HNA Infrastructure eyes sharp rise in duty-free store revenue from Haikou airport

PUBLISHED : Sunday, 11 June, 2017, 5:44pm
UPDATED : Sunday, 11 June, 2017, 10:58pm

HNA Infrastructure, operator of Haikou Meilan International Airport, expects to see a sharp rise in revenue from its duty-free stores as Hainan develops into an aviation hub and a duty-free shopping paradise.

The company’s aviation business would also grow when the airport’s phase two development, which features a new runway, became operational in two years, it said.

HNA Infrastructure chief financial officer Zhou Feng said the phase two development aimed to boost not only the airport’s passenger capacity, but also its non-aviation revenue, which is mostly business from the duty-free stores.

“The company is looking to generate 70 per cent of its revenue from the non-aviation sector as the mainland hopes to make Hainan a top duty-free shopping destination,” Zhou said.

Currently, more than 40 per cent of the group’s revenue comes from its non-aviation business.

HNA Infrastructure, formerly known as Hainan Meilan International Airport, provides terminal facilities, ground handling services and passenger services. It also leases commercial and retail space and operates duty-free stores at the Haikou airport.

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Since 2011, Hainan has been experimenting with a trial scheme that allows duty-free shops to be set up on the island, offering prices up to 30 per cent less than on the mainland.

While duty-free shops are usually only open to passengers travelling on international routes, the trial scheme gives the mainland’s domestic passengers travelling to Hainan access to duty-free shops.

HNA Infrastructure vice-president James Hsing said the Haikou Meilan airport had allocated more than 10,000 sq metres of space for duty-free shops since the trial scheme began, adding that phase two of the development would allot as much space to those shops as possible.

“These shops need to seek authorisation from the State Council to be in business. So products like alcohol and cigarettes are still off the table in the terminals for domestic flights,” he said. “The shops are now mostly selling luxury items and cosmetics.”

The mainland’s experiment with duty-free stores for domestic travel is seen as its effort to spur domestic consumption and keep within its own borders some of the luxury spending by citizens who travel abroad.

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Restrictions on the maximum amount spent in duty-free stores have also been relaxed. Previously, customers could only buy up to 8,000 yuan (US$1,176) worth of duty-free goods twice a year. Starting February 1 last year, they have been able to make purchases any time of the year provided the total does not exceed 16,000 yuan.

Hainan has already attracted more than 18 million visitors in the first quarter of this year, a 12 per cent increase from a year earlier, according to state media. The popular winter getaway destination attracted more than 60 million visitors last year.

Meanwhile, HNA Group is another major force that has propelled Hainan into a top-tier aviation hub. The group has been aggressively pursuing expansion over the past two years, more than doubling its total assets to 1.02 trillion yuan from 469 billion yuan in 2016.

The majority of aircraft at the Haikou Meilan airport are operated by Hainan Airlines, which is owned by HNA Group.