Airbus to send venture proposals
European aircraft manufacturer Airbus has been urged to submit
related proposals for the formation of a joint venture with Thai Airways
International Plc (THAI) by June 7 to develop the maintenance, repair and
overhaul (MRO) facility at Rayong's U-Tapao airport.
Airbus and THAI signed an agreement to jointly invest in the
project in June last year. The two organisations are currently discussing
details under the joint venture deal. The 11.2-billion-baht scheme is one of
the five megaprojects under the government's Eastern Economic Corridor (EEC)
THAI president Sumeth Damrongchaitham said the EEC policy
committee has made it clear that Airbus must submit proposals to THAI for the
establishment of the joint venture within a month or by June 7.
He said THAI and Airbus still have various concerns to thrash out.
Airbus is about to float certain details for discussion later after the
agreement is signed, Mr Sumeth said, adding the concerns range from legal
elements to management issues.
Referring to THAI's plan to acquire new planes, which are worth
156 billion baht, Mr Sumeth said the airline is in the process of submitting it
to the Transport Ministry for consideration.
He said a study is also being carried out for the lease of two to
four aircraft. Expedited efforts will be made to wrap up the study, which will
be sent to the airline's board for consideration, he noted.
"The leased planes must be used for at least six years so as
to break even," said Mr Sumeth. He said the management would ask the
airline's board to approve a new Bangkok-Sendai, Japan flight and the proposal
is likely to be given the green light.
The management wants the board to approve the new flight plan as
quickly as possible in order to seek a budget and map out a timetable for the
flight, which would be launched on Oct 27.
THAI to seek Cabinet approval for acquiring 38 new planes
THAI AIRWAYS International Plc (THAI) expects to this month propose to the Cabinet its project to procure 38 new aircraft at a total cost of about Bt156 billion.
The procurement plan has already been forwarded by the National Economic and Social Development Board (NESDB) to the Ministry of Transport, THAI president Sumeth Damrongchaitham, said. The ministry in turn is expected to propose the matter to the office of secretary-general of the Cabinet within this week and then to the Cabinet within this month. The procurement would be in two phases. About 25 new aircraft will be purchased in the first phase and 13 in the second phase. Of the total, 31 new aircraft would be used to replace older planes that will be gradually decommissioned over the next 10 years, while the remaining seven planes will be assigned to new routes in the future. Meanwhile, THAI is planning to open the Bangkok-Sendai (Japan) route this November, due to Japan’s growing popularity as a destination for Thai people.
Recently, Manchester airport, the UK’s fourth busiest airport by passenger traffic, met officials from THAI about increasing direct flights. Thai tourists have been travelling to the north of the United Kingdom, but experience some difficulty in obtaining visas to the country, said Sumeth. The airport authority will seek solutions to the visa-approval problem. In regard to a solution to the Rolls-Royce engine problems that have affected six to seven of the airline’s planes, THAI is now negotiating with the British jet engine manufacturer for compensation. The airline has hedged against global oil price fluctuations and has adjusted its ticket prices to reflect actual costs. But the Thai flagship airline has taken a cautious approach to adjusting ticket prices, given the high competition, and it believes now is not the right time to raise ticket prices. Sumeth, who is also chairman of Thai Smile Airways, said he has assigned both companies to connect their policies, merge administrative centres for cost reduction and have separate service and aviation sections without reducing staff. “Merging the centres will allow connectivity of overseas routes of Thai Smile and THAI, to facilitate passengers’ transits in the country and abroad. Thai Smile is expected to have satisfactory performance at the end of this year, thanks to new cost management and resource sharing,” Sumeth said. Meanwhile, THAI has reported total revenue of Bt200.58 billion, and a net loss of Bt11.62 billion for 2018 year-end, higher than its Bt2.10 billion net loss in 2017.
Airbus, Thai Airways to ink U-Tapao Deal in May
Pierre Jaffre, president of Airbus Asia-Pacific, discussed with Somkid the arrangements for the project, which is regarded as a showpiece development for the Eastern Economic Corridor (EEC). Airbus has teamed up with Thai Airways International (THAI) to construct the MRO centre at U-Tapao airport in Rayong, one of the three provinces in the EEC. Also attending the talks were Jacques Lapouge, the French ambassador, and Georg Schmidt, the designate German ambassador to Thailand.
