United Airports of Georgia (UAG) recently awarded ATÜ Duty Free – the TAV Airports Holding and Gebr. Heinemann/Unifree Duty Free joint venture – a seven-year duty free contract (plus a three-year extension option) at the newly expanded terminal at Georgia’s Kutaisi International Airport.

In late July, the airports company signed the tenancy with ATÜ Duty Free to extend a long-standing alliance with the travel retailer.

ATÜ Duty Free will preside over a duty free footprint totalling 568sq m, divided into two areas.

TRBusiness spoke to Inga Bakuridze, Business Development Department, Non Aviation Revenue Manager at United Airports of Georgia, who discusses the significance of the new concession following a highly competitive tender, one that attracted 97 bids on the last day of the contest.

Tell us more about the commercial space operated by ATÜ Duty Free in the newly renovated and expanded terminal and what travellers can expect?

The duty free operation will be divided into two areas: one of them is a 420sq m walkthrough duty free area after passport control and the other is 148sq m arranged near the gates. The second area will be dedicated to Georgian concept stores selling local category products such as wines, souvenirs, food, sweets etc.

Both locations were offered through an online auction together under one lot. By winning the auction, ATÜ Duty Free was entitled to arrange both. Apart from these two, there are no other duty free locations available at the airport. However, there are other retail and F&B locations operated by and available for local and international brands.

You mention a highly competitive tender with 97 bids flooding in on the last day of auction…

Last minute active bidding is very common and we observe such behaviour in other online auctions as well. We did expect competitive bidding, since we had several international companies interested and actively communicating with us, however we were also surprised to get to 97 bid points.

In Georgia, the number of international airports is quite limited, so operating a duty free shop in Kutaisi International Airport is a strategic decision on entering and strengthening positions in the Georgian market overall.    

Can you comment on the strength of ATÜ Duty Free’s proposal and why they were selected as the concession partner?

Extensive experience in the field, diverse assortment of products and a highly competitive bidding price.

What are the financial terms of the contract signed with ATÜ Duty Free? Will they pay a MAG/fixed rent or a variable fee based on traffic given the current situation? 

It’s 25% from their sales together with MAG monthly payments. However due to the pandemic, we made MAG a partly variable payment that depends on the yearly traffic of departing passengers. It means that on different levels of passenger traffic, different MAGs will apply. We believe this is a fairer way to work with the partner company since the ongoing pandemic has shown the necessity for more flexibility in the travel retail business.

What other commercial developments do you have in the pipeline you can share with TRBusiness at this time?  

We are currently working on two major projects: a more than 150 sqm business lounge auction and a main fast food restaurant in the departures hall after the passport control area. Interested parties are very much welcome to reach out on [email protected].

How is spend per head performing against passenger traffic this year versus 2021 and pre-pandemic?

We will have a much clearer understanding of it when the duty free shop is open, yet we see growth per head which we link to a slightly different passenger profile in Kutaisi Airport.  

Describe the situation for United Airports of Georgia’s passenger traffic in the context of the ongoing Russia-Ukraine war?

Since we had no Ukrainian flights in Kutaisi International, we did not face a decline in terms of expected passengers or flight numbers due to war in Ukraine. Moreover, it’s important to mention that Kutaisi International Airport has not only recovered month-on-month passenger numbers, but this summer it served its highest number of passengers and flights historically with up to an 11% increase in pax numbers each month.

State-owned enterprise United Airports of Georgia owns three international and two domestic airports in Georgia (Tbilisi, Batumi, Kutaisi, Mestia and Ambrolauri).