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Revamp of King Power Duty-Free Agreements by AOT Amid Accusations of Unfairness

Airport authority in Thailand mulls over renegotiating or canceling key duty-free deals with King Power, according to the company's request, due to challenging global market circumstances.

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Airport authorities in Thailand are contemplating renegotiating or even canceling three key...
Airport authorities in Thailand are contemplating renegotiating or even canceling three key duty-free contracts with King Power, due to an appeal proffered by the retailer, attributing to unfavorable global market circumstances.

Revamp of King Power Duty-Free Agreements by AOT Amid Accusations of Unfairness

The Showdown Between Thailand's Airport Authority and King Power

It's the talk of the town in Thailand, as Airports of Thailand Public Company Limited (AOT), the authority behind Thai airports, is locking horns with King Power Duty Free over the long-standing duty-free concession agreements. King Power has requested negotiations to renegotiate or even cancel all three existing contracts, alleging that the current terms are hard to swallow given our ever-changing global landscape.

On June 16, 2025, a crucial board meeting will be held to approve the hiring of external consultants. This neutral, third-party committee of experts will study, compare, and suggest the fairest possible solution, considering various approaches - from contract amendments to outright termination and re-tendering. A resolution is expected within two months.

Paweena Jariyathitipong, AOT’s Executive Vice President for Engineering and Construction and Acting President, spilled the beans to Thansettakij. According to her, King Power's letter, sent on June 4, 2025, requested discussions, though the heading seemed to call for contract termination for five airports: Suvarnabhumi, Don Mueang, Phuket, Chiang Mai, and Hat Yai. However, the body of the letter mainly tackled the need to renegotiate the contracts' terms.

So, what's King Power's beef? They've got a long list of reasons, starting with the impact of the COVID-19 pandemic that continues to cast a dark shadow on their business. From regional conflicts and global trade wars to a slowing world economy, reduced high-spending Chinese passengers, recent wine tax reductions, and AOT's demand for partial space reclamation, it's a tough pill to swallow for King Power. With such drastic changes since the original agreements, they argue that the terms are no longer fair.

Paweena stresses the need for AOT to examine its past support for operators like King Power. Previously, she clarified that the concept of "support measures" didn't necessarily mean fee reductions. The switch from Minimum Guarantee to Revenue Sharing was merely a mathematical rearrangement. King Power hadn't received exemptions from MG like some other operators, and while deferrals were granted, the core compensation remained untouched.

Moreover, the government's August 2024 policy halting inbound duty-free sales was another hit to overall sales, including outbound. "We must also consider if we have been too self-serving, always prioritizing our maximum benefit regardless of the circumstances," Paweena confessed, questioning AOT’s current stance.

If the drama doesn't end soon, AOT could face a hefty debt. King Power reportedly owes AOT approximately 4 billion baht, primarily from previously deferred payments. However, they've resisted paying the newly accrued debts, again citing unfairness. AOT has made it clear that failure to pay will result in penalties as per the contract.

"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, as a crucial business partner, contributes 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 for both parties.

Amidst the disputes, King Power has put forth a proposal for an interim change to its remuneration terms, shifting from the current Minimum Guarantee (33-34% of duty-free revenue) to a "Sharing per Head" model, reducing their payment to about 20% of monthly sales. This revised payment, starting with July 2025 sales, would be made by the end of the following month, and King Power requests this not be considered a default.

King Power's letter detailed seven "force majeure" circumstances impacting its operations: global economic slowdown, war situations, wine tax reductions, reclamation of commercial space, a decline in high-spending Chinese tourists, the COVID-19 pandemic, and the impact of the government's August 2024 policy on inbound duty-free sales. They also referenced contract clauses allowing for negotiation in unforeseen circumstances, re-negotiation for commercial effect if clauses become void, and requiring written agreement for amendments.

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

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Enrichment Data:The current status of the negotiations between Airports of Thailand Public Company Limited (AOT) and King Power Duty Free regarding the duty-free concession agreements is that King Power is seeking to renegotiate or potentially terminate its contracts at Thai airports. This request involves agreements at five major airports: Suvarnabhumi, Don Mueang, Phuket, Chiang Mai, and Hat Yai International Airports.

Key Points in the Negotiations:

  1. Reasons for Negotiation: King Power cites several negative factors influencing its business, including the closure of arrivals duty-free, reduced wine taxation, reclamation of commercial space by AOT, and global economic challenges.
  2. Force Majeure Claim: King Power references force majeure due to factors such as COVID-19, international conflicts, and economic slowdowns, all of which are beyond its control.
  3. AOT's Response: AOT has acknowledged King Power's request and is open to discussions. AOT has also expressed concerns that the current terms might be "unfair" and is considering hiring external consultants to review the contracts.
  4. Timeline for Resolution: A resolution is expected within two months, with AOT planning to address the matter comprehensively.
  5. Financial Assurance: AOT has noted that King Power's payments are covered by a bank guarantee, providing some financial stability during the negotiations.
  6. The financial repercussions could be significant for AOT if the negotiations between AOT and King Power Duty Free lead to a hefty debt due to unpaid debts owed by King Power.
  7. The international business landscape, hampered by factors such as economic slowdowns, regional conflicts, and global trade wars, presents challenges not only for King Power's business but for other players in the industry as well.
  8. The economy, particularly the aviation sector, is affected by the health crisis as the COVID-19 pandemic continues to impact spending patterns and travel habits.
  9. In the midst of these disputes, King Power's proposal for a temporary change to its remuneration terms, shifting from the Minimum Guarantee to a "Sharing per Head" model, could potentially impact the financial status of both AOT and King Power.
  10. With King Power contributing over 10% of AOT’s revenue, the ongoing negotiations have international implications for the economy and the business industry, particularly in Thailand.

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