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ARI Extract From 2014 daa Annual Report

Chief Executive’s Review


Aer Rianta International (ARI) is a wholly-owned subsidiary of daa which owns or operates airport retail businesses in eight countries across North America, Europe, the Middle East and Asia. ARI is also responsible for The Loop operations at Dublin and Cork airports in Ireland. The Group’s 20% shareholding in Düsseldorf Airport in Germany is also held within ARI.

Passenger numbers at Düsseldorf Airport increased by 3% last year to a record 21.8 million. The stake in Düsseldorf continued to make a strong profit and cash contribution to ARI during the year.

ARI’s retail operations overseas performed strongly during 2014, with most locations enjoying double digit sales growth. ARI’s operations made profits of €18.1 million last year compared to €29.4 million in 2013. This year-on-year comparison masks a very solid increase in underlying profits during 2014 however, as the prior year figure included more than €17 million in exceptional profits and profits from discontinued operations.

Sales at continuing locations rose by 10% during 2014. ARI’s joint venture operations in the Middle East continued to perform very well where Beirut Duty Free, in particular, demonstrated further impressive business resilience despite the impact on economic and travel activity in the region as a result of the ongoing conflict in neighbouring Syria. The

Company’s joint venture at Delhi International Airport recorded its fourth successive year of sales growth, having commenced operations in 2010. Turnover last year increased by more than 7% to $129 million supported by continued traffic growth and innovative marketing and promotional campaigns.

ARI’s operations in Canada and Barbados experienced another year of solid sales growth. The trading performance in Canada was boosted by an upturn in activity as the year progressed at Montreal Duty Free’s new International Store, following completion in the spring of a €2.7 million capital investment programme there. The new store has since won a prestigious award at the Grand Prix du Design annual showcase of Quebec-based designers and architects.

Last summer, in a key strategic business development, ARI acquired the 50% shareholding in its existing joint venture airport retail business in Cyprus, CTCARI, that had been owned by a Cypriot partner, the Shacolas Group.

The €55 million transaction, funded from ARI’s accumulated profits, consolidated the Company’s operations in Cyprus. These now comprise close to 5,000 square metres of retail space at the Mediterranean island’s two principal airports, Larnaca and Paphos, under a long-term contract that runs until 2031.

Earlier in the year, ARIME, an ARI subsidiary company, purchased an additional 25.01% holding in Cyprus Airports (F&B) Ltd, the business that operates the food and beverage concession at the same airports. The €3.1 million purchase, also from the Shacolas Group, doubled ARIME’s shareholding in the business, which it operates in partnership with SSP

Louis Airports Restaurants Ltd.

In China, ARI concluded an agreement with Yunnan Airports Group to cease operation of the duty-paid outlets the Company had operated at Kunming International Airport since 2012. ARI looks forward to potential opportunities for working together again in the future.

ARI continued to focus on business development during the year in new and existing locations and is actively pursuing opportunities across a number of diverse markets. Post year-end, ARI won a tender to operate 2,300 square metres of duty free retail at Auckland Airport in New Zealand. The seven-year contract is due to begin in July and ARI will operate stores in the departures and arrivals areas at the airport, which handles about 15 million passengers per year.

In Ireland, ARI manages the Group’s direct and concessionaire retail operations at Dublin and Cork airports. Operating under the Company’s branded retail concept, The Loop, ARI enjoyed another year of strong trading last year. The performance was buoyed by a recovering Irish economy, further growth in passenger volumes at Dublin Airport and continued double-digit increases in traffic on transatlantic services and on flights to and from the Middle East.

Sales at ARI’s directly-operated stores in Ireland increased by 5% during the period. Sales per passenger were higher than the prior year at Dublin’s Terminal 2 and at Cork Airport, but declined marginally overall due to the impact of works on a major upgrade of the airside retail offering at Terminal 1 in Dublin.

Total sales at the two Irish airports, including retail and food and beverage sales by concessionaires, amounted to €227 million, an increase of 6% on the prior year.

The Loop continues to refine and develop the full range of retail experiences and services it offers passengers. The Shop & Collect service, for example, that enables passengers to purchase goods on their outbound journey for collection on return was pioneered in Ireland and last year saw sales rise by 11% to more than €6 million.

The Company, through its global retail excellence programme, the ARI Way, adapts many of these concepts for the benefit of customers, airport and joint venture partners at its overseas operations.

The Shop & Collect model is now operating successfully across the majority of the Company’s trading regions while the Joy of Giving promotion, which originated in Dublin two seasons ago, was introduced successfully last year to ARI’s stores in Bahrain, Delhi and Muscat.

Significant progress was made during 2014 on the €8 million investment programme at Dublin Airport’s Terminal 1 where the street-style linear layout has been replaced by spacious, contemporary walk-through stores including a single 900 square metre space devoted to fragrances and cosmetics.

This exciting new retail development features an adaptation of the award-winning Irish Whiskey Collection in Terminal 2. The new Whiskey Collection outlet, showcasing a minimum of 365 global whiskey brands, is the largest whiskey store in Ireland and one of the biggest in the world in terms of the volume of the spirit that is stocked.

Other new retail outlets include a specialist Irish diaspora wine concept and vibrant new confectionary and destination merchandise concepts.

The first phase of the redevelopment opened in March 2015, while the second major element of the Terminal 1 investment programme, a 900 square metre food and beverage hall, is on schedule for completion in the third quarter of 2015.

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