Published on February 1, 2008
King Power International will kick off its long-stalled plans to renovate shops in Suvarnabhumi Airport after winning temporary approval yesterday from the Civil Court to stay and keep managing the duty-free area.
"Usually, remodelling is done every six months. Without it, our revenue last year was Bt1 billion below target. This court injunction will restore confidence among [companies with] brand-name products, and this should raise our revenue," chairman Vichai Raksriaksorn said yesterday.
"This will also benefit AOT (Airports of Thailand), which can immediately realise this revenue," he said.
Following the injunction against closing the duty-free shops, King Power is now waiting for the court to decide next Friday whether it will be granted the right to continue operating the airport's commercial areas while waiting for the final settlement of AOT's lawsuits against it.
AOT's board last month ordered King Power to cease operations at the airport, following months of legal disputes. Last March, the board resolved to cancel the two concessions for King Power to operate duty-free shops and manage the commercial areas at the airport, saying the contracts were "illegal", because they had not undergone thorough screening as required by the Public-Private Joint Venture Act.
King Power retaliated with civil lawsuits, claiming Bt68.9 billion in damages plus statutory interest.
The Civil Court yesterday ruled in favour of King Power, allowing it to continue running the airport retail business without any conditions.
The court also released King Power's airport revenue, which has been accumulating at the court since the legal proceedings started. Since AOT could not receive its share of the rental income and experienced huge expenses at problem-plagued Suvarnabhumi, its net profit for fiscal 2006 plunged to Bt1.09 billion, from Bt10.5 billion the year before.
King Power must pay AOT Bt3.6 billion a year.
The good news boosted AOT shares to Bt52.50 yesterday, up Bt1.50, or 2.94 per cent, from Wednesday.
AOT president Chana U-Sathaporn said he would seek approval at the next board meeting to allow AOT to realise the revenue generated from the King Power contract in fiscal 2008. He believes AOT should be allowed to realise the revenue, which would boost AOT's results and benefit its shareholders.
If the board agrees, AOT could double its realised revenues next year by booking the unrealised revenues from fiscal 2007 and 2008.
AOT will still have to proceed with the board's earlier decision to take legal action to evict King Power from the airport, he said.
A negotiated settlement with King Power is possible, depending on the new AOT board to be appointed by the new government, he said.
AOT also plans to present a new Bt46-billion commercial plan to the government, he said. It proposes the construction of an exhibition centre, export centre, office building, community-trade centre, entertainment complex, hotel, hospital, golf course and other facilities.
Even though the court case on the legality of King Power's concessions to operate the duty-free shops and commercial spaces at the airport has yet to be concluded, the court's injunction gives King Power the credibility to continue.
Its business suffered from uncertainty after AOT's board, chaired by Saprang Kalayanamitr, a senior member of the Council for National Security, ordered King Power to move out of the new airport.
Analysts expect the new administration of Samak Sundaravej will be more sympathetic towards King Power, because his Cabinet members are likely to be nominees of deposed prime minister Thaksin Shinawatra, whose administration awarded the two concessions to King Power.
In approving King Power's request for the injunction, the Civil Court cited the need to be fair to King Power and protect its interests until the legal case is resolved.