Somkid told them that the groundwork was being laid for the EEC’s infrastructure projects and that they were moving ahead as planned. He also advised them of Thailand’s cooperation with China’s Zhengzhou Xinzheng International Airport for the development of U-Tapao’s Airport City project.He said the MRO project could be run as a public-private partnership (PPP) scheme and the EEC Office would take charge of this. A contract for the project would be ready for signing this month, marking progress for the partners after a period of delay, he said. “Airbus knows that investing in the MRO centre in Thailand will yield the best economic return compared to other regions,” Somkid said. “In May, negotiations will certainly reach their conclusion. The Airbus executive has flown in to discuss this matter in particular. If it (the negotiations) cannot be concluded, he will not go back. We’re confident that within this month, the contract signing will be made.” According to a source from Government House, during the discussions Airbus expressed concerns over the joint investment between itself and THAI, especially relating to ownership of the project. If the MRO project is specified as being owned by THAI, which is a joint investor with Airbus, the contract may not be able |to be signed under a PPP scheme because both are private enterprises, the source |said. Given this constraint, Somkid has asked THAI chairman Ekniti Nitithanprapas to hold more discussions with Airbus, with a view to proposing that it sign the contract with the EEC Office, the source said. In such a case, the EEC Office would be the project owner, with Airbus and THAI as joint investors, the source said. Of the total investment of Bt10.58 billion in the project, Bt6.333 billion will be made by the public sector and Bt4.255 billion by the private sector. The expected return on the project is Bt38.87 billion, about Bt36 billion of which will be given to the public sector and Bt2.87 billion to the private sector. The expected economic return, excluding those from hi-tech employment valued at Bt80-billion and a Bt200-billion increase in income from services to foreign airlines, is about Bt22 billion. Once the MRO centre is completed, THAI’s repair centre would be removed to pave the way for construction of U-Tapao airport’s second runway and a new passenger terminal. The centre is expected to start services in 2022.
Third runway for BKK Suvarnabhumi Airport approved
A PROPOSED third runway for Suvarnabhumi International Airport has cleared the final hurdle, with the Cabinet yesterday approving the Bt21.8 billion project.
The construction, to be overseen by the Airports of Thailand (AOT), is scheduled to be completed in 2021.
Deputy government spokesman Weerachon Sukhondhapatipak said work is scheduled to begin this year.
A plan for the construction of the taxiway B2 extension, at a cost of Bt622.33 million, was dropped. That decision enabled the overall cost of the project to be reduced from the originally envisaged Bt22.42 billion, Weerachon said.
A contract is expected to be signed after the Environmental Health Impact Assessment (EHIA) gains approval from the Office of National Environment Board.
The third runway will enable 30 more flights per hour for Bangkok’s main airport.
Its two runways can accommodate 64 flights an hour.
The western runway is 3.7 kilometres long and the eastern one is 4km.
The two runways average 63 flights an hour during busy times. If an emergency occurs or a runway is closed for maintenance, total runway capacity will be almost halved to 34 flights an hour.
The 4 km third runway will be in the western part of the airport, the same side as the main warehouse and the current western runway.
Once the third runway comes into service, it will also be used for cargo flights when the western runway is closed for maintenance.
This project will include a navigation system, the construction of drainage system and fire and rescue stations.
The project is part of Thailand’s transport infrastructure development plan from 2015.
According to the Ministry of Finance, the AOT should apply appropriate risk management for the project.
The third runway will provide a low rate of return and it will be 20 years before it breaks even.
The AOT will also coordinate with agencies such as Aeronautical Radio of Thailand Ltd to plan construction of a fourth runway to cope with future air traffic, and set a standard to reduce any impact that may arise from delays and service quality of Suvarnabhumi airport.
Thailand to support aerospace sector via new incentives
According to the state owned agency BOI, Thailand is positioned to become the leader of MRO in Southeast Asia by supporting a rapidly expanding aerospace sector via incentives
The Thailand Board of Investment (BOI) has approved investment promotion incentives for companies that choose Thailand as their base of aircraft maintenance, repair and overhaul (MRO) activity.
Thailand’s MRO expenditure from 2015-2024 has been forecasted to reach a total amount of USD $10.6 billion, with airframe, engine and component MRO being specifically targeted.
As Thailand hosted a record 38 million visitors in 2018, and expects 40 million in 2019, its aerospace sector is growing at an astounding rate uniquely positioning the Kingdom to lead ASEAN in MRO activity.
