Business commentary andanalysis of key developments inthe global duty free and travelretail industry for readers of The Moodie Report.

All advertisements brought toyou with Moodie Interactivity.

Fast, Factual, Free

ISSUE 31 DECEMBER 2007

The Moodie Report PLUS© ispublished by Moodie International.

Please direct any comments toMartin Moodie by e-mail:Martin@TheMoodieReport.com

Back issues can be found atwww.TheMoodieReport.com

i ns ide th i s i s sueThe best of the best ....................................1–4

Interviews of the Year ....................................5

Autogrill heats up .............................................5

London Heathrow’s ‘Five Promises’ ..............8

Incredible India ................................................9

Look out for Lagardère .................................10

Travel Retail’s 5,000 Smiles..........................11

The race for World Duty Free .......................11

The Moodie Report People of the Year ......13

From the Editor: Welcome to our annual year-end edition of The MoodieReport PLUS, in which we review the people, places, issues, openings andstories that stood out in travel retail in 2007 – and consider those thatmay feature in the New Year.

Last year we opened with the doom-laden lyrics of Steve Earle’s Jerusalem(I woke up this mornin’ and none of the news was good…), summing up agrim year dominated by so many headlines of the wrong kind.

We were preparing to close out 2007 with much more optimism aboutthe human condition, and certainly the industry’s. Then on 27 December inRawalpindi, Pakistani opposition leader Benazir Bhutto was assassinated, ablow at every level to hopes for peace, reconciliation and progress. As his-tory tells us, our industry is not isolated from such events.

The Moodie Report’s

ReviewandPreview –2007 & 2008

Maybe you ain’t walked on any highwayYou’ve just been flyin’ in the airBut if you’re on that last train to gloryYou’ll know you must have paid the fare

–Arlo Guthrie

Which retailer put the icing on the cake of a fantastic yearwith record-breaking sales on a single flight? (see page 4)

2

The Moodie Report PLUS

Besides war and terrorism (translatedso directly into travel retail by the LAGscrisis) other major challenges includethe state of the global economy (withall eyes on the fallout from the US sub-prime crisis), mounting environmentalconcerns and the rocketing cost of oil.There’s more than a whiff of recessionin the air. In fact over a quarter of con-sumers expect a global recession in2008, according to Nielsen’s latestGlobal Consumer Confidence Study,denting confidence in 21 of 48 marketssurveyed. Notably, though, Asia Pacificremains highly optimistic.

Currency is another big factor, and cor-porate and social responsibility will movefrom bit-player status to centre-stagefor our industry in 2008, we predict.Those key drivers of travel retail, passen-ger traffic and tourism, remained buoy-ant in 2007 (IATA’s estimates indicatethat international passenger traffic rose+7.3% year-on-year). Just as important-ly the growth was nicely spreadgeographically with all regions postingsolid increases, led by the Middle Eastwith a remarkable passenger gain ofaround +19%.

If you’re a brand company or a conces-sionaire, the ideal travel retail portfoliospans both established and emergentmarkets – and they don’t come muchmore emergent than India and China.2007 was India’s year, with a flurry ofconcession awards (laced with a fairdegree of controversy) which will cometo fruition next year.

2008 will see the focus swing to Chinawith The Trinity Forum taking place inShanghai on 31 March–2 April, and theopening of Beijing Capital InternationalAirport’s new T3 and ShanghaiPudong’s T2. Both will add capacity andclass in a year when the eyes of theworld will be on China as never before,thanks to the Beijing Olympics.

Those two openings will be mirrored bya flurry of equally ambitious terminal orconcourse developments in Abu Dhabi,Auckland, Bangalore, Dubai, Heathrow,Hyderabad, Incheon and Singapore inthe early part of the year.

The Moodie Report’s airmiles quota is set to soar as we plan to bring you

first-hand coverage from these andother commercial developments thatare seeing the qualitative bar in ourindustry raised as never before.

Our popular annual A–Z touches onthese and many other subjects in whatwe hope is a breezy ‘state of the nation’summary of travel retail through theclosing days of an eventful year, and aglimpse of what we think will be one ofthe most exciting, opening-packed yearsin the industry’s history.

Oh… and why the choice of the ArloGuthrie song this year? Simple. Wethink it neatly sums up the great collec-tive generosity of the travel retail indus-try, which championed a series of caus-es in 2007 – but none more so than theone hinted at in the lyric: children’s cleftcharity The Smile Train.

As we go to press it looks like someUS$350,000 has been raised to date,with much more in the pipeline during2008. Stand by for ‘Travel Retail's5,000 Smiles…’

Much of this column was penned on thethird anniversary of the Indian Oceanearthquake and tsunami, the event thatspurred travel retail’s other great fund-raising effort of recent times in SriLanka. In our perhaps rose-tinted viewwe think this industry is a far betterand nobler one than its popularimage suggests. Thanks partly– though not exclusively – toone remarkable man, DFSGroup co-founder Chuck Feeney(page 7), travel retail has donemuch good for mankind overthe past 60 years.

Perhaps it’s time that story wastold more widely. We remain ofthe view that the industry atlarge should put as much workinto public relations and com-munications as it does (oftensuperbly) to reactive lobbying.Who knows, the former mightlessen the need for the latter.

We wish all our readers ahappy, peaceful and prosperous2008.

––MMaarrttiinn MMooooddiiee,, EEddiittoorr aanndd PPuubblliisshheerr

Retail Openings of the Year: Therewere many fine new executions andissues of scale and diversity make com-parisons tough: so we’re naming threethat stood out. The question mark on

the advertising for Narita Airport’s5th Avenue challenges preconceptionsof Tokyo’s gateway. The ‘catwalk’ is arunway, neatly symbolic of this elegantenvironment, light years away from theprevious offer. The main trade criticismwas that the boutiques were too bigand greater diversity was needed. Butfor the sheer transformation in quality –our key criterion – 5th Avenue deservesinclusion.

