Interview: The Civil Aviation Authority of Thailand (CAAT

Raising the bar for the sustainable growth of Thai aviation industry

Dr. Chula Sukmanop, Director-General of the Civil Aviation Authority of Thailand (CAAT)

Geography is very important for the aviation industry. Located centrally among China, India and the South-East Asia, Thailand has a geographical advantage for becoming the aviation hub of the Association of Southeast Asian Nations (ASEAN). According to Thailand’s Board of Investment (BOI), the aviation industry will be one of Thailand’s next major entities as it is a value-added industry that will increase the competitiveness of the country.

However, the adverse effect of the highly contagious Covid-19 outbreak, this sector has become one of the most disrupted industries together with tourism. Commercial flights are banned from entering the Kingdom of Thailand at all points in an attempt to prevent the spread of the pandemic, even though the Civil Aviation Authority of Thailand (CAAT) lifted a ban on international flights from 1 July 2020 under certain conditions.

This issue of UPDATE interviewed Dr. Chula Sukmanop, Director-General of CAAT, on the role of monitoring standard aviation practices as well as promoting and developing sustainable aviation activities in Thailand. Holding a Ph.D. in Maritime Law from the University of Southampton, United Kingdom, he worked as Director-General of the Transport and Traffic Policy and Planning, the Marine Department and the Department of Airports before joining CAAT in 2016.

One of CAAT’s missions is to promote and develop sustainable aviation activities. Can you explain this in more detail?

CAAT has to ensure that aviation activities can take place. It begins with traffic right. Basically, for a country and their airlines to fly and provide services in other countries, they need bilateral agreement for traffic rights. For example, if we agree with the German authorities that our two countries can have 21 flights a week, CAAT will distribute these rights to Thai airlines who are willing to operate and nominate the list of the operating airlines to the German authorities. Conversely, the German authorities will do the same and inform us of their designated airlines. Once both countries have the names of the airlines, the designated airlines will apply for the operating slots at the airports. CAAT’s next activity is about “(airport) slot allocation” managed together with the Airports of Thailand PCL (AOT) and other airport operators. Slots mean time availability. If the slots are full, the airlines will have to land at another time. Thus, CAAT’s involvement in negotiating the bilateral agreements, distribution the traffic rights to operators and airport slot allocation has the direct impact on the promotion of aviation activities.

Thailand aims to become the regional aviation hub for the aviation industry in South-East Asia, with an average growth of 10 per cent per year. How has CAAT been contributing to the growth of Thailand’s aviation industry and the realisation of becoming the regional aviation hub?

CAAT has two main roles. One is that of Regulator. We have been exercising measures to ensure that Thai aviation industry is in line with international standards for safety and security. Another role is Promoter. For the promotion side, we are concerned with economic and social viability as well as the environmental aspects. CAAT wants to make sure that the aviation industry in Thailand is competitive, and that unnecessary barriers are not created. We are trying to provide incentives to attract the use of aviation facilities in Thailand.

The social side is more about consumer protection to make sure airlines treat customers fairly and in accordance with our laws and national policy. For example, flights cancellations or delays must be compensated. As for environmental sustainability, we have to consider carbon emissions and global warming. We have measures and some systems that collect data on how airlines operate and how much greenhouse gas such as CO2 is released by airlines into the environment. This is a global initiative that we need to follow. buses and taxis.” What are the strengths of Thailand’s aviation industry? Apart from being one of the best destination in the world, due to strategic location, Thailand is acting as the centre of aviation activities for the region. Travellers flying through Thailand can transit to many places in Indochina. More than 140 airlines now provide flights to Bangkok. From Bangkok you can go up to 81 per cent of all destinations around the world with only one flight change.

Who are our main competitors in ASEAN?

The aviation industry is a competitive world. In terms of being the regional hub, we compete with Changi Airport in Singapore, but in terms of airlines, all are competitors. Malaysia is now trying to provide some maintenance, repair and overhaul (MRO) services as now demand in the region is greater than supply. They are trying to attract many airlines to use their MRO services. However, such efforts are currently being blocked by Covid-19, so that everyone — including those ahead of us — will have to start again once the pandemic ends.

MRO operations are expected to create jobs and generate income for the Thai economy. What conditions do foreign investors need to consider?

Last year our laws were amended to be less restrictive. Currently, foreign investors can hold 100 per cent ownership of companies in Thailand. The only requirements are providing technology and knowledge transfer to Thai people and hiring Thai employees. Every investor needs to come up with a proposal for knowledge transfer.

We foresee that MRO services in this region will not be enough to service all planes in the market because orders for new aircraft during the past two to three years have been considerable. Once the new aircraft are delivered the airlines will need for MRO services. The facilities are not enough in Thailand and in ASEAN. That is why most ASEAN members are prepared to compete in providing MRO services.

