SOUTH KOREA. Deputy Prime Minister Hong Nam-ki today unveiled a comprehensive support package for the economy worth more than KRW20 trillion (US$16.5 billion) – including the introduction of relief measures for small and medium sized duty free retailers at airports.
There were no measures announced to aid large duty free retailers. Airport companies in other countries – notably Singapore, Hong Kong and Thailand – have introduced their own relief packages for business partners.
The Korean travel retail industry has witnessed a sharp downturn in passenger traffic and duty free sales caused by the COVID-19 outbreak. According to statistics published by the Ministry of Finance and Economy, Chinese arrivals to Korea declined -80.4% year-on-year in the third week of February and by -72.8% in the period from 1-24 February. Duty free sales are down by -40.4% year-on-year through January and February and are expected to deteriorate further amid a surge in confirmed cases of COVID-19 in Korea.
The measures announced by the Ministry of Economy and Finance sees rent relief for small business owners and SMEs that are renting property from government-owned public property. Incheon International Airport and Korea Airports are among the names of 103 institutions which the government announced would provide rent cuts to its SME tenants.
With this package, concessionaires at airports throughout Korea will see rent either reduced by 20-35% for six months, or if the rent is linked to sales, provide a six-month grace period for payment.
Larger duty free operators will continue to pay annual guarantees based on the first year bid amount as agreed upon during the tender process. Incheon International Airport earned KRW1.076 trillion (US$891 million) from rental revenue in 2019. Of this, 91.5% or KRW984.6 billion (US$814 million) came from large conglomerates (see chart above).