Moodie Interactive: Click on the image above

Our other two winners are Nuance’sambitious retail offer at Toronto Pear-son International's new Pier F – agreat Sense of Place and a revolution inthe beauty offer – and La GalerieParisienne, the AdP/Aelia-run offer atParis Charles de Gaulle’s new S3 satel-lite – more Galeries Lafayette than tra-ditional French duty free store.

Terminal Opening of the Year: Therecan only be one winner here. Vancou-ver Airport’s thrilling InternationalTerminal expansion, opened in June, isquite simply one of the world’s mostextraordinary airport developments. Themany highlights include a show-stopping114,000-litre aquarium and the magnifi-cent Fog Woman and Raven carving byFirst Nations artist Dempsey Bob.

It’s all woven into an eclectic tapestrythat gives the terminal a unique Sense ofPlace – the perfect introduction or fare-well to a beautiful city, region and country.

Conference of the Year: We hope thatour Trinity Forum joint venture withACI in Dubai was right up there but thegong goes deservedly to the openingconference at TFWA World Exhibition.The combination of an acidic, challeng-

ing external view (Mary Portas) with agenuinely big-name keynote speaker(the first man on the moon, Neil Arm-strong), linked to strong industryaddresses from TFWA President ErikJuul-Mortensen (latterly showing all thespirit of a good Danish aquavit in theboldness of his speeches) and theETRC’s Frank O’Connell inalmost messianic mood madefor a compelling few hours..

Speech of the Year: This timewe simply have to zero in onThe Trinity Forum, such was theinspiring, enduring excellence ofDiageo travel retail boss RonAnderson’s presentation. “I’dlike to begin by saying some-thing unusual,” he began. “Pleasedon’t sell my products.”

Of course he was only talkingto those retailers who continueto sell spirits to transit passen-gers in the full knowledge thatthe items will be confiscated –but he had the audience’s atten-tion, and never let it slip after-wards in a searing combinationof chastisement and pathfinding.Wonderful stuff.

Joining him in our dual award for 2007is Wang Li, the teenage girl from Chinawho was the first child in that countryto have her cleft palate operation fund-ed by The Smile Train.

Her speech at October’s ‘Turning Tearsinto Smiles’ charity dinner in HongKong – in which she talked of heranguish in crying herself to sleep foryears as a child because of her condi-tion – was almost unbearably moving.

Honorary mentions too to retail guruMary Portas at TFWA; to ‘customerexperience expert’ Shaun Smith, whoheld the audience expertly during adaunting 90-minute solo session atMEDFA; and from the same event thebeautifully crafted speech fromEmirates Airline’s Senior Vice PresidentService Delivery Terry Daly – if youwant to understand the inflight retailbusiness and care about its future, beg,borrow or steal a copy of his address.

Destination Merchandise Store ofthe Year: We liked Aldeasa’s ‘ThinkingEspaña’, and we have a special place inour heart for Tourvest’s ‘Out of Africa’at Cape Town International Airport andJohannesburg; but this year’s awardgoes to the extraordinary ‘Café Britt’at Lima Jorge Chávez International Air-port, a magic emporium of Peruvianproducts, crafts and culture.

3

The Moodie Report PLUS

Moodie Interactive: Click on the image above

‘Beyond, every day’ is the nice tagline used by Vancouver Airportto capture the sense of wonder in its expanded InternationalTerminal. This little boy, entranced by the aquarium, seems to agree.

Airline Retailer of the Year: KoreanAir wins our vote for the third yearyear running, having delivered on whatseemed an optimistic pledge to growthe business from US$170 million in2006 to US$200 million in 2007.That’s an incredible number, driven byan ability to generate extraordinaryspends on individual flights – such asthe US$40,968 on KAL flight KE906from Frankfurt to Incheon on 20 June(see picture, right).

Like all its great peers – Emirates andThomsonfly primary among them –Korean Air recognises the critical make-or-break role played by cabin crew,ensuring that it recognises and rewardsin equal measure. And like other topexponents of the inflight ‘brochure’,including British Airways, Virgin, Emi-rates, Cathay Pacific, Singapore Airlinesand Qatar Airways (see next category),it has elevated that media format to awhole new level – and, incredibly, itdoes it monthly.

Inflight Retail Magazine of the Year:Qatar Airways’ Shopping Extravaganza.As publishers we love the productionvalues of this gorgeous publication – qual-ity paper, photography, section dividers(art-house transparent paper) and sign-posting. The offer is pretty good too…

Launch of the Year: For sheer theatrewe can’t look past Pernod Ricard’sunveiling of Chivas Regal 25yo. Fromthe spectacular moment of the NewYork Public Library unveiling – piped inby 25 members of the New York CityFire Department – to the launch nextday at DFS Group’s store at New YorkJFK Airport and the subsequent‘around the world’ journey of the firstbottle to the DFS store at SingaporeChangi Airport, this was the most bril-liantly choreographed launch we canrecall. Truly Regal in fact.

Promotion of the Year: So many fan-tastic contenders that any selection isinevitably subjective. But three stoodout for us, and we’ll award them ashared first place. The first was fromEmirates, in partnership with Mont-blanc and the latter’s local duty freerepresentative Visions, which offeredpassengers the chance to purchase aUS$1 million diamond Montblanc

jewellery set in aid of The UnitedNations Children’s Fund (UNICEF).Travel retail with conscience.

The next was the (Frontier Award-winning) Bacardi Mojito Lifestyle Expe-rience which gave an estimated 250,000travellers the opportunity to sample aBacardi Mojito in a delightfully interactiveand hugely successful approach.Travel retail with spirit.

And the third of our winnerswas Dubai Duty Free’s 24thanniversary day promotion on24 December, which saw a -24% discount off many items.The result? An astonishing+56% year-on-year increaseover 2006 (itself a record day)to a whopping US$12.6 million insales over a, yes, 24-hour period.Travel retail with a flourish.

