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.
More pilot training centres are required to meet the projected rising demand for aircraft across Asia-Pacific, including Thailand, over the next 20 years, ATR's vice president for training and flight operations, Christian Commissaire, said yesterday.
For ATR aircraft alone, the demand for trained pilots averages at about 1,500 worldwide each year, with up to 700 of them destined for the Asia-Pacific region. This supply of new pilots is needed to keep pace with the company’s delivery of an average of 80 aircraft a year to airlines across the world, Commissaire said in a group interview.
He added that, on average, a newly delivered ATR aircraft requires five pilots and five assistants for air services. Training takes about 24 months at a cost of up US$150,000 per pilot.
With the high cost of training, that limits the supply of qualified pilots to meet the strong demand in the market, Commissaire said.
“We have a training centre in Singapore and Miami in the US, with two in France, and another in Johannesburg, South Africa,” he said. “They can produce an average of 500 new pilots a year, but that is still not enough to the meet the demand for new pilots that averages about 1,500 a year.
“However, we have collaborated with other pilot training centres in the world to train new pilots to help go towards meeting this strong demand.”
According to a survey by aircraft maker Boeing, the commercial airline industry will require 635,000 new pilots over the 20 years from 2017, in response to a doubling in the size of the global aircraft fleet and the record demand for air travel.
Of the total demand for new pilots, up to 261,000 new pilots will be required for Asia-Pacific from 2017 to 2037.
The figure was included in Boeing's 2018-2037 Boeing Pilot and Technician Outlook published at EAA AirVenture Oshkosh recently.
For Thailand, the country is projected to have more than 55 new aircraft from 2018 to 2037, with Thai Airways International Plc accounting for 28, Bangkok Airways Plc with 20, and Thai Air Asia Co Ltd with seven, according to a recent survey The Nation. This means they need more than 550 new pilots and assistants from this year to 2037.
The airlines will also need more new pilots to replace those who will retire during that period. This demand is based on the assumption of five pilots and assistants for one aircraft.
“Bangkok also has a pilot training centre that have enough capability for the training of new pilots to serve the country's aviation growth,” Commissaire said.
Boeing notes in its Business Environment Update report for 2018 that there are 295,000 active commercial pilots around the world.
More broadly, the 2018-2037 Pilot and Technician Outlook also forecast the need for 96,000 business aviation pilots and 59,000 civil helicopter pilots over the next two decades. The report marks the first time that the Boeing report has offered a view on these two sectors.
In line with the strong projected demand for pilots worldwide, including Asia-Pacific, all players in the aviation sector share a responsibility to ensure there are sufficient training facilities to meet the demand for cockpit crews.
ITALY-based aviation manufacturer ATR is intent on expanding its business in Asia Pacific, seeking a big slice of the forecast demand for up to 1,000 turboprop aircraft in the region over the next 20 years, the company's sales director Laurent Janitza said yesterday.
Janitza said that demand for aviation services in Asia-Pacific would see strong growth, benefiting from increased tourism flows.
He pointed to Thailand’s special position, providing travel linkages to neighbouring countries in the Asean region.
“There have been a number of new routes building on linkages between Thailand and neighbouring countries, including Myanmar, Laos, Vietnam and Cambodia,” he said in a group interview.
“Thailand serves as a hub for Asean countries. As a result, we expect our business will expand in Thailand from now until 2037. However, we cannot estimate our market value in Thailand at this time.”
Janitza said he is encouraged by the government’s policy to develop the U-Tapao International Airport under the ambitious vision for the Eastern Economic Corridor (EEC). Recently, the government also announced plans to develop infrastructure and a new international airport in the South. The projects for the Eastern and Southern regions form part of a drive to boost demand for aviation in Thailand and ensure strong growth in this sector, Janitza said.
The company has taken an order to deliver four aircraft to Thai operator Bangkok Airways. This comes under orders it has received for 130 aircraft to be delivered to customers in Asia Pacific from now until 2022, Janitza said.
At present the company has 20 aircraft operating in Thailand.
Janitza added that its parent company Airbus has been expanding its investment to develop a maintenance centre at U-Tapao airport under a collaboration with Thai Airways International Plc. The project in Rayong forms a part of the group’s efforts to support its business in Thailand.
A major stake is held in ATR by Airbus and Leonardo. The company has a production plant in Toulouse in southern France. ATR bills itself as the world leader in the market for regional aircraft of up to 90 seats.
Brisk sales pace
ATR has sold nearly 1,700 aircraft and has more than 200 operators in more than 100 countries.
ATR says its turboprops provide airlines with the best opportunities for operating short-haul routes at a low operating cost. Airlines servicing smaller markets need more fuel efficient-aircraft to continue operating regular flights between regional airports and to main airports and hubs.
For 2017, the company reported turnover of US$1.8 billion.
The company expects to increase its market share in turboprops in Asia-Pacific, especially in Indonesia, the Philippines, and Taiwan. This is due to strong demand, boosted by moves in most Asia- Pacific countries to sign agreements for new air routes that will drive the demand for turboprops.
Janitza said the growth in demand for Asia-Pacific would be stronger than that forecast for Europe and the United States.
Indonesia is ATR’s largest market, with 99 aircraft in operation. It is followed by the Philippines with 22 aircraft.
The company has opened a facility housing a customer service centre, a spare parts warehouse and a training centre in Singapore that will support its business in Asia, Janitza said.
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