King Power Contracts Deemed Unlawful By Council Of State

[thaigene2]

Samran

Other airports have competition - Bangkok has none. The signs are different colours, but it's all owned by King Power - and everything is the same price despite the different 'look' of each shop (you'll notice King Power isn't written all over the sign..hmm?).

So it is complete b+llsh+t to suggest that this is normal practice. But the even bigger smoking gun is the apparent absence of competition that led to king Power getting the monopoly in the first place.

Was it just me that noticed the 'distraction' that the junta are going after 'over occupancy' of space taken by King Power without proper bureacratic clearances?

Shouldn't the real investigation centre on the various bidders and why others were rejected...or bloody h+ll...why competition wasn't allowed in the first place!!!

Edited March 26, 2007 by thaigene2

[Tony Clifton]

They went from the original 5000sq. meters to 25, 828sq. meters. How can there be room left for competitors when there's no room left for adequate toilet space. Maybe we're allowed to pee in the aisles. No one would notice in the perfume section.

[samran]

Samran

Other airports have competition - Bangkok has none. The signs are different colours, but it's all owned by King Power - and everything is the same price despite the different 'look' of each shop (you'll notice King Power isn't written all over the sign..hmm?).

So it is complete b+llsh+t to suggest that this is normal practice. But the even bigger smoking gun is the apparent absence of competition that led to king Power getting the monopoly in the first place.

Was it just me that noticed the 'distraction' that the junta are going after 'over occupancy' of space taken by King Power without proper bureacratic clearances?

Shouldn't the real investigation centre on the various bidders and why others were rejected...or bloody h+ll...why competition wasn't allowed in the first place!!!

re-read my post.

I never said it was normal practice.

I said all airports in the world have elements of monopoly power.

To have competive pressures doesn't mean that you need physical proximity. The definition of what contitutes a market is a complex thing, based on the availablity of choice to the consumer and substitutabilty of the product. Courts when adjudicating whether competiton law has been broken use these tests to determine the level of market power. My educated guess would be that while King Power (allegedly) broke its contract on floor space, a court (in OZ, UK, US) wouldn't neccessarily be thinking that having simply one duty free provider is goingn to cause consumers to be ripped off. It isn't like duty free is an essential service, like water, electricity or public transport.

Also, remember, it isn't illegal in any jursticition to be/become a monoply. It is illegal to expoit that monopoly however. Is King Power exploting a monolply position? That would depend if the are stopping you from buying your purfume at the two dozen purfume shops you passed from beginning your holiday to ending your holiday. Are they stopping you using the food court before entering the airside area if you are hungry? Are they stopping you from buying a 100 baht bottle of Sang Som whiskey at the 7-11?

Again, you have to remember, it is AOT who sets the rent for floor space. If they've got 50 different shops with 50 different owners, so what? How is it competitve if AOT is charging them a kings ransom for rent? They'd all jack up their prices anyway.

Does it matter that AOT charges them a kings ransom? That is a question that consumers ultimately decide if they buy a product or not. Bully for you that you don't. Others do. It is a market.

As I said, go to www.accc.gov.au or www.pc.gov.au.

Shouldn't the real investigation centre on the various bidders and why others were rejected...

thoroughly agree.

but, when it is probably King Power vs Central, I'd have little sympathy for either. I'd rather them investigate the cost over runs, safety issues, where public money went.

King Power is an 'easy' target (relatively). A bit like the junior official who gets done for corruption when it was really his boss who called the shots.

[steveromagnino]

So it is complete b+llsh+t to suggest that this is normal practice. But the even bigger smoking gun is the apparent absence of competition that led to king Power getting the monopoly in the first place.

Shouldn't the real investigation centre on the various bidders and why others were rejected...or bloody h+ll...why competition wasn't allowed in the first place!!!

It was widely known there were two major bidders Central and King Power. Other possible consortiums like Emporium/Mall Group AFAIK did not bid but instead were lobbying for the right to sell via a bonded warehouse concept. Terms of reference did not encourage DFS or similar to come and set up shop, although they had the right to bid.

AFAIK it was a closed envelope tender, so presumably Central didn't offer enough, or did not meet the terms of reference; probably in terms of not knowing or having a significant experience in running duty free.

Previously, incidentally, KP did not have a monopoly on duty free here in Thailand a few years back now; the other operator was run out of town for smuggling or something as far as I can recall.

