July, 2010

One bag rule severely impacting retail revenues

The ‘one bag’ rule prohibits passengers from carrying duty free purchases on board unless they fit into the traveller’s single cabin bag. This is having a hugely detrimental impact on many of the small and regional airports served by the low-cost carriers (LCCs), which rely on commercial revenues as an increasing proportion of income. LCCs are Europe’s fastest-growing airlines; Branquinho explained that they account for 37% of European traffic, 50% of non-domestic traffic in some cases, and 80% of total traffic at some airports.

The ‘one bag’ rule prevents passengers from carrying duty free purchases on board unless they fit into the traveller’s single cabin bag. This is having a hugely detrimental impact on the small and regional airports served by LCCs, which rely on commercial revenues as an increasing proportion of income.

The ‘one bag’ rule prevents passengers from carrying duty free purchases on board unless they fit into the traveller’s single cabin bag. This is having a hugely detrimental impact on the small and regional airports served by LCCs, which rely on commercial revenues as an increasing proportion of income.

“We are seeing losses of up to 40% at airports with a high proportion of LCC traffic. At one UK regional airport, 33% of surveyed Ryanair passengers said they would not buy duty free because of the one bag rule. It is actually difficult to quantify the losses, as some passengers are not visiting the shops at all and some are having their purchases confiscated. It is extremely confusing for travellers, as at some airports they can buy and carry their purchases while at others they cannot,” said Branquinho. “Passengers have always been able to take their airport shopping on board. This is stopping something that is an integral part of the travel experience. At the point where commercial revenues are increasingly important to airports, a lot of retailers are not able to sell their products.”

Non-aeronautical revenues are becoming increasingly important, particularly for small and regional airports, and are vital to providing the low airport charges enjoyed by LCCs across Europe. Olivier Jankovec, Director General ACI EUROPE, said: “There is no question that airlines are free to set their own rules when it comes to cabin bag allowances. However, such rules should not interfere with the ability of airports to sell duty free and travel retail items to passengers before they board their plane. This is an unfortunately short-sighted stance on the part of some LCCs. Demanding even lower airport charges while introducing rules that actively harm an airport’s ability to generate alternative revenues is simply not a tenable position. If LCCs are to continue to benefit from using airport infrastructure at well below cost price, they need to appreciate the role that non-aeronautical revenues, and in particular airport retail, play in making that possible.”

Branquinho: “Generally, airports affected by this have seen up to a 40% drop in retail revenues. In the end, airports are losing revenues too, as well as retailers. This matters because at some airports LCCs handle 80% of traffic and, effectively, hand baggage is all these passengers have.”

Branquinho: “Generally, airports affected by this have seen up to a 40% drop in retail revenues. In the end, airports are losing revenues too, as well as retailers. This matters because at some airports LCCs handle 80% of traffic and, effectively, hand baggage is all these passengers have.”

A key cause of confusion for passengers is the varying degrees of implementation of the one bag rule. “You can fly out on an LCC to a destination and only be allowed one bag, then fly back on the same carrier with no restriction,” said Branquinho.

Surcharges are generally levied by the ground handling agent at the gate to check-in or carry-on an additional bag. While Ryanair frequently restricts passengers from carrying their airport shopping in addition to their piece of hand baggage, instances have also been reported with Wizzair, easyJet, bmibaby, Norwegian, Cimber Sterling, Vueling, Jet2.com, Windjet and germanwings. No network carriers currently apply similar restrictions; however, Branquinho raises the prospect. “If you look at other airlines that are starting to unbundle their products and charge passengers to check-in bags, for example, how long will it be before full-service carriers plan to implement the one bag rule?” she said.

Chart Duty Free Turnover

There have been strong complaints from passengers as a result of bags being refused at the gate. “There have been, and still are, angry reactions from passengers. It is not just a duty free/travel retail goods problem – passengers can’t take their sandwich or coffee onboard, or even a newspaper or magazine, if they can’t fit them in their bag,” explained Branquinho. The problem is being addressed on a piecemeal basis, with some airports refusing to apply the rule, but the ultimate resolution would be for all airports to take a collective position and refuse to let their carriers apply the rule. A key issue is the impact on consumer behaviour – once the one bag rule is in the passengers’ minds, they may stop shopping. “Some airports affected by this have seen up to a 40% drop in retail revenues. In the end, airports are losing revenues too, as well as retailers,” said Branquinho. “This matters because at some airports LCCs handle 80% of traffic and, effectively, hand baggage is all many of these passengers have. For example, 70% of Ryanair passengers only have hand baggage. With commercial revenues so important to airports, this is crucial.”

