"‘No Discounts Next Year’ Duty-Free Industry Protests Incheon Airport Rent Terms"

On the 9th, the departure hall of Terminal 1 at Incheon International Airport is quiet due to the impact of COVID-19. Photo by Mun Ho-nam munonam@

[Asia Economy Reporter Lee Jong-gil] Incheon International Airport Corporation is facing backlash for attaching a condition that tenants of duty-free businesses, hit hard by the COVID-19 pandemic, must forgo rent discounts next year in exchange for a 20% rent reduction this year.

According to industry sources on the 9th, Incheon International Airport Corporation, following government policy, is offering a 20% rent reduction for the period from March to August but has included a clause requiring tenants to waive rent discounts for the following year. Until now, Incheon Airport duty-free shops have adjusted their monthly rent by ±9% based on the increase or decrease in passenger numbers from the previous year. If passenger numbers increased compared to the previous year, rent would rise; if passenger numbers decreased, rent would be lowered accordingly.

This year, international passenger numbers sharply declined due to the spread of COVID-19. As a result, duty-free shops are likely to receive a 9% rent reduction next year. However, Incheon International Airport Corporation has specified in the rent discount application related to COVID-19 that "the passenger decrease rate will not be reflected in the calculation of next year's rent for the period during which rent reduction benefits were received this year." In this case, duty-free shops will not receive rent reduction benefits next year due to the decrease in international passengers caused by COVID-19. Rather, if the situation stabilizes and passenger numbers normalize, they will have to pay 9% more rent in 2022.

Large duty-free operators such as Lotte, Shilla, and Shinsegae are protesting that although they receive a 20% discount this time, the rent they must pay in 2021 and 2022 will increase, effectively nullifying the benefit of the discount. These companies have also not submitted their rent discount applications, which were due by the previous day. In response, an official from Incheon International Airport Corporation explained, "Passenger-linked rent is designed to compensate for losses due to decreased demand this year in the following year. Since rent reductions are being applied this year, applying them again next year would result in double benefits, which we are trying to prevent."