IRELAND. Aer Rianta International (ARI) today reported full-year results for 2020, with its international business recording a group loss after tax of €66.5 million due to the impact of COVID-19. This compared to a profit of €13 million in 2019.
The figures relate to ARI’s overseas businesses, which includes ARI’s share of losses from parent company DAA’s 20% stake in Düsseldorf Airport, but do not include the performance of ARI’s Irish operations at Dublin and Cork airports. (Profit figures for ARI’s operations in Ireland are incorporated in the overall performance of the state-owned group.)
The investment in Düsseldorf Airport accounted for losses of €26 million during the year, but all other ARI locations were also affected by the pandemic.
“Like all of our peers in the global travel retail sector, ARI had a very difficult year in 2020,” said ARI Chief Executive Ray Hernan. “Our turnover for last year was affected by the pandemic in all locations, and we saw significant disruption due to travel restrictions and border closures. All of our outlets with the exception of Bahrain Duty Free and Qatar Distribution Centre were closed for a time during 2020, some for extended periods.”
ARI’s retail activities internationally include direct or indirect interests in 14 countries across North America, Europe, the Middle East, and Asia Pacific. It also holds DAA’s shareholdings in Düsseldorf Airport, and in Hermes Airports, which operates Larnaca and Paphos airports in Cyprus.
“Given the major fall in turnover that we saw across all markets, the main focus for the year was managing our cash burn and ensuring that we had liquidity,” Hernan said. “We took swift and decisive action in terms of reducing costs, but that was what was necessary to protect the business” he added.
“Difficult decisions were taken in 2020 to ensure the long-term viability of the ARI business. New organisation structures are now in place, but we are confident that these changes – coupled with the talented and dedicated people that we have across all locations – mean that ARI is well placed to take full advantage of the upturn in international travel when it comes.”
Hernan praised ARI’s people across the business amid the unprecedented challenges they faced during the year. “I am proud of our wonderful teams in every market in which we operate. Our people had to adapt very quickly their professional and personal lives. They did so with fortitude and good spirits, and they are a huge credit to ARI and the wider DAA Group.”
ARI said it worked with airport partners in its main markets to “share the burden”, with commercial terms renegotiated and extensions agreed for some key contracts (notably at Montreal and Muscat airports, and for its Qatar Distribution Company business; see below).
ARI also availed of Covid-related government supports in all locations in which they were available. Restructuring programmes were implemented during the year, which resulted in approximately 1,000 employees leaving the business across the ARI estate.
Hernan said that management is now focused on ensuring that its retail offer is aligned with consumer expectations in the post-COVID-19 era. “Our business is adapting and will remain agile in a travel retail environment that is likely to endure uncertainty for the foreseeable future. But we have a strong balance sheet and liquidity position, coupled with an estate of world-class, award-winning outlets, with great teams and excellent partnership relationships with our suppliers and our airports; we will be ready to drive our business on as passengers return.”
Passenger numbers at Düsseldorf Airport declined by -74% to 6.6 million last year. As part of an extensive refinancing of the airport, a €20 million subordinated loan facility was provided, some €12 million of which had been drawn down by the end of 2020.
ARI’s joint venture operations at Delhi International Airport, where ARI holds a 33.1% stake, benefited from the opening of the refurbished departures duty free store with a strong early 2020 performance. The sharp decline in international traffic since March had a severe impact on operations, it noted. “Management at Delhi Duty Free have successfully managed cash resources and are well-placed to react speedily to a recovery in passenger volumes,” said the company.
ARI Middle East (ARIME), which has business interests in Bahrain, Cyprus, Lebanon, Oman, Qatar, and Saudi Arabia had a “difficult year” in all markets, with the exception of the distribution business in Qatar, which traded in line with 2019.
ARI said: “The situation in Lebanon was particularly challenging with civil unrest, currency weakness and a catastrophic explosion in Beirut Port. However, the combination of the immediate application of cost reduction measures, coupled with relief negotiated with airports and the leveraging of new e-commerce platforms helped all locations perform better than the underlying drop in passenger volumes during the year.”
The new airport in Bahrain formally opened on 28 January and ARI said it “looks forward to continuing its long-term relationship there”. [We will bring you a major interview with Bahrain Airport Company soon -Ed.]
ARI added that its Muscat Duty Free contract has been extended “on commercial terms that will underpin a viable business there during these uncertain times”.
Trading in Qatar and Saudi Arabia held up well during 2020, it added. ARI’s investment in its Saudi Arabian business – which operates outlets at the domestic Terminal 5 at King Khalid International Airport in Riyadh – completed during the year.
Negotiations on an extension to ARIME’s contract for Qatar Distribution Company (QDC) progressed during the year, with a multi-year extension agreed. QDC is the only licensed importer, retailer and distributor of alcoholic drinks for the domestic, duty paid market in Qatar.
Through its subsidiary CTC-ARI, ARI owns the travel retail offering at Larnaca and Paphos airports in Cyprus in addition to a joint venture shareholding in the food & beverage operation at both airports. ARI’s retail operations in Cyprus had a “challenging year” due to the fall in passenger numbers. Overall passenger numbers at the two airports decreased by almost -80% to 2.3 million which also hit the airports’ operator Hermes Airports, in which ARIME has an 11% stake.
ARI said that, despite the impact of COVID-19 restrictions, the refurbishment and upgrading of retail space in Larnaca was completed on time and on budget in August 2020. “Management is confident that the business will recover quickly, underpinned by an increase in the range of global brands available, coupled with an extensive assortment of high quality local Cypriot products.”
The performance of ARI’s retail operations in Canada and Auckland, New Zealand were hit by border closures and the fall in international long-haul traffic, particularly on Chinese routes, which feature higher spending passengers. In Montréal, ARI has extended its contract, while a new ecommerce platform, The Loop, was launched in English and French in Montréal during the second half of last year.
In Auckland, ARI is working with Auckland Airport to develop a domestic duty paid offering and also collaborated on its ecommerce platform, while preparing for a reopening of the borders. The key Trans-Tasman corridor between New Zealand and Australia re-opened earlier this month, triggering a re-opening of ARI’s stores there.
During the year, as reported, ARI was awarded a five-year duty free retail concession at Tivat and Podgorica airports in Montenegro. Implementation work in Montenegro is complete, and the new store in Podgorica Airport opened recently. The store in Tivat is due to open in June.
In related news, parent company DAA, which operates Dublin and Cork airports, recorded a loss of €284 million last year due to the impact of the pandemic.
Turnover declined by -69% to €291 million last year, as passenger numbers at the two Irish airports fell by -78% to just 7.9 million, compared to 35.5 million in 2019.
“Our Irish airports have been one of the businesses that have been most negatively affected by the impact of COVID-19 over the past 13 months,” said DAA Chief Executive Dalton Philips. “Dublin and Cork airports lost 27.6 million passengers last year, which is more than 5.5 times the population of the State. The last time that Dublin and Cork airports had fewer than 8 million passengers in a calendar year was in 1994.”
The pandemic continues to have a crippling effect on the Irish aviation and tourism sectors, noted the company. In the first three months of this year, passenger numbers at Dublin and Cork airports have fallen by -92% compared to 2020.
“As vaccination levels increase, both at home and in many of our key overseas travel markets, Ireland must develop a roadmap for exiting mandatory hotel quarantine and for easing the blanket restrictions on overseas travel,” Philips said.
