Why tighter duty-free quotas in Norway could lead to pricier plane tickets
Tighter tobacco quotas at duty-free stores across Norway are putting the squeeze on airports. This could lead to pricier plane tickets for travellers in the Scandinavian country.
At the beginning of the year, the Norwegian government halved the tobacco quotas for Norwegians at duty-free stores.
Norwegians can now only bring 100 cigarettes or 125 grams of tobacco products into the country duty-free as a result of the changes. Foreigners can bring 200 cigarettes or 250 grams of tobacco products, but only if bought abroad.
This has impacted the revenues of duty-free operators and airports. Travel Retail Norway operates duty-free sales at most airports run by the state-owned operator Avinor.
Avinor has two main revenue streams. The first is from fees charged to businesses that operate within Avinor airports, and the second is money from airlines flying out of Avinor airports.
Haakon Dagestad, the deputy managing director of Travel Retail Norway, told travel industry publication Flysmart24 that duty-free sales accounted for 50 percent of Avinor’s revenue.
Travel Retail Norway has called on the government to restore the quotas to their older, higher levels.
Norway’s Ministry of Finance has said that any changes to taxes and duty-free would be announced when the annual budget for 2024 is unveiled on October 6th.
Dagestad added that the fall in income as a result of the tighter tobacco requirements was around one-fifth.
“The failure in income compared to normal is 20 percent. There is no indication that things will get that much better anytime soon - unless the government proposes quota increases in the state budget for next year,” he told Flysmart24.
He added that the changes meant that many were instead choosing to do duty-free shopping outside of Norway.
Meanwhile, Avinor CEO Abraham Foss has said that the cut to the duty-free tobacco quota amounted to around 400 million kroner in reduced annual revenue for Avinor. Travel Retail Norway has called on the government to restore the quotas to their older, higher levels.
Avinor warned that it will raise the fees it charges airlines to flow in and out of its airports. This would lead to higher airfares for travellers in and out of Norway.
“Ticket prices must be increased if the fees go up. This may result in lower demand, i.e. fewer seats are sold. Also, low-volume routes are likely to be cut, because the airlines need to make money. This could result in a weakened route offer in a market that is under pressure and where plane tickets are already highly priced,” Terje Berge, the commercial director of Finn-no’s travel section, told Flysmart24 at the end of August.
Avinor, owned by the Ministry of Transport and Communications, last raised the fees it charges airlines in 2019.
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At the beginning of the year, the Norwegian government halved the tobacco quotas for Norwegians at duty-free stores.
Norwegians can now only bring 100 cigarettes or 125 grams of tobacco products into the country duty-free as a result of the changes. Foreigners can bring 200 cigarettes or 250 grams of tobacco products, but only if bought abroad.
This has impacted the revenues of duty-free operators and airports. Travel Retail Norway operates duty-free sales at most airports run by the state-owned operator Avinor.
Avinor has two main revenue streams. The first is from fees charged to businesses that operate within Avinor airports, and the second is money from airlines flying out of Avinor airports.
Haakon Dagestad, the deputy managing director of Travel Retail Norway, told travel industry publication Flysmart24 that duty-free sales accounted for 50 percent of Avinor’s revenue.
Travel Retail Norway has called on the government to restore the quotas to their older, higher levels.
Norway’s Ministry of Finance has said that any changes to taxes and duty-free would be announced when the annual budget for 2024 is unveiled on October 6th.
Dagestad added that the fall in income as a result of the tighter tobacco requirements was around one-fifth.
“The failure in income compared to normal is 20 percent. There is no indication that things will get that much better anytime soon - unless the government proposes quota increases in the state budget for next year,” he told Flysmart24.
He added that the changes meant that many were instead choosing to do duty-free shopping outside of Norway.
Meanwhile, Avinor CEO Abraham Foss has said that the cut to the duty-free tobacco quota amounted to around 400 million kroner in reduced annual revenue for Avinor. Travel Retail Norway has called on the government to restore the quotas to their older, higher levels.
Avinor warned that it will raise the fees it charges airlines to flow in and out of its airports. This would lead to higher airfares for travellers in and out of Norway.
“Ticket prices must be increased if the fees go up. This may result in lower demand, i.e. fewer seats are sold. Also, low-volume routes are likely to be cut, because the airlines need to make money. This could result in a weakened route offer in a market that is under pressure and where plane tickets are already highly priced,” Terje Berge, the commercial director of Finn-no’s travel section, told Flysmart24 at the end of August.
Avinor, owned by the Ministry of Transport and Communications, last raised the fees it charges airlines in 2019.
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