The conflict over rent between Incheon International Airport Corporation and Shinsegae Duty Free has been escalating. The two duty-free stores suffering from losses have entered legal mediation procedures requesting a reduction in rent, but the corporation has declined to participate in the mediation, citing concerns over fairness and possible violations of contractual procedures. As both sides fail to find a common ground, there are fears that the duty-free shops will actually withdraw from the airport.
According to related industries on the 28th, the Incheon District Court held a second mediation session regarding the rent adjustment requested by Shinsegae Duty Free against Incheon International Airport Corporation at 2 p.m. that day. The Incheon International Airport Corporation, having expressed its inability to accept the proposal during the first mediation held on June 30, did not attend the second session.
Accordingly, the court decided on compulsory mediation, believing it difficult to reconcile the opinions of both sides. It is expected to take several days to present a specific mediation proposal.
However, there is no obligation to comply with the compulsory mediation proposal. If the Incheon International Airport Corporation raises objections to the mediation proposal, it will move to litigation.
Previously, the duty-free shops submitted a request to reduce rent by 30-35% due to the decline in sales at the Incheon International Airport duty-free store. Initially, they demanded a 40% reduction but took a step back before the second mediation date.
However, the corporation maintained its refusal to adjust, stating that the amount was determined through competitive bidding at the vendors' discretion. The corporation believes that reducing rent could lead to allegations of breach of trust.
Shilla and Shinsegae secured key vouchers (DF1·DF2) in the 2023 open bidding for duty-free stores at Incheon Airport at 8,987 won per passenger (winning rate of 168%) and 9,020 won (161%), respectively. This was 68% and 61% higher than the minimum acceptable amounts proposed by the corporation.
However, following COVID-19, the consumption patterns of Chinese tourists, who are the main customers of the duty-free shops, have changed, and sales have declined due to the increased overseas and online purchases by locals. Last year, the number of departing passengers at Incheon Airport was 35.31 million, recovering to pre-COVID levels, but duty-free store sales remained at 2.1 trillion won, only 72% of the level seen in 2019.
Currently, Shilla and Shinsegae are reportedly incurring losses of 6 billion to 8 billion won per month while paying 30 billion won monthly in rent to Incheon Airport.
Shilla and Shinsegae have suggested that their legal representatives are indicating the possibility of closing airport duty-free shops, separate from court mediation.
According to the corporation, if the two companies terminate the contracts, they would each have to pay a penalty of about 190 billion won. There is also a six-month mandatory operating condition. While re-bidding is possible, deductions in qualitative evaluations are inevitable.
If Shilla and Shinsegae withdraw from Incheon Airport and re-bidding occurs, Lotte Duty Free and Hyundai Duty Free are mentioned as potential next entrants. There are also expectations that China's CDFG, which previously participated in the bidding for Incheon Airport duty-free shops, will aim to enter the airport.