Build-up of Travel Retail & Duty-Free in the United Kingdom

In 2008, with the acquisition of 49.95% of Aldeasa (previously held by Altadis) and 100% of World Duty Free Europe Ltd. (previously held by B.A.A.1), the Group rose to the top of the airport retail industry and now holds the leadership of that segment as well as food & beverage. The decision to pursue rapid external growth in the airport retail business was based on the size and value of an industry on the rise, which was worth $19bn in 2007 - roughly equivalent to food & beverage2 -and on the way the two businesses complement each other in meeting travellers' needs. The Group's expansion in the airport retail sector, starting in 2005 with the acquisition of joint control of Aldeasa and continuing in 2007 with the purchase of Alpha Group, was confirmed through the two major transactions completed in 2008. The concentration of the three airport retail companies' operations in Europe will generate important synergies in purchasing and logistics. The integration of Alpha Group's activities in the United Kingdom with those of World Duty Free Europe will also produce synergies through the streamlining of head office costs. Total synergies are estimated at €45m per year starting in 2010. The acquisition of Alpha Group and World Duty Free Europe have also given the Group a strong foothold in the United Kingdom, one of Europe's largest concession markets for both retail and food & beverage services. The British market for traveller services under concession is worth an estimated €4bn, of which €1bn refers to food & beverage and €3bn refers to retail alone - giving the UK largest such market in the world.

In the United Kingdom, airports are the main concession channel; food & beverage accounts for more than 40% of the core market, and London Heathrow, London Gatwick and Manchester Airports are respectively the world's first, tenth, and twelfth largest points of sale for retail products, with annual estimated sales of more than $1bn for Heathrow, $500m for Gatwick and $300m for Manchester. The importance of this channel is demonstrated by traffic data3: with 235 million passengers4, English airport traffic accounted for over 5% of global traffic in 2008, with average annual growth in excess of 5% for the past 25 years and forecasts of +2.5% per year for the next two decades, thanks to factors such as the new Terminal 5 at Heathrow, the 2010 Olympic Games and the Open Skies Agreement.

World Duty Free Europe Ltd.

World Duty Free Europe Ltd. is the UK's leading operator in the travel retail & dutyfree segment. Founded by B.A.A. Ltd. and in business since 1997, it has 57 shops with a combined area of 15,000 square meters in seven of the largest UK airports (Heathrow, Gatwick, Stansted, Southampton, Edinburgh, Glasgow and Aberdeen), providing jobs to 2,000 employees. It sells all traditional duty-free and tax-free goods and is particularly specialised in beauty products and spirits, which are respectively its first and second largest earners. Like Autogrill, it works through a large number of brands, mostly under license. It is highly active at Heathrow Airport: the largest in Europe and the third largest in the world for passenger traffic, and second to none in terms of the value of travel retail & duty free transactions. Heathrow is also unique for its highly international clientele, which has allowed the company to become keenly familiar with global travellers and their spending habits. The competitive position of World Duty Free Europe Ltd., its expertise in important categories of the airport retail business, and its ability to offer an increasingly attractive range of products thanks in part to its good relations with suppliers are a key strategic complement to Autogrill's existing command of the travel retail & duty-free industry by way of Aldeasa and the retail operations of Alpha Group.

Alpha Future Airport Retail

On 17 November 2008 Alpha Group Plc. signed an agreement with Pantaloon Retail, an Indian retail concern, to buy the remaining 50% of Alpha Future Airport Retail, a joint venture formed in 2006 to manage duty-free sales at New Delhi International Airport. The deal is consistent with Autogrill's plan to integrate the operations of Alpha Group Plc., World Duty Free Europe Ltd. and Aldeasa, and will generate geographical and other synergies while giving the Group access to the best growth opportunities in India.

In-Flight expansion in Eastern Europe

From Czech Airlines, Alpha Flight has bought out Air Czech Catering A.S., the carrier's exclusive provider of in-flight services. Already active in Romania and Bulgaria, the British company has thus strengthened its presence in Eastern Europe.

1 British Airport Authorities, the UK's principal airport management company
2 Autogrill has estimated the size of the food & beverage and retail markets on the basis of figures provided by Gira and Generation. Gira's figures are expressed in euros and refer to the food & beverage business, while Generation's data on the retail business are in US dollars. Given the descriptive nature of the text, it was deemed unnecessary to convert them into the same currency for the sake of strict comparison
3 Sources: Airport Council International (A.C.I.), B.A.A. and U.K. Civil Aviation Authorities
4 Source: Civil Aviation Authorities