New Delhi : Mumbai International Airport Pvt. Ltd (MIAL) has awarded a contract to run duty-free shops at the new passenger terminal that is scheduled to open in September to the Aer Rianta International-Buddy Retail Pvt. Ltd combine, according to two people familiar with the matter.
Earlier this month, the airport regulator had cleared the Mumbai airport’s tariff plan for the $2.5 billion airport modernization project leading to the opening of an integrated passenger terminal for international flights, followed by a phased transition next year for domestic flights.
The terminal, which is estimated to handle 40 million passengers a year, is awarding contracts for running duty-free shops, lifestyle stores, food and beverage outlets and parking.
Contracts for duty-free shops are the most lucrative with annual revenue for the comparable Delhi airport estimated at $120 million a year.
Mumbai airport had invited bids for its duty-free shops in the new terminal, said a person with direct knowledge of the matter. The person declined to be identified as a formal announcement has not been made.
Retailers including Deepak Talwar-owned IDFS Tradings Pvt. Ltd; Aer Rianta and Buddy Retail consortium; and Nuance Group and Shoppers Stop combine, had bid for the contract. The mandate went to Aer Rianta-Buddy Retail.
“The duty-free area will be spread over 80,000 sq ft. The contract is for 11 years extendable to 15,” said the person cited above. The duty free shops will share 30% of their revenue with Mumbai airport.
A second person with direct knowledge of the matter, who also declined to be named, confirmed the development.
Consulting firm Centre for Aviation (CAPA) said in a May report that liquor is the leading duty-free category in India, accounting for 63% of sales compared with 17% globally.
CAPA expects the duty-free business in India to increase to $3.5 billion by 2021. As much as 70% of the revenue is projected to be generated from the Delhi, Mumbai, Bangalore, Hyderabad and Cochin airports.
GVK Power and Infrastructure Ltd-run Mumbai airport is expected to farm out other contracts to run services at the new terminal soon, the first person said. Mumbai airport hasn’t awarded the contracts through joint ventures as in the case of Delhi airport, a process that had come up for scrutiny by the national auditor.
Air India’s former executive director Jitender Bhargava said the airport should maximize such revenues so that the burden on passengers can be reduced. Mumbai airport is set to levy UDF (user development fee) of Rs.692 on every departing international passenger and Rs.346 on every departing domestic passenger from 1 February. Local flights will pay 40% extra from 1 April and foriegn airlines will pay 120% more for landing at the new Mumbai airport.
“It’s essential that they strike a decent balance between aero and non-aero revenues ensuring that they maximize it and contracts are given out on merit and pure commercial considerations. In fact, these revenues should be benchmarked against airport of similar capacity so that burden on passengers and airlines is the least,” Bhargava said, adding that the opening of the new Mumbai terminal is expected to reduce “the hassles passengers face, particularly long queues.”