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“We suffered. It was unbelievable. I am over 60 years old and I have never come across anything like this“ |
Chulchit Bunyaketu King Power International Group Deputy Chairman |
THAILAND. “It’s business as usual.” That’s the optimistic and confident verdict of King Power International Group Deputy Chairman Chulchit Bunyaketu after a dramatic recent turn of events in the company’s long-running struggle with Airports of Thailand (AOT).
Chulchit was speaking this week to The Moodie Report at King Power headquarters in Bangkok. As has been well-documented, the company’s master commercial concession and duty free contract at Suvarnabhumi Airport has been under a cloud since the AOT board’s decision in March 2007 to nullify both agreements. It claimed that because each of the two contracts was worth more than THB1 billion, they should have been approved under the Public-Private Joint Venture Act.
However King Power dug in, responding with its own lawsuit against AOT, and a claim for THB68 billion in compensation from the airport company’s board.
But the momentum has swung steadily towards King Power since the Thai general elections of 23 December and the success of the People’s Power Party-dominated coalition. The party is closely linked to former Prime Minister Thaksin Shinawatra who was ousted in the September 2006 military coup. The interim military government immediately set about investigating a range of contracts, including King Power’s, struck under the Thaksin regime.
Earlier this month King Power was buoyed by a Civil Court temporary injunction, which allowed it to continue to operate (and refit) the duty free shops at Suvarnabhumi and regional airports in accordance with its initial contracts. Local newspapers immediately lauded the injunction as positive news for the retailer. “˜King Power wins breathing space’ said The Nation; “˜King Power back in business’ cried rival paper the Bangkok Post.
When we sat down this week, Chulchit was speaking for the first time to the international press since a landmark interview with The Moodie Report last August. At that point he said starkly: “We are simply fighting for justice. We have done nothing wrong and everything by the book and by the law of our land. We cannot stand by and allow our business, our vision and our reputation to be damaged – and we will not.”
King Power has been as good as its word. It has been quite some fight. And this week Chulchit made it clear the retailer believes the worst is now behind it.
“We are really pleased that judicial power has proved to be something we can rely on,” he said. “Governments come and go”¦ but this has proved that Thailand has a very good judicial system.
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King Power hopes that political stability will bring the crowds back to Suvarnabhumi Airport |
“The former board left us with no option except to go the final source of power which we believed still existed in this country – judicial power. That was objected by the AOT board which said it should be handled by the Administrative Court. But the Civil Court said very firmly that it is under their jurisdiction and that was confirmed by the Administrative Court. That means the judicial power in this country is really fair.”
But it has been a gruelling few months, he admitted, a period that placed enormous strains on the whole management team. “I have spent most of my time with the lawyers,” he said with a laugh. “Never one time in the history of Thailand has the government taken the position of cancelling a contract, yet we had so many storms from the board – saying “˜The contract is invalid’, ‘You have to get out’ and so on.
“They just came out and said “˜Your contract is invalid’ and that’s really bad. No-one should say that unless the court has decided so or the matter has been fully investigated. This was not about contracts, it was about politics.
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King Power’s downtown (left) and Suvarnabhumi Airport operations (right) seem set for a period of prosperity after the “huge storm” of recent months. And the new government is minded to encourage tourist-related activities, says Chulchit. | |
“We were caught in the middle – the military government was looking at all the various projects that took place during the Thaksin government and we were caught in between.”
Just how tough did it get? “One would have to admit that although we stood firm it was like a huge wind blowing,” Chulchit responds with a grimace. “We suffered. It was unbelievable, all the management were under stress. Because if you wanted to be a good corporate citizen you simply didn’t fight back the way they were fighting”¦ by words. We didn’t want to create a war of words in the television or the press.
“I am over 60 years old and I have never come across anything like this. They tried so hard to make [inflammatory] statements week by week because of certain motives.”
Now with a new board in place and the local newspapers suddenly coming out with stories more sympathetic to King Power, all that has changed. But, perhaps surprisingly given what it has gone through, King Power still wants its day in court.
“We want to set out the record,” Chulchit explains. “If there were to be some form of compromise, I would love to see it done under court jurisdiction. We have eight more years of the concession and I want it to be fully protected now. I want to give comfort to my major supporting bank, so if there is going to be compromise let’s do it under the court procedures.”
But one thing is clear, whatever the verdict the process will take years. “The lawyers will get rich,” said Chulchit with a chuckle. And while he’s too experienced a hand to second guess the court’s verdict he emphasises once again the company’s complete belief in the legality of its position.