Food & Beverage Story ofthe Year: Only one possiblecontender here, and that isBAA’s mighty coup in securinga partnership with the UK’scontroversial superstar of chef-dom Gordon Ramsay to open a‘Plane Food’ restaurant in thenew Heathrow T5 which opens

in March. You’ll be able to book a table,and partake of a leisurely five-coursemeal – or a time-guaranteed menu forthose with an imminent flight to catch –while taking in some of the most amaz-ing views in the aviation world.

The world’s first Michelin-starred air-port restaurant? Don’t bet against it.

4

The Moodie Report PLUS

A Premier Crew vintage: Korean Air management (led by HeatherCho, in the centre of the back row) and cabin crew celebrate theamazing US$40,968 racked up in sales onboard a single flightfrom Frankfurt to Incheon on 20 June

Moodie Interactive: Click on the image above

1) Lunch with Stuart Bull: It’s notoften one gets the chance to meet aman from Mars. But we were talkingconfectionery, not planets, in an inter-view that underlined why the humanfactor remains of crucial importance ina corporatised world. A wonderfulinsight into a man who walks, talks, andoccasionally eats, his category.

2) Rémy Gomez’s bearable lightnessof being: The President of innovativebeauty house Beauté Prestige Interna-tional (BPI) talked beguilingly about his

love of ballet (he danced professionally)as well as business, mixing Prokofiev’sRomeo and Juliet and Debussy’s Préludeà l’Après-midi d’un Faune with keenstrategic insights into BPI’s famed trio ofdesigner brands. Compelling stuff withnot a false step across either discipline.

3) Breeda McLoughlin – ‘A Woman’sHeart’: Yes that’s Breeda, not husbandColm, in the limelight for once. Herinterview in our book The World Roversis one of the most human we have everdone – a fantastic tale of a young

woman transplanted 24 years ago intoa culture unlike anything a lass from thewest of Ireland had ever heard of, letalone experienced. Anyone who onlysees the glitzy towers of modern-dayDubai should read this interview for aglimpse at the foundation stones.

4) From Russia with love – MichaelCashin: Another selection from manyworthy candidates in The World Rovers.But we particularly loved this rollickingpioneer’s tale of duty free on the edge –if nothing else read it for the hilarioustrue-life anecdote about a tailor’s dummyand a few million dollars in cash…

5

The Moodie Report PLUS

The Moodie Report’s Interviews of the Year

AAAAAbu Dhabi Airports Company: DanCappell’s late 2007 return to his oldstamping ground as General ManagerDuty Free coincided with a hectic scheduleof terminal and commercial developmentsin the UAE capital. Awash with fundsand ambition in equal measure, the fledg-ing airports group is determined to cre-ate an airport of world class. To ensurethat happens a US$9 billion investmentprogramme is under way, designed totriple passenger capacity by 2011. Theexcitement kicks off with the opening ofthe new T3 in the second quarter.

Autogrill: Italy’s travel retail-to-cateringgiant grabbed some of the biggest head-lines of 2007, particularly with its sur-prise acquisition of Alpha AirportsGroup, and we think it will generateplenty more in 2008. The Milan-basedgroup’s ownership of Alpha, Aldeasa(50%) and food & beverage powerhouseHMSHost places it firmly in the top ech-elon of airport concession companiestoday. And its ambitions are clearly notsated. CEO Gianmario Tondato da Ruoshas made it clear he will acquire theremaining 50% of Aldeasa once ImperialTobacco (as seems inevitable) finalisesits merger with Altadis, co-owner ofthe Spanish travel retailer. Autogrill isvirtually certain to be a front-runner inthe race for World Duty Free (also seeW). The synergies between Aldeasa,Alpha and World Duty Free are obvious– and the resultant savings could spur avery aggressive bid indeed.

Aéroports de Paris and Aelia: Junesaw one of the best openings of the yearwhen Aéroports de Paris (AdP) inaugu-rated its new S3 boarding satellite atCharles de Gaulle Airport. The key retailspace, La Galerie Parisienne, is operatedthrough the AdP/Aelia alliance Sociétéde Distribution Aéroportuaire and theclose collaboration between airportcompany and retailer shows. Not onlyare the stores among the largest andmost user-friendly in the French airportsnetwork, but commercial considerationswere at the heart of discussions overthe design and layout of the new termi-nal – an overdue first in Paris airportretail terms. Plus there’s a real Sense ofPlace in the signature beautyand liquor outlets, which areunmistakably French in styleand offer.

Arrivals shopping will be one ofthe key industry dynamics of thenext decade. Environmental, reg-ulatory, security and economicconcerns, which could haveentirely the opposite effect onDepartures duty free, could andshould spur the growth ofArrivals shopping – an ideawhose time has really come. Itwill take visionaries and regu-latory change for duty freeArrivals shopping in EU Europe,but come it must. The big twoopenings for 2008 are in Auck-land and Dubai where remark-able space of 1,600sq m and2,000sq m, respectively, hasbeen set aside for Arrivals shops.

BBBBBangalore: It’s almost green light timefor the greenfield airport that is set toplay a lead role in the transformation ofIndia’s aviation, retail and food & bever-age landscape. If the execution matchesthe vision – and we believe it will – thenthe consumer experience and commercialrevenue benefits will surely follow.

Bangkok battleground: The opening ofBangkok Suvarnabhumi Airport in Sep-tember 2006 was supposed to herald anew commercial era for Thailand’s air-ports. And, in the design of the stores

Moodie Interactive: Click on the image above

and the quality of the retail and food &beverage offer, it did. But the darkest ofclouds has hung over the city’s brightnew gateway since Airports of Thailandannounced in March that it was termi-nating duty free retailer and mastercommercial concessionaire King PowerThailand’s contracts. King Power in turnhas sued the airport authority forUS$2.1 billion and continues to operateits stores at Bangkok as thebattleground moves to the Thai courts.Chairman Vichai Raksriaksorn has main-tained a dignified silence through themost difficult days of his working life. Inthe wake of the recent elections –seemingly good news for Vichai – let’shope 2008 brings a swift and positiveresolution for all sides.

