Tensions between Incheon International Airport Corp. and major duty-free operators have reached a boiling point as the corporation refuses to participate in court-led arbitration over rental fee reductions.

In response, Shilla Duty Free and Shinsegae Duty Free have threatened a full withdrawal from the airport.

Speaking to Maeil Business Newspaper on Thursday, legal representatives for the two companies said, “Although both operators have eight years remaining on their lease contracts at the airport, the current rent levels are unsustainable due to mounting losses. If mediation fails, we will exit the airport entirely.”

Each duty-free operator reportedly pays around 30 billion won ($21.8 million) per month in rent, while incurring monthly losses of 5–6 billion won due to sluggish sales.

The companies argue that even with steep penalties for early termination, pulling out may be more financially viable in the long run.

In April and May, Shilla and Shinsegae formally invoked their legal right to request a 40 percent rent reduction for their cosmetics, perfume, liquor, and tobacco stores in Terminals 1 and 2. However, Incheon International Airport submitted a formal objection to the court before the first arbitration session, refusing any proposed adjustments.

Although a second session is scheduled for August 14, the airport authority has already declared it will not attend. The corporation cites potential breaches of fiduciary duty, emphasizing that the rental terms were finalized through international bidding and cannot be altered based on current market conditions.

It also raised concerns over fairness, as competing firms lost the original bidding due to the rent offers made by Shilla and Shinsegae.

“The rent structure was clearly outlined in the original request for proposals, and both operators agreed to the terms,” said an official from the airport. “Participating in court-led arbitration could open the door to legal complications.”

The official added that rent reductions are only allowed under specific conditions stipulated by national contract and lease laws, and the operators’ claims of deteriorating business conditions do not meet these criteria.

Nonetheless, the Incheon District Court has requested an independent appraisal of fair rental levels by external firms, including Samil PwC.

Legal representatives for the duty-free operators warned that “by disregarding the court’s appraisal order and refusing mediation, the airport authority risks long-term harm to its own interests.”

A withdrawal by the two companies could significantly impact the airport’s finances.

Last year, duty-free rent revenues totaled 679.8 billion won, accounting for 27 percent of the airport’s total income of 2.55 trillion won. The specific zones where the two companies are demanding rent cuts alone generated 398.6 billion won.

Industry experts also warn of a potential market shakeup: if the stores are re-bid, deep-pocketed foreign players such as Chinese duty-free groups could enter the market, threatening the domestic duty-free industry.

Some critics accuse the airport authority of self-protective tendencies, noting that rental discounts are often scrutinized during audits.

“For the audit process, faithfully enforcing rental contracts is often seen as more critical than negotiating compromises,” the airport said.

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