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Photo courtesy of Yonhap News |
[Alpha Biz= Kim Jisun] Seoul, September 18 – Shilla Duty Free announced it will return its Incheon International Airport duty-free concession for Zone DF1, just over two years after commencing operations, due to unsustainable rental costs. The decision comes with an estimated ₩190 billion (approx. USD 140 million) in penalty fees.
Shilla Duty Free, operated by Hotel Shilla, began running the DF1 concession in July 2023 under a contract scheduled to last until June 2033. However, the company has opted for an early exit after operating only one-fifth of the contracted period.
The core issue was rental fees. Shilla Duty Free and Shinsegae Duty Free won the DF1 and DF2 concessions by bidding significantly higher than the minimum passenger fee set by Incheon International Airport Corporation (IIAC)—₩8,987 and ₩9,020 per passenger, respectively, more than 160% above the reserve price. Both operators anticipated a post-pandemic surge in passenger traffic and duty-free sales.
Instead, while traveler numbers recovered, average spending per passenger fell sharply. The decline in Chinese group tourists, once the largest customer base, further weakened revenues. Shilla reported losses in the tens of billions of won each month, with rental fees reaching nearly ₩30 billion monthly.
Despite repeated requests for fee reductions, IIAC declined, citing contractual obligations and fiduciary duty. Ultimately, Shilla chose to absorb the penalty and exit, stating it was less damaging than continuing to operate under heavy losses.
The company may pursue negotiations or litigation with IIAC to reduce the ₩190 billion penalty. Shinsegae Duty Free has not yet decided whether to also relinquish its Incheon Airport concession.
Alphabiz Reporter Kim Jisun(stockmk2020@alphabiz.co.kr)
