Time for duty-free sector to face facts

A reluctance to accept the inevitable and to manage change, that's what the duty-free debacle is about

A reluctance to accept the inevitable and to manage change, that's what the duty-free debacle is about. Back in 1992 all the European Union's finance ministers voted to abolish duty-free sales for people moving between EU states. At the time, the decision did not cause much concern.

After all, a sensible caveat had been included which said the decision would not come into effect until 1999. That gave those involved seven years to refocus their business.

For five years nothing happened. Then towards the end of 1997 the duty-free industry started to make noise. It claimed thousands of people would lose their jobs; smaller airports in less-developed areas would face closure; air fares would be forced upwards.

It seemed to be behaving like the decision had just been landed, pardon the pun, on the industry itself, as if it had not known about it for half a decade. And this was all some piece of European lunacy foisted on unwilling nations by uncaring bureaucrats.

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The blame for all its woes lay with others and it wanted it all to go away. A reaction that sounds more like a tantrum thrown by a child than the measured response of a multi-billion-pound multinational industry.

Allowing duty-free sales for people travelling within the EU is an anachronism. It makes as much sense as allowing duty-free sales for people travelling from Leinster to Munster or from Liverpool to London. As regards trade, national barriers no longer exist within the EU. On top of that, even if the system persists, it is unfair. You travel by plane or boat and you get to buy cheaper goods, travel by car, bus or train and the option is not there.

But rather than inflict this reality on the industry all of a sudden a seven-year delay was put, by the EU's ministers for finance, on implementing this change.

Seven years for the various companies involved to find other ways to carry out their business. And they had several options open to them. For a start, some duty-free sales would continue: this ruling has nothing to do with people travelling into or out of the EU. And there are plenty of airports in the US operating almost exclusively to other internal destinations.

They don't need duty-free shops: they simply take advantage of the large captive market they can sell to. Travellers still need to eat, read or buy last-minute presents, and these are the basic needs the airport authorities in the US cater for.

But there are no visible signs these options have been seriously assessed or even casually considered here. In fact, duty-free sales rose from 3.6 billion ecus in 1991 to 5.4 billion in 1995. When their focus should have been on diversifying into sustainable business sectors they seem to have concentrated on expanding a doomed trade. And then they chose a last-minute - well, last year - lobbying campaign to try to roll back the decision. A touch of the King Canute in this tactic.

During the campaign, the duty-free industry has made some startling claims. For example, it talked about 140,000 jobs being at risk. Really? This assumes all of the billions of pounds spent in duty-free shops will not now be spent at all.

This is a somewhat simplistic use of statistics. People will still want to buy drink, cigarettes, cameras and perfumes. They'll just have to spend a bit more, or visit the countries where these items are cheapest. Either way, the business will not simply evaporate and the associated employment will move to retail outlets outside the airports. And, of course, very many fewer of these jobs would be at risk if the industry had acted appropriately six years ago.

They've also said smaller regional airports would be endangered. Not necessarily. The European Commissioner responsible for this area, Mario Monti, has said the EU recognises the special needs of certain airports in certain less-developed areas.

On top of that our own Minister for Finance, Mr McCreevy, following the meeting at which the ending of duty-free was confirmed, said he considered regional airports to be part of Ireland's national infrastructure and their future would be safeguarded. Specifically he said: "If money is needed, money will be forthcoming."

And the claims regarding air fares do not stand up. If the airline companies put their fares up too much people won't travel by plane. Something the airlines will not and cannot allow to happen.

It is important to remember the duty-free industry has done the Irish economy and Irish businesses a lot of good. Brands such as Bailey's and Waterford Crystal have become worldwide market leaders through exploiting this sector.

Having built a reputation for quality and created an image as premium goods through duty-free shops, these and many similar products have expanded their markets beyond the airport shops. But doing away with duty-free will not make such success stories impossible to achieve. It means the companies' marketing people will have to look to new outlets and new strategies.

Realistically, the abolition of duty-free will happen in 1999. Even following the intense lobbying carried on by the industry only three other countries showed enthusiasm for postponing it. Rather than wasting its efforts on turning back the tide the duty-free industry must grow up and start dealing with the problem.

It has left itself with a year to undertake a massive restructuring process. It probably is not enough time to achieve all it needs to achieve, and inevitably some people may lose their jobs. And that is a dreadful thing to happen to anyone. But when the blame for all of this is apportioned, I hope the industry's ineffective management gets its share.