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THURSDAY 5 JUNE 2008

REACH, RELIABILITY, RESPECT

Milos Djuric: The highly influen-tial and much respected GeneralManager of Parbel, the Miami-based regional travel retail oper-ation of L’OréalProduits de LuxeInternational, hasstepped down topursue fresh inter-ests outside thegroup. During histenure he stampedhis mark on the business throughhis strong leadership, charismaand daring attitude to innovation.

Peter Candell: The driving forcebehind Sweden-based retailerand wholesaler Inflight Servicefor the past seven years, PeterCandell has led thegroup throughsome tough timesand more recently,a period of consoli-dation and renewal.Now he preparesfor a new challengeheading strategy and develop-ment, handing over the CEO’s roleto Gustaf Ljunggren as a new eradawns for Inflight Service.

“We are in crisis. Governments,labour and our business partnersmust understand this. And theymust act.” IATADirector Generaland CEO GiovanniBisignani makesan unprecedentedcall for support on behalf of theworld’s airlines, asthe continuing fuel crisis bitesdeep into their profitability.

WELCOME to The Moodie Report. This edition comes to you from Atlanta,Georgia, where on Friday Aldeasa celebrates the Grand Opening of its duty free store atHartsfield-Jackson International Airport. Over 100 guests will attend the inauguration,including Aldeasa CEO José-Maria Palencia Saucedo, HMSHost President and CEOElie Maalouf, and Alpha Retail USA President Rod Wiltshire.

Why all the fuss over a single 640sq m duty free store? Because not only is this Aldeasa’sfirst foray into the US but it is also the first major travel retail event since parent com-pany Autogrill completed the £546.6 million acquisition of World Duty Free Europeand the full buy-out of Aldeasa. The presence of Palencia, Maalouf and Wiltshire issending out a powerful statement that travel retail’s new ‘superforce’ is taking shape fast.

The integration of Autogrill’s expanded empire is well under way. Aldeasa will drive theinternational operations, a logical decision given the company’s extensive global net-work. The integration of Alpha into that network outside the UK is pretty straightfor-ward given the lack of overlaps with Aldeasa. Here in the US Alpha’s admirable Floridaoperations at Orlando International and Sanford will fit neatly alongside the fledglingAtlanta business. The balance of the initial integration – including the marriage ofWorld Duty Free and Alpha in the UK – will take shape over coming weeks, with a viewto being fully in place by year-end. It will be fascinating to watch.

The space in Atlanta may be relatively small, but it still represents a near doubling of thatoperated by Aldeasa’s predecessor – none other than HMSHost. It’s a smart, basic shop,redolent in the trademark Aldeasa yellow and notable for its smart video walls outside thestore. We’ll report our impressions fully after the Grand Opening when the corks – cavaof course – will be popping to celebrate the latest chapter in Aldeasa’s global development.

The fuel crisis continues to dominate the headlines as more carriers announce fare hikesand capacity cuts. Ryanair, traditionally one of the world’s most profitable airlines, hasrevealed that it will ground 10% of its fleet this winter as fuel prices spiral.

CEO Michael O’Leary warned: “The overriding concern for airlines, passengers andinvestors is the irrational price of oil. There will be more bankruptcies as airlines losehorrendous amounts of money.” Those sentiments were echoed by airline leaders at theInternational Air Transport Association (IATA) World Air Transport Summit. IATAsaid: “A total of 24 airlines have ceased operations or entered into bankruptcy protectionin the past five months. Many more will not survive.” Our channel will survive. But itsfoundations may yet take a profound battering.

QUOTE OF THE WEEK

PERSONALITIES OF THE WEEK

On Friday Aldeasa celebrates the GrandOpening of its first US airport duty freestore at Hartsfield-Jackson InternationalAirport in Atlanta, and the Moodie Reportwas on hand a day earlier to take a spe-cial preview tour. It’s a landmark momentfor the Spanish travel retailer, marking animportant new bridgehead in the compa-ny’s international expansion. ‘Welcome toa new shopping experience’ says the sign.Welcome to a new era for Aldeasa.

Image of the WeekImage of the WeekImage of the WeekImage of the WeekImage of the Week

INTERNATIONAL. The lead-ers of the world’s airlines this weekagreed to a resolution calling for gov-ernments, airports and labour to takeimmediate action to help the industrysurvive the growing financial crisis. Theresolution was made at the InternationalAir Transport Association’s (IATA) 64thAnnual General Meeting and World AirTransport Summit in Istanbul.

IATA noted: “Record oil prices are nowdriving airlines into uncharted territory.At the fuel prices currently predicted bythe forward price curve, IATA airlinescould face an additional financial burdenof US$99 billion over the next 12 monthscompared to 2007. A total of 24 airlineshave ceased operations or entered intobankruptcy protection in the last fivemonths. Many more will not survive.

