INDIA. India’s status as one of the most exciting emergent travel retail markets of the future has been underlined by intense international interest in the duty free tender for 10 airports. Today was the deadline for picking up the bid documents with the tender due to close on 17 November.
According to unconfirmed local reports, nine foreign companies picked up the tender documents. Those named included Dubai-based Flemingo International, Alpha Retail, The Nuance Group, SUTL Services, DFS Group and TrueBell Marketing (a UAE-registered ships’ chandler).
Contrary to the reports, King Power Duty Free of Thailand did not express an interest but The Moodie Report has since confirmed that King Power Group of Hong Kong (a completely separate entity with no commercial ties to the Thai company) has collected the papers. One of King Power’s senior executives, Sunil Tuli, worked for the ITDC for several years and has intimate knowledge of the Indian market.
The companies are bidding for the rights to operate duty free shopping space of 1,102 sq m (11,858 sq ft) in Delhi, Mumbai, Chennai, Kolkata, Bangalore, Hyderabad, Ahmedabad, Calicut, Goa and Trichy airports, all controlled by the Airports Authority of India (AAI).
Reports said that the India Tourism Development Corporation’s (ITDC) bid was rejected due to the claimed non-payment of rents of approximately INR20 crore (US$4.3 million) during the last two to three years.
Retail space
The approximate duty free sales space (in sq m) proposed for each of the airports is indicated below:
Delhi – Arrivals 175 – Total 175
Mumbai – Arrivals 51 – Departures 535 – Total 586
Chennai – Arrivals 50 – Departures 50 – Total 100
Kolkata – Arrivals 65 – Total 65
Bangalore – Arrivals 12 – Departures 22 – Total 34
Hyderabad – Arrivals 12 – Departures 12 – Total 24
Ahmedabad – Arrivals 12 – Departures 27 – Total 39
Calicut – Arrivals 14 – Departures 15 – Total 29
Goa – Arrivals 20 – Total 20
Trichy – Arrivals 15 – Departures 15 – Total 30
AAI has also specified a separate space licence fee and royalty will make up the total rental as per the following:
Space licence fee
In the case of the duty free shops at Delhi, Mumbai, Chennai and Kolkata airports, the space licence fee is US$38.72 per sq m per month (subject to a 10% annual compound increase after completion of the first year of the licence).
This is equal to a total US$430,257 fee in year one.
In the case of the duty free shops at Bangalore, Hyderabad, Ahmedabad, Calicut, Goa and Trichy airports, the space licence fee is US$20.60 per sq m per month (subject to a 10% annual compound increase after completion of the first year of the licence).
This is equal to a total US$43,507 fee in year one.
Royalty
In the case of the duty free shops proposed at Delhi, Mumbai, Chennai and Kolkata International airports, the prospective tenderer(s) must indicate their offer on a “royalty” which shall not be less than US$4,516 per sq m per year (a minimum of US$4,181,816 per year for these airports).
In the case of the duty free shops proposed at Bangalore, Hyderabad, Ahmedabad, Calicut, Goa and Trichy airports, the prospective tenderer(s) must indicate their offer on a “royalty” which shall not be less than US$1,116 per sq m per year (a minimum of US$196,416 per year for these airports)
The concession is for a period of five years. At present, ITDC is the sole duty free retailer in the airports concerned.
Meanwhile, battle for Delhi and Mubai privatisation hots up
Several major local and international airport companies have expressed interest in the forthcoming privatisation of two of India’s key airports, Delhi and Mumbai. Bharti group, Singapore Changi Airport Enterprises, Aeroports de Paris, a Malaysian consortium led by Malaysia Airports Holdings Berhad, Fraport, Vancouver International Airport Authority (YVR) and BAA are the leading names cited in the local press this week.
They are vying for a 74% stake in the airports with the remaining 26% to be retained by the government. Delhi and Mumbai airports are the most profitable operations of the AAI. They will be managed by the joint venture for 30 years, extendable by another thirty subject to mutual agreement.
To facilitate a fast-track privatisation, Delhi and Mumbai airports have been hived off into two separate shell companies, Indira Gandhi International Airport Limited and the Chhatrapati Shivaji International Airport Company, which are currently 100% subsidiaries of AAI. A big emphasis on improved commercial facilities, particularly retail and catering, is integral to the development plans.