Brazil: One of the world’s greatuntapped travel and tourism markets isfinally realising its potential. Held backfor years by lack of capacity and invest-ment at its airports and by an underde-veloped tourism infrastructure, Brazilnow faces the future with fresh confi-dence. National airports authorityInfraero has pledged billions of dollarsin airport investment across this vastcountry – good news for dominant trav-el retailer Dufry South America. Buoyedby a resurgent Real, confidence amongBrazilian consumers and refurbishmentsat key Arrivals stores, sales (much of itdriven by Brazil’s airport shops) in thefirst nine months of 2007 rose by+37%. We expect the rise and rise ofBrazil to be one of the great industrystories of the next five years.

CCCCChangi T3: The countdown is nearlycomplete. One of the world’s most antic-ipated new air terminals is about to open(9 January) and if passengers are evenhalf as wowed as The Moodie Reportwas during a recent preview tourthey’re in for something special. It’s anoutstandingly harmonious blend of thecommercial and the cultural, the inter-national and the idiosyncratic, all arisingout of four key concepts – clarity, naturallight, external views and maintainability.You can add commerciality to that mix,particularly a great food & beverageoffer and a retail proposition with amarked focus on exclusivity.

Copenhagen Airport: One of Europe’smost commercially driven airportsgained a vibrant new look for its coreretail operations this summer whenGebr Heinemann opened its 2,500sq manchor duty free store. The retailer hasfollowed through spectacularly on itspledge to introduce “more events, abigger showcase for brands and newhigh-end concepts” to Copenhagen’svast walk-through tax andduty free store, Gebr Heine-mann’s biggest ever invest-ment in airport retailing. Thecore principles behind thestore’s design – visibility, dif-ferentiation and temptation –are an ideal template for anyretailer seeking to entice thetravelling shopper.

Consolidation: The pace ofretailer consolidation gainedfresh impetus during 2007 andwill continue through 2008.Autogrill’s 110 pence per shareacquisition of Alpha AirportsGroup was the stand-out eventwhile the year was book-endedby two acquisitions from DufryGroup and its lead shareholderAdvent International. In Janu-ary Dufry bought the travelretail operations of the Luis

Bared Group in the Caribbean, and inDecember Advent underlined its statusas travel retail’s most powerful privateequity force by taking a majority stakein Hudson Group, one of North Ameri-ca’s biggest (and best) airport operatorsof news-stands, bookstores, cafes andspeciality retail.

But the big play awaits. See W…

6

The Moodie Report PLUS

Changi’s shining light: Terminal Three is based around four keyconcepts – clarity, natural light, external views and maintainability

Moodie Interactive: Click on the image above

DDDDDFS: The world’s top travel retailerenjoyed a good 2007. In July (to thesurprise of locals) it won the two-horserace with Nuance-owned Regency forthe exclusive duty free concession atAuckland Airport in New Zealand. Thatin turn prompted the imminent takeoverof The Nuance Group (New Zealand) byDFS, subject to regulatory clearance.

Elsewhere DFS makes its debut in Indiain early 2008, following an unexpectedyear-end bonus in the form of the dutyfree concession at Mumbai’s ChhatrapatiShivaji International Airport. The con-tract was originally awarded to the high-est bidder, the alliance between IndiaTourism Development Corporation(ITDC) and Aldeasa. But Mumbai Inter-national Airport Limited terminated thataward after a protracted period in whichthe partnership sought to renegotiate itscontract, claiming that the conditionshad changed since the bids were struck.

Enter from stage left DFS… It’s a break-through that may signal the beginning ofa third major front for the group (Japan-ese, Chinese and now Indian travellers).

Dubai Duty Free: 2008 is the 25thanniversary of the world’s third-largestduty free location. And how it’s likely tocelebrate. Last year the UAE retailerboldly predicted that it would hit US$1billion in sales in 2009. For once itsforecasting ability turned out to bewide of the mark: instead, it will smashthrough the landmark barrier a yearearly, in 2008.

Based on recent growth rates in annualsales (US$590 million in 2005, US$712million in 2006 and a predictedUS$850 million in 2007) Dubai DutyFree would probably have come close toUS$1 billion next year without adding asingle square metre of space. Instead, itwill more than double its current7,000sq m when Concourse 2 and T3open at Dubai International Airportopen next summer.

Dufry: The numbers tell their ownremarkable story. Turnover up +39%year-on-year for the first nine months of2007 to CHF1,420 million (US$1,268

million) and, more importantly, EBITDA(before other operational results) aheadby +63% to CHF179 million (US$160million). Strong organic growth (+17%),impressively balanced geographic diver-sity and a steady pipeline of acquisitionshave got Dufry bubbling nicely underCEO Julián Díaz. Don’t expect the heatto be turned down in 2008. The compa-ny is among the front-runners in thecontest for World Duty Free – a rematchof the battle with arch rival Autogrill forAldeasa is firmly on the cards thoughDíaz is too shrewd to overbid, no matterhow tantalising the prize.

EEEEEgyptair Duty Free Shops: Was thisthe year when Egypt’s huge potential asa travel, tourism and duty free locationbegan to be realised? We think so. Foryears beset by bureaucracy, red tape andthe whims of Customs officials – and hithard by terrorist attacks that have shak-en visitor confidence – duty free has sim-ply never been allowed to flourish. Untilnow. For the first time ever, EgyptairDuty Free Shops hit US$100 million inannual sales in 2007 (a milestone itpassed in mid-December) across itsEgyptian operations. Noted ChairmanCaptain Tawfik Assy: “It is a dream cometrue for us to achieve this landmark, andshows how far the business has come.”

Environment: Global warmingmeans the aviation and tourismsector will face unprecedentedscrutiny in the future. All sec-tors of the business, includingtravel retail, must pro-activelyembrace the need for change,for the sake of credibility, com-merciality and sustainability – of our industry and our planet.

Travel retail’s green credentialsremain neglible; after all it is syn-onymous with plastic bags andheavy glass bottles. The lattermay mean fuel burn but are atleast recyclable. Anyone care toargue the merits of the former…?

