AOT Eyes Overhaul of King Power Duty-Free Deals Amid 'Unfair' Claims

 

Airports of Thailand Public Company Limited (AOT) is set to discuss a potential overhaul of its long-standing duty-free concession agreements with King Power Duty Free after the retailer sought negotiations to amend or cancel all three existing contracts.

 

AOT claims the current terms are "unfair" given evolving global circumstances, and a crucial board meeting is scheduled for today, June 16, to approve the appointment of external consultants.

 

A resolution is expected within two months.

 

Paweena Jariyathitipong, AOT’s Executive Vice President for Engineering and Construction and Acting President, informed "Thansettakij" that King Power submitted a letter on June 4, 2025, formally requesting discussions.

 

While the heading of the letter suggested a request to terminate the three concession agreements – covering Suvarnabhumi Airport, Don Mueang Airport, and the three regional airports (Phuket, Chiang Mai, and Hat Yai) – the body of the text primarily sought to renegotiate the terms of these contracts.

 

King Power’s justification for seeking new terms is extensive, citing persistent impacts since the COVID-19 pandemic.

 

 

These include ongoing conflicts in various regions, global trade wars and tariffs, a slowdown in the world economy, a decline in high-spending Chinese passengers, recent reductions in wine taxes, and requests from AOT for partial space reclamation.

 

The company argues that the current operating environment has significantly diverged from the conditions under which the original bids were made and contracts signed, rendering the terms inequitable.
 

 

Paweena emphasised the need for AOT to assess its past support for all operators, including King Power.

 

"Previously, we used the term 'support measures,' but in essence, this wasn't about reducing fees. The shift from a Minimum Guarantee (MG) to Revenue Sharing was merely a mathematical change in calculation," she clarified.

 

She noted that King Power had not received MG exemptions like some other operators, and while payment deferrals were granted, the core remuneration remained unchanged.

 

The impact of the government's August 2024 policy halting inbound duty-free sales was also highlighted as affecting overall sales, including outbound.

 

"We must also consider if we have been too self-serving, always prioritising our maximum benefit regardless of circumstances," Paweena conceded, questioning if AOT's current stance is appropriate.

 

Consequently, at today’s AOT board meeting, approval will be sought to appoint external consultants.

 

A neutral, third-party committee, comprising experts in business, law, finance, and other fields, along with potentially one or two academic institutions, will be established. Their role will be to study and compare approaches to ensure the fairest possible outcome.

 

 

AOT's contracts with King Power are commercial agreements, vetted by the Attorney General, and are thus adaptable to changing conditions.

 

The study will explore various solutions, including contract amendments or, potentially, termination and re-tendering. 

 

AOT aims to finalise its position within two months, a timeline it has already communicated to King Power, who had hoped for a resolution within 45 days.

 

 

 

"There are only two choices: cancel the contract or not. If not, how do we proceed? We want the brightest minds to help us consider all angles – business, legal, and financial," Paweena stated.

 

King Power reportedly owes AOT approximately 4 billion baht, primarily from previously deferred payments which they have honoured.

 

However, they have resisted paying newly accrued debts, again citing unfairness. AOT has made it clear that failure to pay will result in penalties as per the contract.

 

Despite the disputes, Paweena acknowledged King Power as a "crucial business partner," contributing over 10% of AOT's revenue.

 

As a state-owned enterprise, AOT's duty is to protect national interests, meaning any resolution must be fair to both parties.

 

During AOT's deliberation period, King Power has proposed an interim change to its remuneration terms.

 

They seek to shift from the current Minimum Guarantee (33-34% of duty-free revenue) to a "Sharing per Head" model, reducing their payment to approximately 20% of monthly sales, mirroring the COVID-era relief measures.

 

This revised payment, starting with July 2025 sales, would be made by the last day of the following month (e.g., August 29 for July sales), and King Power requests this not be considered a default.

 

 

King Power's letter detailed seven "force majeure" circumstances impacting its operations:

Suspension of Inbound Duty-Free Sales: Government policy since August 1, 2024, unfairly impacting revenue calculation.

Wine Tax Reduction: A Ministry of Finance announcement on February 14, 2024, reducing customs duties on wine from 60%, affecting sales.

Partial Space Reclamation: AOT reclaiming 491.220 sq.m. since July 1, 2024, despite a proportional reduction in fees, still impacting sales.

Lack of Government Proactive Measures for Tourist Safety: Contributing to a decline in high-spending Chinese tourists.

Negative Domestic Situations: Including company relocations, industry closures, cybercrime, and the March 28, 2025 earthquake hitting the Office of the Auditor General building, affecting national confidence.

Lingering COVID-19 Impacts, which led to zero passengers in the recent past. 

War Situations and Global Economic Slowdown, which have impacted purchasing power and international travel.

 

King Power referenced contract clauses allowing for negotiation in unforeseen circumstances (7.9), re-negotiation for commercial effect if clauses become void (7.7), and requiring written agreement for amendments (7.5).

 

 

Nitinai Sirismatthakarn, CEO and chairman of King Power Corporation, confirmed the letter was sent before his tenure. He stated he would await AOT's response before engaging in any potential contract negotiations.