Sky72, Persistent Operations Despite Contract Ending Last Year
New Head of Incheon Airport Corp Announces Strong Measures: "Business Suspension Notice Effective April 1"
Criticism Arises Over Passive Administrative Response from Incheon City Authorities
[Asia Economy Reporters Kim Hyewon, Yoo Jehun] "We have notified Sky72 Golf & Resort to cease operations as of April 1. Sky72 will not be allowed to operate from April." (Kim Kyungwook, President of Incheon International Airport Corporation)
Incheon International Airport, the gateway airport of South Korea, is in turmoil. The conflict centers around a public golf course of approximately 3.64 million square meters (72 holes) located in the Sinbul area near the airport and the planned site for the 5th runway. The landowner, Incheon Airport Corporation, has demanded that the existing operator, Sky72, vacate the premises as the contract period ended last year. However, Sky72 continues to operate illegally and without permission, occupying the facilities. As of the 25th, Sky72 is still generating substantial profits through illegal operations, and Incheon Airport Corporation is considering additional lawsuits, including claims for damages.
The illegal and unauthorized occupation by Sky72 dates back to September last year when Incheon Airport Corporation announced a bidding process to select a successor operator for the site. The construction of the 5th runway, originally planned for the site, was delayed, and according to the implementation agreement signed in 2002, Sky72's land use period ended last year, making this a natural progression.
Sky72 opposed this and filed an injunction with the Incheon District Court to prohibit the bidding process, but the court dismissed the request and sided with Incheon Airport Corporation. The court ruled, "The creditor (Sky72) cannot claim a right to purchase the land improvements against the debtor. It is also difficult to conclude that they have a right to reimbursement for beneficial expenses."
Disputes continued even after KMH Shilla Leisure was selected as the successor operator, but reaching an agreement proved difficult. The Anti-Corruption and Civil Rights Commission declared a 'refusal to mediate,' and the arbitration committee formed under the implementation agreement between Incheon Airport Corporation and Sky72 also failed to reach a settlement. Incheon Airport Corporation filed a complaint with the Administrative Court early last month regarding land delivery and building ownership transfer following the expiration of the land use period. On the 15th, Sky72 filed a lawsuit claiming that the corporation has an obligation to negotiate changes to the implementation agreement.
Although the contract ended on December 31 last year, Sky72 still illegally occupies the site. Sky72's annual sales last year are estimated to have exceeded 80 billion KRW. Simple calculations suggest an average daily revenue of around 2 billion KRW, and since the contract expiration, Sky72 has been earning profits through illegal operations for 56 days up to now.
The consensus is that Sky72's refusal to relinquish golf course operations despite the contract expiration is due to the enormous profits it has enjoyed so far. During the golf course operation period (2005?2019), Sky72 recorded cumulative sales of 955.9 billion KRW and net income of 164.4 billion KRW. Dividends paid to shareholders during this period amounted to 119.1 billion KRW (dividend payout ratio of 72.4%). Considering that the overall dividend payout ratio of listed companies is less than 30%, this is an exceptionally high dividend rate. The largest shareholder, CEO Kim Youngjae of Sky72, is known to hold at least 49.9% of shares through entities such as Skybarun.
An industry insider familiar with the matter said, "Looking at Sky72's operating cash flow in the financial statements, they had already recovered the entire investment cost by 2014, generating enormous economic profits," adding, "Sky72 has formed legal teams with several major law firms and is employing a time-delaying strategy by filing various lawsuits."
There are also voices criticizing the passive administrative response of the local government, Incheon Metropolitan City. Incheon Airport Corporation sent a notification to Incheon City about the selection of a new operator at the end of last year and also sent a letter in January requesting the cancellation of Sky72's sports facility business registration, but has yet to receive any significant feedback. Despite the expiration of the sports facility business registration period, the landowner is illegally allowing operations without registration approval.
This situation is expected to change with the appointment of President Kim, who has announced a 'principled tough response.' On the 23rd, President Kim notified Sky72 to cease operations by April 1. If stakeholders continue disputes or lawsuits, the golf course will be opened to the public free of charge.
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