Aviation and aerospace industry is growing rapidly worldwide. Thailand takes the advantage from this trend as well as its aviation market leadership to bring its aerospace and aviation industry to new heights.
According to its Commercial Market Outlook 2018, Boeing forecasted that in the next 20 years, Asia Pacific will become a major market where fleet of aircraft would be increased 2.8 times from current fleet of 6,139 aircraft to 16,977 aircraft in 2036. This trend will boost demand for commercial aviation services, ranging from supply chain support (parts and parts logistics) to maintenance and engineering services, aircraft modifications and airline operation services. The center of such business, which is now in North America and Europe, will shift to Asia Pacific in the next 20 years.
Huge opportunity is presented to Thailand
Thailand, with its strategic location in the heart of Southeast Asia, is already an aviation hub of the region. The continuous growth in the tourism industry and national economy has driven the country's air traffic to increase three times faster than the global market. In 2017, the number of aircraft movements at the main airports operated by Airports Authority of Thailand Plc (AOT) grew by 5.41% to 833,084 flights. Considering passenger movements, the number of passengers handled at the AOT's airports grew by 9.37% while freight and postal parcel volume increased by 9.68%.
Together with the increasing aircraft and passenger movement, the country's 38 commercial airports, diverse international and local airlines operating in the country make Thailand one of the fast-growing maintenance, repair, and overhaul -- MRO -- services industry and several companies involved in the manufacturing business.
Considering such high potential, the Thai government has included aerospace in the targeted industries that will promote national competitiveness and Thai economic transformation. Thailand's Board of Investment (BOI) also promotes the industry by offering investment incentives to aviation-related activities, namely manufacture and repair of aircraft or aircraft parts, manufacture of aerospace devices and equipment, aerospace operating systems, air transportation services, etc. Investment projects in this category are granted 8-year maximum corporate income tax exemption.
With all supports already in place, 51 projects from 26 companies have been promoted under aircraft part manufacturing activity while 16 projects have been promoted under aircraft and part maintenance and repair activity.
EEC Aerotropolis -- the catalyst
Thailand's aerospace industry is ready to take off and fly high as the development of the Aerotropolis, or an Airport City, in the Eastern Economic Corridor (EEC) is on the fast lane. A comprehensive roadmap of U-Tapao Airport and other facility development is clearly laid out. Once completed, the face of Thailand's aerospace industry will be changed.
The comprehensive Aerotropolis development plan includes U-Tapao Airport expansion plan, under which its total capacity will be increased from 5 million passengers per annum today to 54 million passengers in the next 30 years. New passenger terminal and runways will be built to support this expansion. Other facilities to support the aerospace and aviation industry include a custom free zone, the train system linking Suvarnabhumi, Don Mueang and U-Tapao airports, the development of an ICD in Chachoengsao, Laem Chabang Port Phase 3, Map Ta Phut Port Phase 3 and dual track train projects.
In support of EEC Aerotropolis development, BOI offers additional 2-4 years corporate income tax exemption for investment projects in targeted activities that have cooperation with an educational institution to develop human resources.
At the heart of the Aerotropolis, the 10-billion-baht Thai Airways International's MRO Campus, a cooperation between THAI and Airbus, will be built. Located on an area of 83 acres on the east of runway 2 at U-Tapao Airport, the facility will have the capacity to provide comprehensive services from traditional to predictive and prescriptive maintenance of a wide variety of aircraft from all makers. The MRO will have the capacity to provide maintenance service to 80-100 aircraft per year in the first 20 years.
The TG MRO Campus, when complete in 2023 will become one of the most advanced, state-of-the-art facility in Asia. It will use advanced technology like Big Data & Analytics, Maintenance Information System, Aircobot (computer + robot) for aircraft inspection, 3D printing, etc. Of course, this indirectly means more technology transfer and people development activities.
With state-of-the-art facilities and technology, the MRO will become another MRO hub for Asia, mainly serving airlines in Thailand and the Asia-Pacific. It is hoped that the project will in the future capture 4% market share in this industry in Asia.
The supply chain
Seeing Aerotropolis taking shape, local related industries are enjoying opportunity to lift their capability from local suppliers to advanced aerospace part suppliers.
The aerospace industry will enormously benefit from the country's huge pool of more than 2,000 tier 2 and 3 local automotive and electronics manufacturers and suppliers. These companies have high potential, experienced workers with good knowledge, and skills. By applying some advanced technology and knowledge, they can upgrade their skill and capability to transform themselves into aerospace part suppliers.
