THAILAND. The Airports of Thailand (AOT) Board will meet tomorrow (16 June) to consider King Power Duty Free’s contract renegotiation request relating to its contracts at three regional airports – Phuket International, Chiang Mai International and Hat Yai International.
Thai media has been awash with stories saying King Power has requested to exit the three loss-making regional duty-free contracts.
However, The Moodie Davitt Report has learned reliably from senior King Power sources that it is willing to stay on provided it can renegotiate rental terms that it claims have become unsustainable amid an array of negative pressures.
These include the loss of arrivals duty-free space, softened Chinese arrivals consumer arrivals (and even softer spending), global economic uncertainty and reduced passenger volumes.
Other factors include reduced domestic market taxation on wine, reclamation of commercial space by AOT, and the alleged lack of proactive measures to reassure Chinese tourists of their safety.
According to The Nation, the existing duty-free contracts are for 10.5-year terms from 28 September 2020 until 31 March 2031. Amendments were made in November 2020 and August 2022, with the current term running until 31 March 2026.
Following the pandemic, AOT changed the calculation of minimum guarantee payments to a per-passenger rate of THB127.30 (US$3.93), the title reported.
However, with per-passenger spend declining amid a troubled global economy, King Power Duty Free requested contract renegotiations in May – including potential termination if a satisfactory resolution cannot be reached.
Following tomorrow’s meeting AOT is set to create a contract analysis committee, including external consultants from state-run higher education institutions, according to multiple local reports.
The approach is designed to ensure a neutral and comprehensive contract review, according to a well-sourced report in Thai Examiner.
We will bring you updates in coming days. ✈
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