King Power seeks duty-free contract renegotiation after setbacks
Retail group proposes reduced payments to avoid contract termination, rebidding
Thailand’s leading duty-free giant King Power is in talks with Airports of Thailand (AOT) to renegotiate its contracts across five major airports, after claiming external factors severely impacted business performance.
The duty-free giant, known for its extensive presence in airports across the country, raised concerns about an increasingly challenging market and the financial burden of maintaining its original commitments.
In response, King Power is proposing a reduction in benefit payments, hoping to avoid the costly process of contract termination and a new bidding process.
Deputy Prime Minister and Minister of Transport, Suriya Jungrungreangkit, confirmed that AOT is handling the matter carefully, ensuring that Thailand’s national interests are safeguarded.
According to AOT, there is no need for Cabinet approval to amend the contract terms, as the agreements are not classified as joint ventures under the 2019 Joint Venture Act.
The crux of the issue, according to sources within King Power, lies in a drastic change in circumstances. External factors like the global economic downturn, the Covid-19 pandemic, ongoing international conflicts, and a more significant decline in tourist numbers than initially forecasted, have all combined to affect King Power’s business viability.
The initial conversation with AOT had suggested that King Power might terminate its contracts, but now the company is focused on finding a more reasonable solution.
“If we continue operating under the current payment structure, we risk significant losses,” said a representative. “We need terms that reflect the current market reality.”
AOT is open to these discussions and acknowledges that adjusting the benefit payments is a reasonable option, but they must ensure the changes don’t disadvantage the government.
“We need to assess whether a new auction could generate more returns or if a renegotiation would be the better path forward,” an AOT source stated.
The authority aims to complete this evaluation within 60 days.
If a new tender process were to go ahead, it would take at least six months to prepare, leaving airports without duty-free shops during that time. This potential gap in service is one of the critical factors AOT must consider as negotiations continue, reported The Nation.
King Power’s call for contract renegotiation may be unique in its scale, but it is not an unprecedented request. AOT’s extensive experience in amending contracts will likely provide the flexibility needed to reach a solution.
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