“Over the last six years airlines have cutnon-fuel unit costs by -18% and distri-bution costs by -25%; they have alsoimproved fuel efficiency by +19% andthere has also been a notable increase inlabour productivity. All these efforts aremeaningless in the face of a tripling of oilprices since 2006, with a two-fold increase

in the last year alone. There is limited scope for airlines to lower their costs further. A concerted effort is now required.”

“Extraordinary times call for extraordinary measures,” said IATAChairman and TAP Portugal CEO Fernando Pinto. “Airlines are anengine for global prosperity and failure amongst them would sendshockwaves throughout the world economy.” The resolution comesafter a recent spike in fuel prices that has led to two dozen airlinesceasing operations or filing for bankruptcy.

The declaration made six specific calls to action. They were: n Governments must eliminate archaic rules that prevent airlines from

restructuring across borders. n In view of existing fees and charges, governments must refrain from

imposing “multiple and additional punitive taxes and other measuresthat will only deepen the crisis.

n State service providers must invest to modernise air transport infra-structure urgently, eliminating wasteful fuel consumption and carbondioxide emissions.

n Business partners, in particular monopoly service providers, mustbecome as efficient as airlines are now. If not, regulators mustrestrain their appetite with tougher regulation.

n Labour unions must refrain from making irresponsible claims and jointhe effort to secure jobs in aviation and indeed in other industries.

n In the interest of the global economy and the flying public, we urgeauthorities to enforce the integrity of markets so that the cost ofenergy reflects its true value.

Thursday 5 June 2008The Moodie Report


Selected traffic numbers reported in the past few weeks

Country Airline/airport/ferry company May ’08 vs May ’07 (%)

Source: ©The Moodie Report continued on page 3

Estonia Tallink +9.6 (total pax)Ireland Ryanair +22.1 (total pax)UK Monarch Scheduled +8.3 (total pax)US AirTran Airways +6.0 (total pax)US American Airlines -1.6 (total pax)US Continental Airlines -2.7 (mainline pax)US Southwest Airlines +4.0 (revenue pax)US United Airlines -6.7 (scheduled pax)

Moodie Interactive: Click on the image above

THE MOODIE REPORT DATA ROOM – TRAVEL & TOURISM NEWS

Country Airline/airport Apr ’08 vs Apr ’07 (%)

Australia Brisbane Airport -4.2 (international)Australia Gold Coast Airport +44.8 (total pax)Belgium Brussels Airlines +1.3 (total pax)Bulgaria Burgas Airport +13.1 (total pax)Croatia Dubrovnik Airport +1.5 (total pax)Cypruus Cyprus Airways -0.6 (total pax)Germany Air Berlin +6.5 (total pax)Greece Athens International Airport -4.5 (international)Greece Olympic Airlines -14.3 (total pax)Hungary Malev Hungarian Airlines -8.6 (total pax)Iceland Icelandair -16.8 (total pax)Italy Alitalia -25.9 (total pax)Japan JAL Group -4.1 (total pax)Latvia airBaltic +20.2 (total pax)Mexico Los Cabos Airport -4.2 (international)

http://www.coty.com



IATA Director General and CEO Gio-vanni Bisignani said: “The airline indus-try is sending a clear message to govern-ments, partners and labour. We are incrisis. Governments, labour and ourbusiness partners must understand this.And they must act.”

From the Publisher: ‘Counting thecost of oil’ is an ongoing news series inwhich we present regular updates on theglobal oil and airline crisis and analysethe impact on the travel retail sector.

In our view – and that of several seniortravel retail executives – the crisis repre-sents one of the sternest challenges theindustry has faced in many years. Go towww.TheMoodieReport.com for morenews and analysis on this critical issue.

JAPAN. April saw a -8.0% year-on-year drop in outbound Japanesetravellers, Travel Journal International(TJI) Online revealed this week. Cit-ing Japan National Tourist Organiza-tion (JNTO) figures, TJI said that1,187,000 Japanese travellers wentoverseas in the month. The total num-ber of Japanese outbound travellers in

the first four months of 2008 was down -5.0% year-on-year to 5,368,554.

TJI noted: “The April figure represents the 12th straight month of year-on-year decline since May 2007. It is also thelargest drop in the past 12 months, breaking the -7.6% drop posted in March 2008.” JNTO attributed the decline to aseries of negative factors, including the adverse combination and sequence of the Golden Week holiday season betweenlate April and early May; the yet-unresolved Chinese-made poisonedfood incident; adverse publicity over Tibet; and hikes in fuel surcharges.

The drop in the number of China-bound visitors is beginning to takeits toll on total outbound figures as Japan’s near-neighbour had beensuch a popular travel choice, TJI said. Japanese visitors to China havefallen by -7% to 1,186,024 in the first four months of 2008 comparedwith the same period a year earlier. March and April saw sharp falls of-13.8% and -10.5% respectively. However this shift, if protracted,could spell good news for other nearby destinations such as SouthKorea, Thailand, Taiwan and Guam, TJI said.

