Modifications Ensure Spain’s Colossal $19 Billion Duty-Free Retail Tender Attracts Wide Range Of Bidders

Spanish airport operator Aena has revealed some tantalizing details of a giant retail tender—split into tranches—that is sure to attract the world’s top duty-free retailers like moths to a flame. At stake is business worth an estimated €18 billion ($19 billion) over 12 years.

Aena released some numbers just before the holidays to build interest and whet appetites ahead of the bidding process covering a total of 27 airports in its network.

The commercial space available will be more than 710,000 square feet, which equates to more than seven football pitches, and includes 86 duty-free sales points, as well as a large number of units dedicated to other categories. Full details will be given in a presentation on January 24 next year.

The airport operator has deliberately changed the structure and length of the concessions to appeal more widely and, most likely, to ensure it ends up with more than one retail partner. The last time Aena ran this type of retail beauty contest in 2012, it only offered three concessions, all of which were won by World Duty Free España (which had acquired the then incumbent retailer Aldeasa) and which is now part of the giant Dufry Group.

The two elements that have changed are:

• lots have been doubled from three to six “to boost participation and promote competition among global operators” said Aena
• the contract duration has been significantly increased from seven years up to 12 years, with the option of three annual extensions to allow winners time to profit from expensive upfront refurbishments and ensure a return on their investment.

To encourage bids across all six lots—each one including 4-5 gateways on average—every tranche is likely to include a high-volume international airport, though this is not confirmed. The current top six are Madrid-Barajs, Barcelona-El Prat, Málaga-Costa del Sol, Gran Canaria, Tenerife Sur, and Palma de Mallorca.

Interest expected from far and wide

As well as the incumbent, Dufry, which holds the existing three duty-free concessions covering almost all of Spain’s main airports, there will almost certainly be bids from France’s Lagardère Travel Retail; Germany’s Gebr. Heinemann; DFS Group, which operates the LVMH retail flagship La Samaritaine in Paris, as well as possible interest from South Korea’s Lotte Duty Free which has been on an international expansion drive; its local rival Shilla Duty Free; and even the prospect of China Duty Free Group—which just opened the world’s largest duty-free mall—casting an eye on a possible European debut.

Aena’s commercial and real estate managing director, María José Cuenda, said that the current contracts with Dufry are in force until October 31, 2023, and noted that while the tranches had been doubled to six, they were “a sufficient size for economies of scale to be developed.”

The entire tender strategy aims, first and foremost, to maximize Aena’s own revenue. The company did rather well in the 2012 round by establishing increasing minimum annual guarantees (MAGs) regardless of traffic, which negatively impacted Dufry for some years. It is not clear whether a MAG element will be present this time around given how the Covid years showed that such guarantees only had an upside for airport landlords.

In a statement, Aena also said that the impact of Brexit “has been taken into account as it represents a major change in the business of Aena’s duty-free shops.” That’s because British tourists are the top visiting nation in Spain and capitalizing on duty-free sales to Brits is firmly back on the agenda.

Aena has not released the exact timetable for the bidding process but it said that the results of the tender will be published in July 2023. So far this year, Spain’s airports have made a strong post-Covid recovery. November traffic had returned to 96% of pre-pandemic levels, and in the cumulative 11-month period the rebound stood at 88% versus the same period in 2019. That equals 225.8 million passengers passing through the Aena airport network during those months.