Now you can buy when you fly

Ivan Gale

• Last Updated: January 20. 2009 7:04PM UAE / January 20. 2009 3:04PM GMT

The biggest shopping outlet in the Emirates is not among the familiar names of hypermarket chains such as Lulu or Carrefour. That distinction belongs to Dubai International Airport.

Every day, transiting passengers ring up more than 58,000 transactions, a staggering sum that helps to explain why its duty-free business brought in more than US$1.1 billion (Dh4.04bn) last year. While gold, liquor and fragrances topped the list, the airport has also reached out to suit the tastes of nearly every one of the 38 million passengers who use it every year. Jockeying for space in some of the terminals, one can find bananas for fruit-loving Iranians departing from Terminal 2, while South Asian labourers take home powdered milk from Nestle in 5kg, resealable bags.

The scale and efficiency of the operation has elevated Dubai Duty Free into one of the most successful airport retail operations in the world, with daily per capita spending three times higher than at New York’s JFK International Airport.

The success of Dubai Duty Free highlights a growing trend in aviation. Airports are no longer just places for aircraft to take off and land. Faced with increasing pressure from carriers to reduce landing fees, they have been forced to find new ways to survive. Some, such as Amsterdam Schiphol, Athens and Singapore, have transformed into “airport cities”, where most goods and services found outside the terminal are available inside as well.

Some examples: passengers in Amsterdam can buy works of art by Dutch masters, while 500 couples at Stockholm-Arlanda Airport were married at the airport chapel in 2007. At Singapore’s Changi Airport, meanwhile, passengers can watch a film, relax in a sauna, go swimming, or simply watch butterflies flutter about in a tropical forest.

“Air gateways ... have become as much places of destination as places of departure,” says John Kasarda, a professor at the University of North Carolina who studies how airports and urban development intersect. “They have, in fact, become urban realms in their own right.”

For many years, airports were functional. Owned by governments, few earned any significant profits and were just expected to help passengers get on and off an aircraft. “Historically, airports were seen as utilities, like a bus stop,” says Rimzie Ismail, the general manager of marketing and advertising at Dubai Airports Company. “People did not dwell.”

The search to find new sources of funding began decades ago and innovative approaches can be seen from the sandy deserts of Dubai, at the airport lying below sea level outside of Amsterdam, and even former rust belt cities in the US such as Pittsburgh.

A pioneering moment came in 1992, according to Prof Kasarda, when Pittsburgh International Airport built its AirMall. The terminal funnelled passengers through a duty-free zone containing fashion label and brand-name stores. It became a huge success, and retail sales tripled per passenger. “AirMall spawned the era of modern corporate retail,” he says.

At Schiphol, the airport invested in air cargo facilities including a successful flower mart. It developed the land inside and outside the airport with speciality retail and gourmet restaurants, commercial development office buildings, conference and exhibition centres, and business hotels.

Prof Kasarda, who has consulted with Dubai International Airport, says it was this success at Schiphol that helped Dubai along with its development. The airport replicated the flower mart and cargo centre, opened its terminal to advertisers, and also has five-star business hotels complete with gym, business centres and spa.

Its entrepreneurial roots, however, go back to 1960 when the airport was founded as a sandstrip to sell fuel to British aircraft stopping on their way to India. “From the very beginning, the very concept of Dubai Airport was non-aviation revenue,” Ms Ismail says.

Dubai took things a step further in the 1970s, when it brought consultants over from Shannon Airport in Ireland, which had revolutionised the art of duty-free airport sales. Led by the charismatic Colm McLoughlin, Dubai Duty Free began slicing and dicing passenger demographics to sell everything from fruit to diamond rings to passing travellers. It drew passengers in through lotteries with new Mercedes-Benz sedans as prizes, something other airports have replicated, Prof Kasarda says.

Last month, Mr McLoughlin presided over Dubai Duty Free’s 25th anniversary.

Airports exploit disparities in global shopping. A Rolex in Europe that might cost €5,000 (Dh23,874) after taxes can be found for €4,000 in Dubai. After the collapse of the Soviet Union, appliances were bought at Dubai International Airport by eastern Europeans. It was not uncommon to see passengers on flights to Moscow with a refrigerator in the next seat, Ms Ismail says.

Airports have even exploited small-ticket items that are hard to find throughout the Gulf.

Hallie Engel, a resident of Abu Dhabi, says she buys items at the airport not easily found elsewhere. “For things like a passport holder or a money belt, I find there are more of those in airport stores than anywhere in town.”

A former resident of Doha, she often buys cosmetics, as well as the latest non-fiction and fiction titles there.

“Other bookstores in town would have a few Harry Potters and Danielle Steele novels, and that’s it.”

Duty-free sales proved invaluable in times of crisis in the airline business, when Dubai and other airports relaxed the fees they normally impose on aircraft for parking and landing.

During tough times, such as the first and second Gulf wars, Sars, bird flu and the September 11 attacks in the US, Dubai International Airport worked with airlines to see them through the crisis.

The airport and airlines are again experiencing difficult times because of a deepening global recession, Ms Ismail says, but it has not yet come to the point of discussing fee waivers.

Today, many airports would not exist were it not for their retail services. Athens first turned a profit in 2002 after reshaping the business plan for non-airline revenues. Last year it recorded a record profit of €125 million.

“We would be a totally different airport without it,” says George Karamanos, the director of communications and marketing at Athens International Airport, which earns 40 per cent of total revenues from non-airline sources.

In fact, the airport often gives substantial breaks to new airlines to help them increase passenger throughput at the airport. Etihad Airways, which is set to fly to the city in June, will enjoy free parking and landing fees for three years and significant discounts for another two years.

Mr Karamanos says the airport also earns revenues by consulting with other airlines for IT and telecommunications systems, and has a property division to develop land next to the airport.

In Dubai, the continuing evolution of the terminal space has led to new enhancements. It now offers a sporting goods store, gourmet food shops, salons, a post office and even a crystal, 3D engraving service.

It experimented with a children’s day care centre, but found it unsuccessful. Always innovating, the airport has targeted non-passengers as well, called “meeters and greeters”.

New coffee shops outside the gates have sprouted up, while these “meeters and greeters” can purchase passes for Dh10 to accompany travellers further inside the terminal. “This is popular in cases where they are accompanying someone who is illiterate or there is a problem with the flight,” says Ms Ismail.

Meanwhile, the airport offers its Ahlan and Marhaba escort services to accompany new arrivals, particularly minors, the disabled and the elderly, through the immigration process.

All of these products and services evolved over many years. But the lessons learnt have guided the emirate to invest in a new, master-planned aviation city, the $33bn Dubai World Central, which when completed will be the largest airport in the world.

The massive free zone will include logistics parks, aircraft maintenance centres, private jet terminals, golf courses, and commercial and residential space.

Prof Kasarda argues that the concept of Airport City does not manage to describe the scale of such developments. “As aviation-orientated businesses cluster around these airports and along transportation corridors radiating from them,” he says, “a new urban form is emerging – the Aerotropolis.”

igale@thenational.ae