THAILAND. Airports of Thailand (AOT) has extended the long-term commercial contracts won last year by King Power International Group and its subsidiaries by a year until 31 March 2032, in response to the COVID-19 crisis. The move allows King Power extra time for renovations to take place. AOT has also updated the formula by which rental payments are made.
As reported, on 19 June 2019 the AOT Board approved the bid from King Power Duty Free Co., Ltd (KPD) 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.
King Power Suvarnabhumi Co., Ltd (KPS) also captured concessions for other commercial zones at Suvarnabhumi (including food & beverage, services and foreign exchange), as reported. Contracts at these locations were to run from 28 September 2020 to 31 March 2031, with the early period set aside for store upgrades.
Reacting to the impact of the COVID-19 crisis, AOT said it would extend the period (Phase 1) for renovation by a year to 31 March 2022. It has also moved the start date and end date of full operations (Phase 2) from 1 April 2022 to 31 March 2032.
Explaining the decision, AOT said: “Since the end of January 2020, the COVID-19 outbreak has led countries across the world, including Thailand, to impose several precautionary measures as well as lockdowns. All of these have obstructed KPD and KPS from contacting trade partners to prepare for the commencement of operations and undertaking construction and decoration of areas. Moreover, the COVID-19 outbreak has caused AOT to postpone the opening of Midfield Satellite 1, in which areas for operations of KPD and KPS are located, from October 2021 to October 2022. For these reasons, KPD and KPS submitted letters of request for assistance to AOT.”
AOT has agreed to adjust the MAG payment conditions due from King Power until passenger traffic exceeds the forecasts made in the bid for 2021. The retailer was due to begin making Minimum Annual Guarantee-based rent payments based on its agreed contracts from 1 April 2021. This date now moves to April 2022.
On the formula for calculating MAG for the first year, 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, and the value obtained shall multiply the actual passenger volume of AOT in any given year to determine the minimum guarantee.”
For subsequent years AOT will make adjustments under its original MAG formula based on the passenger growth rate and the inflation rate from the previous calendar year.
The previously agreed terms were as follows:
*For the Bangkok Suvarnabhumi contract, AOT said it would collect 20% of revenue monthly before deduction of expenses (excluding VAT) or the first year’s minimum guarantee of Bt15,419,000,000 (US$498 million) offered by King Power.
*For the regional airport duty free contracts, King Power would pay 20% of revenue in any given month or the first year’s minimum guarantee of Bt2,331,000,000 (US$75 million).
*For the other Bangkok commercial concessions, AOT said it would collect 15% of monthly revenue before deduction of any expenses (excluding VAT) or the first year’s minimum guarantee of Bt5,798,000,000 (US$187 million) as offered by King Power.
In all cases, AOT would then make adjustments to increase the minimum guarantee in the following years under its MAG formula (based on the passenger growth rate and the inflation rate from the previous calendar year).
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