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Spanish airports operator Aena has made awards in four of the six concession packages for the management of duty-free shops across the entire country, covering 27 airports in total. The initial $19 billion tender was launched in December, and today’s announcement means a new operator has entered the Spanish duty-free market.
Two of the six lots received no bids and will have to be re-tendered while three out of the rest—covering 23 airports—have been awarded to the incumbent Dufry as follows: Andalusia-Mediterranean (which includes the key airport of Málaga); the Canary Islands to Canariensis (La Sociedad de Distribución Comercial Aeroportuaria de Canarias) a Dufry company; and the Balearic Islands.
Meanwhile, the ‘Northern Airports’ lot which includes airports in Galicia, Asturias, Cantabria and the Basque Country have been won by Lagardère Travel Retail giving the French duty-free operator a foothold in the Spanish duty-free market for the first time. Prior to this, the company mainly had some fashion and news stores in the country’s airports.
Although airports in the north of Spain are not in high demand compared to the southern gateways that offer access to Spain’s popular seaside resorts, Bilbao was ranked 12th in the country with 5.9 million passengers in 2019, and Santiago de Compostela processed 2.9 million.
Based on these four awards, Dufry retains the lions share of the duty-free business at Spanish airports. So far, eight of the top 10 gateways in 2019—Palma De Mallorca, Málaga–Costa Del Sol, Alicante–Elche, Gran Canaria, Tenerife South, Valencia, Ibiza, and Sevilla—remain in Dufry’s hands and they handled over 110 million passengers in 2019.
However, the busiest airports in Spain—olfo Suárez Madrid–Barajas and Barcelona–El Prat—which carried more than 114 million passengers between them pre-pandemic, did not attract bids for their valuable duty-free concessions, probably because the financial requirements were so high. Both will be re-tendered.
In a statement, Aena said it would launch a new process for Madrid and Catalonia (including Barcelona, Girona, and Reus airports) “with the same technical-financial conditions of the former tender.” This strategy risks getting the same result as last time around.
The two packages represent 44% of the total minimum annual guaranteed (MAG) rents set as a base for the tender. According to Banco Sabadell “this could mean a total of about €190 million annually”, or about $236 million, which is 4% of Aena’s total annual revenue.
Sabadell said that despite the failure to get bids for its top two airports, the impact on Aena, for now, is limited in that current concessions held by Dufry do not expire until October 2023 and can—contractually—be continued for a further maximum period of six months after termination (i.e. until April 2024).
Nevertheless, with such a large slice of revenue at stake, it is surprising that Aena is going into a second round using exactly the same terms. If the process draws another blank, Aena will have to review the conditions it has set, but it is hoping the lure of fast-reviving traffic and its decision to invite all 13 duty-free commercial operators that had originally shown an interest in the concessions, to take part again, will ensure some concrete bids.
Regrouping the bidders
The initial line-up consisted of European operators Heinemann, Smartseller, Lagardère, Aer Rianta, Dufry, Canariensis and DF; Middle East and Asian players Bahrain Duty Free, Hotel Shilla from South Korea, India’s GMR Group, Setur in Turkey, and China Duty Free Group; and the southern U.S. border retailer UETA (part of Duty Free Americas).
In the first quarter of 2023, Aena’s passenger traffic equaled pre-pandemic levels in the same period (at 100.6%) including non-Spanish locations such as London Luton Airport and gateways in the northeast of Brazil. Meanwhile, higher per-head spending meant that commercial sales improved by more than 12% versus the same quarter in 2019.
Earlier this year, analysis from travel retail research agency m1nd-set indicated that the theoretical value of the Spanish airport travel retail market would rise from just over $1 billion in 2022 to $1.35 billion by 2025. However, the 31% increase is much smaller than markets like the U.K. and Germany with respective growth of 41% and 42%.
The four packages awarded today across 23 airports account for 56% of the total MAG set for the duty-free shops tender. Aena said that the bids exceeded the rents set in the tender by 17% (calculated as net present value of MAGs for the 12-year concession period). According to the operator, these results (for the four packages) “demonstrate the appeal of the business” which begs the question: what went wrong with the Madrid and Barcelona packages?