Thursday, December 12, 2019

Lotte considers pulling out of Incheon airport

Sep 05. 2017
Travelers shop duty-free at Incheon Airport on Monday. (Yonhap)
Travelers shop duty-free at Incheon Airport on Monday. (Yonhap)
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By The Korea Herald/ANN

1,686 Viewed

SEOUL - Lotte Duty Free, South Korea's top duty-free operator, is considering withdrawing from Incheon International Airport, a company source said Monday, as the local duty-free industry is struggling to cope with the impact of a diplomatic row between Seoul and Beijing over the deployment of a US missile defense system here.

Lotte Duty Free is considering pulling its duty-free business out of Incheon Airport’s Terminal 1 in the wake of falling sales, according to an official with the company Monday.

“We are in the midst of negotiations with the airport to adjust rent costs, but closing our outlet at the airport is a serious consideration,” the official said.

Korea’s largest duty-free operator has seen sales numbers decrease sharply, following tensions between China and Korea due to the latter’s decision to deploy an American anti-missile system here.

The majority of Lotte Duty Free’s sales, which had been rising at about 20 per cent annually for the past few years, had come from groups of Chinese tourists. So far in 2017, the issue related to the defense system has led to a 14 per cent drop in sales on-year for Lotte.

As sales fell, Lotte Duty Free and other operators such as Shilla Duty Free have called Incheon Airport’s high rent costs burdensome.

At the end of August, executives from duty-free operators met with Chung Il-young, the CEO of Incheon International Airport Corp., demanding lower rents.

Last year, major duty-free operators at Incheon Airport paid out more than one-third of their total sales at the airport as rent.

Earlier this year, Hanwha Galleria announced that it would be closing its outlet at Jeju International Airport, run by Korea Airports Corp., for similar reasons. Due to a delay in determining the next operator, Hanwha will be closing its outlet in Jeju at the end of 2017.

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