No. 1 duty-free operator demands rent cut amid THAAD fallout

By Yonhap
  • Published : Sept 13, 2017 - 11:21
  • Updated : Sept 13, 2017 - 11:21
Lotte Duty Free, South Korea's top duty-free operator, said Wednesday it has asked the operator of Incheon International Airport to adjust its rental fees, as the local duty-free industry is struggling to cope with fallout from a diplomatic row between Seoul and Beijing over the deployment of a U.S. missile system here.

Last week, Lotte said it was reviewing the option of withdrawing from the country's main gateway, located west of Seoul, if the airport operator refuses to cut the rent to help it weather a fall in the number of Chinese tourists, Lotte's main customers.

"We have officially requested Monday that Incheon International Airport Corp. reasonably adjust the lease fee," the company said in a press release. "We are again trying to discuss the issue with IIAC to avoid the worst-case scenario of discontinuing our business at the airport." 


It has asked the airport operator to come up with a schedule for consultations within a week.

In 2015, Lotte Duty Free agreed to a five-year deal to pay rent totaling 4.1 trillion won ($3.6 billion).

Under the new proposal, Lotte insisted that the IIAC change the way it pays rent to reflect sales as it cannot pay rent for the remaining period of the five-year contract due to drastic changes in the business climate, including a plunge in the number of Chinese tourists.

In mid-March, China imposed a ban on selling package tours to South Korea in apparent retaliation for the deployment of a Terminal High Altitude Area Defense battery. The ban dealt a harsh blow to the local duty-free industry, which has heavily relied on Chinese customers. Chinese tourists accounted for nearly 47 percent of all tourists coming to South Korea last year.

The company said it expects to suffer a 200 billion won deficit this year and a 1.4 trillion won loss over the five-year period.

Industry watchers say other duty-free operators may follow suit should Lotte Duty Free decide to withdraw from Incheon International Airport.

Hanwha Galleria, a retail unit of Hanwha Group, has already decided to shutter its duty-free shop at Jeju International Airport on the southern resort island of the same name, a move that highlights the difficulties facing local duty-free operators. (Yonhap)