Kolkata Airport Duty-Free Stores Encounter Bidding Obstacles Due to Elevated Rents and Flight Reductions
Duty-free stores located at Kolkata airport are poised to be put on the block following the conclusion of an extended contract period. However, these outlets must navigate significant challenges, including exorbitant store rents and a sharp decline in international flights, to successfully attract potential bidders. The current operator, Flemingo Duty Free, has expressed its intention to participate in the bidding process once again. Nevertheless, the company is advocating for a reduction in rental costs to enable it to provide liquor, chocolates, and perfumes at more appealing and competitive rates.
Impact of COVID-19 and Geopolitical Tensions on Operations
Since the onset of the COVID-19 pandemic, Flemingo Duty Free has been managing only two out of the four outlets it originally secured through a bid in 2016. This operational downsizing is directly attributed to a substantial slump in international flight traffic. The situation has further deteriorated due to strained relations between India and Bangladesh, which have reached a low point. Consequently, the number of daily flights connecting Kolkata and Dhaka has been drastically reduced from eleven to merely two.
A representative from Flemingo highlighted the severity of this issue, stating, "Our primary customer base consisted of travelers from Bangladesh. Presently, India is issuing visas exclusively to patients and students, neither of whom typically purchase liquor. Additionally, chocolate sales in the departure area have suffered significantly due to the same underlying reason."
Comparative Price Disparities and Rental Concerns
The official also acknowledged that sales have been adversely affected by the relatively high prices of liquor at Kolkata airport when compared to other major airports such as Delhi. In the past, Flemingo Duty Free proudly promoted its competitive pricing, often claiming to offer some of the lowest rates globally. However, private operators at other airports, including GMR in Delhi, have successfully negotiated lower rentals. This reduction has allowed duty-free store operators in those locations to decrease their prices, thereby enhancing their market competitiveness.
Flemingo, which also manages duty-free operations in Chennai, Trichy, and Calicut, pointed out that the rentals at Kolkata airport are the most expensive among its locations. This is because the airport operator is required to adhere to government norms and lacks the flexibility that private operators enjoy in adjusting rental agreements.
Glimmer of Hope and Tender Specifications
Amid these challenges, a potential positive development is the anticipated return of Chinese airlines, which could help revive international passenger traffic. The original tender for the duty-free stores at Kolkata airport was initially set for a seven-year term but was extended by an additional three years. This extended contract is scheduled to conclude within the current year.
A fresh tender has now been issued for a total area of 6,300 square feet situated in both the international arrival and departure sections. An airport official outlined the operational requirements, noting, "The duty-free outlets are mandated to open at least three hours prior to the day's first arrival or departure and must remain operational until sixty minutes after the last arrival or departure. Furthermore, these outlets are required to be open throughout the year, without exception on any of the 365 days."
Previous Failures and Market Realities
The lack of financial viability has previously led to unsuccessful ventures in this sector. For instance, the entity that won the bid to operate two liquor stores within the domestic wing was compelled to cease operations after just six months. An official explained this outcome, remarking, "Customers are reluctant to purchase liquor at prices that exceed those available at off-shop locations, making such ventures unsustainable under current conditions."
This historical precedent underscores the critical need for addressing the core issues of high rents and limited flight connectivity to ensure the future success and sustainability of duty-free operations at Kolkata airport.
