Arrivals Duty and Tax Free shopping can provide new sources of employment and commercial revenue to the European travel and tourism industry for the sustainable recovery of European aviation.
COVID-19 has created the greatest crisis the European travel and tourism industry has ever experienced. Airports have suffered substantial damage due to the capital-intensive nature of their business. Variable costs such as staff and running costs have been reduced, but the cost of capital and major infrastructure developments are much more difficult to reduce.
European airports rely on commercial (nonaeronautical) revenue for in the region of 50% of total income. Given the weakened state of Europe’s airlines, it is inevitable that airports will have to rely further on commercial income as recovery kicks in. Airport commercial income is derived primarily from retail sales, most notably duty & tax free sales to international travellers.
ETRC believes that there is considerable scope to increase this commercial revenue by allowing duty and tax free sales on arrival to passengers arriving from third country airports:
- By allowing passengers arriving from third countries the right to buy duty and tax free before they go through customs control on arrival, research estimates that average spend per passenger in EU airports will increase by 20-30% on average.
- The vast majority of sales in Arrivals Duty Free shops will be displaced from non-EU airports – the airport of departure in a third country.
- ETRC are not proposing any change to current EU Duty Free allowances so the amount of duty & tax free goods coming into the EU will not change significantly. The only real change is that these purchases are made in EU airports, supporting EU jobs and businesses, rather than those in third countries.
- Overall, we estimate this to be worth over €3.2 bn in annual GVA to the EU economy which will potentially support almost 30,000 jobs.
- Over 60 countries worldwide currently allow Arrivals Duty Free, including all EEA countries. Recently Switzerland and Russia both introduced Arrivals Duty Free to much success.
Duty and tax free on arrival is a simple but effective way of creating a new and sustainable revenue stream for airports which is cost-neutral to governments.
Studies commissioned from York Aviation by ETRC reveal the potential benefit of introducing duty and tax free shopping on arrival across EU27 as well as how arrivals duty-free shops have developed in three example European countries (Norway, Switzerland, Turkey). The report results are available here.