“Thailand’s geographic position and strong expertise in the aerospace industry are why global companies choose us when they’re ready to expand their operations to Asia.”
Thailand’s MRO flagship will be the Eastern Airport City (Aerotropolis), anchored by U-Tapao airport, in the country’s Eastern Economic Corridor.
The Aerotropolis project, part of a 15- year aviation development plan for Thailand, calls for an expansion of U-Tapao’s passenger capacity from 5 million passengers to 54 million in the next 30 years.
The Aerotropolis will serve as an MRO hub and will be connected by rail, roadway, and sea to other major airports including Suvarnabhumi and Don Mueang International Airports.
One of the reasons why aerospace companies continue to choose Thailand as their ASEAN regional base, aside from the skilled workforce and the size of the market itself, is the generous support of the Thai government.
8 years corporate income tax exemption
Companies that expand to Thailand receive investment incentives such as 8 years of corporate income tax exemption, plus an additional 5 years of 50% reduction of the corporate income tax rate after the exemption period. BOI offers another 2-4 years of corporate income tax exemption for investment projects based in the Aerotropolis that pair with local educational institutions on workforce development initiatives.
Global aerospace brands have been present in Thailand for decades, and the Kingdom shows no signs of slowing down in attracting large multinational companies.
Recently, a leading aircraft manufacturer announced plans to establish a new MRO facility at U-Tapao Airport, in a joint venture with Thai Airways.
Similarly, Revima, the French APU and landing gear MRO specialist, has started construction of a new landing gear overhaul facility in Chonburi, Thailand. The 12,000m 2 facility will focus on Airbus A320, Boeing 737 and ATR family landing gears.
It will be equipped with state-of-the-art machines and will include all necessary special processes for full in-house repair & overhaul of landing gears. Another investor, BOSA, a UK-based aircraft component maintenance services provider, has launched a joint MRO venture, BOSA-Thayaan Aircraft Service (BTAS), to perform line maintenance operations at U-Tapao Airport.
MRO Investment Heats Up in Southeast Asia
A region of rapid growth and huge potential, Southeast Asia continues to witness a surge in aerospace activity as providers of all sizes vie to capitalize on rising maintenance, repair, and overhaul (MRO) demand. In recent weeks, several companies have announced intentions to expand their presence and support the region’s growing fleet plans.
Among the latest contenders—Malaysia-based newcomer Sapura Technics—signaled its entry into the market on April 2 with an opening ceremony led by Malaysian Prime Minister Tun Dr Mahathir Mohamad. Owned by Sapura Resources Berhad, the narrowbody MRO eyes a July launch date once it receives Part 145 approval from Malaysian authorities.
With two hangars at Senai International Airport, Sapura Technics will first concentrate on line and base maintenance up to C checks for Boeing 737 and Airbus A320-family aircraft. Plans include adding facilities for interiors, wheels and brakes, hydraulics, and safety equipment.
Elsewhere this week, SIA Engineering Company (SIAEC) inked two agreements including a new $1 billion comprehensive services agreement with its parent company Singapore Airlines (SIA) on April 1. The new contract calls for SIAEC to provide MRO services and fleet management support for a two-year period, with an option to renew for a further two years. The new deal replaces SIAEC’s 2015 agreement with SIA.
In a separate development, SIAEC and low-cost carrier NokScoot formed a new line maintenance joint venture (JV) on March 31 to support the carrier’s Boeing 777-200s and fleet-expansion plans. Singapore Airlines' Scoot Tigerair owns 49 percent of NokScoot, while Thailand’s Nok Air holds the remainder.
The new JV will carry a registered capital base of approximately $2 million, with NokScoot holding a 51 percent stake and SIAEC holding the remaining 49 percent. Initial plans include providing line maintenance at Don Mueang International Airport before expanding to other airports across Thailand. The agreement boost SIAEC’s current network of line maintenance stations to 34 airports in seven countries outside of Singapore.
In the business aviation sphere, Dassault Aviation recently announced plans to acquire ExecuJet Malaysia’s MRO facility at Subang Airport in Kuala Lumpur. With a launch date planned between six months and a year, the company will focus on strengthening its aftersales services by adding maintenance capabilities for the Falcon 8X, 7X, and 2000 before expanding to Falcon 900 models.
