EL NEGOCIO DE LA SEMANA
TASA suma espacio con el Morgan
por SABINA AMBOAGE
Apenas un mes después de haber anunciado
su primer emprendimiento inmobiliario en la Argentina,
el J. P. Morgan tiene ya su primer cliente. Es
TASA Logística-Transfármaco, una
empresa en la que BISA -el holding del grupo Bemberg-
tiene el 51% del capital y la familia Ader, el
49% restante. La celeridad con que se iniciaron
las tratativas no es casualidad: los Ader son
el vínculo entre las dos empresas. En Plaza
Logística -el proyecto que el Morgan encaró
junto a OConnor a través de su fondo de
inversión Argo- el 15% pertenece a DASA,
que preside Santiago Ader. El plan prevé
la construcción de 84 mil metros cuadrados
de depósitos con la última tecnología
en un terreno de 14 hectáreas detrás
de la planta de Ford en Pacheco. La inversión
prevista es de 30 millones de dólares.
TASA reservó 20 mil de estos 84 mil metros
cuadrados. Jorge Ader tiene la esperanza de que
en el espacio restante Plaza Logística
no deba albergar a una empresa que compita con
el negocio de TASA, la compañía
que preside. Un proyecto probable -dice- es un
desarrollo integral de frío.Pero la gente
del Morgan busca hacer negocios rentables y no
hace promesas sobre exclusividades. Estamos negociando
con varias empresas multinacionales no sólo
de productos de consumo masivo, sino también
de logística, explica Francisco Bosch,
vicepresidente del J. P. Morgan y responsable
del área latinoamericana de fondos inmobiliarios.
Las obras del warehouse para TASA comenzarán
en diciembre y concluirían unos ocho meses
después. Se está trabajando en el
preproyecto y terminando las especificaciones
de los edificios. El monto exacto que deberá
pagar TASA para utilizarlo, se conocerá
cuando todos los detalles de la construcción
estén perfectamente definidos, porque se
trabaja con un porcentaje sobre el costo, puntualizan
en el Morgan. Peroaproximado -entre 6 y 8 pesos
por metro- arroja unos 1,5 millones de pesos al
año.Pagar un alquiler por ese espacio y
no comprarlo forma parte de la estrategia de la
empresa. TASA no invierte en activos fijos. Actualmente
alquilamos 350 mil metros cuadrados y administramos
una flota de 800 camiones que tampoco es propia.
Nuestro negocio es proporcionar el management
para operar, explica Marcelo Orfila, director
general de TASA-Transfármaco. La incorporación
de know-how arranca desde el inicio de las obras
de infraestructura. Para Orfila, además
de los aspectos técnicos, hay que tener
en cuenta la necesidad comercial de cada cliente.
De otro modo, el proyecto puede resultar inviable.TASA
tiene entre sus clientes a Refinerías de
Maíz, Molinos, Quilmes, Carrefour, Wal
Mart y Barugel Azulay. Y en el caso de Ford administra
un warehouse dentro de la planta de la terminal
automotriz de 3.500 metros cuadrados. En un sector
que mueve unos 230 millones al año, TASA
se queda con una tajada de 75 millones.La crisis
actual no parece preocupar a los protagonistas
de la alianza. Ader apunta que, por el contrario,
en épocas de vacas flacas las empresas
tienden a concentrarse en su core-business y desentenderse
del resto. Y miran a otros países en los
que la tercerización de la operación
logística llega al 70%. La Argentina recién
está en el 15% de una actividad que -según
calcula Marcelo Orfila-
orilla los 2.000 millones de pesos anuales y muestra
que hay aún mucho margen para crecer.
Diario La Nación Publicado en la ed. impresa: Comercio exterior Martes 23 de marzo de 1999
Una sinergia que gana mercados
Tasa-Transfármaco seduce a sus clientes con servicios específicos.
El grupo empresarial Tasa-Transfármaco pasó de facturar US$ 8,7 millones en 1994 a US$ 75 millones en 1998 y llegó a posiciones de liderazgo en el negocio de servicios logísticos integrales.
El consorcio surgió luego de la adquisición en 1994, por parte del holding Bisa -propiedad del grupo Bemberg- del 51% del capital accionario de Tasa Logística, que se especializa en la provisión de operaciones de abastecimiento y de distribución a medida para supermercados, productos alimenticios, juguetes, electrónicos y vidrios, entre otros. Bisa también controla el paquete mayoritario de Transfármaco, que ofrece servicios logísticos para la industria farmacéutica y productos compatibles. Por este motivo se decidió la integración de ambas compañías.
"Se está dando una sinergia entre los servicios centrales de las empresas del grupo, aunque se mantiene la identidad jurídica y comercial de cada una, porque apuntan a nichos diferenciados del mercado", explicó a La Naciónel director general de Tasa-Transfármaco, Marcelo Orfila.
El consorcio presta servicios integrales que incluyen el almacenamiento en depósitos propios o del cliente, consolidado y desconsolidado, abastecimiento de insumos, distribución de bienes, estampillados, etiquetados, manejo de productos con temperatura controlada, despachos de aduana y contratación de fletes.
El ejecutivo manifestó que el crecimiento de su grupo -que superó el 400% en los últimos cuatro años- se relaciona con la mayor importancia que está adquiriendo la logística en el mercado argentino, en virtud de que es cada vez más considerada a la hora de bajar costos y ganar competitividad.
"Las empresas tratan de especializarse y dejan de ocuparse de lo que no conocen bien. Tienden a dedicarse a su core business (negocio principal) y dejan a los especialistas el desarrollo de las soluciones logísticas", subrayó.
Estimó que el crecimiento del sector no se verá afectado por la crisis económica, merced a que en estas situaciones "los clientes buscan sacarse de encima costos, y compañías como la nuestra pueden prestar una ayuda decisiva en este aspecto". Orfila manifestó, además, que la creciente participación del grupo se debe a que posee una oferta diferenciada de la de otros operadores que, más que dedicarse a la logística, "prestan servicios de transporte que, a esta altura, es un commodity ".
Una de las ventajas que distinguió del servicio de Tasa-Transfármaco es la consideración de las metas de sus clientes para el desarrollo de las propuestas. A esto se le agrega el perfil comercial de su personal, "que determina que las propuestas no sean solamente soluciones técnicas ideales, sino que consideren la realidad del producto en el mercado", dijo.
Puntualizó que la empresa puede conectarse con los distintos sistemas informáticos de sus clientes para la gestión de stocks y que cuenta, además, con sus propios programas informáticos, como el MK Logistics, que permite medir la eficiencia del personal y del espacio utilizado en los depósitos.
Desembarcos
El floreciente mercado de la provisión de servicios logísticos está experimentando una mayor competencia a partir de la importante radicación en el país de empresas extranjeras en los últimos años. Tal es el caso de la norteamericana Ryder y de las francesas CAT y Calberson. A estas compañías se agregan varios agentes de carga que suman a sus servicios de transporte internacional las prestaciones logísticas de almacenamiento y distribución just in time de la mercancía.
Orfila reconoció que muchos de estos operadores internacionales poseen la ventaja de tener contratos con empresas a las que prestan servicios en el plano mundial. Pero afirmó que para lograr competitividad en el país estos operadores deben desarrollar alianzas específicas con compañías locales que les provean de un mayor conocimiento del mercado. Puso como ejemplo el acuerdo entre Tasa Logística y la firma norteamericana Customized Transportation Inc. (CTI), operador especializado en la industria automotriz. La alianza determinó la conformación de un joint venture en el país, llamado Customized Logistics Argentina (CLA), que tiene por cliente a Ford y a varios autopartistas.
"Para poder desarrollar este negocio se requiere tecnología, pero también es fundamental disponer de personal capacitado en el país, porque la realidad económica es diferente de la de Europa o Estados Unidos", sintetizó Orfila.
Leandro Uría
El consorcio
Posee 800 empleados, 700 camiones, un centro de distribución en Gral. Pacheco y 17 bases en el interior. Llega a 1250 localidades. Su movimiento de pallets supera el millón de unidades, lo que representa un volumen de 750.000 toneladas anuales. Administra un stock cercano a los US$ 300 millones.
Algunos de sus clientes son Bayer, Cervecería Quilmes, Ford, Mattel, Molinos Río de la Plata, Unilever, Vasa y Zanon.
Publicado en la ed. impresa: Economía
Lunes 27 de mayo de 2002
Mercado aerocomercial
Aeropuertos: más clientes para las tiendas
Por la caída del tráfico aéreo, la empresa concesionaria mudó varios comercios fuera del preembarque
Es la salida que encontró Eurnekian ante caídas del 30% en la venta de pasajes
Los locales son una réplica del free shop y pertenecen también a The Exxel Group
Venden $ 450.000 por mes
Si los negocios caen en la actividad principal, mejor recurrir al ingenio para atravesar la crisis del modo más decoroso posible. Esa fue la postura de Aeropuertos Argentina 2000, que ve con preocupación una disminución del tráfico aéreo que alcanza casi al 30% en promedio desde que comenzó el año.
La empresa de Eduardo Eurnekian, concesionaria de 32 terminales aéreas en todo el país, intentó entonces sacar provecho de las ventas en otra actividad, y empezó por el Aeroparque Metropolitano: así, mudó a principios de año los locales de Shop Gallery, gerenciados por la empresa Interbaires -de la que posee un 50%-, de la zona de preembarque al hall de la aeroestación. De esta manera, no sólo quienes viajan pueden ir de compras, sino también cualquier persona que se acerque, por cualquier motivo, al aeropuerto.
Shop Gallery nació en octubre último y es una réplica de los free shops. Pero, a diferencia de éstos, no está libre de impuestos. The Exxel Group tiene en poder el otro 50% de la firma.
La mudanza, un experimento al principio, acabó convirtiéndose en una salida, ante la fenomenal recesión que afecta al mercado aerocomercial. Y el resultado fue que, mientras el tráfico aéreo cae casi un 30% desde que comenzó el año, las tiendas venden hoy $ 450.000 por mes y son la única actividad del aeropuerto que no sufrió pérdidas.
Para los próximos dos meses, el grupo prevé abrir nuevos locales en el aeropuerto de Mendoza, donde aprovechará el tráfico proveniente de Chile. Más adelante, probablemente el año próximo, el objetivo será Pajas Blancas, el aeropuerto de Córdoba.
Despedidas en multitud
Según Marcelo Orfila, director comercial de AA2000, la idiosincrasia argentina ayuda a que el negocio sea más rentable fuera de la zona de embarque que cerca de las mangas de las aeronaves. "Como en ningún otro país, en la Argentina existe una afluencia atípica de público que no es viajante a los aeropuertos. Va mucha gente a despedir y mucha gente a recibir a los que llegan. Además, también se ven beneficiados los que van o vienen del interior, porque ahí no existen los free shops", dice.
Sin embargo, la apuesta cambió con la devaluación: a medida que comenzaba a agotarse el stock, muchos productos importados les dieron lugar a los de fabricación nacional. Así, por ejemplo, en el sector textil, Gap y Banana Republic les fueron dejando el paso a las firmas que tienen filiales en la Argentina, como Legacy, Lacoste, Paula Cahen D´Anvers y Caro Cuore.
El espectro se completa ahora con vinos nacionales, anteojos, accesorios, cigarrillos, alimentos y bebidas. "Por lo general, el público que se dirige a los aeropuertos es ABC1, con lo que este tipo de locales no sufrió tanto la caída de ventas que tuvo la economía en general. A pesar de que hay menos pasajeros, el expendio de tickets se mantuvo en el mismo nivel desde octubre", agrega Orfila.
La estrategia fue también separar los productos que se venden en el preembarque de los que se adquieren fuera de él. "Para la zona estéril, a la que sólo acceden los pasajeros, colocamos la mercadería rápida, como los perfumes, que tienen más salida. En cambio, para comprar con más tiempo, apuntamos a los que vienen a despedir o a recibir pasajeros", sostuvo el ejecutivo.
El escenario se da como contraposición a una fuerte retracción de las ventas en los free shops. Durante el primer trimestre del año, la actividad disminuyó, sólo en volumen, un 60% respecto del mismo lapso de 2001. En parte, la tendencia obedeció a la devaluación del peso argentino, que provocó el encarecimiento de muchos productos libres de impuestos que tienen precio en dólares.
