Concern over tenders awarded for BIA duty free shops

The decision to award the main five-year major duty free concession at Colombo Bandaranaike Airport to Flemingo over World Duty Free and the latter being asked to vacate their space in short notice has reportedly resulted in a problematic situation. 

World Duty Free, which is owned by Swiss group Dufry and is one the world’ biggest travel retailers, was asked to vacate on Tuesday (14) after it had failed to secure the space they were operating in at the first round of bidding. 

This has cast a shadow of uncertainty over the jobs of 300 employees working under the company at WDF shops as they have been asked to close down and go home until further notice. 

Airport & Aviation Services (Sri Lanka) had issued a tender for both contracts on 9 May 2016. The company had opened the bidding process internationally and implemented a split concession model.

The business has been split for some years between Dufry-owned World Duty Free Group, which had the major space, and Flemingo Duty Free, a subsidiary of Flemingo International, a Dubai based global duty free and travel retail operator. 

Total sales for the core category businesses in 2016 reached over US$90 million. The potential of the new contracts is enhanced by a major expansion of the airport due to be commissioned by 2020.

The tender continued the split concession model, with two concessionaires each managing one duty free shop in Arrivals and one in Departures, under five-year terms.

Bids were opened on 7 July 2016 but the award process was delayed for several months. 

Flemingo emerged as the highest bidder with a revenue share of 40% followed by World Duty Free (Dufry), B&S, The Shilla Duty Free and Aer Rianta International.

However, concerns have been raised that the bidding process lacked transparency and that it is suspected Flemingo had received an advantage over other bidders. 

World Duty Free, which has been present in Sri Lanka since 1996, was reportedly disqualified for submitting a tiered bid, which had suggested a revenue share based on performance.

Flemingo will continue for now to operate from its current space and is expected to move into the new expanded space from 1 July 2017.

“The tender was resolved by selecting one operator and to call fresh tenders for the selection of a second operator. The selected bidder is the consortium between Flemingo Duty Free Shop Pvt Ltd and Flemingo Duty Free Pvt Ltd. The new contract for five years is effective from 15/03/2017 and the agreement was signed [earlier this week],” Airport & Aviation Services Head of Commercial & Properties Geeth Karunarathna was quoted as saying The Moodie Davitt Report.

In 2016 the airport serviced 9.47 million international passengers, a +14% rise year-on-year, buoyed by strong growth in Chinese traffic. The Chinese now rank as the airport’s second-biggest passenger group after Indians.