Incheon Airport T1·T2 Duty-Free Store Bidding, May Kick Off as Early as This Month

Incheon Airport T1·T2 New Operator Bidding May Be Announced This Month
Key Point: Conditional Operating Rate Addition Method Reflecting Rent and Business Recovery Likely
Industry Expects Sales-Linked Operating Rate "Trend Changes and External Factors Remain Variables"

Korea Customs Service Announces Duty-Free Industry Support Plan After Meeting
Industry Welcomes... "Must Maintain World's No.1 Duty-Free Market by Enhancing Public Convenience"

August 11, view of the duty-free shop at Incheon International Airport Terminal 1. Photo by Honam Moon munonam@

[Asia Economy Reporter Yuri Kim] As the Korea Customs Service announced support measures for the duty-free industry, which has yet to spread its wings even after the endemic phase (periodic outbreaks of infectious diseases), the bidding for the passenger terminal business rights at Incheon International Airport, a key industry issue in the second half of the year, is expected to kick off as early as the end of this month. The industry is closely watching how the rent calculation method, a crucial factor for the success of the bidding, will be decided.

According to the duty-free industry on the 15th, the bidding announcement for new operators of Incheon Airport duty-free shops, targeting a total of 15 business rights?9 at Incheon International Airport Terminal 1 (T1) and 6 at Terminal 2 (T2)?is expected to be released as early as this month. The contract for Terminal 1, which expired last year, currently has vacancies, and Terminal 2’s contract will expire in January next year. Considering Terminal 2, where competition is expected to be fiercer, the remaining time for the bidding process is tight for a new operator to prepare, including store renovations, over about six months and start operations in the second half of the year. The industry expects that since Incheon Airport and the Korea Customs Service have reached a consensus on the selection method, which had previously been a point of disagreement, a bidding announcement containing the finalized details will be issued soon.

The most closely watched aspect in the industry is the rent calculation method. During the golden era of the duty-free industry, when cutthroat competition over Incheon Airport business rights occurred, the fixed rent method?where tenants paid a predetermined rent regardless of their performance?was considered burdensome under current circumstances, according to a common industry view. This is also why the bidding for Terminal 1 business rights, conducted under the fixed rent method, failed three times. It is known that Incheon Airport also finds it burdensome to maintain the fixed rent method under the current situation. Therefore, a compromise proposal considering the results of the rent calculation method study is expected. The likely method is a conditional operating rate surcharge method, which applies an operating rate method with a stepwise increase in the rate depending on the level of business recovery. Sales and passenger numbers are being discussed as the basis for the operating rate.

The duty-free industry considers this bidding important, given the symbolic significance of Incheon Airport duty-free shops and the business operation rights of up to 10 years, but they also share concerns that performance is not as strong as before due to changes in duty-free consumption trends. The industry believes that the duty-free sector’s situation, which declined from the COVID-19 outbreak, will not easily recover thereafter.

An industry official said, "In the past, when overseas travel was relatively uncommon and there were many things to prepare at the airport before going abroad, many people arrived at the airport 3 to 4 hours early to complete procedures and use airport duty-free shops. However, nowadays, most people check discount benefits in advance and use downtown duty-free shops or online duty-free shops in the most advantageous way." He added, "Because passenger increases do not translate into proportional increases in airport duty-free sales due to changing trends, if the rent is linked to passenger numbers, there will be deep concerns." Another official said, "In just over five years, external factors such as THAAD and COVID-19 caused many instances of sharp sales declines. There is no guarantee that such external factors will not occur during the 5 to 10 years after the duty-free shop bidding." He emphasized, "From the operator’s perspective, who must bear the risks, a method linked to sales is reasonable, but if the rent calculation method becomes too burdensome, there will be serious concerns about participation."

Meanwhile, on the previous day, Customs Commissioner Yoon Tae-sik held a 'Duty-Free Industry Development Meeting' with the industry and announced support measures for the duty-free industry, including the extension of patent fee reductions and the receipt of duty-free goods at arrival halls. Although some details need to be finalized after discussions with the Ministry of Economy and Finance and others, the industry evaluated the proactive announcement as encouraging support. A duty-free industry official said, "These are measures to enhance the convenience of citizens using duty-free shops and to maintain the world’s number one duty-free market through the recovery of consumer sentiment." He added, "With the support measures from the Korea Customs Service, we will do our best to repay users with the best products and the highest level of service."

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