Transport Minister Saksayam Chidchob has given the green light to loss-making Thai Airways International Plc (THAI) to purchase and lease 38 new aircraft for an estimated 136 billion baht, despite objections from the workers' union.
He said the aircraft acquisition will definitely go ahead because it is a necessary investment, adding an assessment would be conducted to ensure the new planes boost the national carrier's competitiveness.
The acquisition is opposed by THAI's workers' union, which fears the project will add further strain to a company facing accumulated debt of more than 100 billion baht.
Despite the crippling debt, Mr Saksayam said THAI must invest because the existing fleet is ageing, describing it as a bold move that the national carrier has to make to survive.
He said THAI is also being asked to work out a new pricing strategy to increase its competitiveness.
"If we don't invest and instead let the business run at a loss, it will stay like that," he said, adding that Deputy Transport Minister Thaworn Senneam would supervise the acquisition plan.
The transport minister played down a spate of reported resignations by board chairs of state enterprise agencies, saying this was normal during a government transition.
THAI's board chairman, Ekniti Nitithanprapas, has reportedly submitted his resignation.
Mr Saksayam said state enterprises under the Transport Ministry will be evaluated via key performance indicators (KPIs) compiled by the Office of Transport and Traffic Policy and Planning.
"The rules are simple: the evaluations will be based on KPIs from the day they take office. If efficiency improves and business results are positive, nobody will question them [the boards]. If efficiency drops and accumulated losses increase, they should leave and let others do the job," he said.
The transport minister also said that talks to legalise app-based ride-hailing services will be finalised this week, but insisted the operators should be Thai-owned businesses so as to ensure enforcement of regulations and tax payments.
He said conventional taxi operators had nothing to fear if their services were up to scratch.
The national carrier is undergoing a rehabilitation plan, including cutting back on internal expenses and boosting digital marketing, he said after a meeting with THAI and Thai Smile Airways executives on Thursday.
THAI president Sumeth Damrongchaitham said staff are gathering additional information on the airline's plan to buy or lease 38 new aircraft, estimated to cost 130 billion baht, before sending the details to the cabinet for approval.
He believes the rehabilitation plan will pay off and THAI will start to make a profit within three to five years.
The rehabilitation plan is aimed at addressing its almost 100 billion baht debt that has accumulated over the past 10 years.
The measures include procuring new aircraft and improving services.
Mr Sumeth said THAI also plans to promote Otop products by selling them on flights, adding the carrier also plans to start allowing passengers to check in four days to two weeks in advance.
Meanwhile, acting chief executive officer of THAI Smile Chartia Leelayuth said the airline will ask its parent, THAI, to increase capital in the fourth quarter of this year for use as a revolving fund to tackle the low-cost carrier's losses of about 14 billion baht.
The study together with domestic hearings suggest that Thailand has the potential to host an air show to include civil, commercial and military aviation, said Nichapa Yoswee, senior vice-president for business at the Thailand Convention and Exhibition Bureau (TCEB).
The event will also help promote the aerotropolis, one of the megaprojects planned for the Eastern Economic Corridor, she said.
The location of U-tapao airport, which spans areas in Rayong and Chon Buri provinces, could be a suitable venue because of ample accommodation in the area, especially in Pattaya, a city that hosts meetings, incentives, conventions and exhibitions, Ms Nichapa said.
The industry hearing organised recently by the TCEB gathered ideas from 17 agencies in public and private sectors in aviation-related associations and educational institutions.
The agencies include the Eastern Economic Corridor Office, Thai Airways International, Bangkok Airways, the Thai Exhibition Association, the Aerospace Engineering Department and Kasetsart University.
According to the study and industry hearings, Thailand's maintenance, repair and overhaul (MRO) sector is strong, with average growth of 11.8% a year, which is higher than the global rate (5.1%).
The study also revealed Thailand's aerospace industry expertise, which could support the aviation market on the strength of major international MRO and aerospace manufacturing companies operating in Thailand, including Rolls-Royce, Airbus, Senior Aerospace and Ducommun Technologies.
Local subcontractors need to improve aviation manufacturing supply chain from Tier 3 to Tier 2, which entails making more high-end parts like propellers, the study said.
One of the most important factors for Thailand to host air shows is support from the state sector because such events require a large budget.
Ms Nichapa has encouraged the government to sign a 20-year contract with Farnborough International to nominate the company as organiser for the shows, which typically take place every two years.
"International air show events can serve as concrete evidence of how ready Thailand is, in terms of the potential to host global Mice events as well as the capability of the local workforce as an MRO hub in the aviation business," she said.
The initial duration of such an event is four days, featuring 200 exhibitors and 15,000 trade buyers together with 60 aircraft.
The TCEB expects to stimulate spending of 1.4 billion baht from the air show and could create 920 jobs for locals.