We have received some new applications since the relaxation of the regulations last year, including some German and Swiss companies. Actually, we want the type of service for the whole aircraft, not only repair and maintenance; we are open to applications for making aircraft parts in Thailand. Thus, this will mean the whole MRO supply chain can be provided here.

Do MRO operations have to be only in the Eastern Economic Corridor (EEC)?

No. Actually, MRO can be carried out in any part of Thailand and the related laws will be applied to every place where airport is situated. Some investors are interested in being based in Chiang Rai as it is close to China. With limited MRO facilities in China, if airlines want to use the Chinese facilities, they will face a long waiting list. However, in order to provide MRO services for Chinese customers, the operators need to be approved by Chinese Civil Aviation Authority, too.

Expanding MRO services in Thailand will provide an alternative opportunity for vocational schools students who don’t want to repair just cars. There are a few schools serving the demand for MRO technicians and we are trying to combine facilities to support them. We also motivate them to study and practice repairing aircraft or undergo onthe-job training at the real MRO facilities.

Which area of Thailand’s aviation industry needs to be improved?

Aviation is international. Everyone needs to compete following the same rules. We need to be stricter with standards. Now local airlines are getting better. Airlines will lose customers and disappear from the market if they don’t comply with safety standards. It is expensive business. During the past two years, four airlines have gone out of business.

What are the key challenges facing this sector in Thailand and how to improve our aviation industry?

Covid-19 is the main challenge this year and maybe next year as well. It is the most severe situation ever to have happened in the aviation industry. We used to have SARS, MERS and economic disruption, but they were short-term and only affected small areas. But

Covid-19 hits everyone. I don’t see any other challenge at the moment. Passengers don’t want to travel and even they do, they can’t. I think the world will lose some airlines because of Covid-19. The downturn caused by Covid-19 during the past four to five months may have negative consequences for public travel demand for up to two years. Some schools of thought have predicted that 2023 will be back to the level of 2019.

Before the Covid-19 outbreak, the challenge was the oversupply of airlines, especially low-cost airlines, which caused price wars. Thus, airlines recorded a very low profit margin in 2019; as a result, all Thai airlines suffered from revenue loss and had to come up with some additional services such as providing catering supplies to other airlines. The players who made most profit were airports. This happened to most airlines in the world, but they needed to maintain cash revenue. On average, Thai airlines generate 10 billion baht annually in revenue but their expenses amount to around 12 billion baht.

This year, we expect about 75 per cent less passengers because of Covid-19. Last year, 165 million passengers travelled to and from Thailand. However, for this year we expect 40 million passengers or 25 per cent less than 2019. Domestic travel is getting better with about a 40 per cent of last year figure. However, domestic travel is also a part of international tourism. For example, international visitors fly to Bangkok and then on the domestic flights from Bangkok to Chiang Mai. If we have international flights fully operational again, that will improve the situation of aviation industry in Thailand.

What will be the scenario of Thailand’s aviation industry in the face of covid-19 and new opportunities?

The survival of airlines depends on how much they can reduce their costs and find additional revenues. CAAT tries to help decrease their expenditures such as landing and parking fees. Aviation is a long supply chain: If airlines die, the second dying one is airports, followed by shops and local feeder transports like buses and taxis. From now to probably the next two years, domestic markets could be on the rise because Thai people who are still interested to travel may have to consider domestic travel. That is why ‘We Travel Together’ stimulus package was launched. Many different promotion packages such as a family offer for bundled seats on aircrafts with rental cars are needed to attract the target markets.

Unmanned aerial vehicles or ‘drones’ offer potential business opportunities as we receive an increasing number of drones registration requests. We have about 18,000 applicants registered with CAAT. In certain activities, aerial vehicles can be used without pilots such as delivering small packages. But in a Thai scenario, they are not quite practical and cannot yet compete with motorcycles. Drone controllers have to be registered to make sure they know the basic rule to operate drones. For instance, they cannot fly their drone higher than a certain height and it is not allowed in the area nearby airports. Drones are increasingly used for shooting photos, tourism, construction monitoring and agriculture.

How long will the ban on international commercial flights to Thailand continue?

It is a very difficult question to answer. The ban is part of our efforts to ensure that we can protect Thailand from Covid-19. We have to restrict the number of people coming into Thailand because we don’t have enough quarantine facilities to ensure the health and safety of the population.

Most cases of Covid-19 infection result from overseas. We don’t have a vaccine yet and Covid-19 virus mutations are a potential threat. The theories about the virus change every month and we are now seeing a second wave in many countries. They appeared to have contained the virus but once they opened their borders they suffered a new rise in infections. That is why Thai government is really reluctant to reopen the country. However, we realise that we cannot close Thailand for a long period. We have to be able to ensure that opening the border will be safe from spreading the disease in this country.

Interview by Chadaphan Maliphan, GTCC Publications and Communications Manager