Potential bidders for Colombo Bandaranaike Airport’s two duty free contracts now have until 7 July to prepare their submissions after the airport company extended the deadline from 23 June. Today airport company Airport & Aviation Services (Sri Lanka) responded to concerns over the terms of the concessions and the impact of future projects on the business.
As reported, Airport & Aviation Services is inviting bids for the operation of core category duty free concessions at the country’s main international airport. The duty free concession was split between World Duty Free Group and Flemingo in mid-2011 for a period of five years. Total sales are estimated at around US$70 million a year.
The airport company will continue with its split concession model, with two concessionaires each managing one duty free shop in Arrivals and one in Departures, under five-year terms.
The bidding process has been pushed back by two weeks to 7 July due to “high levels of interest” according to Head of Commercial & Properties Geeth Karunaratne. He told The Moodie Davitt Report: “There has been a lot of demand from Asia and Europe. Bidders wanted more time to submit their applications so we extended the deadline. We hope to finalise the process by September.” He said contracts would probably begin by early 2017.
Karunaratne confirmed that a pre-bid meeting on 13 June attracted around ten companies, though around 15 purchased the tender documents. Among those at the pre-bid meeting were Dufry, ARI, Flemingo, Shilla, Truebell, GMR and ATU Duty Free, among others. Others, including Gebr Heinemann, purchased the documents.
Karunaratne sought to ease bidder concerns over concession terms and the impact of future projects.
Addressing a concern about the allocation of the Departures stores (there is one large and one smaller store) identified by one bidder, Karunaratne said: “The bids are for the concession fee, not specific spaces. The highest bid wins, so the highest bidder gets to choose their location.”
A further concern is that the winning bidders will face a sharp contraction in traffic for three months in early 2017 due to runway closures for construction. “January is a peak month and traffic will fall by at least -30%,” said one retailer.
However, Karunaratne said that, contrary to retailer claims, the closure would not last from 8-4.30pm daily in this period. He noted: “There will be runway closures but we are addressing this with the airlines. They are moving their slots to different times, so shop operations will not be affected for as long, perhaps four hours maximum. There won’t be a big fall in traffic levels.”
Work is scheduled to begin later this year on a new terminal building with completion and opening due by 2020. According to one bidder, “this building will have a new duty free tender process and therefore the current bidders could find themselves with half the traffic in the old terminal by the third year of the contract”.
The airport company confirmed that the current tender only covers the existing facility and that the new terminal will feature a separate tender. However, noted Karunaratne, the timetable for this process has yet to be decided. He did not comment on how the new facility might affect existing contracts.
Earlier this year, the government of Sri Lanka established a Procurement Committee and Technical Evaluation Committee to oversee a more “transparent” selection process. It said previous contracts had been awarded as a franchise right with no tender procedure or call for competitive bidding conducted in selection.
Photo – Flemingo (above) and World Duty Free Group currently hold the split concession for duty free in Colombo; bids on the latest tender are due next month
Source: ©The Moodie Davitt Report