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Duty Free Dramas: AOT Starts Negotiations with King Power!
AOT is considering contract changes with King Power at airports in Chiang Mai and other locations due to financial challenges.
Duty Free Dramas: AOT Starts Negotiations with King Power!
The discussion about duty-free concessions at airports in Thailand is taking shape. Loud Kaohoon International On October 29, the Board of Directors of the Airports of Thailand Public Company Limited (AOT), led by Paweena Jariyathitipong, Deputy General Manager, made an important decision that could affect the future of duty-free operations.
The results of an extensive study carried out by two universities have been acknowledged. This proposed two options: either terminating the existing contracts and initiating a new tender process, or making contract changes through negotiations with King Power Group. The latter is the main player in the duty-free business and already has several contracts at Phuket, Chiang Mai and Hat Yai airports as well as at Don Mueang and Suvarnabhumi Airport.
Negotiations with King Power
AOT has decided to enter into negotiations with King Power to modify three of the existing duty free concession contracts. These contracts account for a significant portion of AOT's revenue, with King Power generating approximately 17% of total income. An abrupt end to these contracts would result in an immediate loss of at least a year of income.
Decisions are based on a thorough assessment of legal, financial and income aspects. The AOT plans to appoint a team to lead the discussions from the beginning of November. The goal should be to maximize the benefits for AOT without undercutting the existing sales ratio.
King Power has previously set a minimum guarantee of THB 15,419 million, which corresponds to THB 371 per passenger or 20% of the revenue share. Paweena additionally clarified that the total annual compensation shall not be less than THB 8,516.6 million, reflecting the 2019 second-place bidder's offer.
The challenges in the duty free business
How Nation of Thailand reports, King Power has expressed concerns about the ongoing impact of the Covid-19 pandemic, rising trade tensions and a decline in Chinese travel. These factors have led to a significant decline in sales and further increased operating costs. King Power complains that the AOT has made unilateral decisions that are only in their interests, without a fair discussion about possible solutions.
In order to reach an agreement, King Power submitted a formal request to terminate the contract. AOT plans to set up an independent committee to thoroughly review the matter and assess any potential impact on duty-free operating models. The committee will also involve academic advisors in order to reach a fair result.
Future prospects and restructuring
AOT emphasizes the need to find a solution that protects the interests of both AOT and King Power. A failure of these negotiations could have serious consequences not only for the companies involved, but also for the country's economy as a whole. The former CEO of AOT, Nitinai Sirismatthakarn, who was appointed as the new leadership of King Power in June 2025, also raises questions about possible conflicts of interest.
Finally, Thibodi Wattanakul, director of the State Enterprise Policy Office, suggests that despite the challenges, a restructuring of duty-free concessions could provide opportunities for the future. Should AOT be able to attract new bidders, this could benefit the state without causing financial losses, such as MCG Asia notes.