THE contract under which Aer Rianta will manage the duty free and liquor shops at Hong Kong's new airport is the largest of its kind ever awarded in the world the Hong Kong Airport Authority said yesterday, when officially awarding the contract.
Aer Rianta will operate 12 duty free stores under the concession which was awarded to Sky Connection, a joint venture between the Lia Sun and New World groups. Aer Rianta will not have any equity in this joint venture, but its chief executive, Mr Derek Keogh, told The Irish Times yesterday that Aer Rianta will be responsible for the management of the shops and in charge of all buying and selling of merchandise.
New World is a Hong Kong conglomerate with property interests in the region, while Lia Sun also has extensive property interests and owns the Century Hotel group and the Crocodile Clothing company.
Mr Keogh would not he drawn on the terms of its management contract with Sky Connection, hut said that it would he a combination of a basic management fee and an incentive scheme related to the level of sales. He added that, based on passenger and spending estimates, Aer Rianta and its partners expect annual sales of $250 million (almost £165 million).
This is by far the biggest contract Aer Rianta International has won in the duty free world, and is as much as ARI's dutyfree sales at Moscow Airport and the Channel Tunnel combined. Last year Aer Rianta International had managed sales of £251 million and this will rise to over £400 million in a full year when the Hong Kong contract comes on stream next April.
Mr Keogh said that the Hong Kong airport dutyfree contract will make Aer Rianta definitely the third biggest dutyfree operator in the world, and possibly second biggest. Mr Fred Chiu, head of the retail department of the airport authority, said competition for the dutyfree licence was very keen". The contract will apply for 62 months from April next year, the date the Chep Lak Kok airport with its huge Sky Mall shopping area is scheduled to open. The terminal is 1.2 kilometres long and will have a startup capacity of 40 million and an eventual capacity of 60 million passengers a year. In contrast, Dublin Airport handles just over 9 million passengers.
"Aer Rianta International already has a consultancy contract to operate dutyfree shops at Beijing airport and would manage the dutyfree shops in the two largest and most significant air ports in China," an Aer Rianta spokesman said, referring to the fact that Hong Kong reverts to China on July 1st.
Aer Rianta is now looking at possible management or consultancy contracts at Beijing's new international airport terminal, which is currently under construction, and at Shanghai, Dalien and Guangzhou.
The group already runs or manages dutyfree shops in Beijing, Moscow, St Petersburg, Vybourg, Kiev, Bahrain, Kuwait, Cyprus and the Channel Tunnel. Mr Keogh said that Aer Rianta will also run the dutyfree operations at Damascus and Beirut airports when these come on stream.
This major breakthrough in the Asian dutyfree market, first reported in The Irish Times yesterday, comes at a time when Aer Rianta is facing what its chairman Mr Noel Hanlon described as "a major challenge" from the threatened abolition of dutyfree within the European Union in 1999.
The Irish Ambassador to China, Mr Joe Hayes, said in Beijing yesterday that Aer Rianta's success clearly demonstrates the opportunities that exist here for Irish companies. It was `fortuitous' that the news coincided with the meeting in Beijing this week of the 5th Sino Irish Joint Commission on Economic, Industrial, Scientific, and Technological Cooperation, he said.