SIAEC to Form Line Maintenance JV in Thailand
Mainboard-listed SIA Engineering Company Limited (“SIAEC”) today announced that it has entered into a joint venture agreement with NokScoot Airlines Co., Ltd (“NokScoot”), to form a line maintenance joint venture based in Thailand.
Under the agreement, NokScoot will hold an equity stake of 51% in the joint venture, with SIAEC taking the remaining 49% stake. The agreement is subject to the receipt of regulatory approvals.
The joint venture will have an initial registration capital of THB63,680,000, or approximately S$2,740,000. NokScoot will subscribe for THB32,476,800, or approximately S$1,397,000, in cash and SIAEC will subscribe for THB31,203,200, or approximately S$1,343,000, in cash in the joint venture.
The joint venture will commence operations in Don Mueang International Airport (DMK) and subsequently expand to other key airports in Thailand.
Mr. Png Kim Chiang, Chief Executive Officer of SIAEC, said “We are delighted to partner NokScoot for this line maintenance joint venture in Thailand. The joint venture will allow SIAEC to support NokScoot’s growing fleet in Thailand and grow SIAEC’s existing network of Line Maintenance International (LMI) stations to 34 airports in 7 countries outside Singapore.”
Mr. Yodchai Sudhidhanakul, Chief Executive Officer of NokScoot, said “We are excited to enter into this agreement which will further strengthen the partnership between our two companies. This joint venture is a significant milestone for us at NokScoot. It will help us to provide faster and more reliable line maintenance services to support our growth plan.”
NokScoot is an associate of Singapore Airlines, as it is 49% owned by Scoot Tigerair Pte Ltd.
Scoot Tigerair Pte Ltd is wholly-owned by Budget Aviation Holdings Pte Ltd, which is a whollyowned subsidiary of Singapore Airlines (“SIA”). Mr Ng Chin Hwee, a Director of SIAEC, also
sits on the board of NokScoot as a representative of SIA.
The joint venture is not expected to have a material impact on the earnings per share or the net tangible assets per share of SIAEC for the financial year ending 31 March 2019. Save as disclosed above, none of the Directors of SIAEC has any interest, direct or indirect, in the transaction.
CP seeks to follow up rail success with U-Tapao, aviation city bids
CHAROEN Pokphand Group |(CP Group), along with BBS Joint Venture and Grande Consortium, submitted bids yesterday for the|U-Tapao airport and Eastern Aviation City development projects worth Bt290 billion.
The projects come under the eastern economic zone development scheme, which will feature high-speed rail connections serving urban expansion plans that will see the Eastern Aviation City grow to become an aviation metropolis within 10 years. CP Group and its business allies formed a consortium called Thana Holding Joint Venture and its expected partners include Charoen Pokphand Holding, Italian-Thai Development, Ch Karnchang and B Grimm Joint Venture Holding. As representatives of the joint venture, Noppadol Dej-udom, vice chairman for CP Group’s Sustainability, Good Governance and Corporate Communications Office, and Adiruth Thothaveesansuk, vice chairman for CP Group’s Special Projects Development Office, submitted the bid for the projects.
CP Group’s participation in the bidding for the paired projects in the Eastern Economic Corridor (EEC) comes hot on the heels of its success in winning the bid to build a high-speed train system connecting three international airports: Suvarnbhumi and Don Muang in Bangkok and U-Tapao in Rayong. The group is engaged in negotiations with the government on the details of the project. Another bidder for the U-Tapao and aviation city projects is BBS Joint Venture, which comprises Sino-Thai Engineering and Construction, Bangkok Airways, and BTS Group Holdings. The third bidder, Grande Consortium, comprises Grande Asset Hotel and Property (Grand); Asia Aviation (AAV), which is majority-owned by Thai AirAsia, an operator of a low-cost airline AirAsia; and Christiani & Nielsen (Thai) (CNT). Grande holds an 80 per cent stake in the consortium, while AAV and CNT each owns 10 per cent. Earlier, Thai Airways International Plc and PTT Plc, which had shown interest in bidding, dropped out of the race. “We have an investment plan to buy 38 new aircraft worth Bt160 billion, which is under study by the National Economic and Social Development Council Office,” Thai Airways International Plc's president Sumeth Damrongchaitham said recently. “This is a high investment for our business. As a result, we decided to cancel to our plan to join in on the bidding.” However, the company may join in on an investment covering cargo, aviation catering and ground services at a later stage, he said. Earlier, 42 domestic and overseas private firms from had expressed interest to buy the letter of intent required to participate in the bidding for this project. Of the foreign companies, six are from China, two firms from France, five from Japan, and one each from Turkey and Malaysia. Work on the Eastern Aviation City development is planned to start initially on a 6,500-rai site encompassing U-Tapao airport, before being extended to become the Eastern Aviation Metropolis. The U-Tapao airport development project will be located on a 6,500-rai site owned by the Royal Thai Navy and include a maintenance, repair and overhaul centre, a duty-free zone, a terminal, a second runway and a container depot. Both projects will be developed under the public-private partnership (PPP) model.