Mr. Remy Maitam, President, Triumph Aviation Services Asia, Ltd., a repair and overhaul service provider based in Thailand, said, "We see tremendous growth in the size of aviation fleet in Southeast Asia, which in turn raises demand for aviation services. Thailand has world-class infrastructure, quality workforce with excellent craftsmanship as well as efficient government, which makes perfect ecosystem for our business. Attractive tax incentive, easy process for work permit application for our expats, business friendly environment, and healthy lifestyle, all make investing in Thailand a pleasant experience for us in doing business in the heart of the fastest growing economic region in the world."
Thai Airways International PCL is considering the purchase of Airbus A350s or Boeing 777X jets as part of a plan to renew its widebody fleet, a senior executive said on Friday.
The airline submitted a plan to its government to buy 23 jets worth 100 billion baht ($3.07 billion) including some widebodies, but it was last month sent back to the new Thai Airways leadership team for a three-month review.
“Hopefully the figures will not change too much because we need room for expansion,” Thai Airways Vice President Alliances and Commercial Strategy Krittaphon Chantalitanon said of the order size on the sidelines of an industry conference.
A decision is expected before Christmas, he said, with the widebody jets to replace aging 747s, 777-200s and 777-300s. It would also give the airline the capacity to relaunch U.S. flights assuming Thailand’s safety rating is upgraded by the Federal Aviation Administration.
The flights would compete against non-stop U.S. flights from Southeast Asian rivals Singapore Airlines and Philippine Airlines. Chantalitanon said there was enough premium traffic from Thailand and neighboring countries to make the flights viable.
Chantalitanon said there had been a “bit of a drop” in passenger demand on Chinese routes after a boat accident in July that killed dozens of tourists.European and Japanese demand was stronger, he said, with the airline adding more flights to those regions.
Sumeth Damrongchaitham, 53, was officially appointed last month as president of Thai Airways International Plc (THAI).
His challenge is to turn around the loss-making national carrier, one of six financially ailing state firms that have been placed in business rehabilitation as required by the State Enterprise Policy Commission. The others are the State Railway of Thailand, the Bangkok Mass Transit Authority, TOT Plc, CAT Telecom and the Islamic Bank of Thailand.
Mr Sumeth sat down with the Bangkok Post to talk about his plans for his new role and the progress of a new joint venture: a maintenance, repair and overhaul (MRO) facility at U-tapao airport.
When do you expect to propose THAI's rehabilitation plan to the government?
We expect to finish the rehabilitation plan before December this year, as required by Deputy Prime Minister Somkid Jatusripitak, who visited THAI's office in September and ordered the plan's conclusion within three months.
THAI's rehab plan aims to raise income from the airline business, catering, and the MRO facility at U-tapao airport, aiming to develop one of the most advanced MRO centres in the world.
The airline business sees relatively stiff competition because of rising numbers of airlines and air routes.
The market share of THAI fell to 27% this year from 37% in the past five years. The rehab plan needs to increase market share, which is possible as the airline business grows by only 3% annually.
Thai catering has high potential thanks to increasing aircraft numbers and Thailand's status as an aviation hub in the foreseeable future.
What about THAI's plan to buy 23 aircraft worth up to 100 billion baht?
I cannot yet reveal any details because the company is in the process of revising the purchase plan. The company's aircraft purchase needs to be revised to conform with a business plan.
The company expects to conclude the purchase plan in 45 days before undergoing vetting by the National Economic and Social Development Board's and cabinet approval.
The plan to buy new aircraft is a vital part of THAI's restructuring plan. The purchase is deemed essential to increase the potential of THAI's airline business.
How is the MRO progressing?
The Eastern Economic Corridor Committee chaired by Prime Minister Prayut Chan-o-cha approved the project on Oct 4. The project is expected to be endorsed by the cabinet next week. Terms of reference for the project will be introduced within this month, and the winning joint venture partner will be secured by February next year.
Although THAI has already signed a memorandum of understanding with Airbus on the MRO in June, the auction is still needed because Boeing has expressed interest in joining the project.
Total investment in the project is 10.58 billion baht. The government's investment is estimated to account for 6.33 billion baht, with the remaining 4.25 billion baht from the private sector.
What are the economic returns of the project?
The economic rate of return is projected at 22.1 billion baht, excluding jobs created for high technology experts, and revenue from offering services to foreign airlines worth 200 billion baht over 50 years.
The estimated 200 billion baht worth of income over 50 years will play a key role in supporting THAI's ambitious plan to become a national premium airline.