Revitalising retail: Aeropuertos Argentina 2000 is Latin America's most ambitious airport manager, with an ever-expanding network of locations. John Rimmer talks to commercial director Marcelo Orfila about the company's plans for retail.(Latin America report * Aeropuertos Argentina 2000)
Source: Duty-Free News International - Publication Date: 15-APR-05
Author: Rimmer, John
COPYRIGHT 2005 Euromoney Institutional Investor PLC. Internal use only 10 copy limit. No further use w/o permission. Publisher@euromoneyplc.com.
The gradual privatisation of Latin America's airports has resulted in a hike in retailing standards that few would have thought possible only a few years ago. Some of the credit must go to Aeropuertos Argentina 2000 (AA2000), manager of 32 Argentinian airports and main shareholder at Montevideo Carrasco airport in Uruguay, Guayaquil in Ecuador and also Armenia's main gateway at Yerevan. Majority-owned by Argentinian entrepreneur Eduardo Eurnekian, the company has built its network aggressively and views retailing as a key part of its business.
AA2000 commercial director Marcelo Orfila is charged with improving revenue across the company's network of airports. He is convinced that the wave of privatisation in Latin America has benefited everyone, especially travellers. "The infrastructure of state-owned airports often needs a lot of improvement, and sometimes we invest a lot of money that the passengers don't see," he says. "At newly-privatised airports the state usually tries to get money from the concessionaire. They give the concessionaire the assets, but a lot of changes are needed. We've gained a lot of experience and we try to apply this to any new airport we take on."
Like its retail tenants, AA2000 has had to adapt to changing passenger profiles in the region. "Brazilians, Chileans, Americans and Europeans are completely different in the way they buy," says Orfila. "Before the devaluation of the peso [in 2002] Argentinians represented between 60% and 75% of our traffic at Buenos Aires Ezeiza. After the devaluation the figure fell to 25-30%; the rest were Brazilians, Chileans and Europeans. We had to adapt very quickly to protect our revenues."
In the midst of the crisis AA2000 moved to renegotiate its retail contracts, says Orfila, linking rental payments to traffic to insulate main tenant InterBaires against the sudden drop in passenger numbers. "Before the devaluation we worked with fixed rents, and the variable aspect was not very important. As a result of the crisis, InterBaires' sales fell from $105m to $35m, and it became imperative to change the rent structure. Now that we have introduced a variable scheme, InterBaires is growing again and we are seeing the benefit."
The relationship between the two parties has not always been so cordial, however. In 2003 InterBaires took its landlord to court over claims that it had been illegally evicted from prime space at Ezeiza, and the dispute resulted in the closure of several stores. The disagreement was settled when AA2000 bought a stake in InterBaires, and the two companies have since cooperated on impressive renovation work at the airport, where new walk-through stores were opened last year with more to follow in 2005.
"Last year InterBaires grew very rapidly. We gave them more space and helped them to get more passengers into the stores," says Orfila. "We're trying to improve penetration and make the best possible use of space. InterBaires' sales are very important to our business."
Non-aeronautical revenue accounts for 32% of AA2000's turnover at Ezeiza, compared with 24% when the company took over the concession in 1998. Until the devaluation crisis hit, the landlord had managed to increase the figure to over 42%, but that share has fallen since AA2000 divested its directly-owned catering and taxi companies. "To grow revenue more effectively we decided to appoint partners in each business, and to concentrate on running airports," says Orfila.
That focus appears to be paying off. Last year AA2000's turnover increased by 20%, with growth in non-aeronautical revenue--of which duty-free is the biggest part--reaching 30%. Retail growth was ahead of traffic, which increased by 20% at Ezeiza. But this encouraging performance will count for little if AA2000 fails to negotiate an extension to its Argentinian concession, a scenario that Orfila insists is unlikely.
"We have been negotiating with the government for a long time and the contract is practically finished," he says. "We are waiting for the government to sign the final version. They have been focused on Argentina's debt and getting out of default. They now have to finish 64 contracts with private companies that had to be renegotiated after the devaluation. Our contract is nearly ready and we're confident it will be signed. We have big investment plans in Argentina, and every governor of every province wants a good airport."
AA2000's biggest project is the addition of a new terminal at Ezeiza to ensure the country's main gateway has the capacity to deal with new, bigger aircraft and growing traffic. A new terminal is also planned at the Jorge Newbury Aeroparque facility, which is likely to take on more regional services to allow Ezeiza to concentrate on long-haul flights. The investment will also help AA2000 maximise the opportunity offered by Latin America's burgeoning low-cost sector, which Orfila hopes will open up an Argentinian market dominated by flag carrier Aerolineas Argentinas.
"I believe the low-cost market is a tremendous opportunity, and it will have a big impact here. We haven't seen much merger activity in the Latin American airline business, but it will come. LAN, in particular, is very strong, and has said it wants to launch an airline in Argentina. About 87% of domestic traffic in Argentina is run by Aerolineas Argentinas, so there are not many options available. LAN Argentina will bring more competition, more benefits and more passengers."
Brazilian airline Gol and Spain's Air Madrid were among the first to bring no-frills travel to Latin America, prompting further changes to passenger profiles. Not all those changes are beneficial, says Orfila. "I've been analysing why people don't buy in duty-flee," he explains. "If our penetration rate is 35%, I focus our studies on the other 65%. We are starting to see that there are more young people travelling, but they don't have much money. Budget fliers tend not to buy in duty-free--they might just buy a Coke at the bar."
Orfila insists that the thriftiness of the regional budget traveller is rooted in the Argentinian sensitivity to price. "Argentinians look for low prices all the time," he maintains. "Their sensitivity to even one dollar is incredible. People often travel with their families and the costs can be high. Only 10% of Argentinians have 60% of the country's wealth. When I was with [defunct Argentinian airline] LAPA we embarked on a price war with Aerolineas, charging $26 for flights to Cordoba instead of the usual $100. The move was very successful but when we returned to normal pricing, people made the trip on the bus again. The bus market is very big here, and when low-cost carriers can compete, then you'll see a significant change in traveller profiles."
The full Montevideo
If the renovation of Ezeiza's retail areas is impressive, the transformation of the business at Montevideo Carrasco airport is nothing short of startling. AA2000's involvement at the location stems from its shareholding in the Puerta del Sur consortium, which won the 20-year contract to run the airport in August 2003. The consortium then created retailer Duty Free Uruguay to take over the business formerly run by Neutral, and set about renovating its stores in arrivals and departures. The result is a high-quality operation far removed from Carrasco's old stores.
"The stores were very small and the assortment was poor," says Orfila. "By introducing the walk-through concept we've replicated what we've introduced at Ezeiza. According to our research, passengers are very satisfied with the changes and the sales figures have changed completely. The airport as a whole is more secure and more comfortable. We have to build a new terminal by 2009 and we're drawing up plans for the government now." (See also page 63.)
Traffic at Carrasco grew by 17% last year but retail sales were up by 40%, suggesting that the walk-through format has had the desired effect on penetration levels. The position of Duty Free Uruguay's new arrivals store ensures 100% footfall and capitalises on the popularity of arrivals shopping among Uruguayans. Orfila says that the walk-through concept will be rolled out wherever AA2000 operates. "Only by owning the airport are you able to do this," he argues. "My job is to maximise revenue per passenger, and we're in the same boat as the retailer. We've had experience of fighting with each other in the past, but together we have to do everything we can to raise revenue. Every time we design a new terminal, I have to be the first guy at the table. I need to know what the flow is and optimise it so that we expose passengers to the shops. I work very closely with the architects and engineers to ensure this."
In Ecuador, AA2000 is affiliated to the Tagsa consortium, which won a 15-year contract to manage Guayaquil Simon Bolivar airport last year. As in Carrasco, the group set up its own retailer, Duty Free Ecuador, and opened a walk-through 900sq m (9,684sq ft) outlet along with a new food and beverage operation. Orfila says the location has benefited from a more professional approach since Tagsa's arrival. "We increased revenues by 19% last year after revising the existing contracts. Before, the concessionaires were paying peanuts. Now they have contracts whose terms are based on the commercial activity they run, which is the norm at all private airports. In the past, airports were a service run by the government; now they are profitable companies. This is the change that we have made at Guayaquil."
Orfila confirms that AA2000 is participating in further concession bids in South America and eastern Europe, but insists that the company's principal goal for 2005 is to bring its contract negotiations with the Argentinian government to a positive conclusion. "This will allow us to start projects such as hotels and other long-term investments," he says. "We are forecasting traffic growth of about 10% this year, with an increase in Argentinian domestic traffic of about 8%." As ever in Latin America, much will depend on economic stability, but Orfila is confident that a period of prosperity is within Argentina's grasp. "Although there are a few problems with inflation, Argentina is receiving a lot of dollars from exports," he points out. "I expect the current stability to continue." If it does, AA2000's aggressive strategy seems likely to continue to deliver growing revenues and profits.
ARGENTINA. Aeropuertos Argentina 2000 (AA2000) has granted InterBaires a 17-year extension to the retailer’s duty-free contract. Exclusive to DFNI: By Martin Moodie
Exclusive to DFNI: By Martin Moodie ARGENTINA. Aeropuertos Argentina 2000 (AA2000) has granted InterBaires a 17-year extension to the retailer’s duty-free contract.
The deal extends the contract from 2010 to 2027, with payment terms changing from a flat fee to a percentage of revenue.
It is a great boost for InterBaires, especially as the retailer’s parent company Exxel Group has been granted the duty-paid rights at AA2000?s 33 airports (with certain exceptions).
As a result of the extension agreement, InterBaires will invest heavily in the airports, boosting retail space in Buenos Aires main airport, Ezeiza, by 50% over the next two years.
The number of shops will be reduced by creating much bigger stores which will enjoy vastly improved passenger flows to ensure greater visibility and penetration.
InterBaires CEO Randy Emch told DFNI: "We have extended the term of our contract greatly; and we have expanded our space enormously, both the quality and the quantity. We have also extended into the duty-paid business so the value of the business has improved dramatically."
AA2000 commercial director Marcelo Orfila was also upbeat about the deal. "This will develop the potential of the business in a very significant way," he said. "If InterBaires wins, the airport wins. Currently, they are losing a lot of sales because of the poor locations.
"We want upscale stores at the airports, to give an international image. It is easier for us to handle one contract than to handle lots of contracts in 33 airports."
Aeropuertos Argentina 2000 is Latin America's most ambitious airport manager, with an ever-expanding network of locations. John Rimmer talks to commercial director Marcelo Orfila about the company's plans for retail
The gradual privatisation of Latin America's airports has resulted in a hike in retailing standards that few would have thought possible only a few years ago. Some of the credit must go to Aeropuertos Argentina 2000 (AA2000), manager of 32 Argentinian airports and main shareholder at Montevideo Carrasco airport in Uruguay, Guayaquil in Ecuador and also Armenia's main gateway at Yerevan. Majority-owned by Argentinian entrepreneur Eduardo Eurnekian, the company has built its network aggressively and views retailing as a key part of its business.
AA2000 commercial director Marcelo Orfila is charged with improving revenue across the company's network of airports. He is convinced that the wave of privatisation in Latin America has benefited everyone, especially travellers. "The infrastructure of state-owned airports often needs a lot of improvement, and sometimes we invest a lot of money that the passengers don't see," he says. "At newly-privatised airports the state usually tries to get money from the concessionaire. They give the concessionaire the assets, but a lot of changes are needed. We've gained a lot of experience and we try to apply this to any new airport we take on."
Like its retail tenants, AA2000 has had to adapt to changing passenger profiles in the region. "Brazilians, Chileans, Americans and Europeans are completely different in the way they buy," says Orfila. "Before the devaluation of the peso [in 2002] Argentinians represented between 60% and 75% of our traffic at Buenos Aires Ezeiza. After the devaluation the figure fell to 25–30%; the rest were Brazilians, Chileans and Europeans. We had to adapt very quickly to protect our revenues."
