Lagardère Travel Retail and Lima Airport Partners (LAP), a Fraport company, are pioneering a new era for Travel Retail business models by signing a long-term concession contract based on profits sharing for the exclusive operation of Duty Free stores at Jorge-Chávez International Airport in Peru. This is the first large-scale implementation of a business model that has been widely discussed in the industry to better balance risks and benefits between the airport and retail operator. The goal is to unleash growth potential, even more relevant in the context of the Covid-19 pandemic and the resulting drop in global air traffic.
On 20 July, Lagardère Travel Retail and Lima Airport Partners (LAP), a Fraport AG majority owned company, signed a long-term agreement for Lagardère Travel Retail to take over the Duty Free operations at Lima Airport. Effective January 2022, the 13-year concession will include the introduction of the Duty Free brand Aelia at the airport ́s Duty Free stores, which comprise a total of 3,000 square meters of commercial space. The innovative profit-sharing agreement sets new standards that both partners hope to capitalize on during an environment of uncertainty in the post-Covid consolidation period. This retail model, which has come into sharp focus during the crisis, has been discussed for several years as a necessary evolution to maximize sales potential and to introduce greater balance and new opportunities in the way risks and benefits are shared between parties.
The profit-sharing agreement will open up significant revenue potential for both Lagardère Travel Retail and LAP, as well as greater investment opportunities – ultimately benefitting travelers and enhancing the airport experience at the popular Lima Airport hub.
Commenting on this announcement, Dag Rasmussen, Chairman and CEO, Lagardère Travel Retail, said: “We are thrilled to have found in LAP a like-minded partner who has demonstrated the most innovative and pioneering way of thinking, from selecting an operator via an innovative Partnership Selection Process up to the contract terms. As we continue to face a great deal of uncertainty and are relatively new to the South American region, this profit-sharing agreement is a great vote of confidence from LAP. I am personally grateful for their trust and support in turning theory into action and opening up new perspectives for business models in our industry. We are also confident this is a stepping stone for our partnership with Lima Airport and its majority shareholder Fraport, so that we canall maximize our global expertise and reach to replicate this success elsewhere.”
Juan Jose Salmon, CEO of LAP, explained the strategic importance of the new agreement with Lagardère: “In the middle of the pandemic, Lima Airport Partners has successfully negotiated a pioneering partnership that brings a renowned and long-term partner to Lima Airport. Lagardère Travel Retail is renowned for its strong commitment and extensive expertise in travel retail and duty free. Our cooperation with Lagardère Travel Retail fits fully into our vision-of-the-future for airport retail. We believe that collaboration is the key to managing business relationships, as well as actively engaging in new partnership models. We are impressed by Lagardère Travel Retail’s high degree of engagement and innovation, which they will soon be bringing to the Peruvian airport retail market. In the context of LAP’s airport expansion program, this agreement also sends a strong signal to Peru and the global aviation and travel industries. Our agreement will take us well into the next decade – as we move boldly into the new era of aviation. We are dedicated to delivering new and unique airport retail experiences at the Lima gateway to South America.”
Along with the duty free shops at Lima Airport’s existing passenger terminal, Lagardère Travel Retail will work with LAP to define a new retail experience for LAP’s future terminal, due to open in 2025. The launch of Lagardère Travel Retail’s operations in Peru marks a significant milestone for Lagardère Travel Retail’s plans to expand the group’s footprint in South America, just a few months after being awarded a concession to build and operate food service outlets at Arturo-Merino-Benítez Airport in Santiago de Chile. South America offers exciting growth prospects, lifted by steady domestic and intra-regional air traffic.
Jorge-Chávez International Lima Airport (LIM) is one of South America’s busiest airports. In the past few years traffic at Lima Airport has grown quickly to reach 23.6 million passengers in 2019. Before Covid-19, LIM’s route network featured 24 passenger airlines serving some 50 international destinations. With its Lima Airport expansion program, LAP is currently developing one of Peru’s most significant mega projects.