Eraman: 2008 is going to be abanner year for the MalaysiaAirports-owned travel retailer, oneof the companies we admire most

due to its strong sense of community,culture and place. The company has beenawarded another 30,000sq ft of retailarea at Kuala Lumpur International Air-port’s Contact Pier International and willalso move into self-run food & beverage.In related news, parent Malaysia Airportshas been given Board approval to proceedwith the two much-anticipated RetailOptimisation Projects at the SatelliteBuilding and Contact Pier International.

FFFFFeeney (Charles ‘Chuck’): ConorO’Clery’s magnificent biography of theDFS Group co-founder, ‘The BillionaireWho Wasn't: How Chuck Feeney Secret-ly Made and Gave Away a Fortune’, ismandatory reading for anyone who caresabout this industry and its history, direc-tion and morality. On one level it’s a rol-licking good read about two hustlingyoung entrepreneurs who spotted anopportunity and made up the businessplan as they went along. On another itcontains marvellously anecdotal insightinto how to identify, track, serve andprotect a market niche (the Japanese).But critically, it is also a profoundlyimportant articulation of the concept of‘giving while living’ that Feeney has longembraced. Forget every business manualyou see in your airport bookstore andbuy Feeney’s biography instead.

7

The Moodie Report PLUS

Moodie Interactive: Click on the image above

Five: As in Heathrow Terminal 5. Thelong-awaited new facility will have aprofoundly important impact on theperception of London’s perennially criti-cised gateway. It’s a marvel in archic-tectural and design terms but what getsour interest most of course is the con-sumer offer – diverse and genuinelyexciting in equal measure.

Much of that is down to the ‘FivePromises’ to which all BAA’s commer-cial partners had to sign up. The prom-ises (to the consumer) involve surpris-ing, satisfying and tempting them, whilealso respecting and simplifying theshopping experience.

There you have it, the five (not so) easypieces of travel retail – a template thatmany others could adopt.

Flemingo International: Flemingo haslargely (and deliberately) slid under thepublicity radar during its quietly impres-sive expansion in Indian airport retailingover recent years. But recent airportcontract developments allied to a pio-neering agreement to open land borderduty free stores have thrust the compa-ny into the limelight.

All eyes are on its legal challenge tobeing omitted from the duty free tenderat Mumbai’s Chhatrapati Shivaji Interna-tional Airport. The award has now beenhanded over from the ITDC/Aldeasaalliance to DFS Group. But it ain’t overuntil another F, the fat lady, sings.

GGGGGABICO: Not a name that would haverung any bells in this edition a year agobut you certainly can hear the tollingnow. The acronym stands for Global &Beijing International Co, a new entitywhich has struck a landmark, long-termsupply and retail agreement with Bei-jing Capital Airport Commercial Compa-ny. That relationship will bear importantfruit via a range of duty paid stores atBeijing Capital Airport’s long-awaitednew T3 which opens in early 2008.

Other terminals will follow in 2009 witheight other locations coming on line overthe next two years – Nanjing, Hohhot,Tianjin, Wuhan, Nanchang, Jilin, Chong-qing and Guiyang. Behind GABICO lies

B&S Global, a respected and ambitiousgrouping of Dutch companies with a com-bined turnover of around €600 million.

GMR Group: Another name to remem-ber, one likely to be in the frontline ofairport and travel retail breakthroughs inIndia – and beyond – for years to come.

Already responsible for the modernisa-tion of Delhi International Airport andthe exciting greenfield terminal in Hyder-abad (see H), the group also led a con-sortium that won an important Build –Operate – Transfer contract for SabihaGokcen International Airport in Istanbul,Turkey, ahead of intense internationalcompetition. The impressive managementteam has an acute awareness of therole of commercial revenues and of‘Trinity’ principles in maximising them.

8

The Moodie Report PLUS

Prepare to be amazed: Can this really be Heathrow – the subject of so much scorn and vitriol in recenttimes? Yes. Terminal 5 is set to transform the perception and the performance of London’s gateway.

Now that's what we call a greenfield airport: it’s a first-quartertake-off for the exciting new Hyderabad International Airport inShamshabad, being developed by the GMR-HIAL consortium

HHHHHarding Brothers: Here’s a companythat’s going places – in fact anywhere acruiseline tends to sail. The UK specialistonboard concessionaire made a series ofgains in 2007, including an all-importantstring of agreements with industry giantRoyal Caribbean Cruises Ltd. A companyon the crest of a wave of success.

Hyderabad is poised to get a new air-port on 16 March and what a facility itpromises to be. Built and operated byGMR Hyderabad International AirportLimited (GHIAL), a joint venturebetween GMR Group (63%), the Gov-ernment of Andhra Pradesh (13%), Air-ports Authority of India (13%) andMalaysia Airports Holding Berhad(11%), the new facility at Shamshabadpromises service standard levels andinfrastructure on a par with any globalbenchmark. That’s some step for India,but by partnering with world class con-cessionaires such as HMSHost and TheNuance Group/Shoppers’ Stop, GHIALhas underlined the seriousness of itsambitions. India’s second Silicon Valleyis about to get the airport it deserves.

IIIIIndia. With the greenfield openings inHyderabad and Bangalore, the ongoingmodernisations in Delhi and Mumbai,and the arrivals of several internationalconcessionaires, it’s a big, big year forIndian travel retail. There will be disap-pointments and frustrations – such is thenature of the bureaucratic beast – but thebig picture is the one that matters hereand potentially it’s very, very big indeed.The Times of India described it as ‘zoompower’, revealing that over 100 newairports are to be built in the country inso-called ‘tier-2’ cities (which in popula-tion terms would be ‘tier 1’ in almostany other land) in the next few years..

Incheon: Along with Changi’s liquor &tobacco result, the duty free and F&Btenders at the South Korean gatewaywere undoubtedly the year’s most con-troversial. The main talking points werethe ousting of DFS (political retaliationfor the Changi result in which it, as second bidder, got the nod ahead of

highest bidder Lotte Duty Free ran oneschool of thought), and Lotte missingout on perfumes & cosmetics to ShillaHotel and AK Duty Free, despite (again)bidding higher. The new incumbents willhave much to prove in 2008.

