THAI close to sale of used aircraft to US firm
Thai Airways International (THAI) expects to sign an agreement this month with a US logistics firm on the sale of eight used A340 aircraft worth between Bt4 billion to Bt4.5 billion, said President Sumeth Damrongchaitham.
The company is in the process of examining the contract before closing the sale deal of THAI aircraft to the private US company, he said adding that it also depends on the acceptance of the buyer. "We are studying details of the contract, especially in the area of pre-operational maintenance activities, " Sumeth said.
In regard to THAI's plan for the purchase of 38 new aircraft, Sumeth said it had submitted the proposal to the Transport Ministry, pending consideration as a policy matter, before seeking approval from the Cabinet.
"I would affirm that the purchase of new aircraft is quite necessary as it will raise our competitiveness. I believe the new administration will approve the plan," said Sumeth.
Singapore-Thailand Grow MRO Ties
Singapore Airlines Engineering (SIA Engineering) is a company with a penchant for forming joint ventures, with 25 in total located across eight different countries in Asia-Pacific and North America. Last week it continued this trajectory by incorporating its line maintenance partnership with Thai carrier NokScoot for a repair station at Bangkok’s Don Mueang Airport.
Building on a partnership first announced in March of this year, which will see a 51%-49% split between NokScoot and SIA Engineering respectively, the JV will operate as Line Maintenance Partnership from Thailand’s second busiest airport.
Initially, it will service NokScoot’s fleet, which as of July, is comprised of five in-service Boeing 777-200ER aircraft and services mid- to long-haul routes to Asia-Pacific, China and India.
Over time, these line maintenance locations could grow at other airports in Thailand depending on any increases to the NokScoot fleet, which currently stands at an additional two 777s scheduled to join the fleet.
Not only does this partnership further grow the ties between Singapore and Thailand--with NokScoot itself a JV of Thai carrier Nok Air and Singapore’s Scoot, but it also adds to the maintenance infrastructure of Thailand, a country with ambitious plans to become one of the Asia-Pacific region’s MRO hubs.
Much of this activity centers on its eastern seaboard region, with Don Meaung one of three airports, along with Bangkok’s Suvarnabhumi Airport and U-Tapao Airport located near Pattaya, which are set to serve as the focal point of the country’s plans to grow capacity and better logistics links.
U-Tapao, owned by the Royal Thai Navy, is set to be transformed into an MRO hub, with a joint-venture maintenance facility between Thai Airways and Airbus set for 2022, along with plans for a specialized MRO campus in which Thailand hopes to attract repair specialists.
While Singapore will almost certainly remain as the aftermarket hub of the Asia-Pacific region, space is limited within the realms of the city-state. Thailand, sure to face competition from other regional nations benefiting from low-cost labor markets such as Malaysia, Indonesia and Vietnam, will most likely try to capitalize on this.
Licence regulations streamlined for civil aviation
The Civil Aviation Authority of Thailand (CAAT) has approved a draft regulation aimed at streamlining licensing provisions for business operators in civil aviation.
CAAT director Chula Sukmanop said that the new regulation would establish a subcommittee to screen applications for civil aviation business licences as well as set up licence application and renewal procedures.
Under the new regulations, aviation business licences will be divided into two categories: air transport for commercial use for regular airlines and private charters, and aerial works of a non-passenger transport nature for small aircraft and drones.
The latter is expected to promote new aviation businesses such as scenic air tours, aerial photography and crop dusting.
The draft regulation will soon be presented to Minister of Transport for approval, after which it will be published in the Government Gazette with immediate effect.
The legislation was amended to be in compliance with the new Air Navigation Act B.E. 2497.
Chula also said that the CAAT will host the International Civil Aviation Organisation Assembly for the first time in Thailand from July 22-24 in Phuket. The event will draw 300 representatives from 192 ICAO member countries and “will be a great opportunity for the Thai aviation sector to exchange experiences and study ICAO standards for practical application”, Chula said.
Foreign aircraft maintenance investors to be set conditions
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.
