THAILAND. Airports of Thailand (AOT) has defended and further clarified its decision to offer contract assistance measures to King Power International Group and its subsidiaries due to the impact of COVID-19. As reported on 30 July, the airport company extended ten-year commercial contracts agreed last year with King Power by a further year until 31 March 2032, and updated the formula by which rental payments are made.
The contracts are those won by King Power Duty Free Co., Ltd to run the duty free business at Bangkok Suvarnabhumi Airport, and at the regional airports of Phuket International, Chiang Mai International and Hat Yai International. They also cover King Power Suvarnabhumi Company’s ten-year concessions across other commercial zones at Suvarnabhumi (including food & beverage, services and foreign exchange).
In a statement today, AOT noted that the first six months of the contracts (which were each due to run from 28 September 2020 to 31 March 2031) were intended as a period for “area improvement and decoration” in the main Passenger Terminal Building and the new Satellite 1 at Suvarnabhumi. But, it added, the COVID-19 outbreak “obstructed the concessionaires to be able to prepare as previously scheduled” and also forced the postponement of the Satellite 1 opening from late 2020 to October 2022.
AOT said that King Power’s forecasts and minimum guarantee levels for year one were based on pre-COVID-19 conditions, and that the retailer had requested assistance measures “in line with the facts”.
As reported, AOT granted a further year’s extension to King Power due to the disruption, and also agreed to adjust the MAG payment conditions due from King Power until passenger traffic exceeds the forecasts made in the bid for 2021.
AOT stated: “As soon as the passenger volume is equal to the passenger volume forecast, AOT will further increase the minimum guarantee by means of the calculation formula as determined in the contract.”
Building on its clarification, AOT said: “The assistance measures for the concessionaires and airlines affected by the COVID-19 outbreak were prudently considered based on various factors including fairness as well as shareholders’ interests. As soon as the situations return to normal, AOT’s operations can continue without interruption, thus having positive impacts on AOT’s operations and the national economy as a whole.”
On its rationale and overall approach to partners, AOT stated: “The travel restrictions to control the COVID-19 outbreak, imposed by various countries, including Thailand, have brought inbound and outbound travel to a standstill, and continuously caused a drop in overall passenger numbers at AOT’s airports.
“Moreover, concessionaires and airlines with over 1,000 contracts have been faced with a drop in revenue while bearing the burden of expenses. In light of the decline in passenger numbers and conformity to the government’s policy, AOT, as a state enterprise, therefore established the assistance measures for the concessionaires and airlines.”
The airport company repeated its downbeat forecasts for overall airport revenues for the coming years, saying it expects a -50.7% decrease in revenue in 2020, compared to fiscal year 2019. In 2021, AOT is predicting a -42.2% decrease in revenue compared to 2020. In 2022, AOT forecasts a +188.13% increase compared to fiscal year 2021.
It noted: “However, such predictions are based on the assumption that COVID-19 vaccines are developed and the passenger volume in 2022 accounts for 76% of that in 2019.”