JJJJJonathan Holland & Associates:‘Chaps’ Holland as he is popularlyknown has done a remarkable job out ofcreating a pan-Asian agency companyacross both duty free and domesticmarkets. His integrity and popularity,allied to an acute market insightgleaned over many years with leadingmulti-nationals in the region has createdthe foundation from which this stillyoung Singapore-based company willsurely flourish in the years to come.

JTI: The deeply ambitious tobaccogiant has championed what we considerto be one of the best airport innovationsof recent times – the Smoking Station.“Allowing smokers to smoke, whilerespecting the rights of non-smokers” isa nice democratic catch-cry and onethat is winning plenty of converts in theairport world.

KKKKKorea, South and North, will both con-tinue to play a central role in our indus-try’s prospects during 2008. The lasttwo presidents of South Korea havepursued a softly softly policy towardNorth Korea. New man, Lee Myung-bak,looks set to take a different approach –what could broadly be described as‘carrot and stick’. Stability on the Kore-an Peninsula has direct ramifications forour business – notably on South Koreanand Japanese travel.

As for South Korea, the big industry storyat the tail end of 2007 was the KoreaCustoms Service edict that downtownoperators must do half their trade withforeign customers in the future or losetheir licences. Expect a newly aggressive,heavily targeted approach to Japaneseshoppers if downtown retailers are toget anywhere near their daunting newquotas (the balance is currently 65:35in favour of Korean shoppers).

LLLLLAGs: An ugly yet appropriate acronymfor an array of items that have causedsuch disarray in this business – namelyliquids, aerosols and gels. In the old dayslag used to be slang for a ball-and-chain-wearing criminal and the modern-dayreinterpretation has had a similarlyshackling effect, though this time onbusiness. But the industry hasn’t helpedits own case – it almost defies beliefthat 16 months after the aviation securi-ty crisis erupted some retailers are stillselling such items to travellers in the fullknowledge that they will never be ableto keep them or give them as gifts.

The ETRC reckons that tens of thousandsof LAGs are still being confiscated at EUairports from passengers in transit daily.That’s a 50–60% reduction on earlierlevels but as ETRC President FrankO’Connell points out: “This only meanswe have become better at persuadingcustomers NOT to buy in our stores.”

There was some brighter news at year-end, when the EU Commission adopteda regulation allowing passengers fromSingapore to take their LAGs purchaseswith them in transit through the EU’sairports. But passengers from roughly200 other states will enjoy no suchexemption, until their governmentslobby the EU for acceptance of their

9

The Moodie Report PLUS

Brilliant advertising by BAAdesigned to encourageconsumer confidence – but thetrade at large is still too oftenshooting itself in the foot

aviation security regimes. In some caseshell may freeze over first. And theprospect of a Changi passenger beingallowed through, say, Heathrow’s transitpoint with his Johnnie Walker Bluewhile the Bangkok traveller has his con-fiscated should make for some interest-ing scenes at security.

Lagardère Services: We just have asneaky feeling that 2008 will be a big,big year for the French travel retailgiant whose interests embrace Aeliaand HDS Retail, the latter the parent oftwo highly acclaimed concepts in Relayand Virgin.

Note the words of Lagardère ServicesCEO Jean-Louis Nachury at September’sformal opening of Aelia’s new La GalerieParisienne operations at Paris Charlesde Gaulle S3: “There is finance availableand a willingness to expand Aelia’sinternational business. It’s our goal todevelop specialised duty free activitiesacross the world.”

Not just Aelia – in November HDS RetailAsia Pacific announced the opening ofnine stores in Shanghai Hongqiao Inter-national Airport in China under theRelay and Virgin banners.

MMMMMacau: Travel retail’s 21st goldmine ora retail gambling strip where fortunesare lost as well as won? Maybe a bit ofboth. It’s early days, probably too earlyto properly assess the retail prospectsof the established travel retailers in thespectacular Venetian – King Power, DutyFree Americas and Nuance-Watson (HK).The environment is unrivalled anywherein the world and the retail executionsare consistently good – the real test willcome with consistency of footfall intothe stores and subsequent conversionrates.

Look out too for DFS Group’s big open-ing in May at the Four Seasons Macao.DFS likes to keep its comments, like itsplans, under wraps as long as possiblebut all the internal sentiment on thisproject is of incredible excitement. Thismay leave anything the retailer hasdone, even including Okinawa andGuam, in the shade.

NNNNThe Nuance-Watson partnership, inboth Singapore and Hong Kong (andnow Macau and Mainland China), repre-sents that rarest of beings in travelretail – the successful joint venture.First rate executions every time, qualitymanagement, great partnerships withbrands and the ability to make the bestof whatever airport space is available.

0000With oil hovering around the US$100 abarrel mark as the year closed, therepercussions for the travel industry –and all its sub-sectors – are obvious.Consumer resistance towards fuel sur-charges is already manifesting itself inJapan, influencing travel destinationchoices, while greater focus on fuel burnby airlines could have serious repercus-sions for heavy items such as liquor inthe longer term.

Online retailing: Airports and airlinesin general have done well in exploitingthe power and reach of the web. Butthe widespread failure to do anythingmore than the rudimentary basicswhen it comes to retailing continues toamaze us. Has the travel retail channelbeen asleep while the whole globalexplosion of online retailing has takenplace in the past five years? If youwant to drive awareness of your stores,and footfall into them, what better,more cost-efficient way can there bethan the web?

PPPPPoland: Next time you read the ACI orIATA traffic statistics take a closer lookat Poland. There’s an extraordinarydynamic going on there. As regional air-ports boom, record passenger trafficthis year of around 19 million will hit 49million by 2020.

As a result, some US$2.8 billion has beenearmarked for investment in the coun-try’s airports over the coming five years.A country to watch – Aelia did, whichexplains its investment in Aelia Polskaand openings in Krakow and Warsaw.

