Shaking Aviation Industry... Ministry of Land, Infrastructure and Transport Further Reduces Airport Commercial Facility Rent

On the 26th of last month, Korean Air passenger planes and others were parked at the Gimpo Airport apron in Gangseo-gu, Seoul. Photo by Kang Jin-hyung aymsdream@

[Asia Economy Reporter Moon Jiwon] The Ministry of Land, Infrastructure and Transport, Incheon International Airport Corporation, and Korea Airports Corporation announced on the 1st that they have prepared measures such as additional rent reductions to support commercial facilities operating in airports that are struggling due to the spread of the novel coronavirus infection (COVID-19).

According to the Ministry of Land, Infrastructure and Transport, the rent reduction rate will be expanded up to 50% for large and medium-sized enterprises and up to 75% for small and micro enterprises, depending on the passenger decrease rate at each airport.

To reduce the accumulated rent burden on the industry, the measures will be applied retroactively to rents incurred since last March.

Accordingly, an additional rent reduction of approximately 228.4 billion KRW is expected to be applied from March to August compared to previous support, and tenant companies in airport commercial facilities are expected to benefit from a total rent reduction effect of 400.8 billion KRW.

In addition, the Ministry of Land, Infrastructure and Transport and others will extend the payment deferral period, which was applied for three months from March to May, up to August within the scope of each company's rental deposit, and support the installment repayment of deferred amounts thereafter.

After the payment deferral period ends, late fees on rent arrears will be reduced for six months to alleviate the burden on tenants who are inevitably unable to pay rent.

This support measure will be applied under the same standards to all commercial facilities located in airports nationwide, including duty-free shops, food and beverage outlets, convenience stores, car rentals, bookstores, and pharmacies. Rent paid by airport-related companies such as fueling facilities and in-flight meal providers will also be reduced under the same standards as commercial facilities.

Although the financial conditions of the two airport corporations are expected to deteriorate significantly this year due to COVID-19, the Ministry of Land, Infrastructure and Transport explained that this rent reduction decision was made as a measure of shared pain to ensure employment stability for about 14,000 workers in airport commercial facilities.

The government announced support measures related to airport commercial facility rents through the 6th Economic Vitality Measures Meeting on February 28, the 1st Crisis Management Measures Meeting on March 18, and the 3rd Crisis Management Measures Meeting on April 1 to minimize COVID-19 damage.

However, even after the announcement of the existing support measures, the decline in air passengers and sales worsened. Accordingly, the government prepared additional support measures based on requests from the duty-free shop industry and others.

Kim Itak, Director of Aviation Policy at the Ministry of Land, Infrastructure and Transport, explained, "Beyond temporary support, we plan to prepare together with related organizations and the aviation industry to recover air passenger demand, which has shrunk due to COVID-19, and to normalize air routes step-by-step based on quarantine measures."