There has been an angry reaction from many passengers – carrying airport purchases onboard in addition to hand baggage has been an accepted part of travel for more than 50 years.

There has been an angry reaction from many passengers – carrying airport purchases onboard in addition to hand baggage has been an accepted part of travel for more than 50 years.

ACI EUROPE has issued a Recommended Practice dedicated to this issue, advising that airports should ensure that their Airport User’s Regulations prohibit the performance of commercial activities by users at places other than those areas specifically designated for that purpose by airports. Airports should further ensure that such prohibition is fully respected.

The Recommended Practice advises that airports should ensure that their Airport User’s Regulations require users not to impose any rule or implement any practice in relation to their passengers, which may directly or indirectly affect the airport’s non-aeronautical activities or operational procedures.

Preventative action and a coordinated response from European airports are both necessary. The business model of regional airports is under pressure, with low aeronautical charges and the prospect of low non-aeronautical income as a result of the one bag rule. Some airports have successfully resisted and refused to meet the demands of some LCCs on this matter, with the airlines ultimately accepting their position.

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6 Responses to this article

  1. Smith says:

    Sales made outbound from airports within the EU for intra EU travellers are not duty-free at all and for this reason there is no legal reason why these sales need to be made outbound and carried on board for “export”. The business is conducted in this manner due to tradition only. LCC’s who dominate the EU traffic make huge ancillary revenues from baggage and also they like on-board carry on restrictions as it improves the turn round/boarding time of aircraft. Perhaps airlines, retailers and airports should think creatively to not only generate more sales, but to overcome these problems with on the ground delivery and pre-order, rather than create rules to protect a practice which is not really necessary due to the lack of requirement for the exportation of EU purchased goods.

    Many EU retailers are already opening “arrivals” shops in baggage halls of EU airports, WDF have lead the way in The UK and Spain is now following this example, as are other airports.

    Much as this is a radical way forward, it does provide a solution to this impasse as it overcomes many negatives such as security, LAGS, convenience and weight. Furthermore, the customer should be king…..what would they like?

    • Gerg says:

      This “arrival shop” talk is nonsense. People often want to buy something from the country they depart, not from the country they arrive at. Most local goods of the departure airport will not be on sale on arrival.

  2. Slaney says:

    It makes perfect sense (particularly for the passenger who never gets asked) to device a “facility” for customers to pick up their goods (duty free or duty paid) on ARRIVAL thus helping the customer (hauling the goods around with them), the airline (flammable liquor on board and the cost of flying the weight of the duty free goods) and the airport authority (revenue earner for arrival shops)….. it is only the incumbent cartel of duty free owners who do not wish to look into this scenario! What out boys…. your D-Day is fast arriving!

  3. Steve says:

    Couldn’t agree more – there is general confusion surrouding “one bag”, and many are just not buying. Close on 70% of the questions put into us are on “limits allowed on departure” and “why am I not allowed to buy it when I arrive.”

  4. Smith says:

    This is a quotation easily found on google when searching “arrivals duty free” …. it is a quote from an ACI North America website dated Feb 2008. Why can there be one such assertion on one side of the Atlantic and a completely diverse view from the other? In fact, no regulations need to be changed in The EU for the reasons stated above, so why can Europe not embrace the change that it likely to come across the pond?

    “Arrivals Duty Free represents a unique win-win opportunity for the federal government to help Canadian duty free operators and their” …Ottawa Feb 7th.

    “Arrivals Duty Free represents a unique win-win opportunity for the federal government to help Canadian duty free operators and their airport hosts while also increasing federal tax revenue,” said CAC President and CEO Jim Facette”

  5. Mark Scott says:

    Duty Free or otherwise it is about purchasing products. When to buy is not necessarily that important if you can’t consume the commodities enroute. No one really wants to carry on and then off again – including the airlines.

    The vested interest is the stores on departure who have fought long and hard to get the concessions so want all passengers to buy before they fly. In most cases the passengers return to the same airport so could buy on the way back – only the goods are not as keenly priced as those found at a supermarket(or high street retail outlet) and can be loaded straight into the car with all the other shopping.

    Buying on arrival makes sense for all parties except the shops at departure who occupy the airport like wallet raiding parties. The only difficulty is that another shop needs to be established in the ingoing channel rather than outgoing.

    Both direction businesses can be enhanced by specific offers dynamically inserted into the travellers’ documents as Securidox can do.

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