Airports of Thailand (AoT) has responded to queries from investors regarding assistance measures and adjusted minimum guarantee collection terms for King Power International Group’s (KPIG) commercial contracts.

As reported, AoT announced on 30 July amendments to the slew of contracts won by King Power last year.

These amendments are effective from 1 April 2022 and follow an agreed one-year extension of the concessions until 31 March 2032.

The ten-year contracts covering duty free shops at Bangkok Suvarnabhumi, Phuket, Chiang Mai and Hat Yai International Airports were previously due to run from 28 September 2020 to 31 March 2031.

AoT held a Board of Directors meeting on 19 February to approve assistance measures to concessionaires that included the collection of percentage-based concession charges from operating revenue only, exempting MAG payments for the period 1 February 2020 to 31 March 2022.

OBSTRUCTION OF WORKS

In a statement, AoT explains that the first six months of King Power’s contract is allocated as a ‘period for area improvement and decoration in the main passenger terminal building and the satellite 1 (SAT 1)’.

The statement read: “However, the Covid-19 outbreak has obstructed the concessionaires to be able to prepare for the area improvement and decoration as previously scheduled as well as affected the plan for the opening of the SAT-1, which had been previously scheduled to commence operations by 2020, to be postponed to October 2022 (AOT considered such schedule based on major factors in terms of end date, system test as well as expected increase in the number of passengers to prevent the impacts on AOT’s expenses).”

On 22 April, the Board of Directors approved the rates of fixed concession charges and minimum annual guarantees for commercial activities after assistance measures ended on 31 March. Under the terms, AoT would collect MAG based on fees in 2019 as a calculation base.

Continuing, AoT states that the previously outlined assistance measures (1 February 2020 to 31 March 2022) do not cover KPIG’s contract, whereby the first year’s MAG based on passenger volumes forecast for 2021 were proposed before Covid-19 took hold earlier this year.

KPIG later submitted a letter requesting that AOT consider the assistance measures.

‘PRUDENT’ CONSIDERATIONS

Due to prolonged challenges linked to the coronavirus, AoT granted on 29 July an extension of a 12-month credit term (instead of a six-month credit term) of payment for airlines and concessionaires covering monthly concession charge instalments during February to July 2020.

It also resolved to extend the contracts for one year, adjust the collection of MAG from 1 April 2022, and agreed to adjust MAG collections in line with KPIG’s bid proposals.

“As soon as the passenger volume is equal to the passenger volume forecast conducted by the Group, AOT will further increase the minimum guarantee by means of the calculation formula as determined in the contract,” explained AoT.

“AOT would like to inform that the assistance measures for the concessionaires and airlines affected by the Covid-19 outbreak as mentioned above were prudently considered based on various factors including fairness as well as shareholders’ interests. As soon as the situations return to normal, AoT’s operations can continue without interruption, thus having positive impacts on AOT’s operations and the national economy as a whole.”

In 2020, AoT expects a 50.7% decrease in revenue compared with fiscal year 2019. This is expected to reach -42.21% in 2021 compared with fiscal 2020, and +188.13% in 2022 versus fiscal 2021.

“However, such predictions are based on the assumption that the Covid-19 vaccines are developed and the passenger volume in 2022 accounts for 76% of that in 2019 (the year before the emergence of Covid-19),” added AoT.