Meanwhile the tally of foreign visitors to Japan in April reached 780,200,up +9.3% from a year ago. By originating countries, visitors from SouthKorea, Taiwan, China, Thailand, Singapore, Australia, Germany andFrance marked all-time high records, respectively, said JNTO. Theaccumulated number of inbound foreign visitors in the January–Aprilmonths surged +10.3% from the same period a year ago to 2,919,776.

Editor’s note: For the full report please visit www.tji/tjinet.co.jp. TheMoodie Report works closely with TJI Online, the pre-eminent providerof information on the Japanese travel industry. Week in, week out, it pro-vides timely and sharp analysis of the all-important Japanese travel market– international and domestic. It comes with our highest recommendation.


Selected traffic numbers reported in the past few weeks (continued)

Country Airline/airport Apr ’08 vs Apr ’07 (%)

Source: ©The Moodie Report

Mexico Monterrey Airport -3.2 (international)Mexico Puerto Vallarta Airport +4.0 (international)Netherlands Amsterdam Airport Schiphol +0.3 (total pax)Poland LOT Polish Airlines -3.1 (total pax)Portugal Lisbon Airport -7.2 (total pax)Portugal TAP Air Portugal +8.4 (total pax)Slovakia SkyEurope -4.7 (total pax)South Africa Cape Town International Airport +9.7 (international)South Africa Johannesburg International Airport +7.6 (international)Spain Alicante Airport +9.9 (total pax)Spain Barcelona El Prat Airport -5.5 (total pax)Spain Gran Canaria Airport -5.3 (total pax)Spain Iberia -10.4 (total pax)Spain Madrid Barajas Airport -0.2 (total pax)Spain Málaga Airport -8.2 (total pax)Spain Palma de Mallorca Airport -4.9 (total pax)Switzerland Geneva Airport +3.8 (total pax)Turkey Turkish Airlines +11.9 (total pax)UK British Midland Airways +7.4 (total pax)UK Manchester International Airport -5.7 (international)UK Virgin Atlantic Airways +3.7 (total pax)US Boston Logan International Airport +2.1 (international)US Houston Bush Intercont. Airport +1.7 (international)US Los Angeles International Airport -2.6 (international)

http://www.t-touch.com



ASIA PACIFIC. Association of Asia Pacific Airlines (AAPA)member airlines carried a total of 11.9 million international passengersin April, representing +2.2% growth year-on-year. In revenue passen-ger kilometre (RPK) terms, growth in international passenger trafficwas similarly modest, AAPA noted, registering a year-on-year increaseof +2.6%.

The growth in demand failed to keep pace with the +3.7% growth incapacity, leading to a -0.8 percentage point decline in the averagepassenger load factor, to 75.2%. AAPA Director General AndrewHerdman said: “For the first four months of the year, AAPA memberairlines carried 48.5 million international passengers, representing+3.5% growth compared to the same period last year.

“Airlines around the world are struggling to cope with the impact of runaway oil prices, amid signs of weakeningdemand growth for both business and leisure traffic. Sharply higher fuel costs are inevitably driving up the cost oftravel. Meanwhile, airlines are looking to cut back poorly performing routes, whilst maximising their utilisation ofmore fuel-efficient aircraft. Nevertheless, after the doubling of oil prices over the past year, there is no sign of anyrespite from the current challenges.”

INTERNATIONAL. Global passenger traffic growth slowedmarkedly in April compared with earlier months, said Airports Coun-cil International (ACI) this week. International traffic, which in previ-ous months buoyed overall traffic results, grew by a modest +2%, anddomestic traffic fell by -5.4% year-on-year.

“This drop reflects the impact of slowing economic growth and highfuel prices on airline fares and consumer confidence,” said ACI.“The largest domestic market, North America, was down by -13%as a result of flight cancellations (American Airlines’ mandatory

groundings), ongoing route reduction and carrier consolidation, and the absence of Easter holiday travel (in Marchin 2008 and in April in 2007).”

The figures echo those of the International Air Transport Association(IATA), which said last week that year-on-year international passengerdemand grew by a modest +3% in April. In both cases it should be notedthat the impact of an early Easter holiday in 2008 will have reduced com-parative year-on-year traffic growth. For international traffic – the keydriver of travel retail – the numbers may be modest compared with recentmonths but they still represent year-on-year growth. The whole industrywould settle for a similarly muted pattern for the remainder of 2008.

