Plans for duty-free concessions unveiled by AOT after cancellation of contract with King Power
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Airports of Thailand (AOT) responds to King Power's plea for contract termination at three airports 🛫🛋️
After King Power Duty-Free requested discussions regarding potential termination of contracts at Phuket, Chiang Mai, and Hat Yai airports, AOT is stepping up with a stern response.
Back in 2019, fierce bidding wars boiled over as Thai and international operators alike pounced on the chance to secure duty-free concession rights at these airports. In the end, the golden ticket went to King Power, who pulled off an impressive feat, tenderizing our wallets with a whopping 23.54 billion baht minimum annual guarantee.
Here's a peek at the contracts they bagged:
- Duty-free at Suvarnabhumi Airport: A joyride beginning September 28, 2020, lasting until March 31, 2031.
- Duty-free at Phuket, Chiang Mai, and Hat Yai airports: A rollercoaster journey mirroring the first, from September 28, 2020, to March 31, 2031.
- Commercial management at Suvarnabhumi Airport: Another 10-year-and-6-month romance starting September 28, 2020, ending March 31, 2031.
But, as the pandemic and global economic downturn put a damper on things, sales plummeted, leaving King Power drowning in red ink. They've been hit by a perfect storm of bad news, such as the decline of high-spending Chinese tourists, regional conflicts, trade wars, and protective measures stifling commerce.
AOT, recognizing the struggle and shaking its merciful mane, eased the pressure with relief measures in the form of a new calculation method for minimum annual guarantees. The method switched to a per-passenger rate, gliding smoothly at 127.30 baht for each takeoff, transit, or landing.
Yet, the ongoing crisis has caused a cascade of problems, saddling King Power with heavy compensation payments far exceeding what was initially expected. That, plus their assertion that AOT has been marketing favoritism on its own account, has driven them to seek a solution through shared discussion within a 45-day timeline.
With King Power's bid for contract termination now on the table, AOT has hastily assembled a crack team of analysts to scrutinize the situation thoroughly. They'll examine both the pros and cons of terminating the contract and evaluate the potential impact it may have on duty-free operations in the affected territories. The AOT board will then convene a meeting on June 16 to weigh their options and form a strategic response. Time will tell whether King Power can ride out this storm or if waves crash over them, sending them packing.
Overall:
Here's an overview of the current situation regarding the potential termination of King Power's contracts and the reasons behind it:
- Reasons for Termination: Various factors, such as the cessation of inbound duty-free shops, tax reductions on wine, reclamation of commercial space by AOT, lack of public sector measures for tourist safety, domestic situations, and pandemic impacts have contributed to the decline of tourist and passenger numbers, affecting sales.
- Global Economic Slowdown: Including trade wars and other negative factors responsible for dragging down sales.
Sources:
- King Power International welcomes new prime minister
- King Power struggles with Thai concessions
- Thailand's malls brace for fresh wave of shopper woes
- King Power submission to AOT
- The ongoing crisis in the international economy, characterized by trade wars and a decline in sales, has been detrimental to King Power's business operations, particularly at the airports in Phuket, Chiang Mai, and Hat Yai.
- Recognizing the struggles faced by King Power, the Airports of Thailand (AOT) has implemented relief measures, including a new calculation method for minimum annual guarantees, to alleviate some of the pressure on the company.
- Despite these measures, the ongoing pandemic and economic downturn have led to heavy compensation payments for King Power, causing them to seek a solution through shared discussions with AOT within a 45-day timeline.
- The business community is closely watching the outcome of these discussions, as the potential termination of King Power's contracts may have significant implications for duty-free operations and the broader economy in the affected territories.
