Duty-free giants hand out free flights to lure buyers

Last month, Hyun Jung-a boarded a flight from South Korea’s Incheon Airport. Around two hours later, she was again in the identical airport and loading up on duty-free procuring, regardless of by no means touchdown in a foreign country.
The Air Busan Co. flight, organized by Lotte Duty Free for its VIP prospects, was Hyun’s first because the pandemic started and it didn’t price her a cent. Because the route briefly departed Korean airspace and went over a Japanese island, the 130 passengers on board certified to buy at duty-free shops in Seoul sometimes reserved for individuals who have traveled internationally.
Destination-less flights like these are an try by duty-free operators to salvage an business decimated by Covid-19. Before the virus, enterprise was booming — the worldwide duty-free market was price $85 billion in 2019 and on observe to achieve $139 billion by 2027, in response to Verified Market Research.

Sales plunged as international locations restricted worldwide journey. Globally, just one.8 billion folks took scheduled flights final 12 months in contrast with 4.5 billion in 2019, the International Civil Aviation Organization has mentioned. Annual income for Swiss duty-free large Dufry AG, which operates shops worldwide, fell 71%.
While buyers on flights similar to Hyun’s gained’t fill the monetary void, they at the least usher in some much-needed enterprise.
“I saw a lot of people with bags full of duty-free items,” mentioned Hyun, who purchased a Chanel bag, footwear and cosmetics. “I tell all my friends that it’s worth taking the flight because of the duty-free shopping opportunity.”
Hotel Shilla, South Korea’s second-biggest duty-free operator after Lotte, is providing 114 seats on two so-called flights to nowhere on May 23 and 30 to prospects who’ve spent greater than $550 at its shops since May 3. Lotte is placing on one other 5 flights this month.
Duty-free operators and different shops are among the many final in South Korea to get well from the pandemic, with the nation’s retailers and wholesalers shedding 182,000 positions in April even because the economic system added 652,000 jobs from a 12 months earlier, the statistics workplace reported Wednesday.
The business is in much less of a squeeze the place home air site visitors has rebounded and tax-free procuring zones are in place. The palm-fringed Chinese island of Hainan has develop into an much more in style getaway for vacationers from the mainland now starved of worldwide journey. That’s helped the province’s duty-free gross sales, which greater than doubled to 27.5 billion yuan ($4.3 billion) final 12 months, in response to the Ministry of Commerce.
Duty-free procuring has been permitted for home vacationers in Hainan since 2011. In July, the federal government raised the spending restrict to permit folks to purchase extra and it’s extending some duty-free procuring to Beijing, Shanghai and different cities to faucet the rising buying energy trapped in China.
Catering to the demand in Hainan, Alibaba Group Holding Ltd.’s logistics unit is beginning each day cargo flights from Singapore to ship cosmetics, purses and different items to the island. Japan’s main duty-free retailer, Laox Co., which was acquired by Chinese retailer Suning Holdings Group Co. in 2009, is planning to enter Hainan as quickly because the second half of this 12 months, establishing shops designed equally to its shops in Japan.
“The trend of visiting Hainan to do luxury shopping is here to stay for the Chinese,” mentioned Jonathan Siboni, chief govt officer of data-intelligence agency Luxurynsight.
International air journey, whether it is occurring in any respect, is tending towards shorter-haul, regional routes, and from locations the place vaccination applications are at a extra superior stage. Seven of the world’s busiest worldwide routes within the first 4 months of the 12 months included U.S. hyperlinks, similar to Cancun-Houston and New York-Santo Domingo, in response to aviation analytics firm Cirium.
Share costs recommend traders are upbeat. Dufry’s inventory has climbed greater than 100% because the finish of September, whereas Hotel Shilla is close to the very best in almost 15 months in Seoul.
Paris-based Lagardere Travel Retail, which operates duty-free shops, eating places and different retailers in airports, is relying on prospects from nearer to house to assist it by an unsure summer season in Europe after its income slid 56% from a 12 months earlier to 341 million euros ($414 million) within the first three months.
“We’re betting more on retired Europeans traveling,” mentioned Frederic Chevalier, the corporate’s chief working officer for Europe, Middle East and Africa. McKinsey forecasts passenger flows between Asia and Europe will solely return to 2019 ranges “beyond 2024,” mentioned Anita Balchandani, a accomplice on the agency.
With vaccination charges lagging in locations similar to South Korea — which has delivered sufficient jabs for simply 4% of the inhabitants, Bloomberg’s Virus Tracker reveals — retailers might depend on gimmicks like flights to nowhere for some time.
“The contribution from the flights to nowhere is small but it’s better than having nothing,” mentioned Sung Junewon, an analyst at Shinhan Investment Corp. In Seoul. “Every little bit counts.”
Seven South Korean carriers have operated these flights, carrying about 8,000 passengers in complete. Authorities are additionally contemplating plans to permit abroad flights into Incheon, the place passengers can spend a couple of hours procuring with out leaving the airport earlier than flying again to their unique departure level.

Park Ju-hyun, a 31-year-old workplace employee from Seoul, paid about 90,000 gained ($80) for a flight-to-nowhere ticket in March. It was her first time on a airplane since a visit to the Philippines earlier than the pandemic, and it was effectively price it for the procuring, mentioned Park, who spent about $600, totally on cosmetics.
“It was nice to be back at the airport,” she mentioned.