Aerospace Industry Takes Off Since the first flight occurred in Thailand back in 1911, the country has built a modern 21st century infrastructure to accommodate the most advanced technology and transportation. Thailand has several international airports servicing the north, central and southern regions, and close to thirty domestic airports. And the opening of Suvarnabhumi International Airport in September 2006 significantly boosted the growth potential of the aerospace industry in the Kingdom. The new airport was built with an initial capacity to service 45 million passengers per year and 76 flights per hour. And although it was built to replace the older Don Mueang airport, it too was subsequently reopened to accommodate the demands of arrivals and departures on domestic flights. Indeed, aviation has thrived in Thailand for decades and will continue to do so into the future, whereas the Thai aerospace sector is a new industrial frontier for the country to develop and to open for investment. In the middle of 2003, the Thai government at that time announced a policy to promote Thailand as a premier aviation hub for the Asia Pacific. As the result, aviation as well as aerospace activities were expanded aggressively in order to compete more effectively on a global level. Thus, aircraft repair and maintenance work increased but Thailand back then had no aircraft maintenance center within the country and this placed the Kingdom at a disadvantage when compared to other countries like Singapore and China. Previously, Thai government agencies and private companies had to send their aircraft abroad for the costly and time-consuming process of repair and overhaul. To cater to the need of rising aircraft maintenance demand and save foreign currency for the country, the Thai government aimed to establish an aircraft repair and maintenance service center in the Kingdom. Situated at the heart of Southeast Asia, Thailand today is recognized internationally as a full-service, high-quality aviation locus and a major player in the region’s multi-billion dollar aircraft manufacturing, repair and overhaul industries. With the Asia-Pacific expected to be the largest air travel market in the world within the next decade, Thailand is well-positioned to become a leader in the Asian aviation and aerospace sectors. Furthermore, it can be stated that Thailand’s integration into the global air transport network will enable long-term economic growth for the Kingdom. For instance, this incorporation will open up additional foreign markets to Thai exports, lower transport costs thereby facilitating suppliers to service a wider area and potentially reduce average costs through increased economies of scale, and speed the adoption of
new business practices, such as just in-time-inventory management, which relies on quick and reliable delivery of essential supplies. Focusing on the aviation sector, Thailand has a total of 38 airports, of which six are operated by Airports of Thailand PCL (AOT), all of which are international, 28 domestic regional airports operated by the Department of Civil Aviation (DCA), one international airport operated by the Royal Thai Navy, and three domestic regional airports operated by Bangkok Airways. More specifically, the AOT international airports are Suvarnabhumi and Don Mueang in Bangkok, and Chiang Mai, Phuket, Hat Yai and Mae Fah Luang – Chiang Rai in the provinces. The Royal Thai Navy operates U-Tapao – Pattaya International Airport on the Eastern Seaboard. Meanwhile, Bangkok Airways operate provincial domestic airports at Sukhothai, Koh Samui, and Trad.
In 2006 there were a total of 42.8 million passengers serviced by Don Mueang and Suvarnabhumi airports alone. In fact, Bangkok recently climbed up the list to 14th in the 2012 global rankings measuring the world’s busiest airports in passenger handling, according to the Airports Council International. Moreover, the Thai capital already ranks within the top twenty locations in the world for cargo traffic, which is now a hefty 1.34 million tons. But more than its capacity to handle passenger flows, Thailand’s aerospace industry is fast becoming a center for the production of aircraft parts and components, in addition to engine servicing. The Ministry of Commerce estimates the aircraft and parts market in Thailand to be valued at US$1.09 billion with a fluctuating annual growth rate. Furthermore, according to the Customs Department of Thailand, statistics show that from January to May 2013 imports of aircraft, spacecraft, and parts thereof amounted to THB60.21 billion baht. During the same period, exports of aircraft, spacecraft, and parts
thereof were THB14.37 billion baht. It is clear to see where the value for investment lies. Thailand remains an ever-increasing popular destination among international tourists, reaching 13.8 million arrivals in 2012 and with a slightly increased estimate for 2013. All of these factors have kept the skies over the Kingdom filled with aircraft from every corner of the globe. As such, there is naturally a need for refueling, repairing, maintaining and refitting. Moreover, the opportunities in the aerospace industry, both in servicing domestic needs and in meeting regional demands, are as vast as the horizon. According to IATA, Thailand’s registered airlines already carry 24 million passengers each year and 638 thousand tons of freight. The three largest airports in the country, Suvarnabumi, Chiang Mai and Phuket can handle nearly 50 million travelers combined. In terms of passenger numbers, only Thai Airways International qualifies among the top 25 airlines of the world (at no. 24 as of 2012), and is at 11th placed among Asia-based airlines (including Middle East). Likewise, Thai Air Asia is the only Thai carrier in the top 25 low cost carriers worldwide (at no.25), with its parent Air Asia occupying first place worldwide.
