Following the March 11 five-year Gimpo Aiport duty free tender awards to both Lotte Duty Free (liquor and tobacco) and Hotel Shilla Duty Free (Perfume & Cosmetics), both operators are due to open the much-enlarged facilities in the middle of next month.

The new contract awards follow the decision by the Korea Airports Corporation (KAC) to separate P&C and L&T into two contracts – in an attempt to maximise its return – from duty free space which is being increased from 400sq m to just over 800. 

All operators had previously indicated their preference for a single contract covering all product categories at the location, but their wish was not granted.

TARGETING SALES OF $88.7M
Total duty free sales at Gimpo reached W.76bn ($67.3m) last year, compared with W.66.7bn ($59.1m) in 2009 and Korea’s second-largest airport (after Incheon) has shown consistent traffic growth over the last two to three years. 

Based on the enlargement of the duty free areas across both new contracts, KAC is said to be expecting sales of around W.100bn ($88.7m) in the first full year of trading.

“These are five-year contracts until May 2016. There will be new concession bidding then,” said Chi Jun Park, Deputy General Manager of Gimpo International Terminal Operations and Planning Team.

NEW GUARANTEES ARE CONFIDENTIAL
“The contractual agreements are very important, so we have not said anything. Lotte Duty Free pays W.20bn ($18.4m) per year for the existing sole operator concession – the same as AK Duty Free.” 

[Lotte took over the AK Duty Free concession in July 2010, prior to last March’s tender process, after AK Duty Free was effectively forced to dispose of all of its duty free operations, due to massive losses caused by high concession fees at Incheon Airport. Lotte’s sales between July-December 2010 reached $35m, an improvement of AK Duty Free’s comparative performance-Ed].

Lotte Duty Free’s new concession B is for two shops with a combined area of 430sq m, while Shilla Duty Free’s new concession A is for a single 400sq m duty free outlet.

According to KAC figures, some 3.16m international passengers used Gimpo Airport in 2010, up 27% on the previous year.