THE MOODIE REPORT DATA ROOM – TRAFFIC NEWS


ACI worldwide airport traffic summaryApril 2008

Apr ’08 Rolling 12vs Apr ’07 months

Source: Airports Council International

International passengers +2.0% +7.0%Domestic passengers –5.4% –1.9%Total passengers –0.6% +5.0%

International airport traffic by region April 2008

ACI April 2008 Rolling 12 monthsregion International Change International Change

pax (’000) on 2007 pax (’000) on 2007

Africa 4,473 +11.1% 50,275 +15.3%Asia Pacific 27,556 +0.7% 342,050 +6.7%Europe 56,824 +0.1% 705,471 +5.9%Lat. Am. & Carib. 3,859 +1.0% 47,158 +7.6%Middle East 6,861 +15.7% 78,755 +17.4%North America 12,772 +4.1% 154,393 +5.6%ACI total 112,345 +2.0% 1,378,101 +7.0%

Source: Airports Council International

IATA traffic growth, April 2008 & April 2007

Region April 2008 vs Jan–Apr ’08 vs April 2007 Jan–Apr ’07

Africa –5.6% –1.6%Asia Pacific +2.6% +4.7%Europe +1.6% +3.8%Latin America +4.0% +17.5%Middle East +11.0% +12.4%North America +3.8% +5.8%Total +3.0% +5.6%

Note: Figures are in RPKs Source: IATA

http://www.travelexclusive.esteelauder.com



GERMANY. Marc O’Polo, the fast-growing premium casualwear brand, is set to open a shop-in-shop at CairoInternational Airport’s new Terminal 3 in October, in cooperation with EgyptAir Duty Free Shops. It represents MarcO’Polo’s entry into the Middle East market. Aer Rianta International–Middle East is management consultant forEgyptAir Duty Free’s business in Egypt, including the new T3.

The brand will open a 40sq m menswear shop-in-shop in the new facility. It will present the Modern Casual menswearfashion line and leathergoods from the Marc O’Polo Accessories collection.

HONG KONG. King Power Group (Hong Kong) has opened the first stand-alone Godiva shop at Hong KongInternational Airport (HKIA). The 31sq m store is positioned in the Arrivals area selling Godiva chocolates, drinks andice cream.

According to King Power, this latest venture will further strengthen its position in the food and confectionery category.King Power Duty Free and Travel Retail Managing Director Sunil Tuli said: “We are very pleased to be associated withthe prestigious brand Godiva in this partnership. We look forward to a very successful business in this shop, whichcaters not only to arriving passengers, but also to the people at the airport who go to welcome them, as well as theairport staff.”

In other HKIA news leading French fashion brand Agnès b. has opened its first Global Travel Store at the airport’sWest Hall, offering fashion and accessories as well as travel essentials. The airport said: “Occupying an area of morethan 800sq ft, the Global Travel Store brings a touch of French lifestyle back to travel with a sleek, sophisticated interi-or environment and offerings that add a taste of chic to any trip.”

The Global Travel Store is celebrating its arrival with exclusive product offerings including a photo print bag, a pinkpatent handbag, a fun polka dot canvas handbag, a series of black star print casual bags, and limited-edition carry-onluggage in red nylon. The store also offers travel essentials such as luggage, travel bags, hand carriers, casual bags, alongwith wallets, coin bags and pouches from the company’s Voyage collection. Other travel goods include passport holders,card cases, luggage tags and pouches.

Around 45% of passengers depart from HKIA’s West Hall. Retail space at the West Hall was expanded at the end of2007 to accommodate increasing traffic, and is now a major shopping area at HKIA.

SINGAPORE. Changi Airport this week began a major, multi-terminal shopping promotion called the Changi Airport ShoppingExtravaganza. The campaign will run until 30 June at all terminals,featuring a different themed event every week. Under the differentthemed promotions in the Departure Transit Malls of Terminals 1, 2and 3, shoppers can look forward to attractive ‘S$50 Hot Deals’, wherethey can save up to -45%.

This week’s focus is on beauty and wellness. A six-piece Jurlique Minia-ture Mist Set that usually retails for S$79 will be offered at the ‘hotdeal’ price of S$50. To qualify for such S$50 hot deals, shoppers needto either charge just S$80 or more in a single receipt with their Visacard or spend S$120 and above in a single receipt when they use otherforms of payment.

The following weeks will showcase other themed bargains for sportswear, toys and childrenswear, as well as fashion and accessories. TheS$50 Hot Deals during the themed weeks include Nike or Adidas bags,Vtech children’s laptops and Braun Buffel wallets.

Civil Aviation Authority of Singapore Director General and ChiefExecutive Officer Lim Kim Choon said: “This shopping promotion ispart of CAAS’ efforts to constantly rejuvenate the shopping experiencefor our passengers and enhance the Changi experience. We endeavour


THE MOODIE REPORT RETAILER & CONCESSIONAIRE NEWS

http://www2.johnniewalker.com/home.htm

MACEDONIA. Gebr Heinemann has retained the contract to supply duty free products to the state-run retailoperations at Macedonia’s two international airports, Skopje and Ohrid. Airport authority Public Enterprise for AirportServices (PEAS) issued a tender in January.

PEAS Senior Manager Elena Dejanova said: “Gebr Heinemann has won a one-year additional contract to supply dutyfree to the airports, effective from now. Their financial offer and the quality of their bid were both very good. Thecommission on procurement decided that their offer was the best one. We have a good relationship with Gebr Heine-mann over many years.”

