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Photo courtesy of Yonhap News |
[Alpha Biz= Kim Jisun] Seoul – The Incheon District Court has issued a compulsory mediation order requiring Incheon International Airport Corporation (IIAC) to reduce rent by 25% for duty-free operator Shilla Duty Free, following a dispute over lease terms. A similar order is expected soon for Shinsegae Duty Free, which filed a joint petition.
The ruling, announced on September 9, does not carry direct legal enforceability, but the airport operator has already stated its intention to formally object to the decision.
Background of the Dispute
In March 2023, IIAC held a bidding process to select duty-free operators for various concessions:
Shilla Duty Free won DF1 (perfume, cosmetics, liquor, tobacco) and DF3 (fashion, boutique).
Shinsegae Duty Free won DF2 (perfume, cosmetics) and DF4 (fashion, boutique).
The operating period was set at 10 years, with reported monthly rents of about KRW 30 billion (USD 21 million).
However, both Shilla and Shinsegae recently applied for rent reductions, citing unexpected economic pressures despite passenger traffic at Incheon Airport recovering post-COVID. They argued that a decline in Chinese tourists and shifts in consumer spending patterns have resulted in heavy operating losses. The duty-free companies sought a 40% rent reduction through civil mediation.
IIAC rejected the request and did not appear at the court’s mediation hearing, prompting the court to impose compulsory mediation.
Potential Fallout
Both Shilla and Shinsegae have warned that they may withdraw from their airport concessions if IIAC refuses to comply. Such a move would trigger penalty payments estimated at KRW 190 billion (USD 140 million), but the operators argue that continuing to absorb monthly losses of up to KRW 8 billion (USD 5.9 million) is unsustainable.
Alphabiz Reporter Kim Jisun(stockmk2020@alphabiz.co.kr)
