Gebr Heinemann has announced rising revenues and a new long-term extension to its duty free concession at Hamburg Airport.
The Hamburg based business and largest independent duty free retailer and distributor in the world generated a group turnover of €3.6 billion in its 2015 financial year – a rise of 13% on the previous year.
While the extension of its contract at its ‘home town’ airport means that it will operate the Heinemann Duty Free & Travel Value shops and three other concept stores at the German gateway until at least 2027.
Talking about the Hamburg extension, Raoul Spanger, executive director for retail at Gebr Heinemann, says: “We have a very trusting, friendly relationship with Hamburg Airport, which is based on profound mutual respect.
“After introducing our retail brand Heinemann Duty Free in 2008, we have frequently established new services, such as home delivery.
“We are delighted that we have now been able to agree an early extension of the contract with our home airport, Hamburg Airport, of eleven years. I would like to thank all our staff for their excellent work.”
Hamburg Airport CEO, Michael Eggenschwiler, says: “Heinemann has been at Hamburg Airport for over 22 years. The company makes travelling a true experience for our passengers, because for many people shopping in these attractive shops is a highlight when they take a flight.”
In terms of Heinemann’s performance in its 2015 financial year, co-owner, Claus Heinemann, described it as a “satisfying” and “exciting” year for the company in which retail activities accounted for around €2.8 billion of its revenues and the distribution side of the business for the remaining €800 million.
Highlights included being awarded the duty free contract for Istanbul’s new mega hub, which co-owner Gunnar Heinemann notes was equivalent to winning five airport concessions because of its size and scope; the acquisition of a 60% stake in Amsterdam’s Schiphol Airport Retail; and expansion in Asia-Pacific.
Success in Asia-Pacific, reveals Gebr Heinemann, included the establishment of a new joint venture in Malaysia with Duty Free International, and the successful operation of around 7,000sqm of retail space at Sydney Airport, with more stores set to open in May.
When fully open, it says its 10,000sqm Sydney Airport operation will be its biggest store and the largest single duty free outlet in the world.
Germany (16%), the rest of the European Union (33%), Europe’s non-EU countries (40%), Asia-Pacific (6%) and the rest of the world (5%) accounted for the group’s turnover by region.
But don’t be fooled into thinking that it was all plane sailing for the duty free giant last year, as setbacks included a major decline in the Russian market and the continuing impact on its business of political instability and acts of terrorism across the globe.
Indeed, Gebr Heinemann’s operations in Egypt and Tunisia suffered a downturn last year, arguably the the worst affected airport from a Heinemann perspective being Sharm El Sheikh, which it says has gone from a busy gateway to virtually a ghost airport.
Executive director for retail, Raoul Spanger, however, insists that the company is not in the habit of pulling the plug when the going gets tough as it considers itself to be a long-term partner to airports.
“Our operation at Sharm El-Sheikh is almost non-existent today because there is hardly any business due to the traffic levels. In fact, we have lost 90% of our turnover here, so the situation is tough. We are hoping that flights will start again in the summer and turn things around,” he says.
He reveals that Heinemann and its concessionaire partner Atu Duty Free have also suffered financially in Tunisia where instead of anticipated 2015 revenues of €100 million they registered just €46 million.
“This just shows the fragility of the market,” adds Spanger. “One day everything is alright, and then he next day you get some news that makes it almost impossible to trade.”
Kay Spanger, the company’s executive director for purchasing and logistics, was nonetheless quick to point out that the fragility of the market is nothing new, citing the fire at Düsseldorf Airport in 1996 and the recent terrorist attack on Brussels Airport as an example of how things can literally change in an instant.
“We lost substantial amounts of money in Tunisia and Egypt last year and this is a concern, but we take the long-term view and hope that things improve before too long,” he says.
“You also have to remember that we invested a lot of money in these airports, so looking to get out of contracts at this stage is not really an option we would consider.”
In 2016, Turkey overtook Norway to become Heinemann’s biggest market, based on annual revenues of €631 million, the upturn from €560 million being largely attributed to the new Istanbul airport contract and the “strong performance” of Turkish Airlines.
Although revenues in Norway for the year increased by 3% in Norwegian Krone, fluctuating currency rates meant that in euro terms, Heinemann actually ended the year worse off than the year before with a turnover of €444 million compared to €458 million in 2016.
Reflecting on a 30% decline in turnover in Russia in 2015, Gebr Heinemann admitted that the Ukraine crisis, a 50% reduction in the value of the Russian ruble, a sharp drop in the oil price and the resultant inflation have led to people travelling and spending less.
“The commercial instability of the Russian market has hit its regional airports the hardest as the airlines appear to have decided not to fly from them anymore,” says Heinemann’s
executive director for distribution, Peter Irion, noting that the results for the large airports in Saint Petersburg and Moscow are still good.
He reveals that Heinemann reported a rise in sales at both Moscow’s Sheremetyevo and Domodedovo airports in 2015, the latter despite Transaero’s bankruptcy and the decline in charter traffic to Egypt and Turkey.
“There is turbulence at the moment, but we do believe in Russia and see a positive outlook for the market for 2016 and the years to follow,” he says. “As a result, we will continue to invest in this region and expand our market share from the current 40% to 50%.”
The signing of a ten-year contract to exclusively operate the duty free shops at Moscow’s newly opened fourth gateway, Ramenskoye Airport, certainly proves this point.
Located 43km from Moscow and operated by Ramport Aero – a joint venture between Lithuania’s Avia Solutions Group and Russian state-owned corporation Rostec – the airport is expected to handle up to 1.9 million passengers in its first year of operations.
Looking to the future, Kay Spanger, notes that 2016 highlights will include the opening of the new outlets at Amsterdam Schiphol –the existing stores generated €88 million in sales in its first year – and the opening of Oslo’s new expanded terminal in September, which will allow Heinemann to open the world’s largest Arrivals duty free store at 4,400sqm and follow it up in December with the unveiling of a new 3,500sqm departures store.
Summing up, Claus Heinemann, says: “We are looking ahead with optimism and targeting growth of 10% this year.”