TOP 10 OPERATORS 8: KING POWER INTERNATIONAL 8


Contracts extended and MAG assistance granted as King Power looks to the future


Fresh from securing a clean sweep of new duty free contracts last year, King Power International will hope to be able to hit the ground running when the agreements begin in 2022. Andrew Pentol reports.


King Power’s new commercial contracts by one year in July, until 31 March 2032, in response to the crisis. All agreements were due to run


from 28 September 2020 to 31 March 2031, with the early period set aside for renovations. The Phase 1 renovation period was


also extended by a year to 31 March 2022. The start and finish of the new concessions (Phase 2) moved to 1 April 2022 and 31 March 2032 respectively. King Power Duty Free Co Ltd and


Above: King Power will be looking forward to serving increased numbers of passengers across its Thai airports once the pandemic passes.


W


hen King Power International secured a number of key airport


commercial contracts last year at Bangkok Suvarnabhumi (BKK) and other regional locations such as Phuket, Chiang Mai and Hat Yai, the company was looking to the future with a feeling of optimism. The approval by Airports of


Thailand (AoT) on 19 July 2019, of all three contracts (BKK duty free contract, BKK commercial areas contract and the regional airports duty free contract), marked the end of a testing time for the retailer. This was because the single


contract model covering all four airports, initially proposed by AoT came under intense scrutiny. Organisations such as the Thai


Retailers Association and Thai Duty Free Shop Trade Association,


Thankfully Airports of Thailand (AoT) decided to extend King Power’s new commercial contracts by one year in July, until 31 March 2032 in response to the crisis.


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believed the master concession model encompassing the four airports was monopolistic. In short, they were strongly against the single- contract model. The scrutiny was far from ideal for


King Power, but in reality the retailer faces a much tougher test now and in the future due to the coronavirus (Covid-19) pandemic.


Longstanding incumbent King Power has held the BKK duty free contract since 2006 and runs airport stores in Don Mueang – where it has a contract until 2022 – Hat Yai, Chiang Mai, Phuket and U-Tapao Rayong-Pattaya. It also operates downtown


duty free stores in Rangnam Road, Bangkok and cities such as Pattaya, Srivaree, Phuket and Mahanakhon.


King Power Suvarnabhumi Co Ltd had been planning to contact trade partners and start undertaking renovation work at the end of 2019 with a view to making minimum annual guarantee (MAG) payments relating to the agreed contracts from 1 April 2021. MAG terms for King Power,


however, were adjusted by AoT until passenger traffic equals or succeeds 2021 forecasts. The new MAG conditions will come into effect when King Power begins making payments on 1 April 2022. Outlining the formula used to


calculate the MAG for year one (which begins on 1 April 2022), AoT said: “The proposed minimum guarantee in 2021 shall be divided by the passenger volume forecast in 2021 conducted by the company to calculate sharing per head.” The airport operator added


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estimates, the retailer generated total sales of approximately $2.9bn in 2019, +7.4%. But in a post Covid-19 world,


King Power must ensure it adapts to changing buying habits and passenger behaviour in order to build its sales back up to 2019 levels. Thankfully AoT decided to extend


“The value obtained shall multiply the actual passenger volume of AoT in any given year to determine the minimum guarantee in any given year.” An initial round of assistance


measures for concessionaires was approved at an AoT Board meeting in February. Measures included the collection of percentage-based concession charges from operating revenue only, exempting MAG


OCTOBER 2020


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