THAILAND is moving quickly to become the regional aviation and aerospace hub as the world’s leading aircraft and parts manufacturers from the US, Europe and China are moving to invest in the country’s Eastern Economic Corridor (EEC).
The world’s top two commercial aircraft manufacturers, Airbus and Boeing, are planning for joint investment with Thai Airways International this year while Jinpao Precision Industry Co has just signed a deal to build a new plant in the EEC area, where U-Tapao international airport is situated.
The Thai government has set to invest trillions of baht in infrastructures to develop EEC to accommodate foreign investment including the expansion of the U-Tapao airport, construction of motorway, deep sea ports, high speed railway linking U-Tapao, Suwannabhumi and Don Mueang international airports and another line linking the EEC, Laos and Southern China.
Kanit Sangsubhan, secretary general to the EEC, said aircraft manufacturer Airbus is to cooperate with Thai Airways International Plc to invest in a big aircraft repair center, paint shop, logistics and training center with a projected investment of billions of baht while Boeing plans to invest in manufacturing aircraft parts and a simulator training center starting this year.
Jinpao last week purchased a 54-rai plot in the Hemaraj Eastern Seaboard Industrial Estate 2, where it will build a new plant to produce structural sheet metal parts to serve the aerospace and medical industries.
Jinpao president Chung Kuo-Sung said the cost of land acquisition and construction of the new plant will be around two billion baht. The new plant is expected to start operation in the next two years.
“Hemaraj 2 represents a great location in terms of logistics, transportation and convenient infrastructure. So with the development of the EEC, the location is perfect to serve our requirements,” he said.
The EEC areas cover Rayong, Chon Buri, and Chachoengsao provinces. The area is best suitable for new businesses in the new S-Curve industries ranging from next-generation automotive, robotics, aviation and logistics, to medical hub.
Analysts say Thailand’s move to become the aviation and aerospace industry hub in the region will directly affect Singapore which now dominates aerospace maintenance, repair and overhaul (MRO).
Singapore is still confident it would maintain the lead saying while Thailand has an edge over Singapore in terms of location, availability of land and cheap labor, there are other bigger challenges to overcome.
They include building the necessary infrastructure, cutting down on red tape and providing a conducive political environment to encourage new foreign investments.
However, the Thai government believes U-Tapao can provide an alternative to Singapore, which is “at capacity” already.
An industrial source told a Singaporean press that this plan requires big investments and Thailand’s bureaucracy system can be very slow and not “perfectly clean” and may be susceptible to corruption.
He also said the government needs to review the law on foreign ownership and come up with clearer policies, as political instability in the past decade has created uncertainty for new investors.
Despite such criticism, Prime Minister Prayut Chan-o-cha has already issued an order under Article 44, which grants the junta absolute powers, to ease limitation on foreign ownership in aviation maintenance center and would allow foreigners to own more than 50 per cent of shares in MRO businesses.
What about the problem of starting business in Thailand claiming to be difficult?
That may not be the case anymore at the moment.
Thailand has just been voted the Number One ranking of the list of Best Countries to Start a Business for the second year in a row out of a total of 80 countries surveyed by the US News and World Report beating Singapore, which ranks fifth.
The US media firm also placed Thailand on the 8th ranking of a list of 25 Best Countries to Invest In, 20th Best Country to Start a Career and 35th Best Country to Headquarter a Corporation.
The Commerce Ministry attributed Thailand’s improved ranking in the two categories to the cutback on the red tapes for the registration of new business in Thailand and the expenses for registration for business operators.
The report was based on the random survey of the opinions of 21,000 respondents worldwide.
“Starting a business in Thailand takes about five days,” according to the World Bank. New business density is one of the lowest in the region, leaving room for hopeful entrepreneurs.
Deputy Transport Minister Pailin Chuchottaworn has urged Thai Airways International Plc (THAI) to procure smaller aircraft to decrease operation and maintenance costs for some of the national carrier’s routes, in a bid to decrease its large debt and keep up with emerging low-cost airlines.
