"Still Not Recovered" Duty-Free Industry Bewildered by Incheon Airport's End of Rent Reduction Benefits

Incheon International Airport to Change Contract to Fixed Rent
Industry "Sales Still Not Recovered" Bewildered
Duty Free Association Also Responds "Difficult to Agree"

On the 11th, the departure hall of Terminal 1 at Incheon International Airport is bustling with passengers. Photo by Mun Ho-nam munonam@

[Asia Economy Reporter Jeon Jinyoung] As the rent reduction benefits granted to the duty-free industry due to COVID-19 come to an end at the end of this year, the industry is unable to hide its bewilderment.

According to the industry on the 10th, Incheon International Airport sent an official letter last month to duty-free operators in the airport titled ‘Notice of Special Rent Reduction System and Inquiry on Intent to Change Contract.’ Incheon International Airport had linked rent payments to sales considering the difficulties faced by the duty-free industry during the COVID-19 period. They plan to end this and return to the previous fixed rent system.

According to Incheon International Airport, if the number of passengers decreases by more than 40% compared to 2019, half of the passenger decrease rate will be deducted from the rent. For example, if the passenger decrease rate is 50%, 25% of the rent will be reduced. However, if the number of passengers recovers to more than 60% of the pre-COVID-19 level, the normal rent must be paid. Currently, the daily passenger count at Incheon International Airport has recovered to about half.

However, the industry argues that it is still difficult because business conditions have not yet recovered. The most urgent are Shinsegae and Hyundai Department Store duty-free shops located in Terminal 1, as well as small and medium-sized enterprises. Lotte and Shilla Duty Free shops located in Terminal 2 have contracts expiring this year and are relatively free from the rent charging method, but most of the Terminal 1 tenants’ contracts do not expire until next year, so they have no choice but to pay rent. They raised their voices saying that if the changed method is applied, they will have to pay tens of billions to nearly 10 billion won in rent per month starting next year.

An industry official said, “Even if rent reductions are given according to the passenger decrease rate, we still have to pay an additional 10 billion won per month immediately,” adding, “For sales to normalize, about 80% of passenger numbers must recover, but since they want to charge normal rent at the 60% level, the industry’s concerns are growing.”

Another industry insider said, “Since Chinese tourists, called ‘big spenders,’ have not yet returned, it is difficult to say sales have recovered. Even if passenger numbers have recovered, the main customers have not yet come, so it is unlikely to lead to sales growth,” adding, “From January next year, we will have to pay rent exceeding sales. Deficits are expected.”

Incheon Airport requested responses from companies by the 5th, but the industry is still deliberating. The Korea Duty Free Shop Association reportedly responded, “Unlike the increasing trend in airport passenger numbers, duty-free product delivery counters are still suffering more than a 95% decrease in damage,” and “It is difficult to agree under current conditions.”