The MRO will become significant in generating income to THAI, while the internal rate of return is estimated at 14%, which is quite high.
The MRO is business has less competition compared with the airline business.
The aviation industry is likely to have steady growth over the next 5-10 years, while at the global level aircraft are expected to increase by 50% during the period, Asia is expected to account for 20% of them.
Due to its geographical position Thailand is expected to become the aviation hub for the region, for which the MRO facility is considered an appropriate investment.
The development of U-tapao aviation city is also expected to attract many companies to set up in the MRO.
When will the MRO at U-tapao airport open?
The project will begin operating within the next five years. THAI will remove the existing maintenance and repair centre at U-tapao to allocate an area for the airport's second runway and new passenger terminal.
The MRO facility will be on a larger scale, using technology called a "smart hanger" that can offer services to five wide-body aircraft and two narrow-body ones. It is to include heavy air-frame maintenance and base maintenance, line maintenance, aircraft painting and other modification, and component maintenance.
Thai Airways International Plc (THAI) and Rolls-Royce have announced a collaboration on an R&D programme for the Trent XWB engine.
Surachai Piencharoensak, executive vice-president for technical matters at THAI, said the Trent XWB Development Testing partnership will take place over a two-year period at Don Mueang airport.
"This is the first overseas engine research and development testing for Rolls-Royce outside the United Kingdom," Mr Surachai said. "This programme is part of the strategic plan for 2018-19 and is a revenue-generating, collaborative project for THAI, whereby technology and skills gained will further strengthen Thailand's aviation industry."
The initial objective is to conduct R&D on the Trent XWB-97 engine, which powers the Airbus A350-1000 aircraft that was launched in February.
To ascertain the engine's limitations in usage, continual simulated engine tests are conducted. These tests, in addition to scheduled checks and maintenance, can help improve product quality.
Dominic Horwood, chief customer officer for civil aerospace at Rolls-Royce Holdings Plc, said the company entered the Thai market over 50 years ago and the latest partnership marks another milestone.
The collaboration will undertake the full chain of aerospace activities in Thailand, including manufacturing; maintenance, repair and operations (MRO); and development testing.
"Rolls-Royce invests about US$100 million (3.3 billion baht) a year to support the manufacturing supply chain footprint in Thailand," Mr Horwood said.
In 2020, THAI and Rolls-Royce will cooperate on Trent 700 engine maintenance and overhaul, making THAI's facility a certified and authorised engine maintenance centre for Rolls-Royce.
Transport Minister Arkhom Termpittayapaisith hailed the cooperative effort between the two countries, saying Thailand's development as an MRO hub would create revenue for THAI.
Last December, THAI and Airbus signed an agreement to assess MRO business opportunities at U-tapao airport in Rayong province.
Development of U-tapao is one of several important projects under the Eastern Economic Corridor (EEC) scheme. The deal between THAI and Airbus defines the framework of mutual cooperation to determine opportunities related to MRO development.
The fleets operated by carriers in Asia and the Pacific are forecast to more than double in size over the next 20 years, from 6,100 aircraft to almost 17,000.
Airbus estimates that the value of MRO in this region alone will reach $664 billion over the next decade.
This year, THAI began maintaining the Airbus A380 at U-tapao. New hangar facilities are planned to support the growing airport.
The board of Thai Airways International Plc (THAI) has officially appointed Sumeth Damrongchaitham as the new president.
Mr Sumeth's key mission is to turnaround the national carrier from the red.
The former managing director of Dhanarak Asset Management Co, Mr Sumeth started the job on Sept 1, replacing Usanee Sangingkoeaw, who was acting president from February 2017. He is also appointed acting executive vice-president for finance and accounting.
An aviation expert who requested anonymity speculated that Mr Sumeth will focus on revenue management in his turnaround bid.
A source in THAI said Mr Sumeth will continue the current rehabilitation plan and hopes to enhance competitiveness.
The second quarter was part of the low season and airlines saw fierce competition in part from higher global oil prices.
<p>THAI and its subsidiaries reported an operating loss of 2.8 billion baht in the second quarter, up from 965 million the same period last year.
Total revenue was 47.2 billion baht, up by 2 billion or 4.6% from the same quarter of 2017 as passenger and excess baggage revenue rose.
THAI's rehab plan consists of increasing revenues, adopting low-cost business models, transforming business units by seeking new business opportunities and increasing efficiency in asset management.
In June it signed an agreement to establish a new joint venture maintenance, repair and overhaul (MRO) facility at U-tapao airport, aiming to develop one of the most advanced MRO centres in the world.
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