This month’s CEO interview, in this new series, is with the President and CEO of Incheon Airport, Il-Young CHUNG and Duty Free Management Team Director, Tae Seong Kim.
Read the interview here…
About the airport…
Q: What vision do you have for your airport?
A: To become a Global Leading Airport, Incheon Airport is chasing our vision: Sustainable Corporation, Smart Operation, Global Hub and Futuristic Growth.
Q: What are the challenges facing your airport at present?
A: Incheon Airport is confronting international and domestic issues. First, competition among East Asian airports to play the role as a ‘hub airport’ is getting more intense. New airport construction such as Beijing Daxing and airports enlarging their facilities – Shanghai Pudong and Guangzhou Baiyun Airports – are posing a threat to Incheon Airport.
Incheon Airport has suffered from the THAAD issue last year. The number of Chinese group travelers decreased sharply due to the Chinese government’s regulation. Incheon Airport, however, is growing stably thanks to rapid growth of LCCs and through launching new routes to Japan and South East Asian countries.
Regarding the Duty Free market, Internet and downtown duty free shops are encroaching on Airport Duty Free demand.
Q: Airports develop 5/10 and even 20 year plans. How do you see your airport developing and expanding over that time?
A: During our 17th anniversary celebrations marking our opening, Incheon Airport announced its new vision to be among the world’s Top 3 airports by 2027.
- Incheon Airport will enlarge its passenger capacity from currently 72 million to 130 million.
- State-of-the-art technologies such as AI, VR and robots will be applied in various parts of the airport, such as airport operations and customer service, so that Incheon Airport can be reborn as a truly “SMART AIRPORT”
- Incheon Airport will also develop Complex Resorts in the surrounding area and take part in building and operating overseas airports.
Q: Most airports rely on revenues from Aero, Property, Car Parking and Retail.
Do you see any new commercial opportunities presenting themselves, and do you see the relevance/importance of the four revenue generating areas changing over the short term?
How important is Duty Free to your airport?
A: The proportion of Aeronautical and Non-Aeronautical revenue at Incheon is currently 35:65. Duty Free revenue represents over 60% of non-aeronautical revenue.
The proportion of Duty Free revenue has increased since the opening of the airport, and some experts say that our Duty Free revenue has even reached its peak. Incheon Airport will reinforce its non-aeronautical revenue by diversifying its business in other channels, not only Duty Free.
About the airport retail offer
Q: What is missing from the current duty free offer for your airport?
A: A unique feature of Incheon Airport is lacking in the current Duty Free area. We feel especially that we don’t have enough content which can draw customer participation. In T2, however, we have asked our Duty Free operators to invest more space and resources in developing such unique content. Incheon Airport Duty Free will try to provide our customers with more interesting experiences in the future.
Q: How would you like duty free operators and brands to change to offer more for your airport?
A: We are satisfied that IIAC is maintaining organic growth and has agreeable relationships with the Duty Free operators. As stated above, we would be much happier if operators proposed and established smart, efficient Duty Free environments unique to Incheon Airport. We feel this would be beneficial for our airport.
Q: Does internet shopping and its impact on duty free shopping at your airport concern you?
A: Indeed, Internet and downtown Duty Free are threatening our airport Duty Free sales. In 2017, total sales in Korean Duty Free shops altogether recorded $ 14 billion. And downtown Duty Free alone constitutes over $11billion. In 2018, three new downtown Duty Free shops are planned to open, which is a serious threat to Incheon Airport Duty free today.
Airport’s Knowledge of Consumers
Q: How does your airport try to understand its passenger profile? Do you, for example, conduct analyses of passenger demographics including age, gender, income group, travel motivation, origin and destination?
A: We conduct ‘Commercial Facility Customer Characteristics Research’ every year, and ‘Monthly Service Monitoring’ to understand our customer base.
Q: APTRA carries out annual research studies into duty free & travel retail consumer behaviour in Asia Pacific, by region and by product category. To what extent do their findings contribute to your forward planning?
A: The customer behaviour data such as consumption pattern by nationality are highly utilized when planning Commercial settings.
Airport Benchmarking and Networking
Q: Which are the most relevant and useful ways to benchmark your airport’s performance – financial results, passenger statistics, customer satisfaction, year-on-year, comparison with other airports?
A: Financial information and Passenger Statistics are very helpful. But Customer Satisfaction figures could be subjective, and also Customer Satisfaction doesn’t show meaningful differences among International airports in the Asia region.
Q: Which services from industry groups and bodies such as Airports Council International and the duty free trade associations do you find most valuable?
A: We find the various kinds of data most useful. Statistics and research papers are directly used when operating an airport.
Q: The second APTRA Airport Forum took place in May 2018. Is this a forum in which you participated/will participate in the future?
A: Yes and last year, we also participated in your Forum in Seoul, Korea as well as in Singapore. We are happy to be part of your programs in the future as well.
Local Community, State and National Relationships
Q: Does your airport liaise formally or informally with the regulatory and legislative departments responsible for duty free allowances, retail, transport infrastructure and policy?
A: Yes, Incheon Airport is maintaining close relationship with Customs and Duty Free operators.
Q: APTRA, in association with relevant trade associations, assists in co-ordinating advocacy efforts to defend the duty free & travel retail industry against perceived, potential or actual threats from regulatory bodies, such as product display bans, allowance cuts and the application of restrictive national laws to international duty free sales.
Has your airport and/or country been affected by such regulatory issues and if so, how do you address these issues?
A: Incheon Airport is a public company owned by the Korean Government. When dealing with issues regarding the Duty Free business, we cooperate with government branches like the Customs Department.
Regulations and allowances
Q: Do duty free & travel retail regulations and allowances form part of your customer services training programmes?
A: IIAC is trying to improve our service quality by cooperating with Duty Free operators.