SOUTH KOREA: INCHEON INTERNATIONAL AIRPORT


“We are planning to renovate every part of T1. We will invest a lot to be a smart airport. There will be more smart and self check-in machines and more self bag-drop machines.”


Spokesperson, IIAC


with Bottega Veneta, Bulgari, Omega and Yves Saint Laurent. As part of the plans, Asiana Airlines


will move from its current stationing at the flight gates in T1 west wing to occupy Korean Air’s former east wing flight gates. Meanwhile, a number of foreign airlines will move from the concourse to occupy Asiana’s vacated flight gates. Reorganising airline flight gates is only one of the various additional tasks facing IIAC.


New T1 tenders due The airport authority is now preparing tenders to appoint new duty free operators at T1 following Lotte Duty Free’s abrupt withdrawal half way through its five-year contract period. The retailer announced in March


it was terminating three of its four T1 duty free licences, which formally takes effect in July. In doing so it referenced crippling


concession fees and reduced profitability after negotiations with IIAC failed to produce the shop rent discounts the company sought.


A Burberry unit at Incheon T1.


In fact, Lotte recorded sales worth $990m at T1 in 2017 – fractionally higher than revenue the previous year. The three terminated licences


cover perfume and cosmetics (DF1), leather goods and fashion (DF5) and all goods (DF8), leaving Lotte with its liquor and tobacco concession. “Currently we are analysing


the situation internally,” says the spokesperson. “It was a shock. We will prepare new tenders; we are checking when. We will do all three some time, but things are not decided. We will try to do the tender as soon as we can but it takes time.” Still to be decided is whether the three concessions will be tendered


separately or together; whether any concessions will be changed or broken up; the contract period – two and a half or five years; and whether the concourse is bundled with another concession. Under the termination agreement,


Lotte will continue to operate the three concessions while IIAC appoints new operators. Prior to terminating the three


licences, Lotte is understood to have agreed to a 27.9% reduction in its T1 concession fees to reflect the loss of passengers in T1 who had transferred to T2 to take flights operated from the newly opened terminal. Following a series of meetings


and negotiations, IIAC made the same global 27.9% concession fee reduction offer to all operators in T1 to compensate for the loss of passengers and potential duty free sales in T1. Shortly before TRBusiness went


to press, The Shilla Duty Free also accepted IIAC’s 27.9% fee reduction offer at T1. Negotiations between IIAC and


other operators are continuing, TRBusiness understands


in


conversation with SME traders that all are asking for a higher fee reduction.


The Shilla Duty free began its P&C operation at Incheon T2 on 18 January. 94 TRBUSINESS


SME operators claim that IIAC’s offer does not recognise the higher-than-average spending power of passengers in their shop locations that have transferred to T2 and consequently treats SME operators unfairly. «


MAY 2018


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