Premier Portfolio, owned by AndrewWebster and Kevin Walsh, stunned theindustry – and probably themselves – bybeing named the inaugural ‘Supplier ofthe Year’ at the annual Frontier Awards.Deserved reward for an independentcompany that combines modern prod-ucts, service and supply chain manage-ment with old-fashioned virtues.

QQQQThere have been plenty of queues in theairport sector over the past year, butnot the sort that anyone wants. But wefound two ‘Qs’ that were synonymous in2007 – Qatar Airways and quality.What a fantastic job the dynamic MiddleEastern airline has done in terms ofboth its inflight offer and the innovativepassenger experience – from retail tolounges – at Doha International Air-port. As mentioned earlier, its inflightbrochure represents best practice, andthe airline itself is now one of thefastest growing in the world. It under-lined those credentials in Novemberwith an amazing US$13.5 billion aircraftorder, one that follows a previous orderof US$16 billion – combined these dealswill more than double its 58-strongfleet in the next eight years.

RRRRRussia: The great Russian duty freestory will be 20 years old in 2008 –two decades on from the opening ofMoscow Duty Free in May 1988 – butthere are many exciting chapters still towrite. When The Moodie Report visitedMoscow in August, we saw first handthe vast opportunity that the country’sair transport market presents. Considerthis: together, Moscow’s three interna-tional airports account for fewer than40 million passengers a year, two-thirdsof the volume handled by LondonHeathrow alone. But a booming econo-my fuelled by oil and gas revenues, astrong Rouble, a thriving airline marketand major investment in airport infra-structure will all help those figures sky-rocket in the years ahead. Russia alsobrought the perfect Christmas presentfor Aer Rianta International in theshape of the duty free contract at thenew Sheremetyevo T3.

10

The Moodie Report PLUS

SSSSSmile Train: A name and a charity closeto our heart in 2007 and we’re notgoing to let it slip out of the headlines in2008. The travel retail sector ralliedaround the cause with incredible gen-erosity for the ‘Turning Tears into Smiles’campaign we ran with Hugo Boss thisyear, in the process raising nearlyUS$350,000. Come with us on a further,longer-term journey into 2008 andbeyond as we seek initially to bring ‘TravelRetail Smiles’ to the faces of 5,000 chil-dren – and many more beyond that.

STEB: Our award for the industry’s ugli-est acronymn of the past 60 years, nar-rowly pipping LAGs into first place goesto the dreaded STEB –Secure TamperEvident Bag. The STEB is confirmation,if any is needed, that we have plungedheadlong down a nightmare bureaucrat-ic tunnel that not even George Orwellcould have foreseen.

TTTTTurkey: With its thriving traditionalduty free market, high average spendsand booming inbound tourism, few Euro-pean countries can match the allure ofTurkey for travel retailers. And for TheNuance Group and Gebr Heinemann,that allure only deepened in 2007. InApril, Nuance partnership Urart landed adeal that dreams are made of – a 17-year exclusive concession for duty freeat Antalya Airport worth an estimated€3.2 billion over the contract’s life. It’s aprofoundly important story for Nuance –a long-term deal in a (still) non-EU mar-ket that offers high margins and wherecore categories such as tobacco (espe-cially) and liquor remain so strong.

Gebr Heinemann is already well estab-lished in Turkey, where its shareholdingin Unifree and its joint venture withpowerful airport operator Tepe AkfenVentures has given it a dominant posi-tion at the country’s gateway, IstanbulAtatürk Airport. There, in December, thepartnership opened Europe’s largestduty free shop. The 2,500sq m outlet(plus an adjacent 700sq m store) is theresult of a €3.5 million joint investmentfrom airport and retailer.

UUUUUisge Beatha: “A modern approach toa traditional category” – that’s howCTC-ARI Airports General ManagerGerry Crawford summed up his brain-child, the Frontier Award-winning maltwhisky retail concept that opened atLarnaca and Pafos airports in April.Hooked by the diversity and range ofwhiskies on offer at some of the stand-alone malt whisky outlets at UK air-ports, Crawford and his team took theidea and gave it their own unique twist– not least in the Gaelic choice of name,Uisge Beatha, which means ‘water oflife’. We’ll drink to that.

VVVV“The accidental retailer” is how com-pany director Ashvin Valiram modestlydescribes the Kuala Lumpur-based lux-ury goods powerhouse. The Valiramfamily entered the airport market in1996 with a 40sq m store selling silksin Malaysia’s old Subang Airport – afterinitially applying to run a restaurant.Chance may have played a part in kick-starting the business back then, butthese days The Valiram Group’s reputa-tion is built on other factors: its skilfuland sensitive handling of luxury brandsin the airport arena, verve and style inits store design and the energy of itspeople.

That’s the blend behind the company’slandmark Luxury Fashion store at Singa-pore Changi T2, which opened this year.Expect more of the same at its LuxuryFashion store in Changi’s new T3, and atits stand-alone boutiques. The rise andrise of The Valiram Group will continueat pace in 2008 – and this time it willbe no accident.

WWWWWorld Duty Free: The sale of the UKairport retail giant is not a story thateven the most adept of pundits couldhave predicted two years ago. But allthat changed with the Ferrovial acquisi-tion of BAA in 2006 and ever since thelikelihood of divestment has hoveredover the company. Now the race is onwith bids due in by mid January. Withthe prize retail real estate of London’smajor airports among the seven-airportportfolio at stake it is shaping as one ofthe richest auctions in duty free history.

Will it be a trade buyer? Private equity?Management? Or a combination? Tradebuyers tend to have an innate advantagein divestments like this due to availablesynergies but, equally, private equity cancreate them by targeting further acquisi-tions down the line. It’s a fair bet thatsome of the biggest private equity play-ers are currently running a rule over theworld’s top dozen or so travel retailers.Then the fun could really begin.

11

The Moodie Report PLUS

World Duty Free’s beauty will lie in the eyes of the beholder by midJanuary as bids close for one of the world’s great travel retailers

Wellbeing: The most commercially mind-ed airport authorities manage to skilfullyroll new passenger services and income-generating activities into one. In 2007,more of them than ever seized the oppor-tunity that the broad ‘wellbeing’ cate-gory offers by developing spas, treat-ment areas and health food concessions.

