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Incheon Airport obstinate on court order to lower rent over duty free nosedive

Published: 09 Sep. 2025, 17:42 Updated: 09 Sep. 2025, 17:46

Duty free shops at Terminal 1 of Incheon International Airport are seen on Sept. 1. Althought the number of tourists visiting Korea has surged in recent months, the duty-free business shows no signs of recovery. [YONHAP]

Tensions are escalating between duty-free operators and Incheon International Airport Corporation over rent disputes. Although a court ordered a 25 percent rent reduction on Monday, the airport authority said it cannot accept the ruling, raising the possibility of withdrawals and lawsuits over penalty fees if the deadlock continues.

Earlier this year, Shilla Duty Free and Shinsegae Duty Free filed for civil mediation with the court, asking for a 40 percent rent cut due to mounting losses.

When the airport authority refused to participate, mediation failed. On Friday, the Incheon District Court issued a compulsory adjustment in Shilla’s case, ordering the airport to cut annual rent by about 25 percent — roughly 58.3 billion won ($41.9 million).

But the airport authority remains firm, refusing to accept the order.

“It would be unfair to other duty free operators, so a rent reduction is not possible,” a representative said Tuesday.

Industry observers believe Shinsegae Duty Free will likely receive a similar ruling within the week.

Shilla currently pays about 30 billion won per month in rent to Incheon International Airport. It won the license in April 2023 to operate for 10 years, but pulling out would trigger an estimated penalty of 190 billion won.

A Lotte Duty Free shop is seen in Jung District, central Seoul, on Sept. 7. [YONHAP]

If the compulsory adjustment is finalized as “not established,” Shilla is expected to file a lawsuit.

The conflict reflects worsening conditions in the duty-free industry. July sales fell 8.6 percent on year to 919.9 billion won from 1 quadrillion won last year, according to the Korea Duty Free Shops Association.

Average per-customer spending in July was 350,000 won, down from 420,000 won a year earlier, suggesting many visitors bypassed duty-free purchases altogether.

“Duty-free visitor numbers rose from 2.36 million in July 2023 to 2.58 million this year, but customers appear to be turning away from duty-free goods,” said an industry source.

Analysts cite several reasons for the slump. Global economic downturns are shifting buyers toward cheaper products, while the weak won has discouraged Korean shoppers.

Travelers walk past the duty free stores inside Terminal 1 of Incheon International Airport on Sept. 9. [NEWS1]

Chinese daigou traders — purchasing agents in an informal system of cross-border commerce where individuals buy goods for customers within mainland China — once a key revenue source, have also dwindled. Furthermore, the yen’s sharp depreciation against the yuan has redirected many traders to Japan.

Per-customer spending peaked at 2.63 million won in 2021 but fell to 1.64 million in 2022, 620,000 won in 2023 and just 500,000 won last year.

With the industry unlikely to rebound soon — not just in China but globally — even Beijing Capital International Airport is dotted with empty duty-free shops.

Market watchers warn that if existing operators withdraw and new bids are held, the value of rental agreements could fall sharply.

“Rent is very likely to drop below current levels in any rebidding,” said Lee Jin-hyeob, an analyst at Hanwha Investment & Securities. “It could fall by as much as 40 percent.”

This article was originally written in Korean and translated by a bilingual reporter with the help of generative AI tools. It was then edited by a native English-speaking editor. All AI-assisted translations are reviewed and refined by our newsroom.
BY KANG KI-HEON [[email protected]]