In the midst of the crisis AA2000 moved to renegotiate its retail contracts, says Orfila, linking rental payments to traffic to insulate main tenant InterBaires against the sudden drop in passenger numbers. "Before the devaluation we worked with fixed rents, and the variable aspect was not very important. As a result of the crisis, InterBaires' sales fell from $105m to $35m, and it became imperative to change the rent structure. Now that we have introduced a variable scheme, InterBaires is growing again and we are seeing the benefit."
The relationship between the two parties has not always been so cordial, however. In 2003 InterBaires took its landlord to court over claims that it had been illegally evicted from prime space at Ezeiza, and the dispute resulted in the closure of several stores. The disagreement was settled when AA2000 bought a stake in InterBaires, and the two companies have since cooperated on impressive renovation work at the airport, where new walk-through stores were opened last year with more to follow in 2005.
"Last year InterBaires grew very rapidly. We gave them more space and helped them to get more passengers into the stores," says Orfila. "We're trying to improve penetration and make the best possible use of space. InterBaires' sales are very important to our business."
Non-aeronautical revenue accounts for 32% of AA2000's turnover at Ezeiza, compared with 24% when the company took over the concession in 1998. Until the devaluation crisis hit, the landlord had managed to increase the figure to over 42%, but that share has fallen since AA2000 divested its directly-owned catering and taxi companies. "To grow revenue more effectively we decided to appoint partners in each business, and to concentrate on running airports," says Orfila.
That focus appears to be paying off. Last year AA2000's turnover increased by 20%, with growth in non-aeronautical revenue—of which duty-free is the biggest part—reaching 30%. Retail growth was ahead of traffic, which increased by 20% at Ezeiza. But this encouraging performance will count for little if AA2000 fails to negotiate an extension to its Argentinian concession, a scenario that Orfila insists is unlikely.
"We have been negotiating with the government for a long time and the contract is practically finished," he says. "We are waiting for the government to sign the final version. They have been focused on Argentina's debt and getting out of default. They now have to finish 64 contracts with private companies that had to be renegotiated after the devaluation. Our contract is nearly ready and we're confident it will be signed. We have big investment plans in Argentina, and every governor of every province wants a good airport."
AA2000's biggest project is the addition of a new terminal at Ezeiza to ensure the country's main gateway has the capacity to deal with new, bigger aircraft and growing traffic. A new terminal is also planned at the Jorge Newbury Aeroparque facility, which is likely to take on more regional services to allow Ezeiza to concentrate on long-haul flights. The investment will also help AA2000 maximise the opportunity offered by Latin America's burgeoning low-cost sector, which Orfila hopes will open up an Argentinian market dominated by flag carrier Aerolíneas Argentinas.
"I believe the low-cost market is a tremendous opportunity, and it will have a big impact here. We haven't seen much merger activity in the Latin American airline business, but it will come. LAN, in particular, is very strong, and has said it wants to launch an airline in Argentina. About 87% of domestic traffic in Argentina is run by Aerolíneas Argentinas, so there are not many options available. LAN Argentina will bring more competition, more benefits and more passengers."
Brazilian airline Gol and Spain's Air Madrid were among the first to bring no-frills travel to Latin America, prompting further changes to passenger profiles. Not all those changes are beneficial, says Orfila. "I've been analysing why people don't buy in duty-free," he explains. "If our penetration rate is 35%, I focus our studies on the other 65%. We are starting to see that there are more young people travelling, but they don't have much money. Budget fliers tend not to buy in duty-free—they might just buy a Coke at the bar."
Orfila insists that the thriftiness of the regional budget traveller is rooted in the Argentinian sensitivity to price. "Argentinians look for low prices all the time," he maintains. "Their sensitivity to even one dollar is incredible. People often travel with their families and the costs can be high. Only 10% of Argentinians have 60% of the country's wealth. When I was with [defunct Argentinian airline] LAPA we embarked on a price war with Aerolíneas, charging $26 for flights to Córdoba instead of the usual $100. The move was very successful but when we returned to normal pricing, people made the trip on the bus again. The bus market is very big here, and when low-cost carriers can compete, then you'll see a significant change in traveller profiles." The full Montevideo
If the renovation of Ezeiza's retail areas is impressive, the transformation of the business at Montevideo Carrasco airport is nothing short of startling. AA2000's involvement at the location stems from its shareholding in the Puerta del Sur consortium, which won the 20-year contract to run the airport in August 2003. The consortium then created retailer Duty Free Uruguay to take over the business formerly run by Neutral, and set about renovating its stores in arrivals and departures. The result is a high-quality operation far removed from Carrasco's old stores.
"The stores were very small and the assortment was poor," says Orfila. "By introducing the walk-through concept we've replicated what we've introduced at Ezeiza. According to our research, passengers are very satisfied with the changes and the sales figures have changed completely. The airport as a whole is more secure and more comfortable. We have to build a new terminal by 2009 and we're drawing up plans for the government now."
Traffic at Carrasco grew by 17% last year but retail sales were up by 40%, suggesting that the walk-through format has had the desired effect on penetration levels. The position of Duty Free Uruguay's new arrivals store ensures 100% footfall and capitalises on the popularity of arrivals shopping among Uruguayans. Orfila says that the walk-through concept will be rolled out wherever AA2000 operates. "Only by owning the airport are you able to do this," he argues. "My job is to maximise revenue per passenger, and we're in the same boat as the retailer. We've had experience of fighting with each other in the past, but together we have to do everything we can to raise revenue. Every time we design a new terminal, I have to be the first guy at the table. I need to know what the flow is and optimise it so that we expose passengers to the shops. I work very closely with the architects and engineers to ensure this."
In Ecuador, AA2000 is affiliated to the Tagsa consortium, which won a 15-year contract to manage Guayaquil Simon Bolivar airport last year. As in Carrasco, the group set up its own retailer, Duty Free Ecuador, and opened a walk-through 900sq m (9,684sq ft) outlet along with a new food and beverage operation. Orfila says the location has benefited from a more professional approach since Tagsa's arrival. "We increased revenues by 19% last year after revising the existing contracts. Before, the concessionaires were paying peanuts. Now they have contracts whose terms are based on the commercial activity they run, which is the norm at all private airports. In the past, airports were a service run by the government; now they are profitable companies. This is the change that we have made at Guayaquil."
Orfila confirms that AA2000 is participating in further concession bids in South America and eastern Europe, but insists that the company's principal goal for 2005 is to bring its contract negotiations with the Argentinian government to a positive conclusion. "This will allow us to start projects such as hotels and other long-term investments," he says. "We are forecasting traffic growth of about 10% this year, with an increase in Argentinian domestic traffic of about 8%." As ever in Latin America, much will depend on economic stability, but Orfila is confident that a period of prosperity is within Argentina's grasp. "Although there are a few problems with inflation, Argentina is receiving a lot of dollars from exports," he points out. "I expect the current stability to continue." If it does, AA2000's aggressive strategy seems likely to continue to deliver growing revenues and profits.
Argentina’s biggest airport landlord Aeropuertos Argentina 2000 is drawing a line under years of economic and legal turmoil to get back to what it does best. John Gallagher talks to commercial director Marcelo Orfila about the company’s renewed focus on retail.
Argentina’s biggest airport landlord Aeropuertos Argentina 2000 is drawing a line under years of economic and legal turmoil to get back to what it does best. John Gallagher talks to commercial director Marcelo Orfila about the company’s renewed focus on retail.
As the Argentinian economy emerges from the abyss of monetary devaluation and recession, the fortunes of the country’s biggest airport operator Aeropuertos Argentina 2000 (AA2000) are also beginning to change. When the company was awarded the concession to run Argentina’s main airports in 1998 the economy was showing signs of stagnation. The subsequent recession and the devaluation of 2002 led some experts to talk of a bottomless pit? Consumption levels and living standards had fallen to a degree that was beyond the memory of even those used to the vagaries of Latin American economic management or lack of it.
For AA2000 total passenger traffic fell from 20.3m in 1999 to 12.9m in 2002. Traffic dropped in all of the 32 airports in the AA2000 network most catastrophically at Ezeiza and Aeroparque, Buenos Aires international and domestic airports and the two most important travel-retail locations in Argentina.
In 2003 the situation took a fresh twist. AA2000 was still negotiating with president Duhalde's government to adapt its concession agreement to the new economic reality. The company hoped to define a new investment programme with both parties agreeing the priorities for the concession holder and controlling authority. The Duhalde administration agreed a new deal with AA2000 just days before relinquishing power, but the new government, headed by Nestor Kirchner, rescinded the revised contract and threatened to annul the concession.
As negotiations resumed the climate slowly improved, until at the end of the year AA2000 CEO Ernesto Gutierrez told the local Buenos Aires press that a new deal was imminent. The Kirchner government set up a commission to revise the concession contracts of a number of public utilities and service suppliers.
Most observers agree that AA2000 is doing a good job. Although there are disagreements over backdated concession payments, investments made and investment priorities, the authority is now meeting its financial obligations and insists that the system is working.
The main problem for AA2000 in 2003 was its well-documented dispute with duty-free concessionaire InterBaires. Directors of both companies spent more time on legal disputes than on retail development plans. InterBaires was and remains AA2000's biggest revenue earner, but it became clear that neither side was maximising revenues or satisfying the needs of airport users.
Halfway through the year, the concessionaire and landlord began to talk again. They struck a deal and AA2000 bought a stake in InterBaires for an undisclosed sum. At the end of last year commercial space taken from InterBaires at the height of the dispute was returned and both sides reaped the benefits. In the fourth quarter InterBaires’ retail sales improved, prompting an increase in revenue for AA2000.
TRI met AA2000 commercial director Marcelo Orfila in his office in the Palermo district of Buenos Aires in February, and his outlook had changed since the previous year. "Last year we spent too much time on managing and directing conflicts," he admits. "This year we will be able to manage the business properly, look for short-term opportunities and plan effectively for the medium and long term. We’ll be moving forward and working with our partners in Argentina and in our new ventures in other countries in an aggressive fashion, looking to maximise revenues and customer satisfaction."
International traffic recovers
Passenger traffic in Buenos Aires is beginning to recover, says Orfila, and 2003 ended with encouraging figures. "Last year traffic was better than we expected," he insists. "The strong second half of the year was welcome after the slow recovery in the first few months of the year. Growth took place in the second half once the new president had taken power and the economic situation had stabilised. The uncertainty at the end of 2002 and in the first few months of 2003 disappeared. Growth in the fourth quarter has been fantastic. If that continues we can only be optimistic."
Passenger traffic throughout the AA2000 network increased slightly to 13.8m passengers in 2003. Orfila points to solid growth in international traffic to justify his optimism. "If we look at the split between national and international passengers we can see where the growth is coming from. International traffic reached 5.3m in 2003, an increase of 17.2% over the previous year. National traffic grew by 1.5% to 7.8m. Although relatively low, the figure is still good given the small number of domestic carriers flying. In the past couple of months we have seen double-digit growth in the number of domestic flights and we hope this will continue."
The biggest airports in the AA2000 network are on the road to recovery. Buenos Aires Ezeiza enjoyed strong growth throughout 2003, with the number of international passengers increasing to 4.6m, up by 18.2% on the previous year. Domestic traffic more than doubled to 173,516 passengers. Growth was more modest at Aeroparque airport, where domestic traffic increased by only 1.9% to 4.1m passengers. International traffic, mainly to Uruguay and southern Brazil, reached 471,098, an increase of 5.4% on 2002.
The other airports in the network enjoyed mixed fortunes. Bariloche showed 12.8% growth in domestic traffic, reflecting renewed growth in the tourism industry. Domestic traffic at Iguazu was up by 31.7%, with more than 350,000 passengers using the airport. Argentina’s third biggest airport Cordoba experienced a 5.8% fall in domestic traffic to 755,711. The 13.6% increase in international traffic to 108,475 was scant compensation.
"The growth in traffic was good news for us and our concessionaire partners," says Orfila. "The indications are that the good news will continue. All airlines are flying full to Europe from Ezeiza and many carriers are increasing frequencies or using bigger aircraft. The same is true of North American airlines. Most carriers that stopped flying because of the economic crisis are almost back to their original schedules.
