent & royalty costs and a heavy -12.1% decline in 2013 traffic in Madrid. “The concession was awarded in 2012 expecting growth from 2013 onwards but growth did not start until November 2013,” WDFG said in a statement earlier this month (see passenger traffic chart below).
As we reported yesterday, informed sources say the retailer believes AENA’s pre-tender passenger traffic projections for Madrid were misleading and much higher than those offered soon afterward when the airport operator tendered the food & beverage concessions at the airport (where Ãreas, formerly a joint venture partner with AENA, swept the board to capture all four packages).
But Bosch dismissed these claims and also pointed to a strong passenger traffic recovery in Madrid (see tables below). “It was very clear in the tender documents and in the contract that the projections were merely indicative and not binding and that the bidders must prepare their own projections to put an offer for their own venture,” Bosch said. “All the bidders played the same cards and, from what I know, many of them – including WDFG – hired external support to prepare alternative projections.
“The traffic in Madrid is growing steadily, above +7% in the last month, and this is a seven-year contract. The traffic in other Aena-WDFG airports is also growing significantly, like Barcelona (+6.9% year-to-date) or the Canary Islands airports (+8.9%).”
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Figures for September (above) and the first nine months of 2014 (below) show a steady improvement in passenger traffic across the AENA estate, including Adolfo Suárez Madrid-Barajas Airport |
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Source: AENA |
We’ll analyse the dispute further in this week’s edition of The Moodie e-Zine.
HAVE YOUR SAY: Who’s in the right here? Retailer or airport authority? Let us know your comments via the Disqus feedback forum below.
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“It is not a Spanish problem, it is a Madrid problem,” says a senior source at WDFG. This table shows WDFG’s minimum guarantees year-by-year to 2020 for Lot 1, underlining why the retailer is so wary of its commitments in 2015 (Note: The figures are adjusted to reflect future payments at late 2012 values and hence do not add up to the €753.1 million offered). Source: AENA |
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This key chart shows the rising cost of the Spanish airports minimum annual guarantee; Source: World Duty Free Group |
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Lower than expected Spanish passenger numbers, including a critical -12.1% decline at Adolfo Suarez Madrid Barajas Airport in 2013, together with increased rents led to pain in Spain for World Duty Free Group |
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More positively, core category sales growth continues to easily outstrip a welcome increase in passengers. Note the strong third quarter of 2014; Source: World Duty Free Group |
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AENA split the concessions into three lots, including debut duty free stores for the airports of A Coruña, Asturias, Federico García Lorca Granada-Jaén, Murcia-San Javier and Santander |
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A headline from El Confidencial: “˜Aldeasa declara la guerra a AENA’ (“˜Aldeasa declares war on AENA’). But it’s clear AENA is prepared to fight back |
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WDFG claims that Madrid traffic was negatively affected by AENA’s decision to raise landing fees in 2013. This chart shows combined landing/terminal charges with baggage/check-in for 2012 and 2013; Source: CAPA |
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World Duty Free Group has invested heavily in its new shops at Barcelona El Prat, Palma de Mallorca and Adolfo Suárez Madrid-Barajas airports, but believes the latter’s contractual terms are not sustainable. AENA points to a strong traffic recovery and believes the retailer must give the concession time to perform. |
