This ‘flight to nowhere’ offers duty-free shopping

Last month, Hyun Jung-a boarded 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 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 people 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 US $ 85 billion in 2019 and was on track to reach US $ 139 billion by 2027, according to Verified Market Research.

Then sales fell as countries restricted international travel.

Duty-free in free fall

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, 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 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 duty free.”

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

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 (US $ 4.3 billion) last year, according to the Commerce Ministry.

Vacation paradise

Duty-free shopping has been allowed for domestic tourists in Hainan since 2011. In July, the government raised the spending cap 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.

Responding to demand in Hainan, Alibaba Group’s logistics unit is launching daily cargo flights from Singapore to deliver cosmetics, handbags and other goods to the island.

Japan’s leading duty-free retailer, Laox, which was acquired by Chinese retailer Suning Holdings in 2009, plans to enter Hainan as early as the second half of this year, setting up stores designed similarly to 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.

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 a year earlier to € 341 million ($ 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 has delivered enough shots for just 4% of the population – retailers can count on gimmicks like thefts to nowhere for a while.

“The contribution of flights to nowhere is small, but it’s better than having nothing,” said Sung Junewon, analyst at Shinhan Investment 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. pandemic, and it was worth it for the shopping, said Park, who spent about US $ 600, mostly on cosmetics.

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

This article is published under license from Bloomberg Media: the original article can be viewed here


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