Incheon International Airport Corp. said Thursday that the fashion and accessories duty-free area in its upcoming second terminal may go to a single bidder without competition.

“It is too early to say what will happen, but if we fail to receive two bids on DF3 in our second tender, we may grant the rights to a single bidder,” said a spokesman for Incheon Airport.

The area, called DF3, failed to receive any bids from duty-free operators in a first tender that ended in early April. It is currently in the process of a second tender that will end Tuesday.

The tender originally required two separate bidders to be valid. However, Incheon Airport said that it may grant the rights to a single bidder in the interest of time. According to the airport, an operator must be designated and contracted by May in order to begin operations of the duty-free area by October, when the terminal is to be opened.

Evaluations of operators’ bids for the other five duty-free areas in the second terminal are scheduled for Wednesday to Thursday.

The Korea Customs Service, which grants the final duty-free licenses needed by operators, has agreed to sign off on the single bidder in this situation, the airport said.

Four large operators -- Lotte, Shinsegae, Shilla and Hanwha -- bid instead on the other two areas reserved for large operators, liquor/tobacco and perfumes/cosmetics. Industry sources said that the companies shied away from DF3 because of the high costs associated with recruiting luxury brands and decorating stores, as future sales growth remains uncertain.

If no bids are placed for the second tender, the airport will lower its asking rental prices for a third tender -- alleviating the cost concerns of potential operators. The dilemma for operators is whether they will collectively wait for prices to drop at the risk of losing their bid to another company, or if they will meet Incheon Airport’s asking price and hope that they are the sole bidder.

The main reason for anxiety among duty-free operators is falling sales from the recent drop in Chinese tourists. The airport predicted that up to 4 million fewer, or nearly half of the inbound Chinese tourists last year, will be coming to Korea this year due to the fallout from the Korea-Chinese row over the deployment of an American anti-missile defense system.

The company said that it is looking to new markets to fill the place of falling demand from China, in areas such as Japan, Southeast Asia and India.

However, in terms of duty-free sales, Incheon Airport remains relatively insulated from the impact of the decreasing Chinese tourism. “Compared to downtown duty-free outlets, the Incheon Airport duty-free stores are less dependent on Chinese shoppers,” a spokesman for the airport said. While some duty-free stores in Seoul make 80 percent or more of their sales from Chinese tourists, at the Incheon Airport stores it is only about 30 percent thanks to higher sales from outbound Korean tourists, he said. 

By Won Ho-jung (hjwon@heraldcorp.com)