Lotte and Shilla withdraw Incheon Terminal 1 bids amid Covid-19 concerns

By Andrew Pentol and Luke Barras-hill |

Lotte-LT-Incheon-tender-2020

Lotte and Shilla were the preferred bidders for the Incheon International Airport Terminal 1 liquor, tobacco and food concessions (DF3 and DF4).

TRBusiness can confirm that Lotte Duty Free and The Shilla Duty Free have surrendered their bids to run duty free shops at Incheon International Airport Terminal 1 due to the Covid-19 crisis.

The Shilla Duty Free and Lotte Duty Free were named as preferred bidders for the DF3 and DF4 (liquor, tobacco and food concessions), respectively, as part of a tender issued in January.

News of the withdrawals was met with surprise by this publication given South Korea’s laudable efforts in controlling Covid-19 transmissions, offering hope of a future resurgence in passenger traffic.

However, the decisions are perhaps not completely unexpected given the companies had lodged bids with Incheon International Airport Corporation (IIAC) based on contract terms set out by the operator before Covid-19 had hit in earnest.

In the meantime, TRBusiness has been reliably informed that both retailers believed it would be difficult to operate the concessions under the existing bid conditions.

TOUGH CONCESSION NEGOTIATIONS

This publication also understands that Lotte Duty Free and The Shilla Duty Free asked IIAC to renegotiate the contract terms, a request that was subsequently rejected.

It is unclear whether IIAC will re-tender both lots (DF3 and DF4) or if the contracts will be awarded to the second preferred bidders (Shilla for DF4 and Lotte for DF3). TRBusiness has reached out to IIAC for clarity.

As reported, Hyundai Duty Free Department Store was also named preferred bidder for the fashion and miscellaneous concession (DF7), at the expense of Lotte Duty Free, The Shilla Duty Free and Shinsegae Duty Free.

The Korea Herald has reported that Hyundai Duty Free Department store inked its contract, although TRBusiness is also seeking confirmation on this. The perfumes and cosmetics lot (DF2) failed to attract any bidders.

Until recently, concession negotiations with IIAC to help mitigate against the impact of the crisis had reached deadlock, but on 1 April, South Korea cut airport concession guarantees by 20%.

City Duty Free and Grand Duty Free (excluding SM Duty Free and Entas Duty Free classed as ‘medium’ enterprises) had already received a 25% discount on rents for six months. Larger corporates instead received a payment holiday.

Shilla-PandC-Incheon

The perfumes and cosmetics concession at Seoul Incheon International Airport Terminal 1 (DF2) failed to attract any bidders when the tender was issued in January.

While the 20% concession guarantees cut was welcomed by the likes of Lotte Duty Free, The Shilla Duty Free and Shinsegae Duty Free, the proposed reduction was deemed insufficient in terms of offsetting the impact of the Covid-19 crisis.

 

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