SINGAPORE. A strong field of six bidders has gathered to compete for the latest specialty/brand name shopconcession at Singapore Changi Airport Terminal 1. Although the contract runs for just 13 months from October –shortened because of the Changi T1 upgrading programme – the 79sq m space has attracted keen interest.

Based on the minimum guarantees alone, established Singapore fashion and jewellery brand Chomel looks well placedto capture the business.

Chomel offered either 20% of the total monthly gross sales OR a Minimum Monthly Guaranteed Payment ofS$30,000, whichever is higher.

Times Newslink (representing the Kaboom brand) offered either (i) 10% of the total monthly gross sales for monthlygross sales up to S$170,000, plus 20% of incremental gross sales for monthly gross sales above S$170,000; OR (ii) aMinimum Monthly Guaranteed payment of S$15,000 for monthly gross sales up to S$170,000; OR S$25,000 formonthly gross sales above S$170,000, whichever is higher of (i) or (ii).

Luxury Ventures (representing Shanghai Tang) bid either: (i) 15% of the total monthly gross sales for total monthlygross sales up to S$120,000; 18% of the total monthly gross sales fortotal monthly gross sales above S$120,000 and up to S$160,000; 20%of the total monthly gross sales for total monthly gross sales aboveS$160,000; OR (ii) a Minimum Monthly Guaranteed payment ofS$18,000, whichever is higher of (i) or (ii).

Mid-price fashion house Giordano Originals offered either 13% of thetotal monthly gross sales OR a Minimum Monthly Guaranteed pay-ment of S$10,000, whichever is higher.

Vendermac Distribution (Kidz Time) offered either (i) 15% of the totalmonthly gross sales for monthly gross sales up to $100,000, plus 20%of incremental gross sales for monthly gross sales above $100,000; OR(ii) a Minimum Monthly Guaranteed payment of S$10,000, whicheveris higher of (i) or (ii).

Newry (representing the Weartitude brand) offered either 9% of thetotal monthly gross sales OR a Minimum Monthly Guaranteed pay-ment of S$1,888, whichever is higher.

In other Changi Airport news, the Civil Aviation Authority of Sin-gapore has called a tender for a three-year brand name dessert café concession in T2. Bids are due on 26 June and the contract begins on1 September.



to add value to our retail offerings with such events and encourage shoppers to take full advantage of the great buysoffered during this promotion period.”

Visa cardholders gain another benefit when they shop and dine at Changi Airport. They will be rewarded with a S$5Changi Airport voucher that can be redeemed with subsequent purchases. All they need to do is spend a minimum of S$50(in the terminals’ public areas or at the Budget Terminal) or S$80 (in the Departure Transit Malls) in a single receipt.


THE MOODIE REPORT TENDER & CONTRACT NEWS

http://www.hugoboss.com


The Moodie Report Thursday 5 June 2008

DENMARK. The Optical Studio opened at Copenhagen Kastrup Airport on 1 June, offering eye examinations, abroad range of glasses and quick, professional advice. As part of the service, departing passengers can now have a pair ofnew, individual glasses fitted in just 15 minutes.

“Many people familiar with the optometry industry are surprised that we can produce an individualised pair of glassesat The Optical Studio in just 15 minutes based on commonly used types of glasses,” said Shop Manager Gudjon Gud-mundsson. “We can do that because we have a well-trained, professional team of employees, a large inventory of eye-glass lenses and a broad range of frames from all the well-known brands.” These include Prada, Chanel, Lindberg,Versace, Bvlgari, Ray-Ban and many others.

Optician Kjartan Kristjansson developed The Optical Studio concept in Iceland and has refined it over a ten-year peri-od at Keflavik International Airport. According to Copenhagen Airport Director of Commercial Affairs Henrik Buschconcept fits well into the airport environment. “Time is important at an airport, and we focus on offering passengers arange of possibilities of filling their waiting time by practical and pleasant experiences,” he said.

“We are impressed by The Optical Studio’s professional concept and the success they have achieved in Iceland. It wastherefore a natural step next for us to offer Kjartan Kristjansson a location in our new international ‘shopping street’,where the shop’s famous brands fit well into the product ranges offered by other shops. The first pair of glasses soldwere delivered to the customer at the gate before departure – that is good service,” said Busch.

UK. London-based catering company rhubarb food design is set to open in the Departures lounge of Heathrow Air-port Terminal 3 in July. Founded by Lucy Gemmell, the company aims to offer a unique and unusual dining experiencefor airport passengers. Described as ‘fine dining in miniature’, rhubarb will serve a variety of luxury food, from NewYork brunch to traditional afternoon tea with miniature scones and home-made conserves.

BAA Head of Category for Food and Beverage Catherine Peachey said: “We are delighted to welcome rhubarb toHeathrow Airport. It will be adding to the vast array of exciting restaurants offering innovative food concepts to pas-sengers travelling through the terminal.”

