[비즈한국] SM Duty Free, a subsidiary of Hana Tour039130, has been declared bankrupt. This comes about three weeks after the company filed for bankruptcy on December 24, 2025. SM Duty Free, which launched in 2015, expanded its business by opening the country's first arrival duty-free shop at Incheon International Airport. However, it shut down all operations in 2020 following the THAAD (Terminal High Altitude Area Defense) conflict and the COVID-19 pandemic. After years of legal disputes and over five years of business suspension, SM Duty Free has now entered liquidation proceedings.
The 13th Division of the Seoul Rehabilitation Court declared simplified bankruptcy for SM Duty Free on January 15. Simplified bankruptcy is declared when the applicant's assets are less than 500 million KRW, and the process is streamlined to ensure a quick conclusion. The court stated, "It is recognized that the debtor is insolvent and over-indebted, and that the bankruptcy estate's assets are less than 500 million KRW." The creditors' meeting and the date for investigation of claims have been scheduled for March 31.
According to SM Duty Free's board minutes, the company's total assets as of 2024 were approximately 140 million KRW, with liabilities of about 14 billion KRW. While resolving to file for bankruptcy, the board of directors reported, "As a duty-free operator, we ran a total of four stores, including the Seoul branch and arrival and departure duty-free shops at Incheon International Airport. However, due to excessive competition among duty-free operators and the deterioration of profitability caused by the COVID-19 outbreak in 2020, we ultimately returned our duty-free licenses." They added, "Having been in suspension for several years, and with unfavorable business prospects due to various external factors, normalization of operations is deemed difficult."
The board cited the reason for the bankruptcy filing: "Given the company's worsening financial stability, we judge that there is little possibility of resuming operations or rehabilitation. Filing for bankruptcy, as the company has reached a state where it cannot fully repay its debts, is the best method for the benefit of shareholders." SM Duty Free announced the occurrence of grounds for dissolution on January 16, the day after the bankruptcy ruling. With this, the company has begun the legal process of dissolution 10 years after starting its duty-free business.
SM Duty Free is a mid-sized duty-free operator in which Hana Tour holds a 90.13% stake. It opened a departure duty-free shop at Incheon International Airport Terminal 1 in November 2015, and after receiving a license for a downtown duty-free shop in Seoul, it opened a store in Insadong, Jongno-gu, in January 2016. Due to its name, there were questions about its connection to SM Entertainment, but it was reported that there was no relation. As the government introduced arrival duty-free shops as part of regulatory innovation, SM Duty Free was selected as one of the operators for the country's first arrival duty-free shops, which opened at Incheon International Airport in 2019. SM Duty Free opened its store in Terminal 1, while Entas Duty Free operated the store in Terminal 2.
When SM Duty Free obtained its licenses between 2015 and 2016, the duty-free business was dubbed a 'goose that lays golden eggs.' However, the industry faced a crisis as the number of Chinese tourists declined due to the 2017 THAAD issue, followed by the COVID-19 pandemic. SM Duty Free never turned a profit from 2015 to 2019 as the business environment worsened after its launch.
With international travel effectively becoming impossible due to the spread of COVID-19 in 2020, SM Duty Free closed all its operating locations just five years after launch. It ended operations at its downtown duty-free shop in April 2020 and at Incheon International Airport Terminal 1 in August. The remaining licenses were for the Incheon International Airport Terminal 2 store (expiring in January 2023) and the arrival duty-free shop (expiring in May 2024), but these were also closed after early return of the licenses in November 2020. After clearing its business sites, SM Duty Free reported a suspension of business to the National Tax Service in June 2021 and has remained in that state until now.
The process of exiting the business was not smooth. Incheon International Airport Corporation refused to return the rental security deposit, claiming that SM Duty Free owed approximately 50 billion KRW in relation to the early return of the duty-free licenses. The corporation claimed about 18 billion KRW for five months of unpaid rent and about 33 billion KRW in damages for breach of contract. Conversely, SM Duty Free argued that the corporation's actual loss was in the 7 billion KRW range, based on the 75% rent reduction rate for small and medium-sized enterprises (SMEs) applied with government support between 2020 and 2021.
The conflict between the two parties led to a legal battle. In November 2020, SM Duty Free filed a lawsuit against the corporation seeking confirmation of non-existence of debt regarding the 7 billion KRW claim. The court ruled in favor of SM Duty Free in both the first and second trials, and as the corporation did not appeal, the ruling in favor of SM Duty Free was finalized in October 2024. Hana Tour, which had paid off the 22 billion KRW debt on its behalf, recovered about 19 billion KRW from the corporation.
A Hana Tour official stated, "SM Duty Free's business sites and other assets have already been settled. It took time to reach the bankruptcy filing due to finalizing legal disputes with Incheon International Airport Corporation after the suspension. The debts assumed by Hana Tour have also been settled."
Meanwhile, although the industry has not yet recovered, SME duty-free shops appear to be looking for opportunities to resume business as the number of foreign tourists visiting Korea increases. The Ministry of Economy and Finance announced the addition of downtown duty-free licenses last year, explaining, "We took into account that some SME duty-free operators expressed their intent to establish new downtown duty-free shops in major tourist areas in Seoul."
Currently, Donghwa Duty Free is the only SME duty-free shop operating in downtown Seoul. Donghwa Duty Free, which is in a state of capital impairment, had been maintaining its existence by operating only a part of its store, but it was able to secure another 10 years of operation after receiving a new license in the SME duty-free license review in December 2025. In addition, Myeongdong Duty Free has acquired a new license, bringing the number of SME duty-free shops in downtown Seoul to two.