Duty-free giants hand out free flights to lure shoppers

Last month, Hyun Jung-a boarded a flight from South Korea’s Incheon Airport.

Around two hours later, she was back in the same airport and loading up on duty-free shopping, despite never landing in another country.

The Air Busan Co flight, organised by Lotte Duty Free for its VIP customers, was Hyun’s first since the pandemic began and it didn’t cost her anything. Because the route briefly departed South Korean airspace and went over a Japanese island, the 130 passengers on board qualified to shop at duty-free stores in Seoul typically reserved for people who have travelled internationally.

Destination-less flights like these are an attempt by duty-free operators to salvage an industry decimated by Covid-19. Before the virus, business was booming – the global duty-free market was worth Us$85bil (Rm350bil) in 2019 and on track to reach Us$139bil (Rm574bil) by 2027, according to Verified Market Research.

Sales plunged as countries restricted international travel. Globally, only 1.8 billion people took scheduled flights last year compared with 4.5 billion in 2019, the International Civil Aviation Organisation has said.

Annual revenue for Swiss duty-free giant Dufry AG, which operates outlets worldwide, fell 71%.

While shoppers on flights such as Hyun’s won’t fill the financial void, they at least bring in some much-needed business.

“I saw a lot of people with bags full of dutyfree items,” said Hyun, who bought a Chanel bag, shoes and cosmetics.

“I tell all my friends that it’s worth taking the flight because of the duty-free shopping opportunity.”

Hotel Shilla, South Korea’s second-biggest duty-free operator after Lotte, is offering 114 seats on two so-called flights to nowhere on May 23 and 30 to customers who have spent more than US$550 (RM2,270) at its stores since May 3. Lotte is putting on another five 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 positions in April even as the economy added 652,000 jobs from a year earlier, the statistics office reported yesterday.

The industry is in less of a squeeze where domestic air traffic has rebounded and taxfree shopping zones are in place.

The palm-fringed Chinese island of Hainan has become an even more popular getaway for tourists from the mainland now starved of international travel.

That’s helped the province’s duty-free sales, which more than doubled to 27.5 billion yuan (Us$4.3bil or Rm18bil) last year, according to the Ministry of Commerce.

Duty-free shopping has been permitted for domestic tourists in Hainan since 2011.

In July, the government raised the spending limit to allow people to buy more and it is extending some duty-free shopping to Beijing, Shanghai and other cities to tap the growing purchasing power trapped in China.

Catering to the demand in Hainan, Alibaba Group Holding Ltd’s logistics unit is starting 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, is planning to enter Hainan as soon as the second half of this year, setting up stores designed similarly to its outlets in Japan.

“The trend of visiting Hainan to do luxury shopping is here to stay for the Chinese,” said Jonathan Siboni, chief executive officer of data-intelligence firm Luxurynsight.

International air travel, if it is happening at all, is tending toward shorter-haul, regional routes, and from places where vaccination programmes are at a more advanced stage.

“The trend of visiting Hainan to do luxury shopping is here to stay for the Chinese.” Jonathan Siboni