B290bn upgrade for U-Tapao Airport Approved
Thailand's Cabinet on Tuesday approved a US$9 billion bid from a consortium led by Bangkok's billionaire skytrain operator to develop an airport in its southeastern coast, which the kingdom hopes will transform into an economic and tech hub.
Located near resort town Pattaya, U Tapao airport is one of the infrastructure centrepieces for Thailand's Eastern Economic Corridor (EEC), an ambitious 1.7 trillion baht (S$75.4 billion) scheme seeking to attract investment from industries like auto and tech manufacturing.
BTS Group Holdings, which operates Bangkok's skytrain and is owned by billionaire Keeree Kanjanapas, led a consortium of companies approved to develop the "Eastern Airport City" project. They were chosen "as the winner because it proposed the best guarantee and returns, rent and revenue-sharing to the government", said the Cabinet in a statement after their meeting Tuesday. Bangkok Airways - owned by Prasert Prasarttong-Osoth, who Forbes lists as among the kingdom's richest - is part of the consortium, as well as construction firm Sino-Thai Engineering and Tokyo's Narita International Airport.
The 290 billion baht project will include a new terminal, an air cargo centre, and an aviation repair and maintenance site, according to official EEC documents. Primarily used as a navy airport, U Tapao is touted by the EEC as having the potential to be transformed into a tourist hub, due to its proximity to Pattaya.
But the popular beach town has gone dark - just like much of tourism-reliant Thailand - as the coronavirus has halted global travel and hammered the kingdom's flagging economy. The parliament on Sunday approved a record near-US$60 billion stimulus package to ease the impacts of the virus, which has left millions unemployed.
The EEC project has attracted criticisms in the past for a lack of transparency. Critics say it was ushered in by an army-led junta regime linked to business interests. But the government has boasted of the project's economic returns, and pointed to infrastructure projects bolstering the scheme as an overall benefit for the country.
Last year, the multi-billion-dollar construction of a high-speed rail link was approved for a consortium led by Thailand's largest conglomerate CP Group.
It is expected to connect passengers from Bangkok's two major airports to U Tapao in under an hour.
THAI will move on MRO project after Airbus pulls out
European plane maker Airbus, which is facing dire times like most of the rest of the aviation industry, is said to have pulled out of a planned joint venture with state-owned Thai Airways International that would have seen the two companies build a US$339 million maintenance facility east of Bangkok, according to a news briefing by government officials. Airbus has asked not to participate in the investment, citing the impact of the COVID-19 global pandemic situation on air travel, Deputy Secretary-General for Infrastructure in the Eastern Economic Corridor (EEC) Chokchai Panyayong told reporters in Thailand.
The project to build the maintenance, repair and overhaul (MRO) facility will continue, Chokchai said, adding that Airbus would still cooperate on technology. Rumours had been circulating for weeks that the deal was on the rocks and an Airbus spokesperson had earlier told Asian Aviation that it was “in continuing discussions” about the best way forward. But as the COVID-19 pandemic has swept the globe, killing more than 200,000 as of late April, commercial aviation has ground to a virtual halt and the entire industry – from plane makers to airports to MRO shops – are in survival mode and most expansion plans have been put on hold.
Airbus officials were said to have warned employees that deep job cuts could be in store for them as the aviation world reorients itself to a much reduced industry as long as countries maintain travel restrictions.
There is still time for Thai Airways to find a new partner as the Thai navy, which controls the site, is only just beginning construction on the facility’s hangar, which will take up to four years, media reports said. “By then, the COVID situation will have eased. There is an opportunity for either Airbus or Boeing to come in,” Chokchai said to reporters. Thai Airways itself is in a fight for survival as is said to be in discussions with its government for support. The maintenance hub is part of the government’s project around the joint civil-military U-Tapao Airport, 150 kilometres east of Bangkok.
U-tapao MRO delayed as Airbus misses deadline
The bidding process for the maintenance, repair and overhaul (MRO) facility at Rayong's U-tapao airport is likely to be postponed until April because Airbus failed to submit proposals for the formation of a joint venture with Thai Airways International (THAI) as scheduled on March 6.