The A220-300 is one of the newest single-aisle aircraft of the Airbus family. While the A320neo is the company’s best-selling model, the A220-300 is a complement for destinations with softer demand.
Airbus has more than a 60% market share in the region’s single-aisle market, with more than 3,000 jets flying for 80 different carriers and over 1,500 on order for future delivery.
Christine De Gagne, marketing director at Airbus, said the new equipment should maximise the profits of airlines because now they can fly a smaller jet instead of leaving the seats empty. The efficient design with 20% lower fuel burn per seat highlights the capability of minimising the cost of operations amid fierce competition.
The 100- to 150-seat market is one of the promising segments in the next 20 years, Ms De Gagne said. According to Airbus’s forecast for Asia-Pacific, the demand for this size of single-aisle jet will grow to 7,000 in the next 20 years. Of that number, Airbus aims to take at least a 20% share.
“The A220 family will fill the gap between large single-aisle and regional aircraft, and the range of time which this aircraft can fly is up to 7-8 hours,” Ms De Gagne said. “The lighter weight also means the capability of using a smaller airport in Thailand such as Samui airport, for which we ran a test flight once.”
Korean Air and Air Vanuatu are the first two customers for the A220 in Asia-Pacific. In the global market, Airbus has 551 orders from 21 airlines after delivering 78 aircraft to five airlines.
The accumulated flight hours are more than 200,000, with some carriers using the jet its maximum of around 18 hours a day.
The A220 family consists of the smaller A220-100 and larger A220-300, which are the only passenger aircraft purpose-built for the 100- to 150-seat market.
In Thailand, Airbus has 153 aircraft in service under leading brands such as Thai Airways International, Bangkok Airways, Thai AirAsia and Thai AirAsia X.
Among the popular models are the A320 family, which mainly serves the short-haul route. For long-haul destinations, there are the A330, A350 XWB and A380, connecting Asia with Europe.
Airbus also insists on a pledge to keep safety standards under the scrutiny of the European Union Aviation Safety Agency. The A220 gained approval for 180-minute flights for the extended-range twin-engine operational performance standard, which means it can fly over oceans in the region.
“Thailand is standing out as one of the leading markets in Asia-Pacific,” Ms De Gagne said. “Airbus hopes new aircraft in the fleet will help the airline kick-start with appropriate demand before expanding to the bigger jet in the family when the time is right.”
A royal decree will be issued to lay down conditions for foreign parties wanting to set up maintenance, repair and overhaul (MRO) operations in Thailand, according to the Civil Aviation Authority of Thailand (CAAT).
CAAT director-general Chula Sukmanop said these conditions will include terms regarding the transfer and import of technology and micro-investment in MRO businesses.
The decree is being mooted after the Civil Aviation Committee (CAC) invited national carrier Thai Airways International (THAI) to explain its plan to establish a 10-billion-baht MRO centre at U-Tapao airport in Rayong.
The plan involves investment negotiations with the world's leading aircraft manufacturer Airbus.
The decree, once it comes into effect, would set clear terms and conditions for MRO investments, according to the CAAT chief.
The CAAT sees an MRO operation at U-Tapao as presenting ideal economic opportunities for the Eastern Economic Corridor project, the government's flagship policy.
Mr Chula said MRO businesses will create jobs and generate income for the local economy.
He said they have long-term expansion prospects as the aviation sector in Asia is booming with many aircraft being bought, especially in China where air traffic has grown significantly over the years. The aircraft also need regular maintenance.
Mr Chula said growth in commercial aviation in Asia is expected to continue in the next two to three years. The number of air travellers is on the upswing, as are orders for new planes.
Thailand has the capability to run MRO businesses in terms of available technology and production of spare parts.
In the future, the door will be opened to US aircraft maker, Boeing, to invest in MRO. The airports in Chiang Rai and Nakhon Ratchasima have a combined free space of over 3,000 rai to accommodate MRO facilities. The Board of Investment (BoI) has offered investment privileges such as income tax waivers and tax exemptions on imports of machinery for use in MRO businesses, says the CAAT.
A source at the Transport Ministry said the Asia Pacific accounts for 30% of the world's air traffic volume with 1,900 aircraft deployed by various airlines in the region, expected to grow by another 3,200 aircraft in the next 20 years.
Mr Chula, meanwhile, said the CAC has approved an amendment to the criteria for issuing licences for commercial flights, other than scheduled passenger services, operated for specific purposes including crop spraying, sightseeing and photography.
He added that more personnel will be trained to make safety inspections of ATR turboprop aircraft following the International Civil Aviation Organisation (ICAO) withdrawal of its red flag early this year after finding Thailand made progress in addressing "significant safety concerns [SSCs]".
ATR plane inspectors are in short supply in Thailand and some have to be hired from a neighbouring country, he said.
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