Following The Shilla Duty Free, Shinsegae Duty Free will also return the business rights for some zones of Incheon Airport's duty-free shops. The decision follows The Shilla Duty Free's withdrawal announcement in September. As a result, both duty-free areas DF1 and DF2 at Incheon Airport will be left vacant.
Shinsegae Co. said on the 30th in a regulatory filing that it decided to suspend operations in Incheon Airport's duty-free DF2 zone (perfume, cosmetics, liquor, tobacco). The company cited as the reason for returning the business rights that "losses in the duty-free business are expected to increase. This is to enhance profitability through operational efficiency." It added, "In the mid to long term, we expect improvements in the financial structure and profitability."
With this decision, the penalty Shinsegae Duty Free will have to bear is estimated at about 190 billion won. Under a clause requiring six months of mandatory operations after contract termination, operations will end on Apr. 28, 2026.
Earlier, The Shilla Duty Free also returned the business rights for Incheon Airport's DF1 zone (perfume, cosmetics) on the 18th of last month, accepting a penalty of around 190 billion won. The scheduled end date of operations is Mar. 17, 2026.
At the time, Hotel Shilla, which operates The Shilla Duty Free, said, "The losses are too large to continue operating at Incheon Airport," and added, "The company inevitably decided to return the business rights for the Incheon Airport duty-free DF1 zone based on the judgment that it needs to improve its financial structure and enhance corporate and shareholder value." According to Hotel Shilla, losses from the duty-free business are in the range of 6 billion to 8 billion won per month.
The pullout by these duty-free operators stems from Incheon International Airport Corporation's refusal to adjust rent. The Shilla Duty Free and Shinsegae Duty Free signed contracts to operate the airport duty-free shops in 2023 on terms that rent would be paid based on per-customer spending. However, as changes in consumption patterns and weaker purchasing power meant duty-free spending did not grow in line with the increase in airport users, losses deepened.
The operating losses last year at The Shilla Duty Free and Shinsegae Duty Free were 69.7 billion won and 35.9 billion won, respectively. Ultimately, in Nov. last year, Shinsegae Duty Free implemented its first-ever voluntary retirement program since its founding. In Jan. this year, it closed its downtown Busan store. The Shilla Duty Free also carried out voluntary retirement in Apr.
The Shilla Duty Free and Shinsegae Duty Free filed adjustment requests with the Incheon District Court in Apr. and May, respectively, seeking a 40% reduction in rent from Incheon International Airport Corporation. The Incheon District Court later issued a nonbinding adjustment proposing that airport duty-free rents be lowered by 25% to 27%.
However, despite the court's adjustment, Incheon International Airport Corporation maintained its stance that rent could not be adjusted, citing reasons such as potential violations of fairness and contract procedures. In the end, The Shilla Duty Free and Shinsegae Duty Free decided to return their business rights.
Incheon International Airport Corporation is expected to announce a rebid within the year for the DF1 and DF2 zones returned by the two duty-free operators. In the industry, Lotte, which has past experience operating duty-free shops at Incheon Airport, and Hyundai Department Store, which secured the DF5 business rights in the 2023 bidding and is operating it, are cited as strong candidates. Some also expect that China Duty Free Group (CDFG), which participated in the 2023 bidding, will join again this time.
In the market, many expect winning bid rents to be lower than before in this rebid. In 2023, Incheon International Airport Corporation set the minimum bid amount for DF1 at 5,346 won per person. However, as competition among companies overheated, The Shilla Duty Free and Shinsegae Duty Free won with offers about 60% higher than the minimum bid. Previously, Samil PwC estimated in a court appraisal that "it will be difficult for per-customer spending to recover in the short term and losses are expected to expand," adding, "if the two companies withdraw, the rebid price will be about 40% lower."
A duty-free industry official said, "The returned zones are 'prime' duty-free areas, so as long as appropriate rent is paid, it will be possible to turn a revenue."