King Power and a Must-Win Battle for Duty-Free Concession

The bidding for duty-free concession and commercial areas are considered very important to several operators especially Airports of Thailand Public Company Limited (AOT) and King Power International Co., Ltd., the current operator of airport duty-free shops.

 

AOT had to step on the brakes real hard to temporarily delay the bidding which actually was due to start on March 19, 2019, as some still doubted on the process of the bidding.

The announcement from AOT to delay the bidding might have made King Power felt restless as its business fundamental is tied to duty-free shops. Luckily, the controversary of duty-free concessions had been solved. AOT announced that interested parties could received the envelope for the bidding on April 1-18, 2019.

Duty-free operation and King Power are so connected that they literally became one. Which is why, this time, the bidding for the concession will indicate King Power’s fate.

 

However, the truth is that the yield from duty-free shops is not as good as the old days, proved by King Power’s revenue that has constant growth each year, but with a higher cost that keeps sinking King Power’s profit.

 

In 2015, King Power recorded total revenue of THB 42,443 million with THB 5,575 million of profit or 13.14% of net profit margin. In 2016 the company reported total revenue of THB 50,884 million, but lower profit at THB 5,292 million or 10.40% net profit margin. As for 2017, King Power made THB 56,151 million in total revenue, but also reported a lower profit at THB 3,944 million or 7.03% of net profit margin.

 

Duty-free concession used to be a sweet cake, but now…..not so sure how it tastes like.

Though the cake may taste bad, it is still a precious thing for others, including Central Group, who joined with a renown Singaporean duty-free operator, DFS, or Bangkok Airways Group. Even Lotte, a Korea duty-free operator is also interested in this cake, and all of these bidders have the capability to overthrow King Power at any given opportunity.

Which means a slight misstep from King Power may be the end of its dynasty.

 

This is the real test for Aiyawatt Srivaddhanaprabha, a descendant of late Vichai Srivaddhanaprabha. Whether the era of King Power-duty free will continue or end is up to him.

In case King Power comes out on top, the kingdom will go on, but also with higher costs (a high competition comes with a high cost). On the other hand, if King Power loses, it will not lose only the duty-free concession, but other businesses such as hotel live performance theatres or restaurant will also take direct hits as well.

This time, King Power has to go all out with only one goal, which is to WIN!