Lagardère to enter ‘fighting mode’ for Paris tender if expectations align

By Charlotte Turner |

In an exclusive interview, Lagardère Travel Retail CEO, Dag Rasmussen has told TRBusiness that he is 99% sure that the company will be in ‘fighting mode’ to win the newly announced Aéroports de Paris (ADP) tender, but only after the tender has been properly analysed.

 

As reported by TRBusiness, Chief Retail Officer for Aéroports de Paris, Aude Ferrand, confirmed to TRBusiness that the company is seeking a partner to acquire a 49% stake in its joint venture retail company which manages around 140 travel retail and duty free stores at its airports in the Paris region; Charles de Gaulle, Orly and Le Bourget.

 

Incumbent Lagardère Travel Retail and ADP first forged a joint venture partnership to operate travel retail and duty free stores in 2003. This agreement was then extended to include travel essentials in 2011.

 

The long-established contract was due to end on 31 December 2022, hence the timely launch of the tender by ADP.

 

“Joint ventures have lots of advantages and they creates lots of opportunities," added Rasmussen. "The best model for me in terms of risk sharing and really optimising retail and the entire cake is profit-sharing, more than JV.

“Joint ventures have lots of advantages and they creates lots of opportunities,” added Rasmussen. “The best model for me in terms of risk sharing and really optimising retail and the entire cake is profit-sharing, more than JV.

HOPES FOR AN EXTENSION DASHED

Rasmussen told TRBusiness that the company hoped that ADP might be able to extend the contract, considering the turbulent couple of years for the company and indeed the entire travel industry due to Covid. However, this was not to be.

 

“With most airports we managed to agree extensions because in the last couple of years not only have we not had any activity, we’ve occurred significant losses, so many airports compensated for that with prolongation, which doesn’t cost them anything.

 

“But apparently the legal department within ADP considered it was not feasible so they had to launch this tender, which we of course were then expecting.”

 

The next step for the global travel retailer will be to obtain the tender documents which will be analysed ‘thoroughly’. Only then will the team ‘go into fighting mode to win the tender’. TRBusiness understands that final bid documentation must be submitted by March this year. Internal discussions begin in earnest as Lagardère considers the contract to be a ‘high priority’.

 

LONG-TIME INCUMBENT

Rasmussen made it clear that the company remains interested in operating in Paris, because of its highly advantageous position as long-time incumbent.

 

“We have all the infrastructure, the people, the teams are very linked, we have people on the SDA [Société de Distribution Aeroportuaire] committee. Together will ADP we have tailor-made solutions for IT and logistics, relationships with certified suppliers and so on, so I would say that’s the main reason why we are 99% sure we would want to go for this tender.

 

“Had we not been the incumbent then there would have been a question because we have to see what the tender involves and what they expect. The clear advantage is that we know ADP, we have great relationships and enormous trust; both from ADP and the suppliers in our capacity to run Paris. These are strong reasons why we wish to renew our contract.”

 

Paris Charles de Gaulle is an iconic hub airport; one of the busiest airports in the world which provides astonishing and unique exposure for brands. However, it is also a very difficult airport in which to operate retail, as Rasmussen clarifies.

Incumbent Lagardère Travel Retail and ADP first forged a joint venture partnership to operate travel retail and duty free stores in 2003.

Incumbent Lagardère Travel Retail and ADP first forged a joint venture partnership to operate travel retail and duty free stores in 2003. This shot was taken in 2019.

 

AN AUTHENTIC PARTNERSHIP DELIVERING TAILOR-MADE CONCEPTS

“You have 14 different terminals so it’s very difficult to express your commercial strategy, plus it makes it very costly to operate. I think we’ve managed to deliver quality and tailor-made retail concepts, together with ADP, despite this. It’s really been together that we’ve done that.”

 

When the original joint venture agreement was struck, it was unique in its construction as a risk and reward sharing arrangement; something which many airports and retailers are still unable to replicate.

 

However, since then, Lagardère has been able to forge even closer ties with its airport partners around the world. A good example of this can be found at Lima Airport with operator, Fraport.

 

“Joint ventures have lots of advantages and they creates lots of opportunities,” added Rasmussen. “The best model for me in terms of risk sharing and really optimising retail and the entire cake is profit-sharing, more than JV.

Rasmussen, pictured third from left, with the company's Lima Airport partners earlier this year.

Rasmussen, pictured third from left, with the company’s Lima Airport partners.

PROFIT-SHARING CONTRACTS 

“You can have a JV in profit-sharing but you can also have profit-sharing contracts without a JV…there you have even better risk and strategy sharing.

 

“That’s what we managed to do, as you know, with Fraport in Lima and with other landlords as well.”

 

On the subject of projections for 2022, Rasmussen admits that uncertainty does not allow for accurate forecasting at this point.

 

OPTIMISTIC DESPITE UNCERTAINTY

“It’s all about uncertainty and what I tell everybody, including Lagardère Group, is that we just don’t know [what will happen]. My responsibility as a manager is to prepare for all scenarios.

 

“Obviously I have a preferred scenario which is that things improve. I must say that I am confident that it will improve because of the double vaccinations, the triple vaccinations and so on and I am very positive that this will help. There can still be ups and downs, but the worst is behind us. There is no certainty obviously, but I am confident that this is the case.”

 

Rasmussen said the company is observing a strong rebound in the US, which ‘really drives the whole company’. Conditions are still volatile in China, but Rasmussen is still optimistic.

 

“Although there are some ups and downs, Beijing has been locked down and there are other airports as well, we still have very dynamic regions and Europe is coming back. The fifth wave might slow things down again, but if we look at the next six months I’m really confident that travellers will come back.”

 

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