Shilla Duty Free has been reviewing its airport operations. Shown here is a Gimpo Airport store.

When Shilla Duty Free’s Q3 results were revealed by parent company Hotel Shilla earlier this month, the signs looked promising: losses were cut and revenue increased slightly. On a quarter-on-quarter basis, however, the trend was less clear.

Shilla Duty Free generated KRW849.6 billion/$580.2 million in Q3, just +0.6% more than in the same quarter in 2024. Versus the previous quarter (April to June), revenue was flat (down -0.1%). Essentially, this means there has been no meaningful sales momentum over the past year.

Where the business scored was in terms of profitability. On a year-on-year basis, the Q3 operating loss improved drastically: a loss of KRW38.7 billion/$26.6 million in Q3 2025 was reduced to KRW10.4 billion/$7.1 million. Moreover, the operating loss reduced from KRW11.3 billion in the second quarter (see chart below).

Shilla Duty Free Q3 2025 revenue and operating profit.

The turnaround was enough for Hotel Shilla—which also runs a sizeable hotels and leisure operation across the country—to return to profit in Q3, versus the same period in 2024 with KRW11.4 billion. The company’s operating profit also increased from KRW8.7 billion in Q2. The biggest issue for Hotel Shilla is that travel retail’s operating margin has remained negative for five consecutive quarters.

Shilla’s heavy reliance on travel retail

While the hotels and leisure business has a solid performance in both revenue and operating profit, Hotel Shilla’s business is heavily reliant on its travel retail arm, which accounted for 83% of revenue in Q3. The parent said that its more consequential division suffered a revenue decline of -1.3% YoY in its downtown business while airport revenue increased by +2% YoY.

The airport business was helped by passenger traffic at Incheon International Airport increasing by +6.1% year-on-year in the first half of 2025, reaching a record 36.4 million passengers, a +2.3% increase over pre-pandemic levels in H1 2019.

Overall, the financials indicate that Shilla Duty Free’s efforts to reduce costs are paying off, but that it has to keep going to turn in lasting profits. So, despite the passenger recovery, the operator has decided to pull back from its unsustainable operations at Incheon Airport, even though this will mean a revenue contraction. Rival Shinsegae Duty Free has taken similar steps, and this should help both companies to reap better financial rewards and maintain sustained profitability, likely from the second half of next year.

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