Bangkok Airways Outlines Expansion Plans
Thai regional airline Bangkok Airways has earmarked more than $94 million worth of capital expenditures this year in an effort to tap into new business opportunities and remain competitive amid increasingly challenging market conditions.
In terms of fleet expansion, plans call for the purchase of two ATR 72-600s for delivery in the second quarter of 2019 and a two-year effort to upgrade the cabins in its Airbus A319 jets. Valued at $57.1 million, the aircraft project includes the purchase of new spare parts.
Bangkok Airways also plans to build what it calls a diversified portfolio of partners and a more comprehensive route network to boost feed. Consequently, the airline will launch scheduled and chartered flights to new destinations in the CLMV region (Cambodia, Laos, Myanmar, and Vietnam). The carrier, which targets a 3 percent increase in passenger traffic this year, also wants to increase the number of its codeshare partners from 27 to 29 or 30. Additional plans include a $10.5 million runway upgrade of Trat Airport, which the airline owns and operates.
While the Thailand government has committed to expanding a maintenance complex 90 miles southeast of Bangkok at U-Tapao Airport, the airline has reiterated its intent to build a maintenance, repair, and overhaul (MRO) facility at another airport it owns in the north: Sukhothai Airport. The carrier has set aside $30 million for the project and plans to build a new hangar to accommodate aircraft maintenance up to C-checks. Bangkok Airways runs a one-bay hangar at Don Mueang airport; however, it faces space constraints, making expansion difficult.
Bangkok Airways’ business outlook comes amid a flurry of activity from foreign aviation firms vying to expand their portfolios in Thailand. On March 5, Triumph Aviation Services Asia (TASA) and Triumph Structures inked a memorandum of understanding (MoU) with the Thailand Civil Aviation Training Center (CATC) to establish an aeronautical and space training center at U-Tapao to increase the pool of technicians and boost the country’s MRO industry. The Thai government values the project at $43 billion over the next five years.
Last month, French MRO provider Revima announced plans to build a landing-gear overhaul facility in the eastern province of Chonburi. The 130,000-square-foot center will serve Airbus A320s, Boeing 737s, and ATR turboprops.
February also saw UK-headquartered BOSA launch its first business in the Asia-Pacific region with an MRO joint venture with Thailand-based Thayaan Aviation Consultants Group. The JV will provide line maintenance operations on nearly all aircraft types aside from the Airbus A350 and A380 at U-Tapao.
Meanwhile, Airbus and CATC signed an MoU in January to develop maintenance training and pilot training courses to serve the country’s airlines.
Thai Airways to Acquire Up to 38 New Planes to Modernize Fleet
Thai Airways International Pcl, the nation’s flagship carrier, plans to buy as many as 38 new aircraft to help reduce maintenance costs after losses widened more than fivefold last year amid fierce competition and unpredictable fuel prices.
The new aircraft, which are more fuel-efficient, would help trim operating costs and attract customers, President Sumeth Damrongchaitham told reporters Friday in Bangkok. The state-controlled carrier may need to lease some aircraft before the deliveries are complete, he said, without detailing the models the carrier is weighing.
"Thai Airways is in a trap -- we have old aircraft that have endured heavy use and cause issues to operations,” said Sumeth. “Many times we had to ground planes, do repairs, change flights.”
Thai Airways reported a loss of 11.6 billion baht ($365 million) in 2018, versus 2.1 billion baht a year earlier, with Sumeth attributing the widening losses to currency fluctuations and oil prices.
The plan to purchase new aircraft will need Cabinet approval, said Nattapong Samit-Ampaipisarn, the airline’s chief financial officer.
The carrier’s shares fell as much as 4.6 percent Friday, their fourth day of declines. They have slumped about 80 percent since listing in 1992.