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Photo courtesy of Shinsegae Duty Free |
[Alpha Biz= Kim Jisun] Shilla Duty Free and Shinsegae Duty Free, which have both faced persistent operating losses—prompting even talks of withdrawal—have filed for court mediation against Incheon International Airport Corporation (IIAC) to request a reduction in rental fees.
According to the Incheon District Court on May 21, a mediation session between Shinsegae Duty Free and IIAC has been scheduled for June 1. Shinsegae filed the request on April 29, followed by Shilla on May 8.
The two duty-free operators are reportedly asking for a 40% reduction in rent for their cosmetics, fragrance, liquor, and tobacco stores at Terminal 1 and 2, citing soaring exchange rates and a significant drop in Chinese tourists.
An industry insider noted, “Chinese tourist numbers have declined by nearly 50% due to the strong Korean won and other unfavorable conditions. Despite repeated requests for rent relief, IIAC rejected them, leaving us no choice but to seek mediation through the court.”
However, Incheon Airport maintains that rent cannot be lowered since contracts were awarded through open bidding. If both parties fail to narrow their differences, court proceedings may follow should mediation fall through.
Currently, both duty-free operators are reportedly incurring monthly losses of KRW 5–6 billion (approx. USD 3.7–4.4 million). Although international passenger traffic has rebounded post-pandemic, revenue has yet to return to pre-COVID levels due to high exchange rates, fewer big-spending Chinese tourists, and a rise in e-commerce and overseas direct purchases.
During the 2023 fourth-round bidding for duty-free concessions, IIAC set the base rent at KRW 5,300–5,600 per passenger. However, Shilla and Shinsegae each submitted bids that were 68% and 61% higher than the minimum requirement, respectively.
As a result, the estimated monthly rent for each company stands between KRW 30–34 billion (approx. USD 22–25 million), amounting to over half their estimated monthly sales of KRW 60 billion. With 8 years remaining on their 10-year contracts, the burden remains substantial.
In 2023, both Shilla and Shinsegae reported full-year operating losses of KRW 69.7 billion and KRW 35.9 billion, respectively. The losses continued into Q1 2024, with Shilla losing KRW 5 billion and Shinsegae KRW 2.3 billion.
Alphabiz Reporter Kim Jisun(stockmk2020@alphabiz.co.kr)
