"Incheon Airport Ignores Large Corporations' Pleas as Only Small Duty-Free Shops Receive Rent Reductions"

Rental Fees Reduced by 20-35% Only for Small and Medium Duty-Free Operators

Large Corporations Excluded, Must Pay Full Rent Amounting to Hundreds of Billions of Won

[Asia Economy Reporters Lim Hye-seon, Jang Se-hee] Despite duty-free operators requesting rent reductions due to the COVID-19 pandemic, the government has announced support only for small and medium-sized duty-free operators, sparking anticipated controversy.

According to the Ministry of Economy and Finance and the duty-free industry on the 28th, the Airport Corporation will reduce rent for duty-free shops and commercial facilities by 20-35% only for small and medium-sized duty-free operators. Large corporations have been completely excluded from rent reduction targets. As a result, City Plus at Incheon International Airport and Grand Duty Free at Daegu Airport have received some relief. On the other hand, large corporate duty-free operators such as Hotel Lotte, Hotel Shilla, and Shinsegae DF must pay hundreds of billions of won in rent in full. SM Duty Free and Entas Duty Free were also excluded. Ultimately, the government and Incheon Airport Corporation have 'ignored' the 'pleas' of duty-free operators.

As COVID-19 prolongs, duty-free operators face a life-or-death crisis. The tourism industry has collapsed, leading the duty-free industry into its worst situation. According to the Ministry of Foreign Affairs, there are currently 50 countries imposing entry restrictions on travelers from Korea. Based on the 193 UN member countries, more than a quarter of the world’s countries are not allowing Koreans in. Foreign tourists are also refraining from visiting Korea. The United States raised its travel advisory for Korea from Level 2 'Enhanced Caution' to Level 3 'Reconsider Travel.' Only one step remains before Level 4 'Do Not Travel.' With tourists neither leaving nor entering, duty-free sales this month have plummeted 60-70% compared to the same period last year. At Incheon Airport duty-free shops alone, customer visits have dropped by more than 80%. According to local government open travel business licensing data, 36 travel agencies reported closures in February alone.

A duty-free operator said, "It is natural that support measures focus on small business owners, but the current situation is not one where large corporations can endure," adding, "This is the biggest crisis since Korean companies started duty-free operations."

Duty-free operators have desperately requested rent reductions from Incheon Airport Corporation because airport duty-free losses are snowballing. As customers stopped visiting Incheon International Airport duty-free shops, the deficit of duty-free operators more than doubled compared to the previous year. Normally, Incheon Airport Corporation’s rent accounts for 30-40% of sales. However, current sales have dropped by 70-80%. This means they have to pay rent exceeding their duty-free sales. It is also not a situation that can be covered by downtown duty-free sales. A duty-free operator explained, "Incheon Airport Duty Free is not only symbolic as the world’s top-grossing airport duty-free shop but also serves as a foothold for overseas expansion, strengthens bargaining power, and provides promotional benefits. Operators accept annual losses of 10-15% to operate there," adding, "Until now, losses could be offset by downtown duty-free sales, but now downtown duty-free shops are also struggling, making it difficult." Airports such as Hong Kong International Airport, Singapore Changi Airport, and Thailand airports have reduced airport usage fees and rents, but Incheon Airport has been increasing rents. In fact, the minimum guaranteed rent for perfumes and cosmetics (DF2) at Incheon International Airport Terminal 1 (T1) has risen 22% in five years.

Some criticize Incheon Airport Corporation for focusing on 'profits' rather than 'coexistence.' Last year, Incheon Airport Corporation recorded sales of 2.769 trillion won and operating profit of 1.3141 trillion won. The operating profit margin is said to have remained in the 40% range. For Incheon Airport Corporation, non-aviation revenue accounts for 65-70% of total revenue. Among non-aviation revenue, commercial facility rental income accounts for over 90%. Of the commercial facility rental income, rent paid by large corporate duty-free shops accounts for 70-80%. The rent paid by small and medium-sized enterprises accounts for less than 10% of the total, so reducing their rent has virtually no impact on Incheon Airport Corporation’s profits.

A duty-free operator stated, "Incheon Airport Corporation’s rent reduction only for small and medium-sized operators is just a token gesture," and argued, "Large corporations should also have their rent temporarily adjusted according to sales."

Meanwhile, the bidding for duty-free business rights at Incheon International Airport Terminal 1 (T1) unexpectedly failed for two locations due to insufficient bidders: the perfume and cosmetics (DF2) business rights and the fashion and others (DF6) business rights. Lotte, Shilla, Shinsegae, and Hyundai Department Store duty-free shops did not bid for the DF2 business rights, which have the highest minimum guaranteed rent of 116.1 billion won. Among these, the only business rights all four companies bid on was fashion and others (DF7). For the liquor and tobacco DF3 and DF4 business rights, two companies, Hotel Lotte and Hotel Shilla, submitted bids and divided the operating rights.

This content was produced with the assistance of AI translation services.