Certainly not the only monopoly at the new airport; look at supply contracts, hotel, catering aspects etc - all monopolies. Incidentally, the idea that a duopoly or an oligopoly would assist in competition for customers is arguable; compare the cost of chocolate via duty free in many places to buying at the local supermarket; a significant price premium indeed. At the end of the day, as Samran has pointed out, Paragon, Gaysorn, CentralWorld, Jungceylon, inflight and point of departure duty free all provide choices beyond King Power.

It was always understood that Taksin was going to grant a monopoly for the duty free; what was more of a surprise was allowing KP to manage all retail space; that is the smoking gun IMHO.

Anyway, I still think they won't get another operator out there, and it will stay KP for now. But what do i know?!

[samran]

Anyway, I still think they won't get another operator out there, and it will stay KP for now. But what do i know?!

Nu-fink guvna, nu-fink.

[Jai Dee]

AOT to resolve King Power row in a year

Airports of Thailand (AOT) plans to resolve conflicts stemming from the nullification of its partnership with King Power International in no more than a year, to mitigate the impact on its revenues, says acting president Kulya Pakakrong.

Speaking on the sidelines of a seminar on the direction of Suvarnabhumi Airport held by Krungthep Turakij, Kulya said she believed there was a good chance to resolve the problem.

"If AOT must open bidding to find a new duty-free-shop operator and manager of the commercial area at Suvarnabhumi Airport, it should be quickly carried out, tentatively not longer than a year," Kulya said.

She noted that a quick process would ensure that AOT's revenues were affected as little as possible after the termination of two contracts with King Power.

"Currently, AOT receives revenue-sharing of Bt2 billion a year from duty-free shops," she said.

Previously, AOT's board resolved to stand by the recent Council of State ruling that its two contracts with King Power be nullified for alleged intention to violate the Public-Private Joint Venture Act.

Meanwhile, King Power has rejected the accusations and called a meeting with 60 shop operators, urging them to proceed with business as usual.

However, independent AOT director Tortrakul Yomnak said of AOT's current total revenues, commercial revenues amounted to a minor proportion of 36.8 per cent, compared with 63.2 per cent from fee income.

He is also confident the termination of the two contracts can proceed without legal constraints.

Kulya said that the reopening of Don Muang Airport would help AOT save Bt47 billion in investment costs, which is the amount set for investing in Suvarnabhumi Airport's second phase. This excludes interest payments of Bt2.8 billion annually.

She said if the second phase needed to be constructed, it would have to proceed promptly to its full capacity of accommodating 45 million passengers. The airport now accommodates 42 million passengers.

Kulya said AOT expected the airport to become an aviation hub for Asia and be considered one of the world's top 10 airports.

"AOT has targeted Suvarnabhumi to become one of the world's leading airports by 2009," she said.

She said the airport was now resolving all the problems related to customer services for both passengers and airlines.

Serirat Prasutanond, general manager of Suvarnabhumi Airport and senior executive vice president of AOT, admitted that Suvarnabhumi's services were still at the three-star level compared with those at other leading world airports, even though its terminal is ranked at the five-star level.

He said, however, the new airport was expected to upgrade its level to four-and-a-half stars by 2009 by exploiting aggressive strategic marketing with new airlines from China and India.

Source: The Nation -30 March 2007

[Mid]

Kulya said that the reopening of Don Muang Airport would help AOT save Bt47 billion in investment costs, which is the amount set for investing in Suvarnabhumi Airport's second phase.

that'll work ...........................

[thaigene2]

Anyway, I still think they won't get another operator out there, and it will stay KP for now. But what do i know?!

Nu-fink guvna, nu-fink.

Ya - "I fink so too - guv"

"Are you a Tim-Nice-But-Dim type Guv?" Thailand is indeed a very Bri-Ish type of place "in-it"? Rich st+pid people with low IQs - but with great family pedigrees and educational qualifications - running the show - "in-it"? Sounds like ol' blighty 'in it'?

What a "panorama" - the idiot-stick hi-so's must have? But I'm sure their kids will come back from harvard business school or Oxford of LSE, etc.... and open a chain of (eureka) coffee bars! He -he..

Let's see the UK is 14th or 15th in every int'l survey -but one of the G7...why is that anyway?

[Mid]

AEC to decide Monday whether to investigate King Power concession

The Assets Examination Committee (AEC) will meet Monday to discuss and appoint a fact-finding committee to investigate concessions allegedly improperly awarded to King Power International for duty-free and commercial areas inside Suvarnabhumi Airport.

The Nation

sooner or later one of these committees must come up with the correct answer ....................

[cclub75]

sooner or later one of these committees must come up with the correct answer ....................

Sure. But not before the creation of the ad hoc ... sub-committee.

Within the thai cosmology, it's very important indeed.