The deputy minister commented on the airline’s financial state after his scheduled policy-giving visit to THAI’s headquarters yesterday, as part of a government initiative to decrease the huge debt levels at seven state enterprises.
Rehabilitation plans for transport-affiliated state enterprises include THAI, the Bangkok Mass Transit Authority (BMTA), which operates Bangkok’s public buses, and the State Railway of Thailand (SRT), which operates the country’s provincial trains.
The three authorities have an estimated combined debt of 200 billion baht.
According Mr Pailin, THAI will have to “figure out” how to lower its overall fixed costs in order to succeed with its corporate rehabilitation plans to decrease its accumulated debt.
He urged the airline to conduct research into how some low-cost airlines are able to offer full service at cheaper prices and comparatively lower fixed costs. He also instructed THAI to deal with its discharged aircraft, which are awaiting procurement by other airlines.
Transport Ministry reports state that for this year, THAI plans to procure 28 more planes to compensate for its discharged aircraft. According to the report, 19 will be used by the national carrier, while the remaining nine will be used by its low-cost subsidiary airline, Thai Smile Air.
“Plans for the new planes awaiting procurement should also be reviewed, especially if the type and size of the aircraft are suitable for the routes [they were procured for],” Mr Pailin said. “The carrier must also observe whether its direct competitors are leasing their planes or purchasing them.”
Meanwhile, the State Enterprise Policy Office, also known as the superboard, rejected rehabilitation plans submitted by THAI and the BMTA last week. According to its chief Ekniti Nitithanprapas, the national carrier has failed to meet its revenue target despite servicing more passengers than its main competitors.
Mr Ekniti last Friday instructed THAI to draw up long-term plans that better reflect competition in the market, adding Thai Smile should also be included.
The BMTA’s rehabilitation plans, submitted last week, included a proposal to introduce a 2-baht fare hike for all of its buses.
Mr Ekniti said the authority’s plans must first include how the bus services and new routes will supplement or connect with other mass-transit systems.
BMTA deputy director for bus operations Prayoon Choygeo said last Friday any possible price hikes would “surely not happen anytime soon”.
Prime Minister Prayut Chan-o-cha has also approved the SRT’s rehabilitation plan to set up a subsidiary to manage its assets and reduce debt.
The Department of Airports will open bidding for its regional airports development projects -- valued at 8.8 billion baht -- this year, department director-general Darun Sangchai said.
Mr Darun said the bidding will be staged to seek contractors for four provincial airport development projects and the installation of the In-Line Baggage Handling and Screening system, an automated security programme worth a total 8.8 billion baht being used to screen baggage at several other airports.
Contract signings for all projects are expected to be completed this December as the budget was allocated under the first quarter of the 2018-fiscal year, between this October and January.
The airport development projects worth 7 billion baht will be implemented on four provincial airports in Krabi, Khon Kaen, Ubon Ratchathani and Trang. Of the budget, about 3.2 billion baht was allocated for Krabi airport, for a new passenger terminal and maintenance of two existing terminals, while another 1.3 billion baht will be spent on improving its aprons.
For Khon Kaen airport, 2.2 billion baht was allotted for the expansion of its terminal and parking lot, to allow it to handle up to 1,000 vehicles, while the Ubon Ratchathani airport terminal will also be enlarged to accommodate more passengers with a 177-million-baht budget.
At Trang airport, 110 million baht will be used in expanding its departure passenger terminal to accommodate three flights per hour in order to alleviate congestion.
The department also plans to seek an additional budget for the construction of a new terminal at the airport in the 2019-fiscal year.
Mr Darun also said the department was in the process of seeking contractors to install the In-Line Baggage Handling & Screening system -- costing 1.8 billion baht -- at eight airports in Ubon Ratchathani, Nakhon Si Thammarat, Trang, Khon Kaen, Phitsanulok, Sakon Nakhon, Nakhon Phanom and Narathiwat.