Kanit Sangsubhan, secretary-general of the Eastern Economic Corridor (EEC) Office, said the office is scheduled to inform the EEC Policy Committee chaired by Prime Minister Prayut Chan-o-cha about the delay in the bidding process for the MRO, which is one of five infrastructure development projects in the government's flagship EEC.
He said both THAI and Airbus have been acutely affected by the coronavirus pandemic, which has crippled the aviation business worldwide.
The national carrier is expected to wait until April for Airbus's proposals, said Mr Kanit.
Airbus and THAI signed an agreement to jointly invest in the project in June last year.
The two organisations have long discussed details under the 11-billion-baht joint venture.
Four other development projects in the EEC, worth 684 billion baht in total, are a high-speed railway linking three key airports (225 billion baht); U-tapao aviation city (290 billion); the third phase of Laem Chabang seaport (114 billion); and the third phase of Map Ta Phut seaport (55.4 billion).
THAI is scheduled to open general bidding for potential investors if Airbus fails to submit an investment plan by April 20.
Mr Kanit said the pandemic will not affect the EEC's development plans because investors make long-term decisions when investing. The agency had to cancel all programmes to promote investment abroad.
Total investment applications submitted to the Board of Investment in 2019 stood at 756 billion baht, with projects increasing to 1,624.
This was 16.2% lower than 2018 applications, which were worth 902 billion baht. Of the total applications, 59% were for investments in EEC, in total worth 445 billion baht.
Malaysia's carriers feel financial shock of US FAA downgrade
According to a report issued by the Malaysian Aviation Commission (MAVCOM) on February 11 titled "The Economic Impact and Implications of the Civil Aviation Authority of Malaysia's Rating Downgrade", the country's carriers could see an annual revenue at risk of as much as MYR4 billion ringgit (USD873 million) as a result of a 2018 US Federal Aviation Administration (FAA) decision to downgrade Malaysia to IASA Category 2.
A Category 2 rating means that CAAM may be deficient in one or more organisational and/or operational areas in its technical regulation role. It was reported that there were 33 issues raised in the US FAA findings on technical expertise, trained personnel, record-keeping, and/or inspection procedures.
Malaysia's airlines were subsequently banned from expanding their US networks in November last year or indeed starting new routes, affecting both direct flights operated by Malaysian carriers and those operated jointly with US airlines such as American Airlines (AA, Dallas/Fort Worth). According to the ch-aviation schedules module, the following services and codeshares are operated between Malaysia and the US:
AirAsia X (D7, Kuala Lumpur Int'l) - daily service to Honolulu (via Osaka Kansai);
Malaysia Airlines (MH, Kuala Lumpur Int'l) and American codeshare on services including those between Tokyo Narita and Dallas/Fort Worth and Los Angeles Int'l; between Seoul Incheon and Dallas/Fort Worth; Hong Kong Int'l and Dallas/Fort Worth and Los Angeles; and London Heathrow to Charlotte Int'l, Chicago O'Hare, Miami Int'l, Dallas/Fort Worth, Los Angeles, New York JFK, Philadelphia Int'l, and Raleigh/Durham.
The report estimated that the revenue at risk for the Malaysian aviation sector is MYR372 million ringgit (USD90 million) split between Malaysian carriers (MYR361 million ringgit/USD88 million) and airport operators (MYR11 million ringgit/USD2.7 million).
While this immediate impact is marginal, MAVCOM's report was concerned by the fact that other countries may undertake their own audits following the US FAA downgrade. Of particular worry are markets in China, Japan, and South Korea, which between them generated 7.1 million passengers for Malaysian airlines (11.4% of total passenger traffic) in 2018. The estimated revenue at risk for the Malaysian carriers is MYR4 billion (USD873 million) or 24% of total revenue. At the same time, the corresponding value for airport operators is MYR400 (USD97 million) or 25% of overall passenger service charge-related revenue.
