Jet Airways grounding, Sri Lanka terror attacks hit duty free sales

For Flemingo Travel Retail, the airline's grounding had an impact as its store in Mumbai contributes significantly to its topline

The closure of Jet Airways and terror attacks in Colombo led to double digit drop in duty free sales at airports in India and Sri Lanka, said Manishi Sanwal, chief executive officer of Flemingo Travel Retail on Thursday. 

Flemingo group, which runs duty free stores at twelve airports in India and a few other countries, however, expects business to recover by end of current fiscal with the opening of new outlets and aggressive marketing. The Indian subcontinent contributed 40 per cent to its consolidated revenue of around $750 million (Rs 5,250 crore) in FY 2019. 

"April was the worst month for us. There has been an impact on our business and we are trying to mitigate it by opening new stores and focusing on marketing and promotions to drive sales. We don't know yet what will be the full year impact of Jet Airways grounding on our sales but we expect a recovery. Traffic growth should normalise by next March," Sanwal said.

Jet Airways shut down operations on April 17. The airline suspended all international fights a week earlier. Jet was the largest airline on overseas routes from India and also the biggest airline operating in Mumbai. For Flemingo, the airline's grounding had a major  impact as its store in Mumbai contributes significantly to its topline. Flemingo group also supplied products to Jet Airways for its on board duty free sales. The April 21 terror attacks in Colombo added to the travel retailer's woes as tourists cancelled or deferred travel to Sri Lanka.

International traffic at Mumbai airport dropped 12 per cent in April, according to Airport Authority of India data. Flemingo's business at Mumbai witnessed single digit decline that month. 
 

Typically, around 8-9 per cent of all flyers shop at its Mumbai store and in April the percentage increased to around 12 per cent and thus limiting the impact of Jet's grounding. Sanwal pointed out that the grounding resulted in shorter queues at airport security and immigration, thereby giving passengers more time at the terminal. "Overall airport experience improved for passengers," he suggested. The group's Colombo stores saw far bigger dip in sales post the attack. 

The company opened a duty free store at Attari border a few months ago and is launching a store at Krishnapatnam port. Also, it is focusing on marketing and new product categories. This includes tie-ups with various e-commerce companies and other brands which will allow flyers to earn vouchers on shopping at airport stores. "This has helped us to create a differentiated offering and create value for customers," Sanwal stated.

Over 60 per cent of sales at duty free stores in India comprise of alcohol, while in European stores, tobacco is the most sought after product. Globally, perfume and cosmetics have a large share of sale at duty free stores. Flemingo is introducing new products like protein supplements and increasing sales of electronic goods, phones and accessories. "For us electronics, phones and accessories are the fastest growing category. There is competition from e-commerce companies but we feel we are resilient because of our duty free status," he added.