The conflict over rental fees between Incheon International Airport Corporation and Shinsegae Duty Free is showing signs of prolongation. The two duty-free shops, suffering from deficits, have entered legal adjustment procedures asking for a 40% reduction in rent, but the corporation has rejected this request citing equity and potential violations of contractual procedures.
According to industry sources on the 12th, Shinsegae and Shilla secured key products (DF1 and DF2) at the public bid for the 4th duty-free shop at Incheon Airport in 2023 for 8,987 won (bid rate 168%) and 9,020 won (161%) per passenger, respectively. This is 68% and 61% higher than the minimum amounts proposed by the corporation. Despite conducting aggressive bidding amid concerns of a 'winner's curse', sales have declined due to changes in the spending patterns of Chinese tourists and the increase in overseas and online purchases by domestic consumers after the COVID-19 pandemic. Both companies are currently estimated to be operating at a deficit of about 8 billion won per month.
Last year, the number of departing passengers at Incheon Airport reached 35.31 million, recovering to pre-COVID levels, but duty-free sales totaled 2.0181 trillion won, only 72% of the level compared to 2019. The average spending per customer on cosmetics, perfumes, alcoholic beverages, and tobacco also fell from 51,000 won to 29,000 won. Samil noted in its court assessment results that "recovering the average spending per customer is unlikely to be achieved in the short term and further losses are expected," estimating that if the two companies withdraw, the re-bid prices would be about 40% lower.
However, the corporation rejected the request for a rent reduction, stating that "the rent is the amount directly proposed by the companies in the competitive bidding, and the current contract was signed in accordance with the National Contract Act procedures." It also argues that reducing the rent would not only undermine equity with other companies but also carries the risk of legal violations, such as breach of trust. Furthermore, it emphasized that the stated reasons for rent adjustment (store transfer, reduction, expansion, etc.) do not apply.
According to the corporation, if the two companies terminate the contract, they would have to pay about 190 billion won in penalties each, and a mandatory six-month business operation condition would also apply. Participation in re-bidding is possible, but penalties in qualitative evaluations are inevitable. In 2018, Lotte Duty Free also relinquished its business rights due to high rental burdens and received lower scores in subsequent bidding.
Shinsegye and Shilla explained that the bidding prices reflected expectations for recovery from COVID-19, arguing that it would serve the public interest to reduce fees due to difficulties in finding equally capable operators for re-biddings and to alleviate inconveniences for users resulting from gaps in duty-free operations, as well as the negative impact on the corporation's revenue. Conversely, the corporation maintains that "if the rent is reduced retroactively, demands for adjustments following high bids will increase, undermining the fairness of the contract procedures and the order of competitive bidding."
Meanwhile, the Incheon District Court will hold the second mediation session on the 28th. After the corporation's absence at the first mediation session on June, the court scheduled the second session for the 14th of this month, but postponed it once to allow for the submission of a rent appraisal.