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Chulchit Bunyaketu: “Governments come and go but all this has proved that Thailand has a very good judicial system” |
“We have been confident all along. We were absolutely careful and we talked to lawyers all the time before entering into any agreement. I can’t say we will win or lose but I am confident. I am confident about the documents, about the people involved, about the government officials [of the time], and about the ex-board who were there at the time. They are all very solid. And for every step we took before we signed the concession we have a proven document to support it.”
He’s also happy about the approach of the current government, which has already proved itself pro-Suvarnabhumi and pro-tourism. “This present government has a long term view about how to develop the tourism business in Thailand,” he says.
So what happens next, given that the AOT is currently without a board? Chulchit says there will be an extraordinary meeting on 14 March which will see the election of new members. And though he doesn’t say so it’s a certain bet that the new board will be much more disposed towards the interests of Suvarnabhumi’s concessionaire.
Chulchit replies with understatement while still managing to hint at the company’s outrage about what it has been put through: “I would expect the Board to have more sense of the business and not just take the matter into their own hands without justification or any internal investigation.”
While he says some rival retailers “smelled blood” during the worst days of the crisis, Chulchit says the suppliers were mostly very supportive. “At first we had to talk to them a lot but now they are helping us. For example, I recently concluded an agreement with Polo Ralph Lauren [for a boutique] here at the downtown shop and at the airport. The contract was executed despite all the issues. They are a US company so have to look seriously at all legal aspects. So they were pretty confident in us.”
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In mid-2007, when things were looking desperately difficult, I asked Chulchit how morale was bearing up in the company. Back then he answered: “I would say it’s actually even higher than before. One of the reasons is that we are starting to get support from the Thai people. Everywhere when I walk into a business function people ask if I am OK and tell me they will back us up; they say you have done the right thing, don’t surrender, don’t give up the fight.
“That is also happening in the press. People who used to get jealous about us begin to feel that it’s reaching the limits of unfairness. I don’t think the public will tolerate that. So we’re not fighting alone now. We are fighting with our 6,000 staff and with Thai society behind us. So anyone coming into this area will have to think twice.”
Months later, I ask him the same question. This time his response is more sanguine. “We have proved that we have a solid team,” he says. “We are all in good spirits.”
But there is a commercial rider – Chulchit estimates that sales have been eroded by at least -10% by the former Board’s actions. “We are currently -10% less than plan [at the airport] but still +10% more than the year before last [at Suvarnabhumi’s predecessor Don Muang Airport].
Adverse publicity about the coup also hit South Korean and Japanese visitor numbers to Thailand, though that has been offset to some extent by rising arrivals (and sales) from mainland Chinese.
King Power’s downtown business – opened in August 2006 – is progressing well, Chulchit says. “We’re over target this year. And if you come here between 3 and 4 in the afternoon you will see that even though we have space for 50 coaches it is not enough. The record [for sittings] in our restaurant is 2,000 a day for lunch and dinner so the synergy between the restaurant, the shopping and the tourist is perfect. They can have a quick lunch or dinner and then shop without wasting time.”
They can also stay on site and – soon – be entertained. In late 2007 the company opened the 400-room, five-star Pullman Bangkok King Power next door, which is already achieving impressive occupancy rates. “Ever since we opened it has seen positive cash flows, which is a record in Thailand. After opening, the occupancy rates were 80-90%.”
The same complex also features the stunning Aksra Theatre, an integral THB600 million (US$19 million) component of King Power Chairman Vichai Raksriaksorn’s dream of a one-stop culture-to-entertainment-to-shopping extravaganza in downtown Bangkok (see our review on The Moodie Blog).
Now facing the future with renewed confidence, Chulchit speaks of an ambitious revamp of the company’s retail offer at booming Phuket Airport and the company’s delight in securing the inflight retail contract onboard Thai Airways late last year.
The latter came as a huge boost given the context of the dispute with AOT, he says. “We wanted to prove to the world that King Power is a good company. Under a different board, that of Thai Airways, we got a fair hearing for our bid. They recognised our expertise and they recognised the benefit we bring to the Thai community. So we are very happy with that as all that was happening while AOT was trying to kick us out.”
Is he worried that the volatility of Thai politics could yet return to haunt King Power and its airport contracts?
“No, I have been through the worst,” he replies without hesitation. “Judicial power is protecting us now and I recently had a meeting with a couple of our banks and they are quite pleased. We showed we had the spirit to fight and it proved to be right. For the last four to five years we never took a rest and then this situation came up – now we have to work twice as hard to improve the business.
“Khun Vichai is in a good fighting spirit – we all are. We are all fighting for the right to run this business in our homeland.”
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MORE STORIES ON KING POWER
Further boost for King Power as Airports of Thailand Chairman and Board members resign – 13/02/08
Positive news for King Power as Thai Civil Court issues temporary injunction – 04/02/08
