Revenue and Commercial
Dubai Airports had another strong financial year in 2012 with a record 57.6 million passengers passing through Dubai International and a renewed focus on developing non-aeronautical commercial services to provide a fillip to revenue growth.Overall revenue rose 11 per cent year-on-year in 2012, in line with forecasts. A focus on cost containment, particularly manpower costs, resulted in operating expenses rising only four per cent in 2012, well below that of overall revenue growth.
Aeronautical revenue rose 11 per cent, reflecting the strong growth of Dubai International’s two home airlines, Emirates and flydubai, which recorded double-digit increases in passenger numbers during the year.
The growth in passenger and aircraft movements also slightly augmented yields from a moderate pricing increase on aircraft parking charges, an adjustment necessitated by inflationary pressures. The increase was in line with the average UAE inflation rate of 3.3 per cent for the past two years and was the first in 19 months.
Despite this adjustment in airport tariffs, Dubai Airports continuously strives to keep its airports as competitive as possible and its charges remain among the lowest in the world. It is, therefore, not surprising that more than 140 airlines have chosen to fly from Dubai International.
Also driving aeronautical revenues was a significant increase in traffic at Dubai’s second airport, Dubai World Central (DWC), fast emerging as a preferred cargo hub. Aircraft movements virtually doubled from 8,198 in 2011 to 16,317 in 2012 while cargo volumes surged 144 per cent to 219,092 tonnes.
An impressive performance from Dubai Airports’ commercial activities saw non-aeronautical revenue grow 11 per cent in 2012. In addition to a broad portfolio of commercial activities at Dubai International, new revenue opportunities were identified at DWC in the past year, something Dubai Airports will continue to expand as passenger and cargo operations are ramped up.
The increase in commercial revenue was attributed to a relentless focus on building sustainable long-term concession agreements with specialist operators, the continued recovery of the on-airport advertising business, and the upgrade in quality and performance of food outlets as well as selective retail services.
Dubai Airports’ focus on developing non-aeronautical revenue streams is fundamental to ensuring sustained corporate stability and profitability, and is vital for funding future airport development as well as reducing dependence on government funding, while keeping aeronautical charges competitive.
In 2012, Dubai Airports’ commercial unit optimised results by identifying a disciplined and growth-orientated strategy for each revenue category. These sources include property leasing within terminals and on the airfield, retail services, food and beverage, on-airport advertising, parking and transport, hotels and lounges, and concessions for inflight catering, ground-handling and fuel with key stakeholders.
One of the key commercial developments was the successful opening of Concourse A early in 2013, which included an innovative mix of 16 regional and internationally renowned F&B brands, as well as several high-profile concepts such as a luxury wine and spirits outlet called Le Clos and global foreign currency specialist Travelex. The new concourse also provided 28,000sqm of Emirates-dedicated lounges and a 200-room hotel managed by Dubai International Hotels.
Dubai Airports continued to work successfully with global advertising specialist JCDecaux Dicon. An investment in digital infrastructure and the growing contribution of global luxury brands to the advertising portfolio helped boost advertising revenue 24 per cent in 2012 over the previous year.
This resulted in several partnerships with global brands, including one with Japan Tobacco International to open seven branded smoking lounges across Dubai International, including two in Concourse A. These innovative and spacious lounges not only provide smokers with an ideal place in which to relax but also benefit non-smokers who can experience a smoke-free airport environment.
Retail Food and Beverage
The food and beverage division reviewed its business strategy and direction in 2011, resulting in several new brands being introduced, which not only enhanced revenue in 2012 but boosted customer service as well.
During the year under review Dubai Airports also introduced an impressive list of regional and international F&B concepts as part of the line-up in Concourse A, making the home of the A380 a destination in its own right. Ranging from Giraffe – the popular international family restaurant, which opened its first outlet in the Middle East at Dubai International – to trusted brands such as Paul, Dubai Airports has assembled a portfolio of 16 world-class food outlets and bars for Concourse A.
Selected through a highly competitive process, which involved local and global operators, the successful brands were challenged to deliver outlets that exceed the norm. This has resulted in new design standards, which offer functional but visually appealing outlets, bringing Concourse A in line with the cosmopolitan profile of passengers expected to use the facility.
The full list of concessions includes Paul, Umaizushi Bistro, Picnic, Wafi Gourmet, Carluccio’s, Cho Gao, Pulp Juice Bar, McDonald’s and McCafe, Shake Shack, Costa Metropolitan, Starbucks, Le Pain Quotidien, Giraffe, Heineken Lounge, Jack’s Bar & Grill and Moet & Chandon Champagne Bar. In addition, the facility will have a non-branded food court, to cater for all budgets and tastes.
Dubai Airports continued to expand its range of internationally recognised outlets, opening the first Boots Pharmacy in Dubai International’s Concourse C late in 2012.
Dubai Airports also made significant strides towards revamping outlets elsewhere across Dubai International to ensure that the airport’s commercial activities were aligned with passenger requirements and demands, while from a revenue point they were commercially viable.
Plans for new terminal spaces expected to open in the near future – including Terminal 2, the revamped Terminal 1 as well as the new Concourse D – were finalised and Dubai Airports will soon commence the competitive selection of operators and service providers to populate commercial spaces, including lounges in Concourse D.
The early involvement of the commercial leadership in planning new terminal spaces at Dubai International has allowed Dubai Airports to better integrate the F&B and retail elements into the design of the building, and therefore enhance the overall passenger experience.
Nowhere is this more evident than in Concourse D, which will become home to more than 100 international airlines when it opens in 2015. This integrated approach will provide passengers more time to dwell in a relaxed environment while waiting for their flight.
In a drive to achieve maximum revenue generation from the property assets, Dubai Airports renegotiated or signed several new lease agreements in 2012, increasing property revenue 10 per cent year-on-year. Dubai Airports also managed to increase utility recovery from third parties.