"We are hoping for growth of about 15% this year, which will show the strength of the tourism industry in Argentina and the continuing economic recovery in the country as a whole. Growth in 2004 will depend on two main factors. One is the strength of the tourism business thanks to current exchange rates. With the peso valued at 2.90?2.95 to the
dollar, and the dollar’s weakness against the euro and pound sterling, long-haul tourism from Europe and north America is likely to be strong for the rest of the year. The relative weakness of the peso against most South American currencies means we are welcoming large numbers of visitors from Chile, Colombia and Peru as well as Brazil.
"The stability of the economy is also important. The government’s tax revenues continue to rise, inflation appears to be under control and the consensus is that internal consumption will grow this year. The only uncertainty is what will happen when the government reaches agreement with creditors to begin repaying the defaulted debt. But we continue to be optimistic for the rest of the year, and our objective remains 15% growth. We expect better improvements to international than to domestic traffic."
Since winning the concession AA2000 has made substantial investments in the Aeroparque terminal buildings and at Ezeiza terminal A and more investment is planned. "As soon as the renegotiated contract is signed, we will agree a revised programme with the government," says Orfila. "We will agree the priorities and some projects will start almost immediately. A new terminal building at Cordoba and Rio Gallegos are likely to be top of the list."
The future of Buenos Aires Aeroparque is unclear. The terminal was originally scheduled to close in 2005 under the terms of AA2000's contract, but public opinion may force the government to change its mind. The airport’s position close to the north of the city is a double-edged sword, and will force the authorities to decide between safety and convenience. Traffic levels remain some way from original forecasts and the levels of the late 90s, but a stay of execution still looks likely.
Duty-paid recovery
Duty-paid retailing, which began at Ezeiza in October 2001, is finally recovering from a tough beginning. "We couldn’t have started at a worse time," Orfila tells TRI. "Traffic was down because of the economic recession and the aftershocks from September 11 2001. The 2002 devaluation and the resulting banking restrictions were almost the kiss of death. But we have stuck at it and reworked the selection. For many local shoppers duty-paid is sometimes the only chance they have to buy luxury products. Many fragrance and cosmetics brands are not distributed outside the greater Buenos Aires area and we are able to provide a full range at good prices.
"We have worked hard on duty-paid and if domestic traffic picks up we will see a strong upturn in business. Our range of foodstuffs, textiles and clothing has also been well received by visitors to the region, again owing to the lack of availability of many items outside Buenos Aires.? Fashion is performing well at Buenos Aires
The stability of the peso against the dollar has also helped business, says Orfila, along with lower-than-expected inflation and growth in GDP. "This should mean more growth for domestic airlines in 2004,"he argues. "Austral will grow to push traffic onto the Aerolíneas Argentinas international network, and the Southern Winds alliance with Líneas Aéreas Federales looks like consolidating. The smaller American Falcon and Aerovip should also grow, although more modestly."
Orfila confirms that big changes are imminent at InterBaires duty-free shops at Ezeiza. The main 2,100sq m (22,600sq ft) departures store was reopened late last year, and Orfila says passengers have welcomed the new layout and revenues have improved as a result. "We plan to place greater emphasis on local products, and we are opening a new specialised store with a wide range of upscale products adjacent to the main duty-free store. InterBaires will also be making substantial renovations at the departures store in the Aerolíneas Argentinas terminal.
"In addition we have agreed on plans to renovate the main arrivals store, which we hope will be ready before Easter. This will increase from just over 700sq m (7,535sq ft) to 1,100 sq m (11,840sq ft) and we will offer travellers a wider range of merchandise. The revised traffic flow will ensure a high penetration rate and we hope our concessionaire partner will take advantage of this."
Duty Free Uruguay is born
A year ago the AA2000 management team was at pains to explain that it was unlikely to bid in the tender to manage, operate and renovate Montevideo Carrasco International airport. Ceo Ernesto Gutierrez told TRI at the time that the airport was unlikely to be profitable in the short term. But between March and July the company’s strategic viewpoint changed and Corporación America headed by AA2000?s main shareholder Eduardo Eurnekian and its Italian partner SEA beat competition from Advent International and others to take over Carrasco. The winning consortium, now named Puerta del Sur, started operating the concession in late November.
Puerta del Sur is contractually committed to investing $70m during the first five years of the concession, and a new terminal building should be in place by 2009. The existing terminal building will undergo extensive renovation, with work in the arrivals and departures areas expected to start in March. The new management team is in place. Fernando Pelaez will oversee the operation with Eduardo Acosta looking after all commercial activities. Puerta del Sur will run the duty-free operation, to be named Duty Free Uruguay, directly.
According to Orfila, the facelift will bring significant commercial benefits to the airport. "The new design will mean that the flow of passengers in departures and arrivals will be directed to the commercial activities," he explains. "The departures store will move from the first floor to the ground floor and will be more user-friendly. The arrivals store will also be relocated after immigration and travellers will find new car hire and hotel reservation desks before passing through Customs. The changes are designed to maximise revenues and we are sure that airport users will find the commercial areas more attractive."
The Carrasco airport and duty-free operation will be managed from Montevideo, and Orfila is keen to ensure that all the commercial activities make strategic sense for AA2000. "A large percentage of traffic from Montevideo goes to Aeroparque and vice-versa, so we have to make sure all our commercial activities make regional sense."
Last December the Eurnekian group gave further evidence of its appetite for expansion by winning the tender to manage and operate Simón Bolivar International airport in Guayaquil, Ecuador. Corporación America again in partnership with SEA saw off competition from consortia AGUNSA/Odebrecht and AENA/Hidalgo, and plans to invest over $70m in the first three years of the 15-year concession.
Extending the network
"Guayaquil is a nice addition to our network," says Orfila. "We hope to sign the final contract at the end of February and we will begin renovations to improve passenger services almost immediately. Until now travellers have had few options for duty-free or duty-paid shopping at Guayaquil, and restaurant facilities have also been limited. Both of these will change and commercial and restaurant facilities will be vastly improved. As in Uruguay, we plan to operate the duty-free concession ourselves and we are drawing up plans for the new shop.
"We are confident we will be able to produce a strong revenue stream for our shareholders from the duty-free shop and from the rest of the commercial activities in Guayaquil. Once the final contract is signed, we must have the new terminal building operating within 29 months. There is a lot of work to be done but during that time we will still be looking to ensure commercial revenues." At present 1.7m passengers use Guayaquil but the new operator is looking to increase this to about 3m as facilities are improved and new routes added.
According to Orfila, the Eurnekian group will study all airport projects in Latin America with a view to extending the network. The biggest opportunity is the proposed privatisation of Bogotá Eldorado International airport. Other possibilities include Caracas Maiquetia and the airport network in Paraguay. Orfila confirms that consultants will be appointed shortly to draw up tender documents for Bogotá.
AA2000 and other companies in the Eurnekian group are also sizing up opportunities outside Latin America. The Yerevan Zvartnots operation in Armenia is up and running, and the Eurnekian management team is likely to scrutinise any new projects that become available in former Soviet countries.
A busy year beckons, then, for the Eurnekian empire. As Argentina’s airports emerge from crisis and Montevideo and Guayaquil are added to the network, the role of commercial revenues will be central to the fortunes of the group.
And the expansion of the group will not end there. Eurnekian is in the running to become the main shareholder in Italian airline Volare. In Argentina the group has been looking at the management of motorway concessions and Orfila confirms that the country’s first motorway concession will start shortly. Some may question the link between operating airport and motorway contracts, but the Eurnekian group is spreading the net wide for its ambitions, confident in the future of Argentina and Latin America as a whole.
With legal actions threatening its operations and passenger figures not yet returning to steady growth, Argentinian airport operator Aeropuertos Argentina 2000 is hoping that the year ahead will bring a return to stability.
With legal actions threatening its operations and passenger figures not yet returning to steady growth, Argentinian airport operator Aeropuertos Argentina 2000 is hoping that the year ahead will bring a return to stability.
Argentinian airport operator Aeropuertos Argentina 2000 (AA2000) has had a busy and controversial year. The company has been in conflict with duty-free retailer InterBaires, one of its most important concessionaires; and Aerolíneas Argentinas, the country’s national airline, has also been locking horns with the operator on issues ranging from landing fees to concession renegotiation. And if this wasn’t enough Argentina’s new government of three months has been making veiled threats about a full renegotiation of AA2000’s airport concession contract.
Late last year AA2000 made the headlines when it revoked its "marriage made in heaven” agreement with InterBaires, alleging that the contract extension granted in summer 2001 was not valid. Following Deutsche Bank’s acquisition of Exxel Group’s 80% shareholding, AA2000 forced the duty-free operator to withdraw from prime retail positions, relinquishing 1,800sq m (19,400sq ft) of retail space it had occupied for more than a year, and advised Deutsche Bank that InterBaires concession would now run only to the original date of 2009 and not 2027.
This was not the first time that the two companies had disagreed publicly over contractual matters. In the late 1990s AA2000 president Eduardo Eurnekian and Exxel Group president Juan Navarro had several bitter exchanges following Exxel’s acquisition of a minority stake in AA2000. At the time Eurnekian made no secret of his wish to control InterBaires. Both sides eventually signed a truce, following intervention by Argentina’s then president de la Rua. That truce eventually ended in the contract extension agreement, which was to be blown apart by AA2000.
InterBaires and its new owners took AA2000 to court to try and find a solution. At that time many observers speculated that the solution would be an arrangement whereby AA2000 would buy all or part of Deutsche Bank’s shareholding. That was the general consensus until London Supply appeared on the scene in March this year, muddying the waters further by purchasing a “strategic” shareholding in the duty-free operator.
For the past month or so unconfirmed reports in the Argentinian financial press indicate that a new deal is about to be reached and that a solution to the arguments of the past months has been found. The exact nature of the deal is unclear but is probably good news for the industry as the players involved can now get back to running their businesses instead of wasting energy on litigation.
Uncertain recovery
Meanwhile AA2000 has confirmed that traffic at the main airports in Argentina is growing again. AA2000 commercial director Marcelo Orfila states: "Traffic for the first seven months of the year was up by 5% throughout the AA2000 network.
"International traffic performed very well with an overall increase of 21%. There was a very strong performance at Ezeiza, the leading international airport, which was up 23% on the same period last year.
The performance of domestic traffic was mixed, varying from airport to airport. Overall traffic fell by 3% but we saw some very good performances at some of the tourist airports such as Bariloche, up 21% overall and Iguazu, up 31%.
Obviously we have been hit in the domestic market by the bankruptcy of some of the smaller carriers. We have also seen a fairly aggressive pricing policy by the market leader Aerolíneas Argentinas which has not been discounting or trying to grow certain domestic routes.
Traffic at Aeroparque, the most important airport for domestic flights, has been down overall by 4% and this has affected sales at the duty-paid outlets we own with InterBaires.
We have quite a few plans to renovate parts of Ezeiza and Aeroparque, as well as certain other airports, but we are holding investments until the contract situation becomes clearer."
Orfila confirmed that AA2000 was continuing to look at opportunities outside Argentina. "We are very much involved in new projects in Armenia and we are looking at quite a few possibilities in Latin America.” He refused to discount a bid to manage Montevideo Carrasco airport, but in view of the high fee required by the Uruguayan government he was worried about the profitability of the operation.
AA2000 will be hoping that the recovery in international passenger traffic continues and that the incipient growth in the domestic economy gets stronger. Last year’s 17.9% fall in passenger numbers didn’t help the company’s finances as it reported a loss of Ps20.8m ($6.5m). The first-half recovery has also been confirmed by Aerolíneas Argentinas, whose passengers numbers in the first six months grew by 58.9% to just over 2m.
Just before leaving office in May President Duhalde signed a decree changing the fixed fee nature of AA2000's concession fee to the government to a percentage figure based on traffic and cargo movements. AA2000 made a commitment to increase its investment programme, but the newly installed Kirchner government has revoked the decree and is now revising a number of other agreements in the original concession.
Industry observers have pointed out that AA2000's investment programme is bound to slow until the contract issue is clarified. It is clear however that stronger passenger figures and a final solution to the disagreement with InterBaires would mean fewer problems on two fronts for the AA2000 management team.
