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ARI sells Domodedovo and Vnukovo interests to Duty Free Holding Group

RUSSIA.

Aer Rianta International (ARI) has sold its retail interests in Moscow’s Domodedovo and Vnukovo airports to its local partner, Duty Free Holding Group (DFHG), for an undisclosed sum. The retailer, a subsidiary of Dublin Airport Authority, will continue to supply DFHG, which retains the right to operate under the Runway Duty Free fascia.

In a statement, ARI confirmed it has sold its 50% stake in Arial, the joint venture which runs retail at Domodedovo, and its 19.9% share of Rex Trading, which operates at Vnukovo. It has signed a supply contract and trade mark licensing agreement with DFHG.

Experienced duty free executive and former ARI senior manager John Moriarty has been named Vice President – Operations for DFHG.

The exit from Domodedovo (a thriving business for several years despite intense on-airport competition) and Vnukovo represents a watershed in the history of ARI in Russia. The company pioneered international standard duty free retailing in the country in the late 1980s, a base from which it then extended into neighbouring countries.

Conversely, DFHG now looms as a major force in Russian travel retail, not just in duty free but in duty paid operations across the country’s burgeoning domestic airport sector.

Moriarty told The Moodie Report: “Within the holding group, we are looking at consolidating a number of businesses [under the DFHG banner] to create one strong leading travel retailer in the region, both duty free and duty paid. We will be looking to expand both the duty free and duty paid sides of the business.”

“We’ve got the duty free business of Runway Duty Free at Domodedovo and Vnukovo; also in Domodedovo there’s a domestic travel retail business which will come under the same [holding] roof,” he added. “There are eight stores in the domestic terminal there. We will also have some domestic stores in the new terminal at Vnukovo when it opens.

“There are also a number of stores at Sheremetyevo Airport at Terminal E, both landside and airside, both duty paid and duty free. We also have expanded into the seaport in St Petersburg, both duty free and landside… which handles cruises as well as ferries to Scandinavia.

“We also have a duty free and travel retail business in Novosibirsk and an airside domestic retail store in the [2014] Winter Olympics city of Sochi.

“We’re basically taking all these businesses and putting them into one holding. It needed to be done… it offers economies of scale and from both our point of view and the supplier point of view there’s now one leading operator that people can deal with,” he added.

Moriarty said the group’s more coherent structure would also allow it to better influence the future of travel retail in Russia, particularly in discussions with Customs or the Minister of Finance.

He said that ARI will continue to supply Duty Free Holding Group with core categories under the terms of its supply contract. “From a suppliers’ point of view nothing changes.”

ARI Director General Eamon Foley told The Moodie Report that the company, though exiting its interests in Domodedovo and Vnukovo airports, would retain its 33% stake in Aerofirst, the joint venture with Aeroflot which operates at Moscow Sheremetyevo Airport Terminals D and F. “We have no plans to exit that business,” he confirmed, adding that the Irish retailer continues to operate at St Petersburg Pulkovo Airport as well as Kyiv Boryspil Airport.

Asked why ARI had chosen to exit its other two Moscow operations, Foley replied: “Pure and simple – our local partners made us an offer we thought attractive and we decided to accept it… we had a very good business for a number of years but it came down to a simple question of evaluating future prospects and opportunities against the price we were offered.”

Foley said that Aerofirst’s business in Sheremetyevo Terminals D (the shops opened in February) and F was trading well. “Trading conditions are good in Russia… it recovered very strongly from the economic crisis,” he noted. Aer Rianta International itself won the Terminal D business in late 2007 but that much-delayed operation was finally transferred to the Aerofirst partnership this year.

ABOUT ARIAL

Arial operates 17 stores at Domodedovo Airport under the Runway brand, selling duty free goods, fashion, sunglasses, beauty products, music and gifts. Arial also operates Shannon’s Irish Bar, which is located airside in the international part of the airport. Its overall business comprises just over 1,200sq m of retail and food and beverage space. Arial has been operating at Domodedovo since 2004.

ABOUT REX TRADING

Rex Trading has operated two duty free stores under the Runway brand in the international terminal of Moscow Vnukovo Airport since 2004. The combined size of the two outlets is about 450sq m.

ABOUT AER RIANTA INTERNATIONAL

ARI is a leading international airport retailer and is credited with the creation of airport duty free shopping, in Shannon Airport over sixty years ago. It operates stores in North America, the Caribbean, Europe, the Middle East, and India. It also has airport investments in Germany and Cyprus.

ABOUT DUTY FREE HOLDING GROUP

DFHG is Russia’s leading duty free and travel retail operator with stores in Moscow’s three airports, Domodedovo, Sheremetyevo and Vnukovo, as well as in St Petersburg, Novosibirsk and Sochi – home to the 2014 Winter Olympics.

Source: ©The Moodie Report

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