Rhubarb Managing Director Pieter Bas Jacobse added: “We are delighted to be opening a store at Heathrow’s Terminal3 and hope it will enable us to extend our reach even further. We believe that this venture will provide something for alltravellers, whatever their itinerary. A quick glass of Champagne and a canapé or two before boarding, or a longer lunchmeeting pre-flight – rhubarb will be the place to experience the luxury of travel before the journey has even begun.”

US. HMSHost has unveiled the first airport Z Market at Dallas-Fort Worth International Airport (DFW). The conces-sion in Terminal B is part of a contract awarded to HMSHost and joint-venture partner Howell-Mickens. Z Market aimsto provide ‘variety in a quick-serve environment’, combining convenience store, deli and news-stand. In an agreementbetween HMSHost and Love Style Inc the deli features a special ‘Gourmet to Go’ menu by celebrity chef Tim Love.

“DFW sets high standards for our terminals and our passengers have high expectations for their airport experience,”said DFW Chief Executive Jeff Fegan. “We also know the number one goal of each passenger is to transition to some-where else as quickly as possible. So we think Z Market and Gourmet to Go will be well-received by our hectic andhungry travellers.”

Chef Love’s Gourmet to Go selections include pre-packaged sandwiches and salads, boxed meal combinations, snacks, heat-and-eat one-dish meals and fresh sushi. The food packaging features exclusive signage specially developed by HMSHost.

Z Market is designed specifically to accommodate travellers with luggage in tow, said HMSHost. It features wideraisles, warm stone tiles and finishes, as well as cheerful, contemporary colours to produce a cosy and inviting setting.Self-service stations are set in a design that appears curved, making it quick and easy for customers to move from onespot to another as they help themselves to food and drinks.

“Z Market is the ‘convenient convenience store’ with a difference,” said HMSHost Senior Vice President of RetailJoan Ryzner. “Partnering with a local celebrity chef for upscale gourmet-to-go selections adds enormous appeal. Weare pleased to introduce Z Market to US airports, starting with DFW. This evolutionary retail experience is a newvision for travel shopping and is sure to exceed our guests’ expectations for quality, variety and service.”

FOOD & BEVERAGE AND OTHER COMMERCIAL REVENUESTHE MOODIE REPORT


ATTENTION VENDORS AND AIRPORT AUTHORITIES

Great strides have been made over the past few years to restore confi-dence in travellers by ensuring that they are no longer being overchargedfor food and consumer goods in airports. In fact, it has become commonpractice for airport authorities to enter into contracts with their conces-sionaires demanding price parity with downtown or local market prices.Unfortunately, consumer goodwill is at risk of being eroded once again.Recently, several of our vendors have announced that they intend to raiseprices on a number of their products which we sell in our stores to levels that are essentially equivalent tothose found in department stores, discount chains and factory outlets. Their rationale is based on the flawedpremise that duty free consumers are ignorant about prices and that they do not comparison shop.Duty free stores have historically enjoyed a reputation for offering favourable prices. This is particularlytrue for international passengers from countries where duties on imported consumer or luxury goods, mer-chandise taxes, and retail markups are high by world standards. If vendors go forward with their proposedprice increases, however, this perception will rapidly change for a variety of reasons.First and foremost, duty free operators already face intense competition from traditional brick and mortarretailers. In markets such as the United States, Europe and Asia, where the retail environment is highly com-petitive, consumers have come to realize that these retailers constantly offer great deals, either in the formof discounts, gift-with-purchase or purchase-with-purchase promotions, or similar recurring sales events.The Internet is another reason why duty free stores must not be placed in a position where they have to selltheir merchandise at full retail prices in response to vendor price increases.“The notion that consumers are either uninformed or do not care about prices when it comes to dutyfree shopping is naïve and false, if not condescending. Thanks to the Internet, it is now possible for con-sumers to check which duty free products and prices are available at many airports before a departure dateand to compare those prices with the prices at competitive retail stores in downtown or local markets.Travel retail today boasts some of the most elite and highly desirable selling space in the retail world.Because airport duty free stores cater to a captive audience of luxury-seeking shoppers, renting space at anairport is extraordinarily expensive. In order to ensure that sales generated in these stores justify thisexpense, duty free operators and their vendors must share the responsibility of making certain that con-sumers have a positive experience by offering them the best brands at attractive duty free prices, asopposed to full retail prices.The duty free industry has already suffered enough from the advent of the Internet and increased compe-tition from local retailers. Consumers do care about prices, and they now have the tools to compareand the choice of places to shop. Duty free shops must, therefore, consistently offer better prices thandepartment stores, discount chains and other retail outlets. If vendors are allowed to increase prices to thepoint where the line between duty free and traditional retail becomes blurred even further, the impact willbe felt by duty free operators and airport authorities alike.In conclusion, it is imperative for vendors to realize that, in the event they attempt to force these proposedprice increases upon duty free retailers such as Duty Free Americas, we will have no choice but to stopcarrying their merchandise in our stores. There are plenty of vendors who still understand and appreciatethe duty free concept and who wish to work together as partners in a mutually beneficial relationship thatplaces a strong emphasis on the goodwill of consumers.Simon FalicChairmanDuty Free Americas