The legal dispute between airport operator Aeropuertos Argentina 2000 and duty-free concessionaire InterBaires is not the first in the relatively short history of these two companies. John Gallagher reports on a turbulent relationship gone sour.
The legal dispute between airport operator Aeropuertos Argentina 2000 and duty-free concessionaire InterBaires is not the first in the relatively short history of these two companies. John Gallagher reports on a turbulent relationship gone sour.
Shortly after airport operator Aeropuertos Argentina 2000 (AA2000) took control of Argentina’s privatised main airports in 1999, it realised that a quick way to achieve profitability would be to take greater control of airport retail activities. But its ambitions for Argentina’s airport market have not run smoothly alongside those of its principal concessionaire InterBaires. The story of AA2000 and InterBaires is a story of ups and downs, of court battles and political wrangling, and it’s a drama that’s reaching its endgame in the Buenos Aires courts as DFNI goes to press.
So how has it come to this? At the beginning of 2000 the new airport authority started to renovate Buenos Aires Ezeiza airport, and in a situation that dramatically mirrors its part-eviction of InterBaires today, AA2000 displaced InterBaires from its shops and the two sides ended up in court. Industry observers claimed that the strategy was designed to force InterBaires out of the airports altogether. But following intervention from Argentinian president Fernando de la Rua a truce of sorts was called, and eventually the AA2000 and InterBaires parent company Exxel Group reached an agreement that left the operator in place.
The first part of the deal involved the sale in August 2001 of Exxel Group’s 45% share in airport bonded warehouse operator Edcadassa; and shortly afterwards hostilities were called off completely as AA2000 announced the extension of the InterBaires concession contract from 2009 to 2027. AA2000 announced that the operator would have more retail space, and in better positions; and that the rental would be based on a percentage of sales, reflecting the economic realities of a depressed Argentina.
At the ASUTIL conference in September 2001 in Rio de Janeiro both sides confirmed their new relationship. AA2000 commercial director Marcelo Orfila confirmed that the deal was good for both companies. "Better locations for InterBaires mean more sales," he said, "and more sales mean more revenue for both the concessionaire and the airport operator."
Alejandra Basile, InterBaires then marketing manager, said the new agreement would lead to major investment in shop renovation at Ezeiza and other airports. The companies also announced the formation of a 50:50 joint venture to operate duty-paid sales at airports in the AA2000 network.
At the time, speculation that AA2000 was only months away from a full takeover of InterBaires appeared realistic enough. The Exxel Group had signalled its desire to sell the subsidiary but no one was willing to pay the asking price. Press comment in Argentina at the time mentioned Aldeasa as a possible predator, although more than one international operator has taken a long hard look at InterBaires accounts over the past two years. But the severe economic crisis and economic meltdown that was about to besiege Argentina was to scare away any potential bidders. Meanwhile duty-paid shops were opened at Buenos Aires Aeroparque airport and, in spite of the crisis, sales remained at acceptable
levels.
The downturn in the country’s economic fortunes in late 2001, the floating of the peso in 2002 and the continued bad news in 2003 meant that the deal that looked good on paper was not working in practice. New duty-free and duty-paid shops had opened but sales were hard to come by. InterBaires sales were reported to be down by 60% on the previous year despite the profitable Aeroparque duty-paid outlets. There was simply no money in the economy; families and business executives had stopped travelling. Neighbouring duty-free operators such as Neutral and Zeinal Hermanos in Montevideo, Aldeasa in Santiago de Chile and Brasif in Brazil were all mourning the disappearance of the Argentinian traveller.
Bank takeover
In spite of the economic turmoil in the first half of 2002, rumours still circulated that InterBaires was for sale. No European company was tempted as the economic situation continued to look grim. But parent group Exxel was suffering as much as any big Argentinian company and was under great pressure from the banks. In the late 1990s it had expanded very quickly with a number of highly leveraged deals. Most of its creditors were financial institutions that were becoming increasingly nervous about their returns.
It came as no great surprise when Deutsche Bank announced in November last year that it had taken control of Exxel’s 80% share in InterBaires. Immediately the new shareholder announced the appointment of Enrique Urioste as ceo and its commitment to running the business to recoup some of the $30m that Exxel owed the bank. Suppliers and staff welcomed the news, as the possibility of bankruptcy was staved off.
However the new tranquillity was soon disturbed when AA2000 played its ace card. According to the airport authority the concession contract that everyone had assumed was valid until 2027 was never countersigned by the government, the holder of the other 20% of InterBaires and was therefore invalid. AA2000 insisted that it had reminded the Exxel-controlled company to seek the countersignature to the contract extension, but this was never done.
AA2000’s Orfila told DFNI (Dec 1 2002): “As you are aware, we reached an agreement with InterBaires in September 2001 to extend the contract from 2009 to 2027 and to add new retail space. The government should have countersigned the contract within six months. This was not done, so a six-month extension was granted. No countersignature was added to the contract so we had to inform InterBaires last month that the revised contract had lapsed and that we should revert to the terms of the original contract. As of this month we are operating under the terms of the original concession contract.
"Obviously there is some confusion," Orfila added, "and we are already talking to InterBaires new owners of to clarify certain points. We also need to assess whether Deutsche Bank is in the business for the long term or whether it intends to sell the company quickly to recover debts. We cannot understand why the bank did not come and talk to us, because its relationship with us is crucial to the success of the business."
AA2000 clearly upset at the change of ownership, apparently without either party talking to the airport operator, continued to insist that the original, pre-extension contract was the valid one.
Negotiations started almost immediately and although there was disagreement, the climate of the meetings between the two sides was said to be cordial. A deal seemed likely; after all both would incur big legal fees in running to the courts. Negotiations continued throughout November and December and both sides agreed a brief respite during the Argentinian holiday period at the beginning of January.
Slow progress
However the mood was to change in the New Year. Progress was slow to non-existent and both sides hinted at problems, although they still hoped an agreement would be possible.
In mid-February, AA2000 played another of its aces. Given the lack of progress it applied to the courts to remove InterBaires from the 1,800sq m (19,400sq ft) granted to the operator when the new contract extension was signed. AA2000 insisted that all the other conditions of the original contract were now in play, the contract was only valid until 2009, and the rental payment reverted to the fixed fee of $500,000 as opposed to 10% of sales.
Newly-appointed InterBaires CEO Urioste said: "The court judgement [to remove InterBaires from 70% of its spaces] is totally arbitrary and abusive. It is based on a law that cannot be applied in this case. We will demonstrate in court that a contract is in place until 2027 and that we should be allowed to occupy the additional retail space. We are up to date with all our payments to AA2000. We will continue to fight for the rights of our shareholders and the rights of our employees."
Damian Pozzoli, Deutsche Bank managing director and the new president of InterBaires, confirmed: "We will present all our evidence to the judge. We feel we have a very strong case and we will win. The courts will confirm that our concession is valid until 2027."
He added: "This is part of a strategy by AA2000 to acquire our company, which is profitable and has a strong cash position. We are up to date with all our payments, whereas AA2000 owes the government money."
Pozzoli confirmed that AA2000 had tried to buy the company during the contract negotiations but its offer had been rejected; the company was not for sale. Reports in the Argentinian financial press indicate that AA2000 had offered $10m, some way short of the $30m Deutsche Bank deal and light years away from the $300m that Exxel Group was reportedly looking for only three years before the economic crisis.
AA2000 appears intent on occupying the retail space vacated by InterBaires. A new duty-paid outlet was opened at the beginning of March, only to be closed several days later by the Aeronautical Police as the new shop did not have its licence in order. AA2000 said that it would occupy the remaining retail space with new outlets over the next few months.
Both sides now await the outcome of InterBaires appeal. No one is sure if the appeal court will find in favour of InterBaires or uphold the original decision, which benefited AA2000. Both companies will probably wait until then to reveal their plans.
If AA2000 wins, it will obviously want to operate all its airports’ retail activities as quickly as possible. Further negotiations with Deutsche Bank cannot therefore be discounted. AA2000 has the expertise to operate the duty-free activities on its own, but a partnership with a local or European operator could have its advantages.
If InterBaires wins, it may decide to continue to operate the concession. Confirmation of the concession until 2027 would increase the value of the company. The Argentinian economy is beginning to recover, but it still has a long way to go. Although Deutsche Bank insists the company is not for sale, it must be tempted to get a quick return on its outlay. Nevertheless it cannot be discounted from operating the concession for a further two or three years to wait for a more favourable economic environment. As Urioste says: "Deutsche Bank has a long history of being an active shareholder of different companies. It’s not a typical financial institution that’s nervous about running a commercial company. Deutsche Bank didn’t jump into this business willingly; it was because of an unpaid debt. But they are not in a hurry and if they have to wait until this process runs its course then they will do that."
Uncertain outlook
But what of Deutsche Bank’s real plans? If it were to sell the company, it is difficult to see which international operators would be interested at present, given the uncertain outlook in Argentina and the Mercosur region. One leading international operator tells DFNI: "If I asked my shareholders for cash to buy a company in Argentina, they would probably call an extraordinary meeting and ask for my dismissal."
It is difficult to put a price on a company whose sales have dropped from $125m a few years ago to an estimated $35m this year. Only a few months ago InterBaires was telling suppliers that its close relationship with AA2000 was a key aspect of its business. But given the uncertainty over the contract, this relationship will have an important influence on the value of the company.
Regional operators such as Waked Internacional, Motta Internacional, Duty Free Americas and Operadora de Aero-Boutiques owner Areas could be interested, but the uncertain outlook probably means any expansion strategies will be restrained by financial
concerns.
Discounting these groups and leaving risk capital companies aside, then the most interested party would appear to be AA2000 itself. The company already employs a number of skilled retail veterans who could run InterBaires. Orfila does not deny the authority’s interest, but says many other matters need to be clarified first.
Only time will tell; both companies await with interest and expectation the verdict of the court. As both companies trade insults, suppliers look on with a degree of nervousness. The appeal court will probably announce its decision this month. Then all sides can begin to make their plans for the future.
The legal dispute between airport operator Aeropuertos Argentina 2000 and duty-free concessionaire InterBaires is not the first in the relatively short history of these two companies. John Gallagher reports on a turbulent relationship gone sour.
The legal dispute between airport operator Aeropuertos Argentina 2000 and duty-free concessionaire InterBaires is not the first in the relatively short history of these two companies. John Gallagher reports on a turbulent relationship gone sour.
Shortly after airport operator Aeropuertos Argentina 2000 (AA2000) took control of Argentina’s privatised main airports in 1999, it realised that a quick way to achieve profitability would be to take greater control of airport retail activities. But its ambitions for Argentina’s airport market have not run smoothly alongside those of its principal concessionaire InterBaires. The story of AA2000 and InterBaires is a story of ups and downs, of court battles and political wrangling, and it’s a drama that’s reaching its endgame in the Buenos Aires courts as DFNI goes to press.
So how has it come to this? At the beginning of 2000 the new airport authority started to renovate Buenos Aires Ezeiza airport, and in a situation that dramatically mirrors its part-eviction of InterBaires today, AA2000 displaced InterBaires from its shops and the two sides ended up in court. Industry observers claimed that the strategy was designed to force InterBaires out of the airports altogether. But following intervention from Argentinian president Fernando de la Rua a truce of sorts was called, and eventually the AA2000 and InterBaires parent company Exxel Group reached an agreement that left the operator in place.
The first part of the deal involved the sale in August 2001 of Exxel Group’s 45% share in airport bonded warehouse operator Edcadassa; and shortly afterwards hostilities were called off completely as AA2000 announced the extension of the InterBaires concession contract from 2009 to 2027. AA2000 announced that the operator would have more retail space, and in better positions; and that the rental would be based on a percentage of sales, reflecting the economic realities of a depressed Argentina.
At the ASUTIL conference in September 2001 in Rio de Janeiro both sides confirmed their new relationship. AA2000 commercial director Marcelo Orfila confirmed that the deal was good for both companies. "Better locations for InterBaires mean more sales," he said, "and more sales mean more revenue for both the concessionaire and the airport operator."