MAVCOM's report also highlighted other Asian countries and their lack of success in returning to a Category 1 status in the short-term, something which Civil Aviation Authority of Malaysia (CAAM) believes can be done in 12 months. It took the Philippines six years (between 2008 and 2014) to return to Category I status, and Thailand remains at a Category 2 rating after being placed there in 2015.
The commission also suggested that "it is unclear how CAAM's organisational and/or operational deficiencies will be resolved effectively." This discord between the aviation authorities follows a decision by the Malaysian Cabinet in December to merge the country's aviation regulators into one entity, seeing MAVCOM disbanded and its responsibilities absorbed into CAAM. In conclusion, the report said: "The takeover of MAVCOM by CAAM is questionable as burdening CAAM with additional responsibilities over economic regulation will not aid its capacity to regain the Category 1 status."
THAI Makes Progress on Selection of Private Investor in TG MRO at U-Tapao
Thai Airways International Public Company Limited (THAI) has made progress on the selection of private investors that will invest in THAI’s Maintenance, Repair, and Overhaul (MRO) facility at U-Tapao (UTP). An additional working group has been appointed to support the proceedings of the selection committee on private investors.
Mr. Sumeth Damrongchaitham, THAI President, said THAI as the project owner of the Maintenance, Repair, and Overhaul (MRO) facility at U-Tapao (UTP) has sent an updated list of qualified private investors to those concerned and is the process of providing responses to these potential investors within February 2020. The selection committee has agreed to allow the Eastern Economic Corridor Office (EECO) to designate a committee to support the operations, which includes evaluation and negotiation of the private investors’ proposals in technical and financial areas. Another committee will negotiate conditions of the draft investment contract. These tasks will be conducted with transparency and caution, in accordance with the Terms of Reference (TOR) and the EECO’s announcement. It was agreed that THAI should be responsible to appoint a committee that will accept and collect documents from TOR bidders, whereby those who express an interest may submit the required documents by 6 March 2020. Based on the committee’s proposal, information gathered will be checked and evaluated. Eligible private investors will be selected by May 2020.
BBS JV wins bid for U-Tapao airport project
BBS Joint Venture has been awarded the U-Tapao International Airport and Eastern Airport City projects for offering the highest returns to the state, Admiral Luechai Ruddit, commander-in-chief of the Royal Thai Navy, said on Thursday (January 30) in his capacity as president of the selection committee.
“BBS offered Bt305.555 billion as returns to the state, while the Charoen Pokphand-led Thana Holding Consortium offered Bt102.217 billion and Grand Consortium proposed Bt100.903 billion,” he said. “We have asked BBS to prepare the contract details and technical specifications for approvals by the committee and the Cabinet, which is expected to be completed by March,” Luechai said.
The BBS Joint Venture includes Bangkok Airways (which has a 45 per cent stake), BTS Group Holdings (35 per cent) and Sino-Thai Engineering and Construction (20 per cent).
The U-Tapao International Airport and Eastern Airport City project will cover the development of 6,500 rai of land in and around the airport. The government will invest Bt20 billion in civil works for a second runway and a second air traffic control tower, while the private partner will invest Bt270 billion in the construction of the third passenger terminal, ground transportation centre, logistics and cargo complex, cargo village for a free trade zone and a commercial centre.
Increase in revenue, cost reduction critical for THAI: Thaworn
Deputy Transport Minister Thaworn Senneam discussed the open sky policy and emphasised the importance of increasing revenue and reduction of expenses for Thai Airways International Pcl (THAI) to turnaround its fortunes and become a sustainable operation in the future.
Thaworn, Jua Ratchasri, assistant secretary at the Ministry of Transport, along with other officials visited THAI's headquarters to follow up on policy implementation and take stock of the situation.
