WDF signs on for another five years in Kuwait

By Charlotte Turner |

Kuwait Airport.

World Duty Free Group and local Kuwait partner That Es-Salasil, have signed contract to operate the duty free stores at Kuwait International Airport for an additional five years. WDF and That Es-Salasil have been operating at this airport since 2006.

 

The new contract, signed with General Directorate of Civil Aviation of Kuwait (DGAC), is effective from 1 March 2015, and includes an option for an additional year under the same conditions.

WDF and That Es-Salasil presented an offer of a flat annual investment rent fee of KWD 7.77m ($26m)) for each of the five years of the concession.

As part of the agreement with the airport, the contract includes an additional six-month refurbishment period to carry out the necessary store renovations (with around $1m capital investment). The rent fees are payable as of 1 September 2015.

 

FIXED FEE OVER CONCESSION LIFE

As previously reported, WDF’s sales in Kuwait sales were relatively flat in Q1 2014, which the company attributed to ‘a reduction of selling space’.

Unlike other concessions, where World Duty Free Group agrees rent as a variable percentage of sales – with the option of including a Minimum Annual Guarantee – the agreement in Kuwait consists of a fixed fee over the life of the concession, regardless of sales performance.

[For WDFG’s Spanish concessions, which it famously won in 2012, the contracts require the payment of a percentage of sales with a MAG. WDF had its offer of rental contract renegotiation rejected by AENA in 2014 following a prolonged period of traffic decline at Spanish airports]. 

Left to right (front line): Carlos Sáenz de Tejada, Ambassador of Spain in Kuwait; Pedro Castro, Chief Operations Officer International, World Duty Free Group; Fawaz Abdul-Aziz Al-Farah, President of DGAC and Abdel Asiz Ar Mansour, President of That Es-Salasil.

WDF says that the arrangement with the Kuwait airport “permits increasing rates of profitability as traffic and sales grow”.

According to the information supplied by DGAC, World Duty Free Group–That Es-Salasil offered just a 6% premium over the second bidder, making it the best offer.

Under the new contract, World Duty Free Group will operate two stores at the existing location in departures; a store with WDFG’s beauty range and Pure Gold jewellery and a store which offers a selection of tobacco and food and confectionery products.

 

‘A STREAMLINED COOPERATION’

“We are very pleased to have made a very competitive offer to retain the Duty Free business in Kuwait and to keep partnering with the General Directorate of Civil Aviation in Kuwait,” said Pedro Castro, International COO, WDFG.

 

“As the incumbent bidder, and operator of the stores in this airport since 2006, we know the dynamics of Kuwait International Airport and its potential very well. In partnership with That Es-Salasil, we have streamlined cooperation with the DGAC to make this operation a real success story and we are delighted to extend this partnership”.

 

In January of this year, World Duty Free Group approved a three-year plan for 2015 to 2017 which it hopes will push consolidated revenue up to €3,004m ($3,553m) in 2017 and adjusted Ebitda to €335m, through investment of €190m during the period.

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