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High rentals and falling passenger traffic discourage potential bidders

High rentals and falling passenger traffic discourage potential bidders
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First Published: Wed, Apr 22 2009. 10 46 PM IST
Updated: Wed, Apr 22 2009. 10 46 PM IST
New Delhi: Declining passenger traffic and spiralling rentals are forcing potential duty-free operators to stay away from bidding for retail spaces being offered at international airports across the country.
The airports regulator Airports Authority of India, or AAI, has been forced to extend by two weeks the 17 April deadline to bid for duty free retail shops in international airports at Chennai, Ahmedabad, Kozhikode, Goa, Thiruvananthapuram, Jaipur, Lucknow and Amritsar.
A senior AAI official, who did not want to be identified, said the agency extended the bidding date to the end of April because it did not get any response from the potential bidders during the time the bid was open.
The bids invited for duty-free shops at Jaipur, Lucknow, Thiruvananthapuram and Amritsar international airports three months ago, met a similar fate when no prospective bidder submitted any proposal.
In that round, Coimbatore and Pune, however, had received bids. Dubai-based Flemingo International Ltd and state-owned India Tourism Development Corp. had bid for Coimbatore whereas Flemingo was the lone bidder for the Pune airport store.
A senior executive at a firm that operates duty-free stores across the world said many bidders stayed away because of falling air traffic at the airports in question. Escalating rentals that AAI is asking for have also made these duty-free spaces unattractive, added this person who did not want to be identified. According to the executive rentals are up three-four times in some cases. “With the falling revenues at many of the airports, it (the idea of setting up duty-free shops) does not make business sense.”
Duty-free operators have complained in the past that the three-year period for concessions to operate the stores was too short a time to make profits. However, AAI had extended the period of concession to five years this time against three. Yet, it failed to get any response from potential bidders.
“AAI is asking for far too much money in terms of the concession fee and it is out of sync with the reality,” said a senior executive at another firm that operates duty-free stores across the world. This company has not bid for any of the airports so far. “The amount they seek in terms of rents and minimum guarantees are very high.”
The AAI spokesman could not be reached for a comment.
In an effort to attract bidders, Delhi International Airport Ltd (DIAL) plans to form a joint venture with the potential global duty-free operator to set up 20,000 sq. m of retail space at the Terminal 3 of the airport. A senior DIAL official had told Mint earlier this month that falling passenger traffic was one of the major reasons for the airport developer to opt for a joint venture instead of renting it out to a duty-free operator.
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First Published: Wed, Apr 22 2009. 10 46 PM IST