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INTERNATIONAL. Dufry South America produced the best performance among the stocks in The MoodieReportfolio in May. Buoyed by a +63% rise in its net income for the first quarter of 2008 (to US$15.3 million com-pared with US$9.4 million in Q1 2007), the company saw the total value of its shares (in US Dollars) rise by +14.0% inMay over the previous month.

The total Dollar value of shares in The Moodie Reportfolio decreased by -0.5% in May. Overall The Moodie Report-folio has decreased by -16.9% since it was launched on 1 August 2007; this is largely due to the deterioration in financialmarkets, driven by the US sub-prime crisis.

At the beginning of August last year The Moodie Report invested a hypothetical US$10,000 – or equivalent in local cur-rency at prevailing exchange rates – in 13 travel retail-related stocks. Some are pure duty free/travel retail companies,some are parent or related groups. The resultant basket of stocks is The Moodie Reportfolio.

The stocks are: n Autogrill (Aldeasa, Alpha, HMSHost, World Duty Free) n Lagardère (Aelia; HDS Retail) n Bahrain Duty Free Shops n Lotte Shopping Con Dufry n LVMH (DFS Group) n Dufry South America n MISR Duty Free Shops (Egypt)n Hellenic DFS n Stefanel n Japan Airport Terminal Co n Tourvest n Jordanian Duty Free Shops

Each month our Research & Analysis Manager, Singapore-based Justin Lee, reports on the change in The MoodieReportfolio and its individual components. He tracks our original investment and notes the outstanding performers forthe month in both local and US currency and the year to date (the latter in US Dollar terms).

RUSSIA. Changi Airports International of Singapore and Russian investment company Basic Element have an-nounced that they are creating a bidding consortium to develop and operate St Petersburg Pulkovo Airport.

In April the St Petersburg government announced a tender to modernise Pulkovo. The winner is to be named by 12March 2009, and a public–private partnership agreement is to be signed by 30 July 2009. The parties to the agreementwill be the city committee for transport and transit policy acting on behalf of St Petersburg, Pulkovo Airport, and thewinner of the tender.

The modernised terminal’s annual capacity will increase more than threefold to nearly 22 million passengers. Pulkovo isthe largest airport in northwest Russia and one of the biggest in the country. Interest in the project from potential part-ners is said to be intense, as witnessed by a recent investors’ roadshow held in London which attracted around 300visitors from 15 global airport operators and over 30 investment companies, banks and funds.



THE MOODIE REPORT GENERAL NEWS

The Moodie Reportfolio % change May 2008 in US Dollars

Source: ©The Moodie Report

Autogrill

Bahrain Duty Free

Dufry

Dufry S. America

Hellenic Duty Free

JATCo

Jordan DF Shop

Lagardére

Lotte Shopping Co

LVMH

MISR Duty Free

Stefanel

Tourvest

Grand total

–20% –10% 0% +10% +20%

–13.7%

–10.2%

+1.9%

+7.7%

–4.8%

+1.3%

+3.9%

+14.0%

–3.7%

–4.7%

+0.7%

–16.7%

–0.5%

–0.5%



“Pulkovo Airport has been on our radar screen for some time and it will be one of the landmark projects in the industryover the next few years,” said Changi Airports International Chief Executive Officer Chow Kok Fong. Changi AirportsInternational said that the Pulkovo Airport development is the first airport public-private partnership project in Russia.It involves the upgrade and operation of the existing airport while a new terminal will also be developed, the Singapore-an company said.

Passenger traffic through Pulkovo for the first four months of 2008 rose +29.5% year-on-year to 1.8 million. Interna-tional passenger traffic, excluding flights to the countries of the Commonwealth of Independent States (CIS), rose+15.2% to 714,698. CIS passenger traffic rose +95.8% to 132,280 and domestic passengers increased by +35.9% year-on-year to 931,858. In 2007, passenger traffic through the airport rose +20.3% to 6.1 million.

Basic Element is one of Russia’s fastest-growing investment companies. Created in 1998, it has assets in Russia andabroad. In aviation, one of its six key investment sectors, it holds a 9.99% stake in German company Hochtief. It hasover US$23 billion in assets and generated revenues in excess of US$18 billion from its various holdings in 2006. Dutyfree at Pulkovo is run by Lenrianta, the Aer Rianta International joint venture.

UAE. Emirates Airline, the largest customer for the A380 superjumbo aircraft, has announced that it will receive thefirst of its 58 A380 aircraft on order from Airbus’s Hamburg facility on 28 July 2008.

