Return secures duty-free bid
King Power's profit guarantee sways AoT
The high returns of 23.5 billion baht promised by duty-free giant King Power helped it to secure the concessions to run duty-free operations and other commercial areas across four airports, according to Airports of Thailand (AoT).
"The figure is much higher than we had expected," said AoT president Nitinai Srirsmatthakarn after the deal with King Power was approved by the AoT board on Wednesday.
Mr Nitinai said the returns promised by King Power were much higher than what one could expect given the current market conditions. "The other bidders only estimated about 10 billion baht in returns in the first year of operations," he said.
With the concession granted to the duty-free giant, King Power effectively swept aside any competitors seeking to run duty-free operations and other commercial operations in AoT-managed airports for 10 years, beginning on Sept 28 next year.
The announcement came amid growing calls for the AoT to end King Power's monopoly on duty-free operations across airports under its management.
King Power managed to beat out other contenders vying for the same concessions auctioned off in the bid, which concerns duty-free operations and the right to manage other commercial areas at Samut Prakan's Suvarnabhumi airport, Chiang Mai, Phuket and Hat Yai airports.
"In its proposal, King Power promises to pay the AoT 23.5 billion baht in revenues from the projects -- this is 10 billion baht, or 135%, more than we had initially expected," said Mr Nitinai.
The AoT was won over by King Power's proposal relating to duty-free operations at Suvarnabhumi airport, in which it guaranteed a minimum return of 15.4 billion baht -- far higher than the estimated return proposed by the the other two bidders, which stood at 7.2 and 8.5 billion baht, respectively.
With regards to the right to run other commercial areas at Suvarnabhumi airport, King Power guaranteed 5.7 billion baht in return, while other contenders capped their revenue guarantee at 3 billion baht.
For the three regional airports, King Power offered returns of about 2.3 billion baht, while its rivals bid 2.1 and 2 billion baht respectively.
"Ultimately though, it doesn't just boil down to revenue guarantees -- King Power presented a good business plan that is significantly different from its competitors," said Mr Nitinai.
AoT vice president Wichai Bunyu said King Power clearly detailed various factors and forecasts, as well as a new plan to draw new shoppers and maintain its existing base.