Bangkok’s airport operator Airports of Thailand (AOT) has revealed in a regulatory filing with the SET that they have negotiated a settlement with King Power to compensate the company for previously contracted rental space at their terminals.
As BKK is undergoing several expansion projects, they face the situation that required space has already been leased to other parties, which they now have to “buy back” in order to complete the construction.
The amount in question is rather high, hence why the regulatory filing was a requirement, as AOT is set to compensate its commercial partner King Power a total of 193.08 Million Baht ($5.5M) for the retail space.
As reported by The Nation, AOT was unable to provide an alternative space so the settlement was the only option for this dispute.
Airports of Thailand (AOT) has agreed to pay 193.08 million baht to King Power Suvarnabhumi Ltd (KPS) for the area it plans to acquire for the expansion of Suvarnabhumi Airport’s eastern passenger terminal, also known as the East Expansion project.
AOT, which operates Suvarnabhumi and five other airports, notified the Stock Exchange of Thailand of its board of directors’ decision on Friday.
The airport authority said it had asked KPS on July 30 to return the area at the Food Stop (formerly City Garden) on the eastern terminal’s second floor so it could start the construction for the expansion project.
KPS has a rental contract for the area for commercial purposes from September 28, 2020 to March 31, 2033.
The company had asked the AOT to allocate a commercial area within the domestic terminal of the same size as the Food Stop. However, AOT was unable to accept the request, as there is not enough space available in the terminal.
The AOT’s board of directors therefore resolved to pay 193.08 million baht to KPS, which is the amount that the company had paid the AOT as a minimum return on the rental space from April 1, 2023 to March 31, 2024. KPS also agreed to not demand any further compensation from the AOT, said the notification.
The AOT added that by taking the space back from KPS, the authority would suffer a drop in rental income of 591,000 baht per month, and a minimum return from April 1, 2024 to March 1, 2025 of around 23.46 million baht per month. This projected missing income was already acknowledged in the AOT financial report of fiscal 2024.
The AOT estimated that after the East Expansion project is complete, the authority would earn higher income from additional renters to offset the loss of revenue. …
Suvarnabhumi Airport – despite its massive size – has indeed run out of space, and ongoing construction makes it even more complicated.
AOT has recently completed the midfield terminal at BKK, which opened up additional gates but requires an annoying train ride and endless escalators to move around, with no major airline lounges in the facility.
This is not the only dispute that the airport operator has with King Power. A few months ago, we reported that AOT in coordination with government entities, is planning to shut down all arrival duty free stores Thailand-wide which will of course have a massive impact as well.
Thailand Aims To Close Arrival Duty Free Shops In Effort To Drive Domestic Purchases
The airport is really a mess at the moment. It’s one thing to have a rather incoherent development policy over the years, which led to decay and some security lapses. Still, once they realized that space was needed, they suddenly faced the problem that construction couldn’t go on because just a short while ago, they doled out decade-long leases to companies like King Power.
At the same time, Suvarnabhumi turned into a giant parking lot for aircraft that will likely never fly again as THAI parked decommissioned aircraft all over the place. That being a sad sight and an eyesore is one thing, but it obviously creates a logistical problem as time progresses as well. How will they ever get this garbage off the grounds? Many other airlines have flown their aircraft into a storage facility (airplane graveyard) but THAI decided to just dump their planes at Suvarnabhumi and Don Muang Airport. Who allowed this?
Conclusion
Suvarnabhumi Airport operator Airports of Thailand (AOT) negotiated a settlement with one of their commercial partners – King Power – to compensate the company 193 Million Baht for the early termination of a lease for real estate in the terminals, which is now required to complete an expansion project of BKK.
I think the sum isn’t as much of a problem as BKK has 51 million passengers per year, aiming for more while collecting substantial fees for every passenger they handle. The 700 Departure Tax alone would pay for this transaction (283,000 passengers). Suvarnabhumi handles roughly one million pax per week.
What’s more worrying is that there has been no foresight by AOT management as to the future needs of the airport. There has been a lot of decay, space has been blocked by unsuitable architecture and now the tarmac is choked with old Thai Airways planes that can’t be flown out anymore.