Thailand’s Aircraft Traffic in 2012 The spectacular growth of Asia-Pacific aviation has been underpinned by the progressive liberalization of air services, and this trend is expected to continue, with further developments including multilateral agreements within ASEAN countries, as well as expanding bilateral relations amongst other countries in the region and around the world. In fact, forecasts indicate that this impact is set to grow rapidly over the next 20 years. Passengers numbers are expected to almost triple in Asia-Pacific from 779.6 million in 2010 to over 2.2 billion in 2030, with RPK (revenue passenger kilometers) growing at an average annual rate of 6.7%. Meanwhile, cargo volumes are projected to rise at a similar rate of 6.3% per annum. Accordingly, significant investments are planned to meet this projected growth in demand, including fleet expansion using newer, more fuel efficient aircraft, as well as corresponding investments in building the necessary aviation infrastructure, including modern airports and air traffic management systems to support long-term sustainable development of region. Thailand’s Imports, Exports of Aircraft Parts and Components in 2012 Civil aviation is reported to contribute THB139 billion baht or 1.5% to Thailand’s GDP, and to support 393,000 jobs directly, as well as indirectly a total of 1.8 million additional jobs in the tourism and travel sectors as a whole. Upon closer examination of the GDP figure, the number comprises: THB64 billion baht through the output of the aviation sector (airlines, airports and ground services); THB44 billion baht through the aviation sector’s supply chain; and THB31 billion baht through the spending by employees of the aviation sector and its supply chain. In addition, there is THB678 billion baht in ‘catalytic’ benefits through tourism, which raises the overall contribution to THB818 billion baht or 9% of GDP. Similarly, when assessing the employment figure, the number can be broken down as follows: 79,000 jobs directly supported by the aviation sector; 185,000 jobs indirectly supported through the aviation sector’s supply chain; and 130,000 jobs supported through the spending by the employees of the aviation sector and its supply chain. In addition, there are a further 1,802,000 people employed in the tourism industry through the catalytic effects of aviation. Bangkok remains one of the main aviation hubs in the Asia Pacific region, matching Hong Kong, Incheon (South Korea), and Singapore, as well as being a focal point for travel to the Greater Mekong Sub-Region of Cambodia, Laos, Burma and Vietnam. With all of these incoming and outgoing flights, it is no surprise that aircraft, spacecraft and parts (HS code 88) is Thailand’s largest aircraft import sector, with inbound shipments valued at US$2.4 billion in 2012, a 72% increase from the previous year. Major import markets of the category are France (39%), Sweden (25%) and the United States (18%). The Thai aviation sector currently comprises air transport services, which includes
passenger and cargo flights, and ground based infrastructure, which includes all of the activities at airports. Likewise, supply chain activities for this industry include not only aviation fuel, catering and repair and maintenance, but also tickets, freight forwarding, financing and related business functions. Finally, one should not overlook the many companies in Thailand that are manufacturing aircraft parts and components. A number of US companies like GE, Chromalloy and Triumph have already made significant investments in the Kingdom to take advantage of the country’s ancillary electronics and automotive industries that also provide developed and available suppliers for cost-effective and efficient production. The BOI promotes the manufacture, repair or conversion of aircraft, including aircraft parts and equipment or onboard equipment. These activities are classified as a priority activity of special importance and benefit to the country, which means that projects in the aircraft maintenance industry are eligible for exemption of import duties on machinery, regardless of zone, and an eight-year corporate income tax exemption, regardless of zone, and not subject to the corporate income tax exemption cap. Non-tax incentives include assistance with work permit documentation, authorization to bring in foreign workers, own land and take or remit foreign currency abroad. Additionally, foreign businesses are entitled to 100% ownership. Other rights and benefits shall be granted according to BOI Announcement No.1/2543 dated 1 August 2000. Thailand, as a signatory to free trade agreements with various countries, such as Australia, New Zealand, India, Japan and members of the Association of Southeast Asian Nations (ASEAN), has created for itself a very extensive and diverse trade environment. Furthermore, the establishment of the ASEAN Economic Community (AEC) in 2015 will permit Thai businesses and industries to expand their reach throughout ASEAN, which collectively comprises a region of 600 million consumers. The AEC will serve as a massive single market that is fully integrated into the global economy. Plus, the AEC will open new doors to aircraft manufacturers and aerospace providers by transforming ASEAN into a community with the free movement of goods, capital, services, investment and workforce. This too can only lead to an increase of passenger and cargo movement through Thailand’s several airports. In 2012, intra-ASEAN trade was estimated to be valued at US$598.2 billion and its global trade at US$2.38 trillion.