To Attract Buyers, Duty Free Companies Offer Free Flights To Nowhere Aviation News

Last month, Hyun Jung-a took a flight from Incheon Airport in South Korea. About two hours later, she was back at the same airport and loading duty-free shopping, although she never landed in another country.

The Air Busan Co. flight, organized by Lotte Duty Free for its VIP customers, was Hyun’s first since the pandemic began and it didn’t cost him a dime. Because the route briefly left Korean airspace and passed through a Japanese island, the 130 passengers on board qualified to shop at duty-free shops in Seoul generally reserved for those who have traveled overseas.

Destinationless flights like these are an attempt by duty-free operators to save an industry decimated by Covid-19. Before the virus, business was booming – the global duty-free market was worth $ 85 billion in 2019 and was on track to reach $ 139 billion by 2027, according to Verified Market Research.

Sales fell as countries restricted international travel. Globally, just 1.8 billion people took scheduled flights last year, up from 4.5 billion in 2019, the International Civil Aviation Organization said. The annual turnover of Swiss duty-free giant Dufry AG, which operates outlets around the world, has fallen by 71%.

While buyers of flights like Hyun’s don’t fill the financial void, they do at least bring much-needed bargains.

“I saw a lot of people with bags full of duty free items,” said Hyun, who bought a Chanel bag, shoes and cosmetics. “I tell all my friends it’s worth flying because of the opportunity to shop tax free.”

Hotel Shilla, South Korea’s second-largest duty-free operator after Lotte, is offering 114 seats on two supposedly nowhere flights on May 23 and 30 to customers who have spent more than $ 550 in its stores since May 3. may. Lotte is putting on five more flights this month.

Duty-free operators and other stores are among the last in South Korea to recover from the pandemic, with the country’s retailers and wholesalers shedding 182,000 jobs in April even as the economy created 652,000 jobs year-on-year previous, the statistics office reported on Wednesday.

The industry is less rushed when domestic air traffic has rebounded and duty-free trade zones are in place. The palm-fringed Chinese island of Hainan has become an even more popular getaway for mainland tourists now hungry for international travel. This helped the province’s duty-free sales, which more than doubled to 27.5 billion yuan ($ 4.3 billion) last year, according to the Commerce Ministry.

Duty-free shopping has been allowed for domestic tourists in Hainan since 2011. In July, the government raised the spending limit to allow people to buy more and is expanding some duty-free shopping in Beijing, Shanghai and other cities. to harness China’s trapped purchasing power growth.

To meet the demand in Hainan, the logistics unit of Alibaba Group Holding Ltd. starts daily cargo flights from Singapore to deliver cosmetics, handbags and other goods to the island. Japan’s leading duty-free retailer, Laox Co., which was acquired by Chinese retailer Suning Holdings Group Co. in 2009, plans to enter Hainan as early as the second half of this year, setting up similarly designed stores. way that its outlets in Japan. .

“The trend of visiting Hainan for luxury shopping is here to stay for the Chinese,” said Jonathan Siboni, managing director of data intelligence firm Luxurynsight.

International air travel, as far as it occurs, tends to shift to shorter regional routes and from places where vaccination programs are at a more advanced stage. According to aviation analysis firm Cirium, seven of the world’s busiest international routes in the first four months of the year included US routes, such as Cancun-Houston and New York-Santo Domingo.

Stock prices suggest investors are bullish. Dufry’s stock has climbed more than 100% since late September, while the Shilla Hotel is near its nearly 15-month high in Seoul.

Paris-based Lagardere Travel Retail, which operates duty-free shops, restaurants and other stores at airports, is counting on customers closer to home to help it get through an uncertain summer in Europe after its figure business fell 56% from the previous year to 341 million euros ($ 414 million) in the first three months.

“We are betting more on European retirees who travel,” said Frédéric Chevalier, the company’s operations director for Europe, Middle East and Africa. McKinsey predicts that passenger flows between Asia and Europe will only return to 2019 levels “beyond 2024,” said Anita Balchandani, a partner at the company.

With vaccination rates lagging behind in countries like South Korea – which delivered enough jabs for just 4% of the population, Bloomberg’s Virus Tracker shows – retailers can count on gimmicks like thefts to nowhere for a certain time.

“The contribution of thefts to nowhere is small, but it’s better than having nothing,” said Sung Junewon, analyst at Shinhan Investment Corp. in Seoul. “Every little detail counts.”

Seven South Korean carriers operated these flights, carrying around 8,000 passengers in total. Authorities are also considering allowing overseas flights to Incheon, where passengers can spend a few hours shopping without leaving the airport before returning to their original departure point.

Park Ju-hyun, a 31-year-old office worker from Seoul, paid around 90,000 won ($ 80) for a plane ticket to nowhere in March. It was his first time on a plane since a trip to the Philippines before the pandemic, and it was well worth it for the shopping, said Park, who spent around $ 600, mostly on cosmetics.

“It was nice to be back at the airport,” she said.

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