The 58 A380s on Emirates’ order book are worth US$ 18.8 billion at current list prices. Emirates’ A380 interiors andonboard product, which have been kept under wraps thus far, will also be revealed during the delivery ceremony inHamburg next month.

Emirates Airline & Group Chairman and CEO H.H. Sheikh Ahmed bin Saeed Al-Maktoum said: “The A380, with itslarge capacity and excellent operating economics, will be one of the pillars of Emirates’ future growth. We’ve beenworking very closely with Airbus since the A380 programme’s inception back in 2000, and all through the ups anddowns from the drawing board to production, we have remained unshakeable in our belief that this is the aircraft forthe next chapter of aviation.”

He added: “Despite the high oil prices, for us, demand remains strong and the A380s combination of range, capacityand fuel efficiency will help Emirates to continue achieving our growth targets. We very much look forward to receiv-ing our first A380 aircraft next month.”

PEOPLE NEWS, JOBS, EVENTS & NOTICESTHE MOODIE REPORT

AMERICAS. Richard Cymberg has been appointed General Manager of Parbel, the Miami-based regional travelretail operation of L’Oréal Produits de Luxe International. He replaces the much-respected Milos Djuric who left at theend of May to pursue other interests outside the group.

L’Oréal Produits de Luxe International said: “We will all remember Milos’ boundless humanity, his leadership and hisstrong and charismatic personality. Milos has greatly contributed to the qualitative development of the travel retailbusiness in the Americas.”

Martin,

I read with interest the letter from Simon Falic and his thoughts on pricing. I can understand his position but there is a widercontext that he, other concessionaires and airport management need to understand. It is crucial to considering the pricing issue.

For many companies, duty free (or travel retail) is worth less than 5% of overallsales. In the case of confectionery houses it’s usually well under 2%. Such brandcompanies do not, and cannot, view the travel retail channel in isolation.

Duty free is also – because of its historic margin structure – a far less profit-able channel for most brands. In the UK, for example, a supermarket giantsuch as Tesco or Sainsbury would operate on a net operating margin of circa4%. Yet a major travel retailers such as World Duty Free or The NuanceGroup expect 55–60% margins. If brands are faced with a sharp decline inmarket conditions, a tumble in currency, or other external pressures, whereare they going to choose to invest?

That’s the dilemma as I see it of Mr Falic’s no doubt sincerely held sentiments.The danger of putting a gun to the supplier’s head is that the latter can – andmay – simply choose to walk away. Without big brands the channel will begravely weakened. All big brandowners understand the value – and role – ofthe duty free channel. It’s sizable in its own right as well as offering an impor-tant showcase. But as a percentage of some businesses it’s actually very small.Shake the tree too much and the fruit will not just fall down, it will be ruined.–Name withheld by request

Thank you for your readership and support of The Moodie Report.

Martin Moodie, Editor and Publisher



FRANCE. Yves Saint Laurent, widely acknowledged as one of the greatest fashion designers of the 20th century,died this week at his home in Paris, aged 71. His legacy, and loss, were eloquently summed up by François andFrançois-Henri Pinault of PPR, which acquired the Yves Saint Laurent house (via Gucci Group) in 1999.

“With [Saint Laurent’s death], French fashion and indeed the world, lose a genius,” they acknowledged, describing thedesigner as a singular couturier who carried a revolutionary vision of fashion to the highest level. “Yves Saint Laurent atonce maintained traditions of excellence and invented new codes of French elegance,” the company said in a statement.“More than a great designer, in reality an immense artist has left us. Elevating fashion to a new form of art, Yves SaintLaurent expressed the evolution and the revolutions of society through his creations.

“Yves Saint Laurent leaves us with a heritage for which we are forever indebted to him. The PPR Group and all whowork at Yves Saint Laurent are imprinted with the spirit of his creation and invention. And each individual therein willendeavour to stay faithful to the style and grandeur of his legacy.”

LVMH Chairman and CEO Bernard Arnault also paid tribute to Saint Laurent, declaring: “Monsieur Saint-Laurentwas the embodiment of French Haute Couture for half a century. He designed for a woman who reconciled the twofundamental truths which always guided him in his personal life: freedom and elegance. I will never forget his shiningdebut at Christian Dior where his talents were first unveiled. His humility was the mark of his genius.”

SWEDEN. Swedish travel retailer and wholesaler Inflight Service Europe has named Gustaf Ljunggren as its newCEO, replacing long-serving CEO Peter Candell from 19 August. Candell will move to a new position overseeingstrategy and business development.

In related news, Purchasing & Logistics Director John Baumgartner will concentrate on the company’s vast logisticsbusiness in future. His purchasing role will be taken by Jan-Erik Ericsson, who joins from the ICA Group, one of theNordic region’s leading retail groups. Ericsson is currently Nordic Purchasing Manager for the Home & Personal Carebusiness area. He joins Inflight Service on 1 September.

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