JR/Duty Free has emphasised the significance of the new alliance with Gebr. Heinemann at Tel Aviv Ben Gurion International Airport.

Having operated the principal DF licence comprising liquor, tobacco fragrance, skincare and confectionery on its own at Tel Aviv Ben Gurion Airport since 1988, it secured the 10-year contract to continue operating at the airport (Terminal 1 and Terminal 3) in partnership with the German family-owned company last year.

The tender took place after JR/Duty Free reached an agreement with Israel Airports Authority (the terms of the previous agreement were deemed unfavourable – Ed).

The previous lease term for its DF departures business ended on 31 December 2017 and the new lease covering 4,000sq m of space started on 1 January.

FIRST YEAR OBJECTIVE

Speaking candidly to TRBusiness, JR/Duty Free Chairman Garry Stock said: “The objective for the first year is a little different from a ‘normal tender win’ because in this case James Richardson was the incumbent and we were running the business very effectively.

“Where we were suffering was from what turned out to be an extremely onerous contract because of the effect of open skies.”

The signing of the Open Skies agreement between Israel and the European Union in 2012 when the airport handled 12m passengers – the agreement was ratified in April 2013 – has led to challenging operating conditions, but Stock emphasised: “The real significance of 1 January was that it was a new contract on different terms from the tender we one we one in 2013.

“We are now working on different arrangements with the Israel Airports Authority which will obviously have an impact on business in 2018. Hopefully, we will now have a chance to get a decent return. With the growth in passengers only time will tell.”

With the joint-venture predicting annual sales of $400m this year and Tel Aviv being Heinemann’s third-strongest sales location next to Istanbul Atatürk and Oslo Gardermoen Airports, the future is certainly bright.

Co-owner Claus Heinemann said at the annual Heinemann press conference attended by TRBusiness earlier this week: “We were very proud and honoured to establish our JV in Israel, especially with our historical background. The partnership with JR is special and we feel very welcome in Israel.”

Q1 SALES INCREASE

With sales increasing +20% in the first quarter compared to the same period last year, Executive Director Raoul Spanger (Retail, HR) added: “[The JV] is ahead of target in year one, with 71% of sales made to local pax.

“The highest spend per pax is in Tel Aviv. We are proud and respect this partnership. For us, it is a fantastic feeling as a German company to work there.”

Offering an insight into the function of the joint-venture, Stock says Heinemann has ‘full access’ to everything and that both parties are working together to determine where the business can improve.

He explained: “Thankfully, we have a great basis to work from in that JR at Ben Gurion is a strong business which has been well run and respected by suppliers. We also have a strong and good understanding of the market, which consumers can relate to.”

The transition into a joint-venture is seamless from the consumer point of view, according to Stock, who reiterates the real focus is on using Heinemann’s input to try and improve.

“The brand name hasn’t changed,” Stock emphasised. “The entity that is owning the business is James Richardson/Gebr. Heinemann, but to the Israel whole world is still James Richardson/JR Duty Free.”

POSITIVE DEVELOPMENT

From the landlord perspective, the joint venture between JR/Duty Free is a positive development in a period of significant change.

IAA Deputy Director General Commerce and Business Yoram Shapira told TRBusiness: “Because there are major changes in the DF market, I believe this kind of joint-venture will prove very helpful in running the business.

“When two global companies unite to offer services at Ben Gurion, their [global] experience really gives us an advantage. This is one point of view. Another is the benefits for consumers. If a passenger is from Oslo, for example, where Heinemann is present and needs some kind of assistance having purchased something from Ben Gurion, they can receive assistance on their return home.”