Then, they should come up with a.... panel. And later on, the light will be passed to its divine child : the sub-panel.

Now you start to understand...

It's beautifull. All those tiny pieces, that connect together. Blend into the "Big All".

[steveromagnino]

Anyway, I still think they won't get another operator out there, and it will stay KP for now. But what do i know?!

Nu-fink guvna, nu-fink.

Ya - "I fink so too - guv"

"Are you a Tim-Nice-But-Dim type Guv?" Thailand is indeed a very Bri-Ish type of place "in-it"? Rich st+pid people with low IQs - but with great family pedigrees and educational qualifications - running the show - "in-it"? Sounds like ol' blighty 'in it'?

What a "panorama" - the idiot-stick hi-so's must have? But I'm sure their kids will come back from harvard business school or Oxford of LSE, etc.... and open a chain of (eureka) coffee bars! He -he..

Let's see the UK is 14th or 15th in every int'l survey -but one of the G7...why is that anyway?

Just FYI, neither Samran nor I are Engrish; we are both Thai (sort of) educated in the Antipodes.

If you could call what passes for edukaychun down under that. Espexially convict land.

[Jai Dee]

Transport Minister wants more info. on King Power deal

The Transport Minister, Admiral Thira Haocharoen, says he would like additional information on the nullification of the contracts for King Power International Company Limited to run duty free shops at Suvarnabhumi Airport.

The Airports of Thailand (AoT) Public Company Limited has reported that the contracts with King Power have been cancelled. However, Transport Minister Thira says he needs more information to help the investigation process.

Referring to the decision whether King Power will sign the new contracts, Admiral Thira says the AoT will consider and revise the case, to determine the most appropriate outcome.

Source: Thai National News Bureau Public Relations Department - 02 April 2007

[Jai Dee]

AOT calls new bidding for duty-free deals

Airports of Thailand Plc (AOT)'s board of directors resolved on Thursday to call a new bidding for operators of duty-free shops at the Suvarnabhumi Airport, indicating an eventual end in its contracts with King Power International.

The board also agreed to have all tenants at the airport to negotiate for new contracts with AOT individually. Previously King Power had secured the concession for commercial area management.

AOT, which runs the Suvarnabhumi Airport, had nullified its deals with King Power at its previous board meeting, arguing that the company had violated the Public-Private Joint Venture Act.

Source: The Nation - 20 April 2007

[samran]

Anyway, I still think they won't get another operator out there, and it will stay KP for now. But what do i know?!

Nu-fink guvna, nu-fink.

Ya - "I fink so too - guv"

"Are you a Tim-Nice-But-Dim type Guv?" Thailand is indeed a very Bri-Ish type of place "in-it"? Rich st+pid people with low IQs - but with great family pedigrees and educational qualifications - running the show - "in-it"? Sounds like ol' blighty 'in it'?

What a "panorama" - the idiot-stick hi-so's must have? But I'm sure their kids will come back from harvard business school or Oxford of LSE, etc.... and open a chain of (eureka) coffee bars! He -he..

Let's see the UK is 14th or 15th in every int'l survey -but one of the G7...why is that anyway?

Just FYI, neither Samran nor I are Engrish; we are both Thai (sort of) educated in the Antipodes.

If you could call what passes for edukaychun down under that. Espexially convict land.

but I'm MUCH better looking that Steve is.

[samran]

AOT calls new bidding for duty-free deals

Airports of Thailand Plc (AOT)'s board of directors resolved on Thursday to call a new bidding for operators of duty-free shops at the Suvarnabhumi Airport, indicating an eventual end in its contracts with King Power International.

The board also agreed to have all tenants at the airport to negotiate for new contracts with AOT individually. Previously King Power had secured the concession for commercial area management.

AOT, which runs the Suvarnabhumi Airport, had nullified its deals with King Power at its previous board meeting, arguing that the company had violated the Public-Private Joint Venture Act.

Source: The Nation - 20 April 2007

One, two, three, a sqabillion-zillion different duty free operators wouldn't make a difference. Ole KP is drawing the rough end of a pineapple here the more I think about it.

AOT is the monopolist. They own the land, and manage the facility. The set the rent. World wide, governments regulate what the airport charges the users, so the tennant don't have to pass on the high costs to consumers!!

[steveromagnino]

but I'm MUCH better looking that Steve is.

Yeah, but I am infintessimally more adept at quoka socca and a variety of other indigineous Aussie sports, despite never being imprisoned there 'for the term of his natural life'.

Regarding monopoly on space; well obviously the more adept the landlord leasing the premises is, the easier and less cost gets passed onto consumers.