XXXXXue: As in Dr Shell Xue, Chief ProjectOfficer of The Smile Train China, whosegrace and dignity touched everyone

during her speech detailing the pro-gramme’s work at the Hong Kong fund-raising dinner on 5 October. We’redelighted to announce that a significantdonation will be made to The Smile TrainChina from the forthcoming ACI AirportBusiness & Trinity Forum in Shanghai.

X-ray: It will be at least three yearsbefore airports introduce a safe, financial-ly viable method of detecting liquid explo-sives, according to ETRC officials. Andthat leaves today’s X-ray machines as theoutdated front line of defence for avia-tion security. All of which means we’re infor more customer confusion and worse,many more LAGs confiscations in 2008.

YYYYYen: Up or down against the US Dollarin the New Year? That question hasbeen taxing the industry’s best mindsever since Chuck Feeney and Bob Millerset up shop in the 1960s, and the rela-tionship between the two currenciesremains a key one. American ExpressBank reckons by around late 2008 theYen will sit at about 118 to the green-back (it was 113.68 as we went topress). With the Yen's relative strengthor weakness against various currenciesbeing such a proven driver of Japanesetravel choice that prospect won’t cheerthe hearts of Feeney and Miller’s latterday successors in Hawaii and aroundthe Pacific.

ZZZZZürich Airport: Peter Eriksson and histeam continue to deliver impressive com-mercial results at the Swiss gateway. We think the key drivers of that successare partnership, innovation and trans-parency. The airport hosts its fair shareof key brand launches through core con-cessionaire The Nuance Group, while itspremium food & beverage offer has adistinctly stylish edge.

How many other airports would dare toserve a CHF40 (US$33) sandwich forexample? Not just any sandwich, but onefilled with a whole lobster. When it intro-duced the concept through food & bev-erage partner SSP in May the airport com-pany said there was as much demandfor luxury food as there was for luxuryfashion brands. And it’s been proven right.

Zhuhai: The letter A (Auckland) mayhave been a bitter disappointment forThe Nuance Group in 2007 but theother end of the alphabet brought bet-ter news late in the year as the Nuance-Watson (Hong Kong) joint venture madeits Mainland China debut with the open-ing of two stores at Zhuhai Airport.With an expected passenger volume upto two million in the next three years,Nuance-Watson rightly sees the openingas offering great exposure to the 52million population of the Greater PearlRiver Delta.

12

The Moodie Report PLUS

Dr Shell Xue: grace and dignity,passion and poignancy

SHANGRI-LA HOTEL, SHANGHAI31 MARCH Ð 2 APRIL 2008

For details please contact ACI’s Andreas Schimm at aschimm@aci.aero or The Moodie Report’s Martin Moodie at Martin@TheMoodieReport.com

www.aci.aero www.TheMoodieReport.comHosted by Shanghai Airport Authority

Hans Bakker: The ebullient ‘flyingDutchman’ and Commercial Director atAirport Authority Hong Kong is aremarkable character who just keepsmaking things happen at Hong KongInternational Airport. His vision of anairport as the modern day equivalent ofa mediaeval cross-roads finds voice inHong Kong, where all manners of trans-port – air, sea, road, rail – converge.He’s an important leader and influencein this business; and his achievements,including the new Sky Plaza, and ambi-tions – the imminent East Hall expansion– explain why.

Peter Eriksson: Zürich Airport’s ChiefCommercial Officer completes a ‘Trinity’of airport executives this year. That’sappropriate given his championing ofthe Trinity concept – better empathybetween airports, concessionaires andbrands to aid all parties, consumerincluded. The airport nurtures campaignsinvolving all three players – notably lastyear’s brilliant ‘Soul of Chocolate’ pro-motion and the watches-related ‘ExcitingTimes’ follow-up (both part of the ‘Bestof Switzerland’ series). Eriksson is achampion of transparency too, issuingdetailed commercial results monthly.

Peck Hoon Lim: The tireless Director(Commercial) of Civil Aviation Authorityof Singapore has delivered – via whatappeared a seemingly endless series oftenders during 2007 – a commercialoffer that lives up to the stunning physi-cality of Changi Airport’s new T3 whichopens on 9 January. It’s got newness,exclusivity and diversity in equal measureand much credit must go to Ms Lim fordelivering that result amid some of themost high-profile, high-pressure tendersin industry history. CAAS also deservespraise as one of the few airports world-wide that publishes full bid details.

13

The Moodie Report PLUS

People of the YearIndividuals who The Moodie Report believes by their deeds, attitudesand behaviour advanced the industry’s cause in 2007.

Ron Anderson: Everywhere you lookedin travel retail in 2007 you saw Diageo.Everywhere you saw Diageo you sawinnovation. The company may have therichest treasure chest of brands in liquorindustry history, but it’s what you dowith them that counts. Some of thebest POS material in the business, bigin-store investments (think Heathrowand Changi cocktail bars) and supportwhere and when it matters earn Diageo’stravel retail chief inclusion here.

Gianmario Tondato da Ruos: TheAutogrill CEO has deftly created a globaltravel-related concessions empire, rang-ing from food & beverage (HMSHost) tonewly acquired Alpha Airports Groupand Aldeasa. The company now rightlydescribes itself as “the world’s biggestprovider of food & beverage and retailservices for travellers”. And it has clearlynot stopped there: expect the Italian giantto be at the forefront of the New Yearbattle for control of World Duty Free. n

John Sutcliffe: 2008 sees the 15thanniversary of regional powerhouse AerRianta International–Middle East. From aUS$25 million start-up it will have growninto a US$750 million empire. That’ssome story, especially given the region’sconstant political volatility, which saw anentire business (Beirut) closed overnightin 2006. The man at the helm throughoutdeserves immense credit for his leader-ship, pugnacity and insistence on retailquality and fairness of relationships.