King Power, a leading duty-free company in Thailand, has made the announcement that it will be closing its branches in Srivaree, Pattaya, and Mahanakhon by September. This move forms part of a broader cost-cutting strategy that involves a voluntary redundancy program for employees across all branches.
The Reason for the Closure
Initially, the three stores slated for closure played a significant role in the company’s earnings, catering largely to tour groups. However, the business model has since been deemed unsustainable, according to CEO Nitinai Sirismatthakarn. He highlights the unfavorable business structure of these branches and the need to streamline the company’s workforce to maintain a competitive edge in a shifting market.
The COVID-19 pandemic has also had a notable impact on sales. While airport duty-free stores have been less severely affected, sales at the downtown outlets have dipped considerably.
Employee Compensation and Store Operations
King Power’s staff, who choose to take part in the redundancy program, will receive compensation in line with labor law. Additional payments will be made based on the length of service. Employees will also have the option to transfer to other branches.
After the closure of the three branches, the company will continue its operations at three other downtown locations – Rangnam, One Bangkok, and Phuket.
Renegotiations and Downturns
Simultaneously, King Power is renegotiating its concession contracts with Airports of Thailand (AOT) for five airports. Despite earlier intentions to terminate these contracts, revised payment terms have now been agreed upon. This is happening against the backdrop of a wider downturn in Thailand’s tourism sector, with a significant decrease in visitor numbers this year.
Investor concerns have been raised due to a 35.6% fall in AOT shares since the beginning of the year, which could indicate potential revenue losses for King Power. To review the concession agreements, two state universities have been commissioned by the airports. Sirismatthakarn supports this as a “check and balance” mechanism.
Questions & Answers
What is the reason for King Power’s closure of three branches?
King Power will be closing three of its branches as part of a cost-cutting initiative. The business model of these branches is no longer sustainable due to their unviable business structure and the need to streamline operations in response to a changing market landscape.
What will happen to the employees affected by the closures?
Employees who opt for the voluntary redundancy program will receive compensation as per labor law, with additional payments based on their length of service. They also have the option to transfer to other branches.
What is the current state of King Power’s concession contracts with Airports of Thailand (AOT)?
King Power is presently renegotiating its concession contracts with AOT for five airports. While initial plans were to terminate these contracts, revised payment terms have now been reached.