The system has already been installed at Krabi, Surat Thani and Udon Thani airports. The department aims to complete installation at 29 airports nationwide by next year. The system is being installed in compliance with security measures raised by the International Civil Aviation Organisation, he said.
Speaking about the department's new airports under development, Mr Darun said a new terminal, valued at 447 million baht, was under construction at Mae Sot airport in Tak.
The terminal is expected to handle up to 600 passengers per hour or about 1.5 million travellers per year.
Mr Darun said the department also wanted to upgrade Mae Sot airport to make it an international airport. Almost 300 million baht has gone into expansion of aprons, taxiways and runways at the airport, so it will be able to handle large-sized aircraft.In Yala, Betong airport, the department's 29th regional airport, is also under construction, and is expected to be finished within the next two years.
NewGen Airways, Thailand's largest China-focused charter operator, yesterday became the latest carrier to get its air operator certificates (AOCs) reissued.
It brought the total number of Thai-registered airlines re-audited by the Civil Aviation Authority of Thailand (CAAT), in compliance with the stringent global standards set by the International Civil Aviation Organisation (ICAO), to nine operators.
The process of completing AOC re-certification is helping the country overcome its struggle to restore its aviation safety credentials after being red flagged by the UN's aviation watchdog in June 2015.
CAAT director-general Chula Sukmanop told the <span class="Italic">Bangkok Post</span> yesterday that the airlines re-certified to date represent 98-99% of all international passengers carried by Thai-registered airlines last year.
But there are 12 more Thai-registered carriers that still need to have AOC re-certification and most are likely to miss the CAAT's Aug 31 deadline which would require them to suspend their international flight operations.
But private jet charter firm Mjets might be able to get its AOC re-certified by the deadline if flight proving can be arranged quickly, according to Mr Chula.
Complicating the process is that Mjets has four types of aircraft which require an individual international flight audit by CAAT inspectors.
If Mjets misses the deadline, the company would likely need to suspend international services for only a few days.
CAAT is likely to be able to complete the audit during the first week of September, he said.
It looks certain that Thai VietJet Air (TVJA), Vietnam's low-cost carrier VietJet Air, will miss the Aug 31 deadline and need to temporarily stop international flights.
But the impact may be minimal as TVJA has only one international route -- Bangkok-Hai Phong -- in operation, with four flights a week.
Like other Thai-registered airlines, TVJA's Thai domestic flights are not impacted by the CAAT's directive.
ICAO is due to conduct an audit on CAAT and its efforts to deal with "significant safety concerns'' in the third week of next month.The official audit result will be released in October, the CAAT chief said.
Middle Eastern lessor Dubai Aerospace Enterprise (DAE) has completed its acquisition of AWAS.Goldman Sachs acted as financial advisors to AWAS for the sale, while Milbank acted as legal advisor.
The Civil Aviation Authority of Thailand (CAAT) has agreed to allow airlines required to halt international flights during the International Civil Aviation Organisation's (ICAO) red-flag re-evaluation next month to operate an additional domestic flight per day per route until January.
CAAT director Chula Sukmanop yesterday said the measure was to help airlines that will need to temporarily stop operating international flights from Sept 1 because they have yet to be reissued Air Operator Certificates (Re-AOCs).
Those airlines have to pass an ICAO safety standard inspection due to take place around the third week of next month.
Mr Chula was speaking after a CAAT committee meeting, chaired by Transport Minister Arkhom Termpittayapaisith.
He said requests to operate one extra domestic flight per route per day must be in compliance with CAAT regulations which stipulate that only three airlines are allowed to operate out of small airports.
Since two airlines operate out of Ranong airport, only one more airline could use the airport, he said.
The extra domestic route will last until Jan 31, next year.
So far, Asia Atlantic Airlines, Thai VietJet Air and Orient Thai Airlines have submitted requests to the agency. However, if airlines receive their Re-AOCs in time they will be allowed to resume international routes immediately.
Airlines that have already sold tickets for after Sept 1 but are required to cancel flights have to find other flights for their passengers.
