Photo: The Shilla Duty Free

 

 

[Alpha Biz= Kim Jisun] Shilla Duty Free and Shinsegae Duty Free have requested a 40% reduction in rent for their duty-free operations at Incheon International Airport, prompting the court to initiate a formal arbitration process. As part of this, the court has commissioned Samil PwC to reassess fair market rent levels based on what would be expected in a re-bidding process.



On July 24, the companies’ legal representatives stated, “The court is reviewing the possibility of reaching an agreement on reasonable rent levels through arbitration,” noting that the accounting firm was tasked with assessing expected lease rates as of July 14.



In April and May of this year, Shilla and Shinsegae each filed for arbitration with the Incheon District Court, seeking a 40% reduction in the rent for their cosmetics, perfume, liquor, and tobacco duty-free shops located in Terminals 1 and 2 of Incheon Airport.



The first arbitration session was held on June 30, with a second hearing scheduled for August 14.



Both companies secured 10-year operating licenses for Incheon Airport’s departure duty-free concessions in July 2023, with about 8 years remaining. At the time of bidding, both firms proposed a per-passenger concession fee of approximately KRW 10,000.



With Incheon Airport currently serving around 3 million passengers per month, each company's monthly rent is estimated at around KRW 30 billion.



The companies argue that steep declines in Chinese group tourism, shifts in spending behavior among domestic and foreign independent travelers, and the impact of high exchange rates have sharply reduced duty-free sales, justifying the need for rent relief.



In 2023, Shilla Duty Free and Shinsegae Duty Free posted operating losses of KRW 69.7 billion and KRW 35.9 billion, respectively.
 

 

 

 

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