Incheon Airport: "Duty-Free Rent Adjustment Impossible... Will Select New Operators"
by Jun Youngjoo
Pubilshed 12 Aug.2025 14:00(KST)
Updated 12 Aug.2025 14:01(KST)
Absent from Second Round of Negotiations on the 28th
"Excessive Bids Are to Blame for Duty-Free Shop Losses"
Incheon International Airport Corporation has decided not to participate in negotiations to lower duty-free shop rent with Shilla Duty Free and Shinsegae Duty Free. If the negotiations fall through and the two duty-free shops decide to withdraw, the corporation plans to complete the selection of new operators within six months.
Kim Chang-kyu, Head of Operations at Incheon International Airport Corporation, told reporters on August 12, "We have already expressed our intention not to accept the proposed rent adjustment during the first round of negotiations, and we do not plan to attend the second round scheduled for the 28th."
The corporation maintains that, since the current rent was proposed directly by Shilla Duty Free and Shinsegae Duty Free, the duty-free industry must bear the business responsibility. Kim explained, "During the 2023 bidding, the outlook for the duty-free sector was uncertain due to the COVID-19 pandemic, so we lowered the minimum bid price to 60% of the 2019 level. Despite offering a reasonable price, the operators secured the business rights with high bids." In fact, while the corporation received 1.06 trillion won in rent from duty-free shops in 2019, last year’s figure was only 670 billion won?about half that amount.
Industry insiders had expressed concerns about a "winner's curse" immediately after the contracts were awarded, pointing to the excessively high bids submitted by the two duty-free shops. Shilla Duty Free bid a per-customer rent of 8,987 won, 161% higher than the minimum bid, while Shinsegae Duty Free bid 9,020 won, 168% higher, securing the operating rights for 10 years. Other bidders submitted bids in the range of 100% to 130% of the minimum. As a result, there were predictions that Shilla and Shinsegae Duty Free would see rent costs reach 40% of their sales and incur losses exceeding 700 billion won over the 10-year period.
Furthermore, the corporation made it clear that rent adjustments due to changes in market conditions are not permitted under the contract. According to the lease agreement between the corporation and the duty-free operators at the time, rent adjustments are only possible in cases of store relocation, downsizing, expansion, new openings, or closures due to changes in airport operating conditions. Reasons such as a decrease in Chinese tourists or changes in consumer purchasing patterns were not specified as grounds for rent adjustment. Law firms Yulchon and HwaWoo, which provided legal counsel to the corporation, also concluded that the requirements for rent reduction were not met and that it was reasonable not to accept the adjustment proposal.
Kim stated, "Reducing the rent under these circumstances would not only constitute a breach of trust, but could also potentially violate the Act on the Aggravated Punishment of Specific Economic Crimes. There are also issues of fairness, as companies that entered with relatively reasonable bids are making profits, and it would undermine fairness for those who lost in previous bids." He added, "If this becomes the norm, every future public tender will be followed by requests for renegotiation after securing business rights with unachievable conditions."
If Shilla Duty Free and Shinsegae Duty Free decide to withdraw after negotiations break down, they will each forfeit a 190 billion won penalty deposit. In addition, they are required to continue operating for six months from the date they announce their intention to withdraw. The corporation plans to complete the process of announcing and selecting new operators during this six-month period. The two duty-free shops may also face penalties if they re-bid in future tenders. The corporation evaluates the reliability of operators' business performance over the year prior to the bid announcement, awarding up to five points in a qualitative assessment.
Previously, in April, Shilla Duty Free and Shinsegae Duty Free requested a 40% rent reduction for their cosmetics, perfume, liquor, and tobacco stores in Terminals 1 and 2 of Incheon Airport. After the corporation rejected the request, the operators filed for court mediation. The corporation attended the first mediation session on June 30 and declared its intention not to accept the proposed rent adjustment.
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