Southeast Asian aerospace takes off on back of budget carriers
Southeast Asia is building a reputation as a producer of aircraft components, parlaying jet demand from the region's low-cost carriers.
The region as a whole made the rough equivalent of $14 billion in aircraft parts and related services in 2018, fast approaching Japan's $16.7 billion or so. It is expected to become an even bigger player as global supply chains shift toward the region.
At a UMW Aerospace plant in Selangor, Malaysia, massive machinery can be seen polishing steel cylinders to a mirrorlike finish. Welders attach 44 metal blades with laserlike precision further down the production line.
These parts affect the safety of jet engines, so they must meet strict standards dictated in thousandths of millimeters.
The finished product is shipped to a Rolls-Royce factory in Singapore, along with components from Japan, the U.S. and Europe, for use in Boeing 787 engines. Rolls-Royce previously made all its parts in-house but signed on UMW as a contractor in 2015.
"We are doing better," said Rahul Kashyap, who heads the Selangor plant. "This is because of the new machines. And when we train, we train through the best method. So today, we are doing very well. The quality is as good."
Malaysia has rolled out the red carpet for overseas aerospace companies, allowing full ownership of local units and offering tax breaks. Companies including Honeywell International have set up manufacturing bases there, leading to the rise of local players like UMW. A variety of aircraft parts are now made in Malaysia, including wings and brakes.
But Singapore was the region's pioneer in the field. More than 60 foreign and domestic companies, including Rolls-Royce and Pratt & Whitney, carry out research, manufacturing and maintenance operations at a dedicated industrial park there. The government-affiliated park employs 6,000 and comes with its own 1,800-meter landing strip.
Revenue in Singapore's air and space industry, including maintenance and repair operations, totaled 11.1 billion Singapore dollars ($8.18 billion) in 2018. Malaysia's came to 14.4 billion ringgit ($3.49 billion), which the government wants to roughly quadruple to 55.2 billion ringgit in 2030.
Southeast Asia's aerospace sector earns roughly half its income from maintenance and repairs. But parts manufacturing is also a growing field.
An aircraft original equipment manufacturer would shift labor-intensive parts fabrication to Southeast Asia, "as the people there are known for good work discipline and low work hour costs," said Bjorn Fehrm of U.S.-based consultancy Leeham.
The trend is propelled in part by the rise of budget carriers. The Asia-Pacific commercial airplane market will top 17,000 deliveries through 2038, according to Boeing projections published in June -- far more than the roughly 9,000 each for Europe and North America. About 70% of Asian demand is seen coming from single-aisle models for medium-haul flights.
Naguib Mohd Nor, president of the Malaysia Aerospace Industry Association, said being close to the market is important. "There is an overarching philosophy," he said, "that being near the market where the aircraft is sold creates better chances that the aircraft will get sold."
Many airlines are government-affiliated, making them more likely to buy jets with domestically produced components.
And with aircraft increasingly repaired in Southeast Asia, there is greater incentive to make spare parts closer to those operations. Singapore Technologies Engineering delivered nearly 43,000 jet components and overhauled 167 engines in 2018.
Other countries in the region are making moves. Thailand granted preferential tax treatment to 26 parts makers and brought in Airbus to run a joint maintenance and repair facility with Thai Airways International. The Philippines aims to increase aerospace exports by more than four times from 2015 to $2.5 billion in 2022.
But the industry remains in its infancy in Southeast Asia. An airplane has about 3 million parts -- roughly 100 times as many as an automobile. To become a player in the more valuable components, the region needs to up its technological game.
AoT chief enjoys life on cloud nine
Airports of Thailand president Nitinai Sirismatthakarn plans to use digital innovation to improve AoT's service and make more money.
Two decades ago, airports were perceived purely as transportation infrastructure.
Not anymore, now they're business opportunities as much as anything else, as Airports of Thailand (AoT) president Nitinai Sirismatthakarn knows only too well.
AoT, the listed state agency which oversees major national airports, is experiencing a boom in earnings driven by huge government investment in transport infrastructure.