Alejandra Basile, InterBaires then marketing manager, said the new agreement would lead to major investment in shop renovation at Ezeiza and other airports. The companies also announced the formation of a 50:50 joint venture to operate duty-paid sales at airports in the AA2000 network.
At the time, speculation that AA2000 was only months away from a full takeover of InterBaires appeared realistic enough. The Exxel Group had signalled its desire to sell the subsidiary but no one was willing to pay the asking price. Press comment in Argentina at the time mentioned Aldeasa as a possible predator, although more than one international operator has taken a long hard look at InterBaires accounts over the past two years. But the severe economic crisis and economic meltdown that was about to besiege Argentina was to scare away any potential bidders. Meanwhile duty-paid shops were opened at Buenos Aires Aeroparque airport and, in spite of the crisis, sales remained at acceptable
levels.
The downturn in the country’s economic fortunes in late 2001, the floating of the peso in 2002 and the continued bad news in 2003 meant that the deal that looked good on paper was not working in practice. New duty-free and duty-paid shops had opened but sales were hard to come by. InterBaires sales were reported to be down by 60% on the previous year despite the profitable Aeroparque duty-paid outlets. There was simply no money in the economy; families and business executives had stopped travelling. Neighbouring duty-free operators such as Neutral and Zeinal Hermanos in Montevideo, Aldeasa in Santiago de Chile and Brasif in Brazil were all mourning the disappearance of the Argentinian traveller.
Bank takeover
In spite of the economic turmoil in the first half of 2002, rumours still circulated that InterBaires was for sale. No European company was tempted as the economic situation continued to look grim. But parent group Exxel was suffering as much as any big Argentinian company and was under great pressure from the banks. In the late 1990s it had expanded very quickly with a number of highly leveraged deals. Most of its creditors were financial institutions that were becoming increasingly nervous about their returns.
It came as no great surprise when Deutsche Bank announced in November last year that it had taken control of Exxel’s 80% share in InterBaires. Immediately the new shareholder announced the appointment of Enrique Urioste as ceo and its commitment to running the business to recoup some of the $30m that Exxel owed the bank. Suppliers and staff welcomed the news, as the possibility of bankruptcy was staved off.
However the new tranquillity was soon disturbed when AA2000 played its ace card. According to the airport authority the concession contract that everyone had assumed was valid until 2027 was never countersigned by the government, the holder of the other 20% of InterBaires and was therefore invalid. AA2000 insisted that it had reminded the Exxel-controlled company to seek the countersignature to the contract extension, but this was never done.
AA2000’s Orfila told DFNI (Dec 1 2002): “As you are aware, we reached an agreement with InterBaires in September 2001 to extend the contract from 2009 to 2027 and to add new retail space. The government should have countersigned the contract within six months. This was not done, so a six-month extension was granted. No countersignature was added to the contract so we had to inform InterBaires last month that the revised contract had lapsed and that we should revert to the terms of the original contract. As of this month we are operating under the terms of the original concession contract.
"Obviously there is some confusion," Orfila added, "and we are already talking to InterBaires new owners of to clarify certain points. We also need to assess whether Deutsche Bank is in the business for the long term or whether it intends to sell the company quickly to recover debts. We cannot understand why the bank did not come and talk to us, because its relationship with us is crucial to the success of the business."
AA2000 clearly upset at the change of ownership, apparently without either party talking to the airport operator, continued to insist that the original, pre-extension contract was the valid one.
Negotiations started almost immediately and although there was disagreement, the climate of the meetings between the two sides was said to be cordial. A deal seemed likely; after all both would incur big legal fees in running to the courts. Negotiations continued throughout November and December and both sides agreed a brief respite during the Argentinian holiday period at the beginning of January.
Slow progress
However the mood was to change in the New Year. Progress was slow to non-existent and both sides hinted at problems, although they still hoped an agreement would be possible.
In mid-February, AA2000 played another of its aces. Given the lack of progress it applied to the courts to remove InterBaires from the 1,800sq m (19,400sq ft) granted to the operator when the new contract extension was signed. AA2000 insisted that all the other conditions of the original contract were now in play, the contract was only valid until 2009, and the rental payment reverted to the fixed fee of $500,000 as opposed to 10% of sales.
Newly-appointed InterBaires CEO Urioste said: "The court judgement [to remove InterBaires from 70% of its spaces] is totally arbitrary and abusive. It is based on a law that cannot be applied in this case. We will demonstrate in court that a contract is in place until 2027 and that we should be allowed to occupy the additional retail space. We are up to date with all our payments to AA2000. We will continue to fight for the rights of our shareholders and the rights of our employees."
Damian Pozzoli, Deutsche Bank managing director and the new president of InterBaires, confirmed: "We will present all our evidence to the judge. We feel we have a very strong case and we will win. The courts will confirm that our concession is valid until 2027."
He added: "This is part of a strategy by AA2000 to acquire our company, which is profitable and has a strong cash position. We are up to date with all our payments, whereas AA2000 owes the government money."
Pozzoli confirmed that AA2000 had tried to buy the company during the contract negotiations but its offer had been rejected; the company was not for sale. Reports in the Argentinian financial press indicate that AA2000 had offered $10m, some way short of the $30m Deutsche Bank deal and light years away from the $300m that Exxel Group was reportedly looking for only three years before the economic crisis.
AA2000 appears intent on occupying the retail space vacated by InterBaires. A new duty-paid outlet was opened at the beginning of March, only to be closed several days later by the Aeronautical Police as the new shop did not have its licence in order. AA2000 said that it would occupy the remaining retail space with new outlets over the next few months.
Both sides now await the outcome of InterBaires appeal. No one is sure if the appeal court will find in favour of InterBaires or uphold the original decision, which benefited AA2000. Both companies will probably wait until then to reveal their plans.
If AA2000 wins, it will obviously want to operate all its airports’ retail activities as quickly as possible. Further negotiations with Deutsche Bank cannot therefore be discounted. AA2000 has the expertise to operate the duty-free activities on its own, but a partnership with a local or European operator could have its advantages.
If InterBaires wins, it may decide to continue to operate the concession. Confirmation of the concession until 2027 would increase the value of the company. The Argentinian economy is beginning to recover, but it still has a long way to go. Although Deutsche Bank insists the company is not for sale, it must be tempted to get a quick return on its outlay. Nevertheless it cannot be discounted from operating the concession for a further two or three years to wait for a more favourable economic environment. As Urioste says: "Deutsche Bank has a long history of being an active shareholder of different companies. It’s not a typical financial institution that’s nervous about running a commercial company. Deutsche Bank didn’t jump into this business willingly; it was because of an unpaid debt. But they are not in a hurry and if they have to wait until this process runs its course then they will do that."
Uncertain outlook
But what of Deutsche Bank’s real plans? If it were to sell the company, it is difficult to see which international operators would be interested at present, given the uncertain outlook in Argentina and the Mercosur region. One leading international operator tells DFNI: "If I asked my shareholders for cash to buy a company in Argentina, they would probably call an extraordinary meeting and ask for my dismissal."
It is difficult to put a price on a company whose sales have dropped from $125m a few years ago to an estimated $35m this year. Only a few months ago InterBaires was telling suppliers that its close relationship with AA2000 was a key aspect of its business. But given the uncertainty over the contract, this relationship will have an important influence on the value of the company.
Regional operators such as Waked Internacional, Motta Internacional, Duty Free Americas and Operadora de Aero-Boutiques owner Areas could be interested, but the uncertain outlook probably means any expansion strategies will be restrained by financial
concerns.
Discounting these groups and leaving risk capital companies aside, then the most interested party would appear to be AA2000 itself. The company already employs a number of skilled retail veterans who could run InterBaires. Orfila does not deny the authority’s interest, but says many other matters need to be clarified first.
Only time will tell; both companies await with interest and expectation the verdict of the court. As both companies trade insults, suppliers look on with a degree of nervousness. The appeal court will probably announce its decision this month. Then all sides can begin to make their plans for the future.
After almost three years of falling traffic at Argentinian airports, airport operator Aeropuertos Argentina 2000 (AA2000) posted an increase in passenger numbers last month.
ARGENTINA. After almost three years of falling traffic at Argentinian airports, airport operator Aeropuertos Argentina 2000 (AA2000) posted an increase in passenger numbers last month. Just over 1.1m passengers used AA2000 airports in January, a rise of 6.8% on the same month in 2002.
AA2000 commercial director Marcelo Orfila told DFNI the increase was "small but significant" and said it would have positive implications for retail.
He added: “We have seen strong traffic growth at the tourist airports of Bariloche and Iguazu, but we have also seen increasing numbers leaving Buenos Aires Ezeiza for international destinations in North and South America and Europe. The economy is settling down and we are hoping for some stability this year, following the elections."
ARGENTINA. Following a short break coinciding with the southern hemisphere summer, Argentinian duty-free operator InterBaires and privatised airport operator Aeropuertos Argentina 2000 are back at the negotiating table.
By John Gallagher
ARGENTINA. Following a short break coinciding with the southern hemisphere summer, Argentinian duty-free operator InterBaires and privatised airport operator Aeropuertos Argentina 2000 (AA2000) are back at the negotiating table.
The two parties are attempting to resolve a dispute that arose after the change of ownership at the duty-free operator. When Deutsche Bank took control of Exxel Group’s 80% share in InterBaires in December last year, AA2000 cast doubt on the validity of the contract extension signed in 2001, which added almost 1,000sq m (10,765sq ft) of retail space and lengthened the contract duration until 2027.
AA2000 commercial director Marcelo Orfila told DFNI: "We are talking to the other parties involved and there is a common aim to reach an agreement. We have had several meetings with InterBaires and more meetings are planned. We hope to be able to announce an agreement shortly."
lndustry observers have reported improved traffic figures at Buenos Aires Ezeiza airport as national carrier Aerolíneas Argentinas unveiled plans to increase international services to Tokyo and Beijing, as well as extending services from Madrid. As the airline returns to profitability the company has also announced plans to create subsidiaries in Chile, Bolivia, Uruguay and Paraguay.
Aeropuertos Argentina develops airport services arm
28-Mar-2002
A team from Aeropuertos Argentina 2000 attended the Duty Free Show of the Americas to unveil a new service and new retail concept.
"We are a privately-owned company with 33 airports in Argentina," said commercial director Marcelo Orfila. "So we feel that we have some expertise to offer other airport operators. What we're offering is expertise in the field of communication and marketing under the name AirCom. We can help companies in everything from selling light boxes, to promotion of the duty-free shops, to banners and totems."
In addition the company has set up a 50-50 joint venture with the Exxel Group, owner of duty-free operator InterBaires, to develop duty-paid shops in airports.
"We will be selling some traditional duty-free products such as accessories and fragrances. But they will also contain a section dedicated to regional specialities, including food and wine, leather goods and souvenirs. The concept is called Tierra Argentina. The first one has already opened in the airport of Aeroparque in Buenos Aires and we will roll the concept out to all other airports."
At Orlando, Orfila was accompanied by former InterBaires executive Alejandra Basile who has joined the airport group as a consultant.
03-Dec-2002
By John Gallagher
Given the state of the Argentinian economy and the continuing liquidity problems for the once all-powerful Exxel Group, the recent purchase of Exxel’s 80% share in InterBaires by Deutsche Bank Trust Americas Corp came as no surprise.
But the move raises as many questions as it answers. How long will the company’s contracts be at Argentina’s principal airports? How much retail space will InterBaires control and where, particularly at Buenos Aires Ezeiza and Aeroparque airports? And what is the future of the duty-paid retail contracts controlled by Exxel under the terms of last year’s much-trumpeted long-term agreement between Exxel, InterBaires and airport authority Aeropuertos Argentina 2000 (AA2000)? As the story unfolds, the trade eagerly awaits news of what plans Deutsche Bank has for the retailer in the long term.
InterBaires chairman Damian Pozzoli informed suppliers on November 22 about the change of shareholder, and announced that well-known industry figure Enrique Urioste had been appointed ceo to replace Exxel-appointed Gustavo Sanchez. Pozzoli insisted that operations would continue as normal, which for now appears to be a sensible approach for Deutsche Bank, a financial institution whose knowledge of the duty-free business can only be described as limited. However, almost immediately questions began to surface about the length of the retailer’s duty-free contract (last year extended from 2009 to 2027) and the size and location of the retail outlets that were greatly expanded under the new contract (DFNI Sept 1 2001).
