Don Muang duty free, general retail and F&B contract awards are delayed
THAILAND. Airports of Thailand (AoT) has delayed awarding the duty free and general retail/food & beverage contracts at Don Muang Airport in Bangkok.
As reported, offers were presented to AoT on 28 August after a short tender process following the issuing of Requests for Proposals on 17 August. The ten-year duty free contract begins on 1 October.
King Power International Group, the incumbent at Bangkok’s main airport Suvarnabhumi, was easily the highest bidder for the duty free contract while powerful local company The Mall Group topped the food & beverage and general retail offers (see below for bid details).
Both awards were due to be announced on 31 August but no announcements have been made, leading to speculation (perhaps optimistic) among other bidders that the financial offers are under further review, particularly the seemingly aggressive level of the King Power bid.
That theory gained momentum today when the Bangkok Post claimed that AoT had “halted” its approval of the King Power bid. It quoted Transport Minister Jarupong Ruangsuwan as saying the King Power offer is being “scrutinised”. A panel has been set up to consider the possibility of a counter offer, Mr Jarupong told the newspaper.
However, given that AoT, in common with every other airport authority, has pressing financing needs to fund infrastructure development, and that King Power is a well-funded credible retailer certain not to default on any financial obligations, the likely reality of any delay is that politics are at play.
That is something King Power became well-used to during a long-running, politically driven dispute with AoT over its Suvarnabhumi contracts in 2007/08.
A clear hint of that can be seen in the Bangkok Post article, which noted: “Politics will not interfere in evaluating King Power's contract bid, Mr Jarupong said. He was responding to a report that former Prime Minister Thaksin Shinawatra disagreed with giving the concession to King Power because the company's owner, Vichai Raksriaksorn, has close ties with the Bhumjaithai Party.”
King Power is understood to have offered a minimum monthly payment of THB63 million (US$2.02 million) to Airports of Thailand for the concession. The winning bidder will operate 1,112sq m of airside duty free space (including a 107sq m pick-up counter) at Bangkok’s second international airport once it is fully reopened on 1 October.
King Power's bid is reported to have been +50% higher than the THB40.6 million (US$1.3 million) offered by its nearest rival, local company Central Retail Corporation, and +250% more than the lowest bid of THB24.2 million (US$772,546) from a joint venture between Lotte, Siam Future Development and Holiday Gift Co. Shilla bid THB35.2 million (US$1.12 million) in a partnership with powerful upscale retail developer The Mall Group.
AoT needs to make its decisions fast as Don Muang reopens for international traffic on 1 October. AirAsia (representing around 5% of passenger traffic at Suvarnabhumi), plus all other low cost carriers (including Malaysia AirAsia, Thai AirAsia and Indonesia AirAsia) will use Don Muang, to ease capacity pressure at the old airport’s modern replacement.
How the Bangkok Post reported the story today