Nine of 21 airlines without certificates will be issued Re-AOCs this month, according to Mr Chula. NewGen Airways will be among the nine, he said.
Meanwhile, the CAAT has agreed to reduce aircraft parking fees at 38 airports under the supervision of the Airports Department.
This was another measure to help absorb expenses for airlines not allowed to operate international flights during the ICAO inspection, Mr Chula said.
Mr Chula said there are already grounded planes parked at Don Mueang airport, resulting in a waste of usable areas so the measure also aimed at persuading airline operators to park their aircraft at other airports.Responding to calls to increase security officials at airports made by the ICAO's Universal Security Audit Programme Continuous Monitoring (USAP-CMA) programme, Mr Chula said the CAAT had informed airports nationwide to recruit more security officials to examine passengers' belongings for hazardous objects.
Thai VietJet Air (TVJA) is likely to have to temporarily suspend its international service by the end of this month till getting AOC re-certificated.
The Thai subsidiary of Vietnam's low-cost carrier VietJet Air will take longer time to get its air operator's certificate (AOC) re-certificated than the deadline of August 31 set by the Civil Aviation Authority of Thailand (CAAT).
But the impact may be minimal as TVJA has only one international route -- Bangkok-Hai Phong -- in operation, with four flights a week.
TVJA has a contingency plan -- to have its parent carrier assume the services on its behalf until it gets its AOC recertified.
TVJA head of commercial Luoung Truong An said yesterday that CAT's audit of TJVA operations is in the advanced stages and the recertification process is expected to be complete in the next two months.
TVJA is one of a few last Thai-registered airlines with international flights left to be recertified by the CAAT as part of the basic requirement set by the International Civil Aviation Organisation (ICAO) for removing the red flag placed on Thailand aviation since 2015.
A total of eight Thai-registered carriers, which altogether carry 97% of all passengers being transported by Thai-registered airlines, have had their licences to operate commercial flights reissued so far.
But TVJA's Thai domestic flights on three routes -- Bangkok-Chiang Mai (four flights per day), Bangkok-Phuket (three per day) and Phuket-Chiang Rai (one flight per day) -- are not impacted by the CAAT requisite.
Mr An acknowledged that the AOC recertification is one of the key factors complicating the airline's expansion plan and launch timing.
However, TVJA has sought approval from Thai authorities to introduce additional domestic routes to cover key provinces such as Krabi, Surat Thani, Hat Yai, Udon Thani and Ubon Ratchathani.
Over the next few months, TVJA hopes to get one domestic route off the ground, he said, without elaborating.
TVJA is working closely with the authorities to obtain international license and will soon finish, but in the meantime TVJA is expanding their local presence here with more flights and destinations.
TVJA is looking to spreading its wings to Vietnam, China, India and Taiwan, from its Bangkok base at Suvarnabhumi airport.TVJA also hopes to be able to increase its fleet, which consists of three Airbus A320s, each with 180 seats, by seven to 10 aircraft annually from next year.
The full-scale commercial launch of the upgraded U-tapao airport in Rayong has been put off again, this time until the end of the year.
Teething problems with the 1.7-billion-baht expansion, initially slated to open this month, have forced the airport to be delayed by some five months.
After the new passenger terminal was put to the test in an intensive trial recently, it was decided some adjustments needed to be made with more time required to put certain facilities in place.
"We would rather spend more time perfecting our facility before declaring ourselves fully-commercially operational, because we don't want to open too soon and discover some problems have yet to be ironed out," Worapol Tongpricha, director of U-tapao Airport Authority (UAA), told the Bangkok Post yesterday.
One problem the airport authority is looking to solve before opening is the passenger flow layout, which needs to be reviewed to ensure domestic and international passengers are separated by a glass "curtain wall" that does not pose a security threat.
The launch of the airport has also been delayed by the installation of two sets of aerobridges, which are behind schedule and expected to be completed over the next four months.
Rear admiral Worapol said it is critical that these two features of the airport are in place before any commercial launch. Minor works also need to be made, he added, such as expanding toilet facilities.