- lower cost position per sq. m in management fees

- higher sales reduces rent as a proportion of turnover

nothing wrong with allowing people to tender as much as they want to pay to manage the space...question becomes at what point is the purpose of the airport corrupted because the price gouging is too severe?

Not a monopoly/non-monopoly issue but rather one of terms of reference in bidding for the space; capping price per sq. m for instance or demanding a certain % of F&B and various price points etc - that is what should be in the terms.

I have no doubt KP are the ones getting screwed over in this, they won the rights in a competitive (although skewed bid); with TS's approval the AOT virtually encouraged KP to do this and that; the major payment was presumably made to ensure that this occured beyond the terms of the contract without issue; now they are totally getting made the scapegoat when AOT really have had the ability to control this entire issue the whole way through.

Of course, Chotisak was put in charge of AOT for a reason to protect certain people's interests. That didn't last long.....

[marshbags]

The Nation Sat, April 21, 2007 : Last updated 20:37 pm (Thai local time)

Quote:-

DUTY-FREE OPERATOR

SCB holds off on loan made to King Power

'No immediate problem' despite end of monopoly

Siam Commercial Bank (SCB) is giving more time to King Power International before making any decision on a loan it made to the duty-free operator.

Airports of Thailand (AOT) has cancelled its contracts with King Power for its exclusive duty-free shop and management of the commercial area at Suvarnabhumi Airport.

SCB executive vice president Sarunthorn Chutima said yesterday that, as a creditor, the bank could negotiate with King Power on its new business plan if the company's prospects were changed by the end of its monopoly at the new airport.

However, he said King Power so far remained financially healthy and posed no problems in servicing debts.

Vichai Raksriaksorn, chairman and chief executive officer of King Power, was not available for comment about the issue. He is reportedly on an overseas business trip.

On Thursday AOT's board of directors resolved to open new bidding to find several duty-free operators. It also wants to have all retail tenants at the terminal sign new leases with AOT individually.

Chirmsak Pinthong, an AOT director and the board's spokesman, admitted it had not yet delivered official notice to King Power of the nullification of its contracts, but he said the Office of the Attorney-General would take action soon.

Confirmation of the decision caused jitters among retail operators at Suvarnabhumi.

SCB is concerned that it may have to give up some foreign-exchange booths at the airport to other banks if tenants have to sign new leases.

Prawet Sutthirat, SCB's executive vice president, said yesterday that the bank's branches at Suvarnabhumi would not be affected as they did not generate much income. One branch has been changed to a controlling office due to low business volume.

However, he noted that if AOT demanded that SCB give away some of its foreign-exchange booths to other banks, that could hurt its income.

Unlike Don Muang Airport, where nearly all banks operated forex booths, only two banks won concessions to operate the service at Suvarnabhumi, SCB and TMB Bank. Each has 17 booths.

Amid the uncertainty, some tenants of the commercial area have urged King Power to clarify the situation of the nullified contracts.

The operators also threatened not to pay rent to King Power if they could not get a clearer explanation.

An officer of the Association of Thai Travel Agents (ATTA), which is among the tenants, said it had been paying its rent to King Power.

"We have no further comment on the contracts, but we are worried about the problem," the source said.

A member of staff at a counter of the Tourism Authority of Thailand (TAT) said TAT had a contract directly with AOT and therefore the nullification of contracts with King Power would pose no problem.

However, TAT and ATTA want both AOT and King Power to clarify the matter.

Despite the Council of State's ruling that King Power violated regulations when signing the contracts, King Power insists it has broken no rule.

Somruedi Banchongduang,

Suchat Sritama

The Nation

Unquote.

Yet more interesting observations are publically revealed in this article.

King Power got their loan from the SCB to support the airport business plan.

The SCB in return, or should i say, as an added incentive to approve the said loan are given 17 exch. booths while the exclusion of other major banks is also an interesting, yet not coincidental and a beneficial privilidge they manage to secure ?????

The usual Tea Money, Kick Backs and Corrupt self interests are yet again crying out to be investigated as further evidence to support ongoing business ethics in relation to K.Power and it,s financial supporters and last but not least " The last administrations obvious involvement "

The most important concern in all of this is the seemingly lack of concern and don,t give a ###### about passenger safety and comfort that has been totally ignored.

