Aerofirst was founded
in the late eighties between Aeroflot and Aer Rianta.
Can you briefly tell us how this took place?
If you want to have a look at how business creation
takes place in Russia, you have come to the right
place. We are maybe not making huge investments
in the national economy, but were one of the pioneers
to expand economic and business relations in foreign
trade. Our business started in May 1988 and our
licence to carry out foreign trade was numbered
as the 35th and I am not sure that the 34 companies
that had received a license before us, are still
alive because the country has seen so many economical
changes including the crisis of 1998. Not all
companies can survive through these burdens of
taxes, customs and other economic leverages, but
we managed to. Not just to survive as we have
increased our sales volume every year.
Flying through Sheremetyevo 2, you must have noticed
the shops that we have built and the service that
we provide to passengers. In 1988, a decree, which
was revolutionary for its time, charged all the
Ministries and government agencies related to our
business to establish duty free shops in all international
airports and on boards of the planes flying abroad.
Basically, in 1988 we joined the world community
of duty free.
Aerofirst was originally a joint venture between
Aer Rianta and Aeroflot. How was the company created
with an Irish partner?
We were very lucky that Aer Rianta was one of the
founders of the company as they initiated the the
duty free shopping sustem more than 50 years ago
when they presented the world a new idea of doing
business. The idea was simple: a traveller leaving
a country does not have to pay any taxes. Surprisingly
the world community accepted the idea and nowadays
it is nearly impossible to imagine an international
airport or flight without duty free shopping. The
Irish introduced this idea in Russia in 1988.
A few years later, the Sheremetyevo Airport Authority
joined you. How crucial was this to further develop
the company?
This was an important step as from 1994, Aerofirst
became a joint venture between three partners: Aeroflot,
Aer Rianta and Sheremetyevo Airport Authority.
There is now much competition going in Moscow both
on the flights and in the airport between different
companies offering these services now. How do you
manage to stay ahead from the others?
I have been working at this airport 30 years and
many changes have taken place. Until 2000 we had
no competition whatsoever, but then all of a sudden
other duty free shops began springing up like mushrooms
in the airport. Today there are 6 other duty free
operators working in the airport, but they are not
serious competitors to us. We are a large and strong
company with a rich history in Russia: next year
we will celebrate our fifteenth anniversary. Historically
it is not a long period, but for a Russian duty
free company it is pretty long. We are the absolute
leaders of duty free trade in Russia and we hold
a flattering position in the world duty free community.
According to the international reference book on
air travel, Sheremetyevo is ranked as the ninetieth
airport by passengers flow. At the same time, Aerofirst
occupies the thirtieth position in the list of duty
free shopping companies. In Europe we are ranked
twentieth.
If you have a look at the product range of our competitors
in terms of quantity and quality and you compare
it with our range, you will know why we stay ahead.
Our company offers over 20,000 items whereas their
product range is very limited. They have limited
themselves to bestsellers such as liquors and cigarettes.
Are cigarettes also important for you in Russia
where cigarettes are already so cheap in the streets?
Cigarettes are cheap here, but you have to take
into account what kind of cigarettes are cheap.
One of the peculiarities of our company is that
we work directly with the producers: Phillip Morris,
Chivas, Cartier, etc. We have direct business relations
with all of them. There is an interesting point,
which confirms our recognition as a trustworthy
company: in our company almost all the world perfume
companies are presented except for the Japanese
ones and 80% of these leading perfume houses have
granted Aerofirst exclusive rights to sell their
products. If you fly in the future, you can look
around in the airport and try to buy luxury perfume
from our competitors and in Sheremetyevo, perfume
is the top selling product.
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Can you give us an
estimate of your market share?
We have a 90% market share. Russia's two major
cities are Moscow and Saint Petersburg as they
are the major historical centres, but also the
economically most developed ones with a strong
growth potential. A similar shop in Pulkovo Airport
in Saint Petersburg has a turnover ten times lower
than our shops.
There are 47 duty free companies in Russia, but
not all of them are located in international airports
as there are many shops in the checkpoints between
the borders of Russia and other countries. This
is applicable to the Russian-Finnish border as
the Finnish people are very fond of these shops.
They like to have a good drink and this is why
the shops are so successful.
Can you give us an idea of the size of your company?
What is your turnover?
Our annual turnover is over 70 million dollars.
Around 15 to 16 million come from on flight sales
and the rest is made in the shops. However, our
turnover used to be around 100 million before 1998,
but the people have not fully recovered yet, have
not come to their senses. Our annual sales growth
now proves the people's welfare improvement.
Is the number of international flights here increasing?
And is it helping you to further increase sales?
Our sales volume is directly dependent on the number
of passengers flying through Sheremetyevo. Therefore
the more the passengers the higher the sales volume.
Do you expect the passengers flow to further grow
the way it is growing now?
This process can be managed by the airport management.
The Sheremetyevo Airport Authority is in two minds
now. On the one hand it is rather outdated and is
no longer in the condition to service passengers
according to the international standards and this
is why they have to control the flow of passengers.
In order to increase the level of servicing and
provide more conveniences to its passengers, the
managers have deliberately reduced the number of
flights, especially charter flights. A considerable
share of these charter flights have been shifted
from Sheremetyevo to Domodedovo. This immediately
had an impact on our business because we are used
to boost sales volume thanks to the growth in passenger
flows. And this year we unfortunately do not have
this trend continuing.
Are you looking at other airports, either in Russia
or in foreign companies, to further develop your
company?
In Saint Petersburg there is already one duty free
shop, one of the founders of which is Aer Rianta.
We could expand our network, but before we introduce
ourselves somewhere, we have to calculate everything
thoroughly. We do not see good business in other
Russian cities and are therefore quite satisfied
working in the major international Russian airport.
If we have some interesting offers from other Moscow
airports, we will consider them. However, we do
not have a definite aspiration to start working
in other national airports.
You have been working for 30 years at this airport,
what has been your greatest achievement during these
years?
I have not been granted the Hero of the Socialist
Labour award, but destiny has always favoured me.
Since I came to the Airport back in 1973, I have
always occupied managerial positions in the Airport
system. From 1982 to 1989, I was the Head of the
Aerostation complex of Sheremetyevo 1. Then I was
the General Representative of Aeroflot in Spain
from 1989 to 1994. I then came to my current position.
And looking ahead, I believe the Socialist award
will probably not happen any more, but what would
be your major challenge in the years to come?
To keep as we are. I am quite satisfied with managing
one of the largest non profile subsidiaries within
the leading Russian Aeroflot company and within
the system of the leading Sheremetyevo airport.
What is your final message to our readers?
After having read this, they will already have an
idea of who we are and what we are doing at Sheremetyevo.
I would like to add that we have launched a new
campaign to attract passengers. If a passenger
flying out buys only one single item in our duty
free shop, liquor for example or cigarettes, he
is granted a 7% discount for all the items and
there are many items for women as well as for
men and children. In addition to this, we grant
a 10% discount on board of Russian planes flying
abroad. At any rate, it will be much more beneficial
for a passenger to buy goods in our shops then
in those of our competitors because there are
more possibilities to save.
Another campaign was introduced a while ago.
If a passenger buys goods for 1000 USD and more,
he is granted a 15% discount for a year. If he
buys for less than 1000 USD, the discount is 10%.
Furthermore, for the 15 years of our existence
we have never had any complaint about the quality
of goods.
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Mr
Mikhail Dzamashvili