Paris: Where “Chinese” Now Means Money
As Paris sales staff, deploying their best Mandarin, push overpriced luxury goods — some even made in China — the big winners from the current Chinese influx is the national airport authority, writes Wolf Richter.
This piece is cross-posted by kind permission of Wolf Richter (*) publisher of the Testosteronepit blog.
In Paris, the most touristy city in the most touristy country in the world, “Chinese” has a new meaning: money. This phenomenon shows up by the busload at major luxury retail areas where sales staff are now trying to say a few words of bad Mandarin, instead of bad English, as they’re hawking overpriced handbags and glittery baubles, some of them made in China. And Aéroports de Paris (ADP) has put a number on it. A glimmer of hope for France, though perhaps of the wrong kind.
ADP owns and manages the fourteen civil airports and landing strips in the Paris metropolitan area, including the two biggies, Charles de Gaulle and Orly. The former government agency was converted to a corporation in 2005 and went public in 2006, but the French government still holds 50.6% of the voting rights. To assuage the anti-privatization forces, particularly labor unions that could paralyze – and have paralyzed – the airports to vent their displeasure with privatizations, ADP’s financial report even specifies that the “Law n°2005-357 of 20 July 2005 on airports” requires that the French State retain “a majority shareholding.”
So the results for the first half of 2013 were mixed. Passenger traffic inched up an anemic 0.5% to 43 million. International traffic excluding Europe (39.6% of the total) rose 2.6%despite a 1.4% decline from North America, as traffic from China surged 8.9% and from Russia 14%! European traffic excluding France (41.9% of the total) decreased by 0.5%. Domestic traffic (18.5% of the total) fell by 1.5%. And speaking volumes about the dilapidated French economy: freight activity fell by 6%!
Yet, total revenue rose 6.2% to €1.346 billion, “thanks particularly to the good performance of retail (+10.5%).” But “operating income from ordinary activities” remained stagnant at €286 million, and net profit plunged 13.9% to €125 million.
So retail is the hope. Retail space at both airports is already 50% larger than at the Printemps flagship department store on Boulevard Haussmann in Paris, according to La Tribune. And ADP is constantly adding new retail areas, including 15 shops at Orly by the end of 2013.
One of the key metrics: how much money was extracted by hook or crook from each passenger. For the first half of 2013, departing passengers surrendered on average €17.6, an 8.5% jump from the same period last year. It was the result of the “favorable development of passenger-traffic mix,” as the report called that phenomenon that shows just how much the world has changed in recent years.
The hard-pressed French, other Europeans, and Americans struggled with their own problems. The Japanese, the erstwhile big airport spenders, suffered from a devalued yen that made overseas adventures and airport purchases prohibitively expensive. They all cut back on traveling to Paris. And those who did travel to Paris, weren’t lured by “duty-free” scarves, perfumes that make others sneeze, Cognacs with caramel added for color, or other “luxury” products, chocolates, and canned French specialties with a Michelin-starred chef’s name on the enticing label….
But the Chinese – the wealthy ones who made it to France – spent an eye-popping €100 per passenger at airport shops. Russians, in second place, spent €80 per passengers. On top of the growth in passenger traffic from those countries (8.9% and 14% respectively)!
And from each sale, ADP received its share. Some stores are concessions, others belong to joint ventures. They accounted for €472 million, or 35%, of ADP’s total revenues, and for 74.5% of its profit! How important are these Chinese and Russian buyers to ADP? Very!
But even the flood of well-heeled Chinese and Russian passengers, and their predilection for blowing minor fortunes on the way out of France, after having blown major fortunes in France, could not stave off the fate that has befallen much of the “private sector” – so called, even if these companies, like ADP, are partially state-owned.
ADP CEO Augustin de Romanet spoke of the effort “to control our costs,” and he mentioned “efficiency” and the need for continued “structural improvement of our organization,” etc., to confirm the plan, announced in July, that ADP would cut 370 jobs, or 4% of its workforce of 6,900, on an “essentially voluntary” basis. The plan was part of the Economic Regulation Agreement (CRE) with the government, signed in 2010, that envisioned workforce reductions of 10%. Much of that job shedding had been “accomplished” by the end of last year, and even the influx of Chinese and Russian money couldn’t stop it.
Wolf Richter is an entrepreneur, executive, and writer based in San Francisco. The article above has been republished with the author’s permission and our thanks.
Wolf is also author of:
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- Eurocrats Relentless in their Grab for Power
- Les Pigeons Make a Royal Mess on Hollande
- La Crise: France Feels Poorer – Worse to Come?
- French Union Anger as Socialists Fail to Deliver
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- Erosion of Common Law and Common Sense
- Freedom of Speech – No Ifs No Buts
- Freedom of Speech – Universal Human Right?