Last year, its profits were 25 billion baht, double those of 2014. In fact, AoT has been praised as one of the best-performing stocks in Asia.
A bullish aviation industry, the proliferation of low-cost airlines and thriving tourism industry are the driving factors, but Mr Nitinai has also been credited with being a key factor behind AoT's impressive growth.
Mr Nitinai told the Bangkok Post in an exclusive interview that the recent boom is only the beginning.
"The aviation and travel industries show no sign of abating. They will only keep increasing [in profitability] over the next five years," he said.
Last year, 140 million travellers passed through AoT's five airports, compared to 87 million in 2014.
"But profits are not the only marker of success for AoT. We need to pay heed to the quality of our services too," he said.
Mr Nitinai does not have a background in aviation or the service sector. He trained as an economist and has previously worked for both the ministry of finance and the United Nations Development Programme.
In his view, services are not just fixed rigid steps of actions to serve and impress people. "Service is a transformable act. It can be developed and adjusted to suit changing environments in order to cope with demand and make customers happier," he said.
For him, service at AoT airports does not stop at just good hospitality. "Airport services," he said, "must make use of digital innovation, to serve travellers and customers better."
For instance, AoT will launch its own smartphone application this August.
The mobile app, he said, will help travellers avoid confusion at airports, better manage their flight schedules and give them more time enjoy shopping and dining while waiting to board their flights.
"Passengers can check information like their flights and check-in counters in real time and let a 'smart map' lead them precisely to various zones in a terminal," he said.
Travellers can even consult the application on local traffic conditions to help them avoid delays on their way to the airport, Mr Nitinai added.
The app is just one of the elements of the "Anachak Digital AoT" (Digital Kingdom of AoT) project.
In the future, he said, the AoT will also have its own digital currency for use within its airports, and the application will record what they buy and give them AoT points to spend -- similar credit cards' loyalty programmes.
While travellers will enjoy convenience and privileges, AoT will be able to harvest data and consumption behaviours to create big data to sell to tourism-related businesses, like Agoda and Wongnai.
"In the future, our revenues will not only come from the real world. We'll be making money virtually too," Mr Nitinai envisaged.
But this does not mean the AoT will stop developing its physical facilities.
It is pushing ahead with its "Airport City" at the Suvarnabhumi airport, a 10-billion-baht mega-project of commercial areas covering more than 1,600 rai.
"The project is so attractive that up to 40 investors have already contacted AoT asking to invest," Mr Nitinai said.
Mr Nitinai was promoted as AoT president five years ago by the military government and is full of praise for the political stability since then.
"In terms of work style, I see myself as a sedan passenger car that can work well only on a level road. But when you travel on rough terrain, you need a tough SUV car which I think other executives are better at," said Mr Nitinai who admits he lacks the skills of a strong lobbyist.
But no matter what the future holds, Mr Nitinai, whose contract will expire in 2022, said he will focus on making AoT stronger and sustainable.
"If AoT fails in future, I will have to take a share of the responsibility. So, I'm I'm determined to make sure that doesn't happen," he said.
Thai Airways backs Nok Air’s purchase of new aircraft
Thai Airways (THAI) recently announced that it is lending strong support to Nok Air’s purchase of new aircraft, president of the national airline Sumeth Damrongchaitham said.
He added that a meeting among top executives of THAI and its allies, comprising Thai Smile and Nok Air, was held to seek greater collaboration and assistance in many areas, such as marketing and route arrangements. “We will collaborate with Nok Air, which is facing management problems, and will help it rebuild confidence, including negotiations with trading partners. Our collaboration will also offer THAI’s credibility when it comes to Nok Air purchasing new aircraft,” Sumeth said, adding that the assistance was not financial in nature. As for progress in THAI’s plans to acquire 30 aircraft worth a total of Bt150 billion, Sumeth said the airline has already submitted the proposal to the Transport Ministry. “We need to wait for the new Cabinet to approve the plan. Though the delay in the purchase of new aircraft will have a negative impact on THAI’s revenue, we are adjusting some business plans to ease the impact, such as renting new aircraft,” Sumeth said. “At the group meeting, we also discussed the obstacles faced by THAI, especially unfair practices related to the ‘open skies’ policy. Thailand has opened its skies to foreign airlines, but we have found that many countries do not open their skies to Thai airlines. This is an unfair practice and will have a negative impact on our tourism industry,” he said. Sumeth added that THAI, along with other local airlines, will soon hold a forum to seek solutions to such “open skies” problems and will come up with proposals for the Transport Ministry and other related agencies so the problem can be solved as soon as possible.