AA2000 commercial director Marcelo Orfila tells DFNI: "As you are aware, we reached an agreement with InterBaires in September 2001 to extend the contract from 2009 to 2027 and to add new retail space. The Argentinian government should have countersigned the contract within six months of the original deal. This was not done so a six-month extension was granted. No countersignature was added to the contract and we had to inform InterBaires last month that the revised contract had lapsed and that we should revert to the terms of the original contract. As of this month we are operating under the terms of the original concession contract."
Uncertainty discourages bids
If this decision is upheld, InterBaires must return to the original 883sq m (9,500sq ft) it operated until the end of last year, as described in the original contract. According to Orfila, the additional 1,800sq m (19,375sq ft) allocated last year must be returned to the airport operator by December 31 this year.
"Obviously there is some confusion," Orfila adds, "and we are already talking to the new owners of InterBaires to clarify certain points. We also need to assess whether they are in the business for the long term or whether they intend to sell the company quickly to recover debts."
He says: "We cannot understand why Deutsche Bank did not come and talk to us because their relationship with us is crucial to the success of their business." Talks on the contract issue were continuing as DFNI went to press, although several regional observers say it would be a logistical nightmare to force InterBaires to close its new stores and to continue operating only with the old ones, as if it were possible to turn back the clock.
But what of Deutsche Bank’s plans? If it was to sell the company, it is difficult to see which international operators would be interested at present, given the uncertain economic outlook in Argentina and the Mercosur region. One leading international operator tells DFNI: "If I asked my shareholders for cash to buy a company in Argentina, they would probably call an extraordinary meeting and ask for my dismissal."
It is difficult to put a price on a company whose sales have dropped from $125m a few years ago to an estimated $35m this year. Only a few months ago InterBaires was telling suppliers that its close relationship with AA2000 was a key aspect of its business. But given the uncertainty over the contract, this relationship will have an important influence on the value of the company.
Regional operators such as Waked Internacional, Motta Internacional, Duty Free Americas and Operadora de Aero-Boutiques owner Areas could be interested but the uncertain outlook probably means ambitious expansion strategies will be curbed due to financial concerns.
If we discount these groups and leave risk capital companies aside, then the most interested party could be AA2000 itself. The company already has a number of skilled retail veterans in-house who could run InterBaires. Orfila does not deny the authority’s interest but says many other matters need to be clarified first.
AA2000 did not comment on the future of the joint-venture company set up by AA2000 and InterBaires in September 2001 to develop duty-paid retail sales at several Argentinian airports. And at the time of going to press the future of IOSC, the InterBaires purchasing arm, also taken over by the Deutsche Bank subsidiary, remains unclear.
The relationship between InterBaires and AA2000 has often been described as a constant struggle between boyfriend and girlfriend with few dull moments. If the marriage was finally cemented last September, could it now be on the rocks? Only the next few weeks will tell whether the two companies can get back together and re-establish what seemed to be the dream concessionaire/airport authority relationship.
Aeropuertos Argentina 2000 announces airport services and duty-paid developments
16-Apr-2002
ARGENTINA. A team from Aeropuertos Argentina 2000 attended the Duty Free Show of the Americas to unveil new service and retail concepts.
“We are a privately-owned company with 33 airports in Argentina,” said commercial director Marcelo Orfila. “We feel that we have some expertise to offer other airport operators. What we’re offering is expertise in the field of communications and marketing, under the name AirCom. We can help companies in everything from selling light boxes, to promotion of the duty-free shops, to banners and totems.”
In addition the company has set up a 50:50 joint venture with the Exxel Group, owner of duty-free operator InterBaires, to develop duty-paid shops in airports.
”The concept is called Tierra Argentina, and will be selling some traditional travel-retail products such as accessories and fragrances. But our shops will be built around a section dedicated to regional specialities, including food and wine, leather goods and souvenirs. The first one has already opened at Aeroparque in Buenos Aires, and we will roll the concept out to other airports.”
Aeropuertos Argentina 2000 commercial director Marcelo Orfila talks to DFNI about the tough times the country faces, and why diversifying the business is the way forward.
Aeropuertos Argentina 2000 commercial director Marcelo Orfila talks to DFNI about the tough times the country faces, and why diversifying the business is the way forward.
Airport authority Aeropuertos Argentina 2000 (AA2000) commercial director Marcelo Orfila isn't panicking. While he describes the economic situation his country faces as Argentina’s worst crisis in history, he’s going to remain calm as the storm rages around the country’s aviation business.
After all, he says, we’ve been down this road before. "Argentina has been through a crisis every 10 years. I’ve seen it in every job I’ve worked in, and every time we’ve recovered. We’re adapting to it this time too." But it’s not just the economy that requires a quick fix. Orfila says: "One of the main problems in predicting the future is that we have no clear idea of where the country is going economically. After the elections next year, the president needs to be very clear on the government’s aims for Argentina in the world. That can help change occur, and it can happen quickly."
AA2000 operates Argentina’s 33 airports. For the airport authority’s revenues at Buenos Aires Ezeiza, the fall in passenger numbers remains the biggest issue. "Overseas travel by Argentinians is suffering from the dollar rate. We make our money in pesos but it’s then difficult to travel overseas and spend it. And airlines have also cut schedules to cut costs, which doesn’t make life any easier."
Playing by the rules
The authority is also forced to defend its privatised airport business against regulations which have become outdated by the current crisis. Orfila explains: "Our concession is based on traffic levels, and it also stipulates that we pay in US dollars. With the devaluation, clearly the figures don’t add up, and we’ve already had four court judgments in our favour on this issue. On traffic levels, we forecast 25m passengers this year, and we’ll only have 10m but we are still supposed to pay based on the previous estimate. Not only this, but last year the government reduced tariffs for domestic airlines by 50%. It changed our revenue forecasts but it was out of our control. All of this means the rules have been changed completely." As all the authority’s investments have been in US dollars until now, it is also asking tough questions about the nature of future investments.
But AA2000 is mounting a strong defence and is taking matters into its own hands where possible. "We’ve started taking passenger taxes at Ezeiza and Aeroparque ourselves rather than letting the airlines do it. It took too long for the payments to come through to us. And we’re working hard on renegotiating with our support services and talking to airlines to maintain the system until things improve."
Orfila says InterBaires has made some admirable changes to the airport stores in Buenos Aires, and says the operator's long-term contract to 2027 can help it ride out the tough times. InterBaires has also benefited from moving from a flat fee payment to a percentage of sales, which has helped it survive. "Their contract helps them a lot,” admits Orfila, "but when we agreed the extension we were sure traffic would grow and our revenues would increase. But they’ve implemented cost savings, they have new retail concepts and they will get back to their previous sales levels eventually. I think they’re better off now than they were six months ago. And it’s good to have a long-term transparent relationship with an operator and be open about your shared goals."
AA2000 has made some of its own retailing investments. In partnership with InterBaires owner Exxel Group, it has opened a series of duty-paid shops. "We’re expanding the Ezeiza concept to Mendoza and hopefully then to Bariloche and Cordoba,” he says. The group has also started up a chauffeur service from the airports; it has its own food concessions company and owns Airport Media, which handles all the advertising at the airports. "It’s all about improving those areas of the business that we can control, whether by ourselves or through our concessionaires," he adds.
Looking overseas for profit
The company is not just looking at staying afloat at home; it wants to grow overseas too, mainly through its airport consulting arm.
"Since September 11 we’ve had to look to diversify to make money. We’re interested in all the privatisations that come up in this region, and we even have a business in Armenia. We know how to conduct the process for an airport system or government; we can analyse the situation and offer the best solution for that particular location. Our experience shows that you need to have a deal that is elastic and that is adaptable to changes in traffic. We also know that wherever you go, the airlines will claim your airport is expensive, whether you charge $1 or $5 per square metre."
Back to Argentina, and Orfila believes the long-term outlook is still good. "Traffic will begin to recover, and it will end up being better than last year for sure. The domestic business will be stronger as everyone is staying at home, travelling within the country, so domestic airports are growing compared to last year."
There is reason for hope from the international business too, he insists. "This country has a lot to offer, from hunting and fishing to skiing or sightseeing. And even if the passenger numbers are lower from outside South America, you get quality spend. Where a Brazilian will spend $1,000 on a trip, a European or American might spend $5,000. Commercially, it's quality, not quantity, that counts."
ARGENTINA. As DFNI went to press, talks were continuing over the future of InterBaires contracts at Argentina’s leading airports following the company’s takeover by Deutsche Bank Trust Americas Corp on November 15.
By John Gallagher ARGENTINA. As DFNI went to press, talks were continuing over the future of InterBaires contracts at Argentina’s leading airports following the company’s takeover by Deutsche Bank Trust Americas Corp on November 15.
The bank assumed an 80% controlling share in the business from previous owner Exxel Group, which has been selling off many of its interests in the country. Well-known regional industry figure Enrique Urioste has been appointed ceo of InterBaires.
However airport authority Aeropuertos Argentina 2000 (AA2000) has questioned the viability of last year’s agreement to extend InterBaires duty-free contracts to 2027. AA2000 commercial director Marcelo Orfila claimed the government had not approved the extension agreement, and said that contracts would run only to 2009.
"Our understanding is that we are working on the original contract,” he told DFNI. "The revised contract [to 2027] was never countersigned by the government and has now lapsed. We advised InterBaires of this at the end of last month. Clearly there is some confusion and we will try to clarify this with the new owners. We will talk to them to see in which direction they plan to take the company."
He also claimed that the extension of space awarded to InterBaires in the new agreement was invalid. The operator has gained almost 1,000sq m (10,800sq ft) of new space since last year’s agreement.
"We’ve just got married and are now on our honeymoon." That was how InterBaires marketing manager Alejandra Basile described the Argentinian operator's relationship with airport authority Aeropuertos Argentina 2000.
"We’ve just got married and are now on our honeymoon." That was how InterBaires marketing manager Alejandra Basile described the Argentinian operator's relationship with airport authority Aeropuertos Argentina 2000, with whom the retailer has just signed a 17-year extension to its duty-free contract (DFNI 15). Basile and AA2000 commercial director Marcelo Orfila took the stage at ASUTIL to explain the reasons behind the deal that has caused many an envious glance toward developments at Buenos Aires.
Orfila began by explaining how the new contract would operate, with a concession fee based on a percentage of InterBaires turnover replacing the fixed fee that had been in place before the new deal. "There will be a 50% increase in retail space at Buenos Aires Ezeiza and our other principal airports, related to the growth in air traffic." Orfila said that 1,500sq m (16,140sq ft) would be dedicated to duty-paid shops under the Aeroparque concept, which AA2000 hopes to further develop as a brand.
Orfila was bullish about the future despite the economic gloom in Argentina. "As far as our international business is concerned, we haven’t suffered too much. This goes against the current economic picture. In the past, a lot of product categories suffered because of a lack of retail space, but that is going to change. And spend per passenger has held up well in 2000." Orfila added that AA2000 was rebuilding Cordoba airport which handles 2m passengers a year and also developing its facilities at Bariloche and Iguazu.
Basile went on to describe the work now being carried out at Buenos Aires. "We will start the renovation with two arrivals stores which will open on October 16. Our departures stores will be unified to form one 1,950sq m (21,000sq ft) outlet to open on December 1. And by the end of 2003 we will have further departures stores focusing on newer categories such as fashion and toys. Historically we have concentrated on the traditional duty-free items, but with the extra space we will have, we’ll be giving more space to smaller categories."
One of the world’s longest airport retail tenures has just been agreed after a pioneering deal between Argentinian airport authority Aeropuertos Argentina 2000 (AA2000) and the Exxel Group, parent company of the country’s dominant travel retailer InterBaires. In a world exclusive, InterBaires CEO Randy Emch and AA2000 commercial director Marcelo Orfila talked about the significance of the new relationship to Martin Moodie.
One of the world’s longest airport retail tenures has just been agreed after a pioneering deal between Argentinian airport authority Aeropuertos Argentina 2000 (AA2000) and the Exxel Group, parent company of the country’s dominant travel retailer InterBaires.
