which has a three-year automatically renewed concession contract,” Kim explained. “JDC gives us a concession fee, but it’s different to our
agreements with the operators as their MAG is relatively small compared to the others. We calculate the fee by sales, but their commission percentage is smaller.” In addition to reviewing its concession fee structure,
KAC also wants to look at ways of increasing revenue from providing pick up counter facilities for downtown duty free shops at its international airports. “Downtown duty free shop sales increase each year and we
think the base rate for pick up counter rental should increase, but we have a fixed rate; that’s our problem,” Kim said.
Retender required for Gimpo and Gimhae KAC’s review is timely, as it follows the award of the two duty free concessions at Seoul Gimpo Airport in 2016 and the perfume and cosmetics concession at Busan Gimhae Airport last year. After JDC’s automatic three-year concession renewal takes
place at the end of this year, KAC will have about 18 months to carry out the review and plan new strategies before the next set of its airports’ duty free license renewal tenders takes place. This will be for the Busan Gimhae Airport liquor and tobacco
concession that is currently held by DufryThomasJulie, a local joint venture, which expires in February 2019. In fact, KAC had to re-tender all three duty free concessions
for Gimpo and Gimhae airports last year after setting the MAG payment too high for each license during the original tender round that failed to attract bids from any operator for the two Gimpo and single Gimhae concessions. Lotte Duty Free eventually won the Gimpo Airport
perfume, cosmetics and general merchandise license during the second tender round, replacing the previous concession holder Shilla Duty Free. SME operator City Plus Duty Free won the Gimpo liquor,
tobacco and general merchandise license, replacing Lotte Duty Free which had previously operated the concession. Gimpo Airport recorded total duty free sales worth
about US$100m in 2016, according to KAC figures. Foreign passengers, mainly businessmen from Japan, Taiwan and China accounted for an estimated 60% of duty free sales at Gimpo while South Korean outbound travellers represented an estimated 40% of purchases. International arriving and departing passenger numbers
totalled 4.2m at Gimpo Airport last year, registering a 5.3% increase compared with 2015. The perfume, cosmetics and general merchandise
concession generated about 55% of total Gimpo duty free sales while the liquor, tobacco and general merchandise concession accounted for the remaining 45% revenue share. As part of its plans to improve passenger facilities and
increase duty free sales at Gimpo Airport in particular, KAC is due to expand duty free shopping space in the international terminal by 600sq m for the new five-year concession period which began in August 2016. Remodelling work is due for completion this summer and
will increase the total duty free shopping space in Gimpo’s airside departure area to 1,433sq m from 8,33sq m at present. «
MAY 2017
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