"We want to make sure that our airport has no issues when it undergoes an audit by the CAAT (Civil Aviation Authority of Thailand) in compliance with ICAO (International Civil Aviation Organisation) standards," RAdm Worapol said.
The UAA will ask the CAAT to come and inspect the airport, which was built four decades ago and served as a major staging and refuelling base during the Vietnam War, for certification in November.
But while those works are being carried out, the new passenger terminal, which covers a floor space of 20,000 sq m, and supporting facilities remain operational to accommodate the small number of passengers transiting through.
Those additional works, estimated to cost 90 million baht, have not forced the company to go over budget, he noted.
The late opening will not impact the airport's handling of international passengers during the high season, starting at the end of October.
The airport last year handled 710,000 passengers, 80% of whom were AirAsia passengers, and is forecast to see visitor numbers jump this year to 1.2 million.The new passenger terminal was designed to handle 3 million passengers a year, a significant increase from the 870,000 handled previously.
Thai Airways International Plc (THAI) is committed to moving ahead with plans to ensure long-term profit growth, in line with a positive bottom line last year and in the first quarter this year.
The national carrier vows to come up with a series of strategic plans to tackle global aviation challenges such as fierce competition, technological change, varying passenger behaviour and slowing demand in some markets.
The flag carrier is evaluating its business practices and strategies, a phase stipulated in its rehabilitation plan due to end of this year.
The rehabilitation plan calls for the carrier to lower expenses and boost revenue after it experienced hefty losses between 2013 and 2015. THAI reported operating losses of 12 billion baht in 2013, 15.6 billion baht in 2014 and 13.1 billion baht in 2015. Thanks to its rehabilitation plan, THAI turned a marginal net profit of 15.1 million baht last year. Profits totalled 3.15 billion baht in the first quarter of this year, a drop of 47.4% from 5.99 billion baht in the same quarter last year.
THAI is among seven ailing state enterprises undertaking business rehabilitation plans mandated by the government.
According to THAI acting president Usanee Sangsingkeo the carrier's new strategic plan will focus largely on product and service improvement, fleet and network management, revenue and cost management, new investment and human resources.
"As acting president, I will continue to strengthen the airline for more sustainable growth and more profit," she says.
Mrs Usanee, who was previously the executive vice-president of the aviation business unit, was picked in February this year as acting president after the company's presidential selection committee failed to find a new president to replace Charamporn Chotikasthira, whose term ended that month.
She is the airline's first woman to be appointed internally to a top management position after outstanding performances in various areas, including cargo, ground service and catering.
Mrs Usanee says THAI needs to improve its products to strengthen its competitiveness. The company is adding at least 20 new aircraft to its fleet over this year and next year.
Five Airbus A350 have already been delivered while an additional seven Airbus A350 will be arriving next year. The carrier now has six new Boeing 787 and plans to acquire two more similar models in the near future.
"New planes come with modern features so we will have much more product competency to beat up other airlines," says Mrs Usanee.
The company is also refurbishing old aircraft to provide updated features. The decor for five aircraft has been completed, and two more are undergoing renovation.
Although the airline aims add more new aircraft, it will maintain its total fleet at 100 aircraft this year as some older aircraft will be discharged.
Mrs Usanee says the company will initiate a plan to enhance service standards over the next one or two months to improve flight attendant skills and knowledge of modern technology, equipment and new features on board.
"We are going to send our crew to other airlines to observe and learn their products and services. Our crew usually don't fly with other airlines, so they don't realise what special services competitors may have. This will enable us to improve our products and services."
As part of the move to improve its products and services, THAI recently held a customer board meeting attended by frequent-flyers from the public and private sectors as well as members of media. The objective was to collect feedback about THAI products and services, ticket and seat reservations, in-flight meals, passenger lounges, seat comfort, and customer service.
"All feedback will be used to further improve THAI's services for increased customer satisfaction," Mrs Usanee says.
According to Mrs Usanee, the airline also needs to hire more staff, especially younger workers because new graduates understand modern features and young travellers' taste.