In a world exclusive, InterBaires CEO Randy Emch and AA2000 commercial director Marcelo Orfila talked about the significance of the new relationship to Martin Moodie.
It is arguably the most significant deal to be struck between an airport authority and a duty-free retailer anywhere in the world during the past decade. An agreement that has resulted in an unprecedented ultra long-term extension to a retail contract and one which paves the way for a 50% increase in shopping space over the next two years alone.
The location is Argentina and the two protagonists in the conclusion to this fascinating commercial drama are Aeropuertos Argentina 2000 (AA2000) and Exxel Group. In the past few weeks, the privately-held airport management company and Exxel (parent company to InterBaires) have agreed a 17-year extension to InterBaires exclusive retail concession at the country’s leading airports (taking the company’s contract to 2027).
Great news for InterBaires, boosted further by the fact that Exxel will also take over most of the duty-paid activities at AA2000-controlled airports.
The deals are part of a wider alliance between AA2000 and Exxel, which recently saw the latter’s 45% stake in airport bonded store company Edcadassa acquired by the
airport authority.
For the two organisations the deal offers mutual advantages. InterBaires will now enjoy an almost unparalleled security of tenure, encouraging it to invest heavily in the country’s fast-developing airport retail scene.
At a stroke, the value of InterBaires has also soared; a considerable coup for the company’s CEO Randy Emch who assumed the reins shortly after Exxel acquired the retailer in 1997.
AA2000, meanwhile, has gained an improvement in its contract terms. A higher concession payment based on a percentage of revenue instead of the previous flat fee will encourage the authority to work hand in hand with the retailer to improve penetration and spend per passenger.
And the landlord will enjoy a long-term relationship with a retailer wholly committed to developing the allure of the country’s leading airports. Just as significantly, the alliance marks the patching up of a relationship that had soured dramatically a year earlier.
At that point, AA2000’s main shareholder Eduardo Eurnekian was involved in a war of words, all of them bitter, most of them public, with Exxel chairman Juan Navarro. As the public wrangling, which stemmed mainly from Eurnekian's outrage over Exxel's acquisition of a 3.4% stake in AA2000, was splashed across the country’s newspapers last May, few would have wagered on such a harmonious conciliation little more than a year later.
That conciliation came after the country’s president Fernando de la Rua demanded that the parties end their differences and appointed a mediator to achieve that end. The results would make any marriage counsellor proud. InterBaires already enjoyed a long-term contract by industry standards. The new one extended from 2010 to 2027 is the stuff of dreams for any retailer.
InterBaires CEO Randy Emch knows exactly how important it is to his company. "For any airport duty-free operator, the assets of the company are its concessions and the rights to exploit the business that you have in those airport concessions," he says.
"From that point of view, we have extended the term of our contract greatly; and we have expanded our space enormously, both the quality and the quantity. We have also extended into the duty-paid business so the value of the business has improved dramatically.
"We have a much more secure foundation for a long period of time, plus more space and that is a great benefit."
The new deal will boost duty-free selling space over the next 24 to 30 months, says Emch. "We will be receiving approximately 50% more space in the principal airports and the principal locations. And in quality terms, the spaces we will get will be better located, better designed and more usable."
By the year 2003 all incoming international passengers will have to pass through the shops, after immigration, before collecting their luggage. Currently the shops are located before immigration, meaning that most passengers ignore them in the race to get into the entry queues. Also by 2003, changes in passenger flows will mean that over half of departing travellers will have to walk through the stores.
It’s an encouraging and rare sighting of that virtually extinct species, the landlord/retailer partnership, working together in perfect and profitable harmony. AA2000 commercial manager Marcelo Orfila is very enthusiastic about the new relationship.
"Even more than 50% of departing passengers may have to pass through the stores because we are giving InterBaires a much bigger store in Ezeiza departures," he explains.
"The new stores will be open stores, so this will not only affect the business of InterBaires, but the revenue for the airport. Our revenue today is not at its optimum compared to other airports."
That should change soon. More and better space will mean big opportunities for new product categories, Emch affirms. "We will bring in new products and new brands," he enthuses.
"There are whole categories of merchandise that we did not commercialise previously. Not because we did not think we could not sell them, but because of restricted space, so we focused on the products with the highest possibilities, highest rotations and which were simpler to sell.
"For example, we ignored sporting goods. And Argentinian wine is a wonderful product. With this new space we can start developing such areas. Seemingly every airport in the world sells local souvenirs, yet we have not because it requires a lot of space which we did not have.
The new deal means fewer but bigger stores. "We currently have too many stores," says Emch. "There are too many small stores and not enough big ones. In terminal A departures, for example, we have four stores and we will change to just one. In arrivals, in the same terminal, we have three stores; instead we will have one."
The advantages are enormous, both in customer service terms and the fact that InterBaires will no longer have to duplicate sales staff across its various stores. Similarly, duplication of merchandise and promotions will be avoided and suppliers will be able to have larger fixtures. It will also allow room for new companies to enter the Argentinian market.
"Right now, we have very costly and inefficient duplication of merchandise in two sectors of the same departure hall, because of a separation of a flow in the passengers," says Emch. "We will unify these two larger single stores, so not only do we have a 50% increase in space, but we do away with the duplicate space. I am thrilled about the efficiency aspect of having fewer, but larger, stores in addition to more space."
Another improvement will be what Emch describes as optimal gate usage. InterBaires is exchanging information with AA2000 about the flights that have the highest spend per passenger, to ensure that those flights use the gates which have the best visibility of the shops. He notes: "That represents a level of sophistication in the relationship between the airport and the retailer which just does not exist in most places.
"There is a certain degree of trust and alignment of interest in this new deal. Yes, 27 years is unusual, but when you start looking at the investment plans that AA2000 have, the number of airports they need to remodel and the opportunity for new shops in the smaller airports in the interior, you realise we need to have a long term horizon as well.?
Orfila says that the once rocky relationship between privately-held AA2000 and the government is now very good. AA2000 is a major investor in the country’s tourism infrastructure, through not only its airports but also the recently-acquired LAPA airline as well as taking a stake in another domestic carrier Southern Winds.
Orfila says retailer and landlord will work together to better communicate the shopping offer to passenger. "This will develop the potential of the business in a very significant way," he says.
Adds Emch: "We will coordinate publicity and advertising. So, for example, when we have a major fragrance launch, you will see the advertising in our stores and in the check-in area. So the passenger will see a consistent message from the point at which they arrive at the airport to the point of purchase.”
It’s the most positive of stories. Yet, perversely, it comes at the worst of times for the country as a whole. Faced by near default on some $130bn of public debt, Argentina has been trapped between a sharply slowing economy, rising debt payments and an anti-inflation policy of pegging the peso to the US dollar. The end result has been protracted recession and unemployment exceeding 20%. More than a third of the population is said to live below the official poverty level.
Orfila though, like most Argentinian businessmen, has seen it all before. “I have had many years of doing business in Argentina, and we had experience of passing through this sort of crisis many times," he says. “Although this particular crisis has been going on for a long time, my personal impression is that while Argentina is suffering, there are many positive things happening.”
He cites a sharp reduction in the size of government bureaucracy at both national and provincial level which he says will address the vicious cycle of a cash-strapped government needing higher taxes to fund its own operations. July’s zero deficit law, which called for big cuts in state salaries and pensions to help balance the budget, gives further cause for optimism.
"I believe that Argentina has a better future than most people expect,” says Orfila. “The changes we are seeing in Argentina both in the political and business sectors are very important to the future.”
Emch admits the economic gloom has made retailing tough but he, too, sees solid grounds for optimism.
"We have had to be a bit more agile and a bit more creative but we have managed to do a very good job. While supermarket sales were declining, for example, ours grew. Yes, sales are slightly off right now, but that is really because [national carrier] Aerolineas Argentinas, which is having financial problems, has cut back all their international flights which normally account for 23% of passenger traffic.
"But that will resolve itself in time. The airline will find new investors or a new company will take over the international routes of Aerolineas, and seat capacity will come back on stream, so the passenger rate will go back to its normal level."
While it’s not quite a case of "crisis what crisis", Emch believes that InterBaires has been relatively immune from the worst economic ravages. And with such a long-term deal in place, the company will be much better placed to ride out future economic slumps.
For AA2000, the future looks rosy. "If InterBaires wins, the airport wins,” says Orfila. "Currently, they are losing a lot of sales because of the poor locations. InterBaires is already a very good retailer, they try to maximise everything and analyse every square metre. With the new space, they will have the chance to increase sales drastically."
Emch concludes on a similarly upbeat note: "This is a new chapter in the company’s history, a very positive one. There is a huge amount we can do together now. It’s also a completely new chapter in the relationship between our group and the airport. Over the years you will see a lot of great things happening in our area." Duty-paid debut for Exxel InterBaires parent company Exxel Group will take over most of the duty-paid retailing rights in AA2000?s 33 airports under the terms of the new alliance.
The only exceptions to the group’s exclusive contract are food and beverages; books, newspapers and magazines; jewellery (H Stern); pharmacies; a local semi-precious stone business; and a small kiosk business selling cigarettes by the pack, candy, chewing gum and other small items.
So what has happened to Weitnauer's duty-paid business, begun in 1999? And once seen as a potential long-term threat to InterBaires?
Orfila replies: "That business will disappear. The airports are being refurbished. The old spaces will disappear and the new spaces are being given to this new company."
In some cases existing short-term contracts will be allowed to complete their terms, Orfila says. He adds: "We are going to adapt the [duty-paid] business according to the size of the airport and the traffic. At the smaller ones, we will have smaller stores. But the idea is to try to take to all the airports a new type of business and new interior style." DFNI says: A deal to shake the duty-free world The new relationship between AA2000 and Exxel has profound implications for the duty-free world. In an industry dominated by short-term contracts ranging from three to five years, long-term thinking and investment are constantly discouraged by the need for an immediate return. The airport may think it benefits from the bidding up process but the end loser is ultimately the consumers, who do not get the retail offer they deserve.
What were AA2000's aims during the contract negotiations? Simple, replies Orfila: "We wanted upscale stores at the airports, and to give an international image. It is easier for us to handle one contract than to handle lots of contracts in 33 airports."
Notes Emch: "Because of the historic, legal issues between the two companies we did not invest as much as I would have liked over the last few years. With this new agreement, the floodgates are open and we are investing a great deal of money in the airport.
"We are talking about very substantial investment for our company, and the objective of both InterBaires and the airport authority is to have shops in this country every bit as good as those you would find at Heathrow, at Charles De Gaulle, at JFK or Hong Kong.?
With such a long-term deal in place, and given the meteoric rise in retailing standards under Emch's stewardship to date, few would bet against that. Make no mistake, the consumer will be the real winner here. Key aspects of the new agreement between AA2000 and Exxel Group/InterBaires:
Duty-free retailing contract at AA2000 airports extended from 2010 to 2027
Change from flat fee to percentage of revenue
Contract to cover duty-paid [certain stores excluded] as well as duty-free
Approximately 50% increase in retailing space over the next two years
04-Sep-2001
Aeropuertos Argentina 2000 (AA2000) has granted InterBaires a 17-year extension to the retailer's duty-free contract.
The deal extends the contract from 2010 to 2027 with payment terms changing from a flat fee to a percentage of revenue. It is a huge boost for InterBaires especially as the retailer's parent company Exxel Group has been granted the duty-paid rights at AA2000's 33 airports.
As a result of the agreement, InterBaires will invest heavily in the airports, boosting retail space in Buenos Aires' main gateway, Ezeiza airport, by 50% over the next two years.
InterBaires CEO Randy Emch told TRW: "We have extended the term of our contract greatly; and we have expanded our space enormously, both the quality and the quantity. We have also extended into the duty-paid business-so the value of the business has improved dramatically."
AA2000 commercial director Marcelo Orfila was also upbeat about the deal: "This will develop the potential of the business in a very significant way," he said. "If InterBaires wins, the airport wins. Currently, they are losing a lot of sales because of the poor locations."
An exclusive interview with Emch and Orfila appears in the September 1 issue of Duty-Free News International, out now.