Yet more to come is the scenario on this particular issue about to surface and King Powers total control of the airports retail concessions exposed. IMHO

marshbags

Edited April 22, 2007 by marshbags

[marshbags]

For reference to my last post on the " King Power Duty Free Article " the following url can be used:-

http://nationmultimedia.com/2007/04/22/opi...on_30032373.php

Apologies for not including it and i couldn,t edit to post it.

marshbags

[Jai Dee]

AOT to consider forcing King Power to demolish shops

Airports of Thailand's board of directors would consider in its meeting Thursday to force King Power International to demolish shops and other structures located outside the designated commercial areas.

Earlier, the board preferred waiting for the Office of the Attorney General to notify King Power. But it is of the opinion that such order is within its power. Earlier, Deputy Transport Minister Sansern Wongcha-um said AOT should have the power to have King Power demolish the structures, to increase security for passengers.

Meanwhile, AOT acting president Kulya Pakakrong said at the meeting, the board could be briefed on the progress of problems at Suvarnabhumi Airport. She also referred to Prime Minister Surayud Chulanont's concern on the delayed compensations to the locals living near the airport. Kulya said the compensations could be Bt90 million higher than the budget approved earlier by AOT.

It was also reported that the board could endorse the US$5 million (Bt170 million) disbursement for GE InVision's CTX bomb scanners.

Source: The Nation - 03 May 2007

[Jai Dee]

King Power sues AOT for Bt70 bn

King Power International Group yesterday filed two civil lawsuits against Airports of Thailand (AOT), seeking compensation of Bt68.9 billion plus 7.5 per cent interest for the nullification of its exclusive contracts to run duty-free shops and commercial area at Bangkok's Suvarnabhumi Airport.

The lawsuits were signed by King Power managing director Sombat Dechapanichkul and filed in the Civil Court by its lawyer Bundit Siriphan. The court set September 24 for the first hearing.

AOT nullified King Power's concessions, which also include the Hat Yai and Phuket international airports, on April 5 on the grounds that they breached the Public/Private Joint Venture Act.

"The nullification is unlawful use of law. The company passed qualification screening by AOT's committee. The company has hired contractors, recruited new employees, ordered products from all corners of the world for over three years. The company borrowed money from financial institutions for that and shoulders interest costs," King Power said in its affidavit.

King Power also cited Supreme Court ruling 508/1997, in which the court held that the Royal Thai Army was still subject to make payments to a private procurement company from which it had ordered electric saws but later cancelled the order, as applicable to its case.

"We want payment for the recruitment of people, construction works, product orders, as well as the tax burden incurring from the investment at Suvarnabhumi, Phuket and Hat Yai airports. We also want the upfront guarantee - which has been paid to AOT - back," King Power said.

AOT's board of directors, chaired by General Saprang Kalayanamitr, resolved to cancel the contracts in March based on the Council of State's ruling that they breached the public-private joint investment law.

Saprang also serves as deputy secretary-general of the Council for National Security, which overthrew the Thaksin Shinawatra government in September last year.

King Power was also told that its extension of the commercial area at Suvarnabhumi had caused damage to the airport and was not in line with international standards and resulted in security problems. It was ordered to remove its structures from the airport.

The two contracts were signed during the Thaksin administration, when Suriya Jungrungreangkit was the transport minister and in charge of AOT.

King Power bid for the concessions against other duty-free operators and beat them all when the AOT screening committee considered that it had been in the business for a long time and had tens of billions of baht in working capital.

King Power has operated duty-free shops for 16 years, including 15 years at Don Mueang Airport. It said on its website that it paid Bt7 billion in concession fees to the Thai government and created more than 3,000 jobs during that period.

Source: The Nation - 05 June 2007

[Jai Dee]

AoT acting President says AoT has no intention to defame King Power

Mrs. Kalaya Pakakrong, the Airports of Thailand (AoT) acting President, comments about King Power International Group filing two civil lawsuits against the AoT for cancelling its exclusive contracts to run duty-free shops and commercial area at Suvarnabhumi Airport. She says the AoT sympathizes with King Power as the firm is still carrying on its businesses in the airport, but its personnel have to carry temporary passes with them.

Mrs. Kalaya says the AoT cannot issue temporary passes without any condition to the King Power staff because the issuance may imply that both sides are doing businesses with each other. Thus, the AoT has issued a memorandum of understanding on this matter. However, Mrs. Kalaya says she understands that King Power may consider that such memorandum as unfair, but she insists that the AoT has no intention to defame King Power. She says King Power can negotiate with the AoT whenever it is ready.

The lawsuits filed by King Power seek compensation of Bt68.9 billion plus 7.5 percent interest for nullifying its contracts to operate duty-free shops at Suvarnabhumi, Phuket and Hat Yai airports.

Source: Thai National News Bureau Public Relations Department - 06 June 2007