[UPDATE] IIAC DF sales at $2.4bn; arrivals bid looms

By Luke Barras-hill |


Incheon International Airport duty free sales hit $2.4bn in 2018.

Incheon International Airport (ICN) has once again sealed its spot as the globe’s number one operator for duty free sales.

Annual duty free revenues grew double-digit (+14.8%) in 2018 to hit US$2.4bn, outflanking Dubai International Airport via Dubai Duty Free in second at $2bn.

Passengers totalled 68m, which IIAC Executive Director of Concessions Development Group Chang-Kyu Kim correctly predicted during an interview with TRBusiness in the August Top 10 Airports report.

Of that total, 67m were departing international passengers (+9.9%).


The result is particularly impressive in a year when THAAD-related pressures on Chinese arrivals only began to ease in March, according to the Korean Tourism Organization. The return to growth has been pronounced since then, with the latest data for November 2018 indicating a 35% year-on-year spike in numbers.

Nonetheless, Incheon International Airport Corporation (IIAC) has been proactive in offsetting the impact in various ways, such as stimulating growth in its low-cost carrier segment including launching new routes to Japan and Southeast Asian countries, TRBusiness was told previously.

Perfumes & cosmetics (P&C) strengthened its grip as the best-selling category, generating $953m and accounting for a 40% share of total sales. Meanwhile, liquor & tobacco (L&T) posted $540m and took a 23% slice of revenues.

In a results statement, IIAC points to momentum generated by last year’s opening of Terminal 2, which houses flagship P&C and L&T shops from The Shilla Duty Free and Lotte Duty Free, respectively, together with the PyeongChang 2018 Olympic Games as important contributors to the result.


Terminal 2’s flagship stores boast a variety of luxury boutique brands such as Chanel and Valentino, offering passengers immersive and digital-led shopping experiences.

Shinsegae Duty Free and Grand Duty Free also bolstered sales with their respective openings at Terminal 1, with IIAC praising both for minimising store closures during the transition.


As reported, IIAC is gearing towards the expected opening of duty free arrivals following a government move to de-regulate the business.

The first shop, which will merchandise all categories except tobacco with a $600 allowance ceiling applied to South Korean nationals, is now understood to be going live in June.

As anticipated by TRBusiness, the operator is to begin accepting SME bids from next month when the tender publishes, an IIAC Spokesperson confirmed. IIAC declined to share further details on the bid, including interested parties, when TRBusiness enquired.

IIAC hopes duty free arrival shops will temper ‘discomfort’ experienced by tourists travelling with duty free goods, while providing a boost to domestic consumption.

“With the introduction of the first Arrival Duty Free in Korea, Incheon Airport will strengthen the competitiveness as the leading airport of the industry, satisfying customers with an advanced shopping environment,” added IIAC.


This time last year, the industry was discussing the perpetual THAAD impact on South Korean duty free, compounded by heightened security tensions on the Korean peninsular.

At that time, IIAC reported it had lifted sales in 2017 by 4.1% to $2.1bn , as it eyed its much-vaunted Terminal 2 opening in January. The THAAD ‘effect’, however, wasn’t going away quietly, and the subsequent pressures of Lotte Duty Free’s concession withdrawals at Terminal 1 and rent negotiations with other concessionaires underpinned THAAD’s perfect storm.

One year on – and with Chinese arrivals to South Korea becoming more fulsome month-on-month – the signs point to a resounding turnaround. However, there is still work to do. 

Incheon’s diverse passenger spending profile has helped largely to offset the impact of THAAD since the US-deployed missile defence system began its stationing in March 2017.


IIAC is expected to release a new commercial tender at Terminal 1 by the end of 2019 ahead of key contract expirations in 2020.


Indeed, the Korean to Chinese share of sales was weighted at around 50:30 that year, TRBusiness learned in conversation with Incheon officials in August 2017, but the subsequent knock-on effect to Chinese tourist volumes was harsh – and swift.

Following a tumultuous year, numbers began to revive following South Korea and China’s decision to ‘normalise’ trading relations in November 2017, paving the way for Chinese tourists and group tours to return to the country.

China’s share of passenger volumes at Incheon rose from around 10% to 15% following the agreement and IIAC expects that to reach 20% by the end of 2019, IIAC Executive Director of Concessions Development Group Chang-Kyu Kim told TRBusiness in an exclusive interview during the TFWA World Exhibition & Conference in October.

In terms of spending, the signs are also reassuring. As reported in the most recent Top 10 Airports report in August, Korean passengers accounted for the greatest slice of sales (48%), followed by Chinese (36%) and Japanese (3%) in H1 2018.

Closer to home – and as alluded to above – South Korea’s move to permit duty free arrivals offers strong promise for the country, in a similar manner to Japan’s still nascent rollout of stores at the likes of Tokyo Narita and Kansai following government tax reforms.

Unsurprisingly, it remains relatively difficult to predict the fiscal contribution of the business to Incheon’s DF&TR sales, although it is likely to be fairly modest – particularly in the early phases.

IIAC had suggested it could account for approximately 6% of its total DF&TR earnings, but with further de-regulation (as mentioned above sales will be subject initially to a $600 allowance limit for South Korean nationals and excludes tobacco), that could rise to around 10%.

Separately, Incheon is looking ahead to a remodelling at Terminal 1, which opened in 2001, and a new commercial tender is expected to release by the end of the year ahead of the expiration of contracts held by Lotte Duty Free (note: Lotte Duty Free’s L&T contract was re-tendered and won by Shinsegae Duty Free earlier this year) and The Shilla Duty Free in August 2020.

The long-running debate on whether a non-Korean operator could snare a presence at Incheon continues; while IIAC is expected to open up the market to international bids, many will have felt disappointed by the result at Terminal 2 as Lotte Duty Free and Shilla moved to consolidate their positions.

Macro-economic and geopolitical pressures will continue to shape business at Incheon – and the entire DF&TR sector. This unpredictability makes for an interesting 12 months…

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