SOUTH KOREA. The ‘big three’ of Korean travel retail – Lotte Duty Free, The Shilla Duty Free and Shinsegae Duty Free – have stepped up their calls for concession relief from Incheon International Airport Corporation (IIAC) in the wake of COVID-19 plunging passenger traffic and spending.
The IIAC is holding meetings this week with its commercial partners, including large and SME retailers and food & beverage operators such as CJ Foodville. Underlining the gravity of the matter, the discussions are being attended by the CEOs of each of the big three – Kap Lee from Lotte, Ingyu Han from Shilla and Shinsegae’s Son Yung-sik.
Despite plunging traffic, IIAC had so far resisted all pressure to cut fees for major retailers, indicating that only SME operators will receive relief. But talks this week may have laid the path for a temporary solution until the crisis passes.
One senior retailer told The Moodie Davitt Report that Korean reports that the IIAC had rejected the claims for relief were incorrect. He said that the talks were constructive and he hoped for a “positive” outcome in coming days.
IIAC’s capacity to offer relief may be boosted by a government initiative to introduce a ‘good landlord’ system to stimulate the economy and reduce the rent burden of institutions such as IIAC by 20-35% in the next six months, according to a report in the respected financial and business title Maeil Economy.
Quoting the Ministry of Justice and the Credit Finance Association, the report said that the Korean duty free market decreased -40.4% year-on-year in the third week of February, coming on top of drops of -38.4%, -42%, -23.4% and -14.3% in the previous four weeks back to January.
The report said that food & beverage sales at Incheon International Airport at the end of February were down by 50-60% month-on-month. Concession fees are around 24% of IIAC’s KRW28.8 billion (US$22.1 million) monthly F&B sales it said, adding: “Considering that sales have halved, the share of rentals has soared to 47%.”