The airline has already hired 400 staff, all aged under 24 years, under three-year contracts with the option to renew for three and one years.
"We still need about 200 more new staff this year," she says.
In a bid to raise competitiveness, the flag carrier is also continuing to work closely with alliance airlines operating across the globe.
THAI is synergising marketing activities with Star Alliance. THAI and 28 other members of the global alliance are helping each other promote networks and destinations. Star Alliance earlier announced plans to ramp up its market share and revenue by using more advanced technologies and online platforms to reach more clients.
Aside from networking with Star Alliance, THAI is also teaming up with 13 airlines outside the alliance to offer links to THAI's network, covering more than 600 cities across the world. Carriers from China, the Middle East and eastern Europe have shown the most interest in making indirect alliances.
"No airline can fly alone. All airlines must work with one another for a greater network," says Mrs Usanee.
More importantly, she says the airline needs to re-manage networking and routing, flight frequencies, and seek new clients, particularly from potential markets.
"The airline is penetrating only high-potential markets. But we also have to study market opportunities and learn about the populations, competitors and business results from existing players before making any decisions to open new routes or adjust flights," Mrs Usanee says.
Good yield comes first
In a bid to expand its revenue and increase profit, the airline has been focusing on a revenue management system, a new sales and booking system that works in real-time, which provides effective monitoring and gathers information on other airlines' air fares and promotional activities.
With the new booking system, THAI will be able to adjust fares quickly in response to those of rivals, leading to overall increases in booking, even in the current low season, says Mrs Usanee.
"Before opening a new route, revising existing routes or adjusting frequencies, the airline will have to consider yields, which are the most important factor."
According to Mrs Usanee, THAI's cabin load factor (a measurement of capacity utilisation) averaged 83% in the first quarter, up from 78% in same quarter last year, and 79% in the second quarter from 69% in the same period last year. This put the average cabin load factor for the first half this year at 81%, up from 75% in the first half last year.
Mrs Usanee predicts the cabin factor for the third quarter will be higher than 80% as advance booking for the period has already jumped 9-12% from same period last year.
The airline expects revenue to be close to 200 billion baht this year.
Last year, the company reported total revenue of 181 billion baht, down from 193 billion in 2015, 204 billion in 2014 and 212 billion in 2013.
Revenue base diversification
According to the acting president, the airline is also seeking more revenue from other units, especially catering, ground service, cargo and aircraft maintenance.
The company is planning to invest in a catering kitchen in Chiang Mai to serve market demand from THAI and other airlines. The kitchen's construction is expected to start within the next two months, with an investment of 100 million baht.
The airline also plans to build a catering house in Phuket and Krabi in the next phase, the investment value of which has not been made available.
"The airline has been working on boosting revenue from non-core units for years. As a result, revenue from supportive units has increased from 10% of total revenue during past three years to 20% this year," she says.
THAI recently signed a memorandum of understanding with French aeroplane maker Airbus to build an aircraft maintenance centre at U-tapao airport in Rayong province, to cater to all aircraft types operating in Thailand and Southeast Asia.
The new centre is expected to push the eastern coast of Thailand to become a high-tech industrial zone and an aviation hub for the region. Construction of the maintenance centre is expected to start late this year.
THAI to underline teamwork
According Mrs Usanee, the government has also ordered THAI to lead its two sister airlines, Nok Air and THAI Smile, to strengthen the country's aviation sector, by improving not only safety and security, but also services and competitiveness.
The three airlines have also formed a working framework called THAI Group to drive the plan, she says.
THAI Group is teaming up with privately-owned Bangkok Airways to promote Thailand as a regional gateway, carrying passengers to all destinations in and outside Thailand.
Mrs Usanee says she also recently created a "DD Command Center" to centralise daily workflow between head offices and all domestic and overseas stations. DD is an internal employee code that represents the position of president.The new unit will help the president work closely and supervise major divisions such as the revenue department, network systems, operations, crisis management and others that are intrinsic to THAI's operations.
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