Bids to open for U-Tapao airport redevelopment
The Eastern Economic Corridor (EEC) Policy Committee will proceed with the opening of bids for the redevelopment of U-Tapao airport under the Eastern Airport City project on expectations of declaring the winners by the end of next month.
The projects related to the airport and the city to grow around it come under the development scheme for the flagship economic zone. Part of the plan features high-speed rail connections serving urban expansion plans that will enable the area’s growth into an aviation-themed metropolis within 10 years.
Kanis Saengsuphan, the secretary general of the committee, said there are two projects within the scheme that are facing difficulties.
While some bidders have been tardy in submitting documents for the U-Tapao project, several bidders have made mistakes related to the signatures for documents for the third phase of the Laem Chabang deep sea port – another major development planned for the economic zone.
Papers have been filed in relation to both cases with the appeal-review committee of the Administrative Court in order to bring the conflict between bidders and the committee to an end, Kanis said.
“If the committee doesn’t stick to the rules, then other bidders may file a lawsuit, so the best way is to stick to the biding regulations,” Kanis said. “Nevertheless, we believe that bidding for every EEC project will be completed within August this year.”
According to a source, the EEC selection committee has opened a second set of documents covering the technical details and business plans of the three bidders.
The bidders are Grand Consortium (Grand Asset Hotels and Property PCL, Thai Air Asia Co Ltd and Christiani and Nielsen); BBS Group Consortium (BTS Group Holdings, Bangkok Aviation PCL and Sino-Thai Engineering and Construction); and. He Pokphand Group-led Thana Holding Consortium (Thana Holding Co Ltd, B. Grimm Joint Venture Holdings Co Ltd, Italian-Thai Development PCL, Ch. Karnchang PCL and Orient Success International Co Ltd).
The source said that CP Group’s second set of documents has not been opened due to its late submission and the review is ongoing.
Several airlines eyeing Betong airport
Betong airport, now expected open to commercial air traffic in June 2020.
Nok Air, Bangkok Airways and Malaysia's Firefly airline are interested in flying to Yala's Betong airport after its planned opening next year, according to the Department of Airports.
Director-general Ampawan Wannako said on Thursday that Nok Air wanted to operate direct flights between Betong and Don Mueang airports. Bangkok Airways also planned to extend its domestic service to Betong, and Firefly planned international flights to Betong.
The department would also invite other airlines from Malaysia and Singapore to use Betong airport, she said.
The 2-billion-baht airport was now 85% completed. It was designed to handle aircraft such as the ATR twin turbo-prop with 60-80 seats, Mrs Ampawan said. The airport would operate from 6am to 6pm, without air navigation aids. It was expected to open in June next year.
Tourist attractions in Betong district would benefit from the new airport, and Malaysian travellers were likely to use it because they could save travel time journeying to Penang airport, Mrs Ampawan said.
Huge potential seen in MAINTENANCE work
WHILE THAILAND’S aeronautical industry will see a rapid expansion in the next 20 years as the country is set to become the Asean region’s hub for aircraft maintenance repair and overhaul (MRO), strong political will and a “mechanism” are needed to make the fuller ambition come true.