Thaworn also looked at operational problems and obstacles faced by THAI in improving its financial results and becoming one of the world’s leading airlines. He followed up on the ministry’s policy, such as turnaround plan and business plan, acquisition plan for 38 aircraft, company management and structure, the U-Tapao aircraft maintenance centre, plans to boost revenue and operating results. Additional policies were also presented, such as human resource management, managing company property to extract maximum benefit, manage and improve sales and marketing between THAI and Thai Smile.THAI president Sumeth Damrongchaitham said they were acting on the policies issued by the Transport Minister, which will be used in resolving accumulated financial losses and achieving longstanding profitability. He said progress was being made on some of the projects.THAI is reconsidering its long-term plan for 2019-26 to acquire 38 aircraft. THAI’s board of directors approved the plan to acquire the aircraft to replace 17 aircraft that will be decommissioned, which must be suitable for the financial situation and altered conditions. The management will study aircraft types and present the results to the board in February 2020. The company will present information on the number of aircraft, acquisition methods and investment sources for consideration of the board at their meeting in March. This plan will help the company to grow continuously and not be a financial burden. It will be presented to the Ministry of Transport by March 31.Regarding the Maintenance, Repair, and Overhaul Centre (MRO), THAI has sent information on bidding to investors. The deadline for submission of proposals is March 6, to enter into the negotiation process, conclude the selection results and draft the PublicPrivate Partnership Agreement (PPPA) that would be submitted to the Office of the Attorney-General and the Eastern Economic Corridor (EEC) Policy Committee. After that it will be proposed to the Cabinet in August. The company expects to sign the PPPA with the bid winner by the end of August. It is expected that the new MRO centre at U-Tapao will be operational by April 2023.
Meanwhile, negotiations are going on between the THAI and Rolls Royce over demand for damages. THAI is seeking compensation from Rolls Royce for the period THAI’s aircraft was not operational as they were awaiting spare parts, resulting in damages and lost business opportunities.The company is working on increasing revenue according to the Middle Turnaround Plan (2020-24) through innovation and digital technology, implementing modern technology in various projects such as TG Digital Technology, sales development plan and boosting of ancillary revenue in order to improve online sales. THAI is in the process of implementing cost reduction and cost control as well as organisational restructuring.
Thai Airways adds wet-leasing as an option for fleet plan
Thai Airways International will evaluate wet-leasing as one of the possible ways to finalise its plan to add 38 aircraft using its approved budget of THB156 billion bahts (USD5.1 billion), Thai Transport Minister Saksayam Chidchob said.
As reported by the Thai Post daily, Saksayam underlined at a press conference that the debt-ridden flag carrier must get on with the long-planned fleet renewal this year.
He said that the airline should explore all options, including buying aircraft, as well as dry- or wet-leasing them. Saksayam added that any regulatory obstacles to long-term wet-leasing will be removed by the government if Thai Airways chooses this option.
Thai Airways has been working on its fleet renewal for at least two years now. In 2018, it suffered a set back after the National Economic and Social Development Board (NESDB) criticised the previous plan. Then, in mid-2019, the government gave its go-ahead in principle, although the details of the carrier's fleet renewal and larger restructuring are still being worked out. In a recent interview with ch-aviation, President Sumeth Damrongchaitham said that the final version of the plan will be ready by the end of the first quarter of 2020.
According to the ch-aviation fleets advanced module, Thai Airways' fleet currently includes fifteen A330-300s, twelve A350-900s, six A380-800s, nine B747-400s, six B777-200s, six -200(ER)s, six B777-300s, fourteen B777-300(ER)s, six B787-8s, and two B787-9s. The bulk of the aircraft is owned by the airline except for all B787s, eight B777-300(ER)s, and eleven A350-900s. Wholly-owned subsidiary Thai Smile operates twenty A320-200s, of which fifteen are dry-leased.
THAI gets all clear to boost fleet
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.
Deputy Transport Minister 'confident' in Thai Airways' rehab plan
Deputy Transport Minister Thaworn Senneam has expressed confidence that loss-ridden Thai Airways International (THAI) will be able to stage a turnaround and start making profits within three years.
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.