Abbott "delighted" with Alpha performance

John Rimmer

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The Alpha Airports Group CEO tells RavenFox.com he is "delighted" with the retailer's full-year airport and inflight sales but warns of challenge in Asia

Alpha Airports Group CEO Kevin Abbott told RavenFox.com he is "frankly delighted" with the retailer's performance last year, despite the fall in pre-tax profits reported by the company today. Alpha enjoyed sales growth of 11.4% in its airport business, while its inflight division reported impressive growth of 40.6%. Total retail profits were up by about 33%, said Abbott, although start-up costs in the company's Flight Services division caused a fall in overall profits. Click here for a report on Alpha's full-year results.

"On the retail side we've had an exceptionally strong year," said Abbott. "Retail profits are up by 33% and that reflects strength in all of our businesses in the UK, Asia and the US. The work we've put in to strengthen our team through the Alpha Heroes programme is now benefiting the business."

Abbott said that Alpha's inflight retail division was approaching £100m ($192.3m) in annual sales. He attributed the growth in the business partly to the acquisition of new contracts with MyTravel and Qantas, but insisted that the sales increase last year was mostly like-for-like, reflecting improved spend especially on board Alpha's no-frills partners, including Easyjet. "More and more customers on board low-cost airlines are now regular travellers, and they know they can get quality snacks and gifts on board," said Abbott. "We've added a gift programme on board Easyjet that has gone down extremely well, and MyTravel has enjoyed a dramatic increase in sales per passenger since we began our procurement agreement with them. We're going to roll out the same programme with Monarch Airlines when our contract begins in May."

In Alpha's UK airport business, much will depend on the outcome of the Birmingham duty-free tender, in which Alpha is competing with Aelia in a bid to retain its contract. "We've got our fingers crossed for Birmingham and we're quite excited about other opportunities in mainland Europe [including Paris Charles de Gaulle terminal one]." Alpha is certain to participate in this year's duty-free tender at Istanbul Atatürk airport following its purchase of a 60% stake in operator Istanbul Duty Free, but Abbott said the company was unlikely to bid for the licence to run duty-free on the Turkish-Bulgaria border (RavenFox.com March 21). "We're more focused on the airport and airline business in Turkey. Our focus is taking what we know from the UK and applying it to the market there.

"The reality is that 80% of our business is in the UK. Last year we saw about 8% traffic growth in that market and managed to grow sales by over 10%. This year we expect similar traffic growth but we're aiming for a 12% increase in sales."

Given that Alpha's financial year ended on January 31, its results do not give a full reflection of the impact of last December's tsunami on its business in Sri Lanka, India and the Maldives. Abbott said that sales growth in Sri Lanka stood at about 25% until the tsunami struck, but added that the retailer had forecast a 40% decline in tourist traffic in the first half of 2005 before a recovery in the latter half of the year. "Tourists are half of our market in Sri Lanka and that has been badly hit, but sales to returning Sri Lankans are holding up. The whole airport at Colombo is being developed on the departures side and we've been guaranteed space, although we're yet to finalise where."

Alpha also plans to invest in its stores at Orlando International and Sanford airports after securing an extension to its contract with the Greater Orlando Aviation Authority.

Abbott expressed optimism that Alpha's business in the UK and US would show further growth in 2005, but admitted that the retailer's Asian business faced a greater struggle. "The challenge is to manage a £2m ($3.85m) shortfall in Asia owing to the hit to our business in Sri Lanka and the Maldives. But we're confident we can expect improvements elsewhere and add to our business in the UK and Europe."