Airbus and national flag carrier Thai Airways (THAI) signed a joint venture for MRO facilities at U-tapao Airport in Rayong province, in June 2018. Creating an MRO hub at U-tapao Airport, located in one of the three provinces in the Eastern Economic Corridor (EEC) special economic zone, has been one of the EEC’s flagship projects since its launch under the Thailand 4.0 policy in 2016. Foreign investors see the potential for growth in Thailand’s aeronautical industry in the next two decades. This year, some 7,000 aircraft will fly across the Asia Pacific region, and the number is expected to reach 20,000 over the next 20 years, according to Airbus. “Hence, there is a need to increase maintenance capacity in the Asian-Pacific region,” said Pierre Jaffre, president of Airbus Asia Pacific. The government’s Thailand 4.0 policy and the development of the EEC, he said, present a promising opportunity for Airbus to meet this demand, and has led it to establish an MRO centre in cooperation with THAI in Rayong. “Of all the EEC projects, the MRO hub at U-tapao Airport has the highest possibility for success,” said Phacharaphot Nuntramas, senior vice president for global business development and strategy group at Krungthai Macro Research. This, he explained in an interview with The Nation, is because the aeronautical industry in Thailand has strong fundamentals with more opportunities to grow in the economic environment of the Asean region. Particularly, he said, there has been a growth of smaller airlines such as AirAsia and Vietjet in the region, and the aircraft from these smaller carriers will require maintenance. “The other key MRO centre in the region is located in Singapore, which faces the challenge of limited land space,” he continued. The growth of smaller airlines means that smaller-sized aircraft will be used more often, leading to a growth in the demand for maintenance space” “This market trend presents an opportunity for the MRO centre at U-tapao to rise and become Southeast Asia’s new regional MRO hub,” Phacharaphot stated. Looking at the big picture, the MRO centre is a key plank in the development plans of the aeronautical industry, said Thailand’s former ambassador to France, Sihasak, Phuangketkeow, who helped THAI and Airbus conclude the MRO deal last year, adding that Thailand needs to ensure the sector’s future growth. Thailand has great potential in the sector, as the Kingdom is already a regional aviation hub and boasts a strong automobile and electronics manufacturing base on which to build an aircraft and spacecraft sector, he said. The country has already developed legal instruments to encourage foreign investment, not only for the MRO sector but also for original equipment manufacturers (OEMs), said Sihasak who is now an advisor to the EEC project. “We are improving our ecosystem to accommodate S-curve technology industries,” he said. The TIROS II with Airbus could also be spun off to encourage a future space industry in the country, as the technology transfer could help Thais to develop the sector, he said. The biggest challenge to the long-term development of the MRO centre, like other projects in the EEC, is the imminent lack of skilled labour, Phacharaphot said. Sihasak agreed and added that the country also needed to compete with neighbouring Asean countries, notably Singapore, Malaysia and Vietnam which have had a stronger focus on the aviation and aeronautical industry. “Our strength is that our workforces have a strong commitment to their work and our airbases with huge space, like U-tapao, are available,” he said. “We are also aiming higher to build an ‘aerotropolis’ in the region.” Research has shown that in the next 10 years, the targeted ‘S-Curve’ technological industries in the EEC will require an additional one million workers, with almost 500,000 jobs in demand in the next five years, according to the EEC office. The research also revealed that the aeronautical industry will demand an additional 30,000 skilled workers in the next half-decade. To meet this demand, Phacharaphot suggested, the supply-side will need to quickly develop the appropriate curricula to build a capable labour force to support the growth of the aeronautical industry in the next two decades. An alternative solution is to recruit foreign talent to, for example, operate the MRO centre in U-tapao. The government has been issuing “Smart Visas” since February 2018 to allow highly trained foreign talents working in the targeted ‘S-Curve’ technological industries to work in the Kingdom for up to four years without having to renew their visas yearly. However, adoption of the Smart Visa has been disappointing, with only approximately 100 foreign talents so far having been issued the special visa in the past year, according to the Digital Economy Promotion Agency (DEPA). More importantly, Sihasak said, both the government and private sector should have a clear joint vision and a strong will to get aboard the S-Curve technology industry. The country should have a national mechanism to move this sector forward, he said. “We cannot just wait for foreign investment and technology transfer to develop the aeronautical industry,” he said.