Printed headline: Thailand’s MRO Push
A proposed MRO hub at U-Tapao Airport is expected to have an important role in attracting investment to the country’s ambitious Eastern Economic Corridor project
Industry projections have long forecast a surge in the Asia-Pacific region’s commerical aviation segment, and this trend shows no sign of waning over the next decade. Aviation Week forecast data predicts the region’s fleet size will grow 5.3% annually and include nearly 8,300 aircraft by 2028. In the same year, the region’s MRO industry is expected to be valued at $164.5 billion. Given the pace of expansion in the Asia-Pacific, aftermarket competition is increasing in its Southeast Asia subregion.
Capacity in Singapore, long established as the MRO hub of Southeast Asia, is limited by the high concentration of companies in a relatively small area. This has led to neighboring countries with developing aviation aftermarkets—incuding Indonesia, Malaysia and Thailand—looking to take advantage of that situation by building up their own MRO infrastructure and offering incentives to attract new business.
Thailand, Southeast Asia’s second-largest economy and home to MRO providers such as Triumph Aviation Services Asia and an Airbus Helicopters repair station, has been particularly ambitious in seeking further investment across its manufacturing and services industries. As part of its state-led Thailand 4.0 policy, it aims to develop a culture of innovative technology-based manufacturing and services. The Thai government passed legislation in February 2018 greenlighting trade and investment in the country’s eastern seaboard region, a hotbed of manufacturing over the past 30 years, focusing on turning the three eastern provinces of Chonburi, Rayong, and Chachoengsao into high-tech economic zones.
Known as the Eastern Economic Corridor (EEC) development plan, the strategy targets 10 identified key industries, one of which is bundled together as aviation and logistics. Its goal is to revitalize Thailand’s eastern seaboard area. Encouraging a more attractive business landscape, new legislation saw the introduction of tax breaks for EEC project investors, including exemption from income tax for up to 14 years, allowing investors to rent land for up to 49 years and extending visa terms for foreign professionals to four years. The project’s targets are lofty ones: From 2020 onward, the EEC aims to add 5% to national GDP while creating 100,000 jobs annually.
Supanit Chantarasiri, executive director of the infrastructure management group for the EEC office, says incentivizing development of an industry like aviation is important for Thailand as other regions also look for ways to grow the segment as a regional economic contributor. “What is good for one company may not be right for the other,” he says. “We’ve tried to remove the burden by setting up the right infrastructure.”
Plans for Thailand’s aviation industry center on three of its biggest airports, located in the EEC region. They are Bangkok’s Don Mueang and Suvarnabhumi airports—the two busiest in Thailand—and U-Tapao International Airport in Rayong Province, a Royal Thai Navy-owned airport built during the Vietnam War. It has since become a fast-growing international destination, with more than 1.8 million passengers recorded in 2018. One of the government’s main priorities is to improve links between these hubs. Starting in 2023, the project plans to connect the three airports with the opening of a high-speed rail link.
Rayong’s U-Tapao Airport, located around 40 km (25 mi.) from the seaside city of Pattaya, could serve as the hub for Thailand’s MRO industry in the region. As part of an upgrade program to the airport, known as the Eastern Airport City project, a new MRO campus will be built east of a planned second runway at U-Tapao, with a 2021 completion planned. Once the MRO campus opens the following year, the EEC project hopes to attract several companies to the site, which will also house an additional passenger terminal for U-Tapao, cargo terminal, commercial precinct, designated cargo logistics and free trade zone and an aviation training center.
The aggressive approach could create one of Southeast Asia’s most modern hangars. In the summer of 2018, Thailand and Airbus announced a joint venture for a new maintenance facility at the proposed 337,500-m2 (3.6-million-ft.2) MRO site. With an initial investment of 10.588 billion Thai Bhat ($333 million), and a 60/40 split between the private sector and the Thai government, Thai Airways has plans to deliver a full return on investment within 10 years from the date it begins operations. It will occupy the site for an agreed rental period of 50 years, says Catipod Keadmongkong, Thai Airways’ deputy director of the aircraft overhaul department at the U-Tapao site.
A formal signing of the joint venture is expected later this year, with construction expected to commence on the new facility at U-Tapao before the end of 2019. In 2020, tools and equipment for the “smart” hangar will be purchased; recruitment and training of new staff will follow. Thai Airways has had a presence at U-Tapao since 1999, one of its three main bases in Thailand along with locations at Don Mueang and Suvarnabhumi. Its primary services at U-Tapao include C and D checks on Boeing 737, 747 and 777 aircraft, along with C checks on Airbus A330s and A340s and as of May, its first A380 completed in just over 50 days.
The facility will have an extensive capability range, servicing both the in-house Thai Airways fleet and third-party customers and adding heavy check capabilities for new-generation aircraft such as the A350 and the 787. Thai estimates its work split is 80% in-house fleet and 20% third-party work. For heavy maintenance, it will support both widebody and narrowbody aircraft across three bays with up to 800,000 available labor-hours per year.
Thai Airways says that for widebodies this amounts to 56 events per year, while for narrowbodies it will handle 130 events annually. In line maintenance, which spans widebody and narrowbody aircraft, it will provide services for a maximum of 70 flights per day. Paint shop services will also be available for widebody and narrowbody aircraft and can accommodate approximately 22 aircraft per year. In addition, a spare parts warehouse and a ground support equipment center will also be located on-site.
The maintenance expansion will be aided by investment in new technologies, Keadmongkong says. He adds that Thai plans to embrace new tools such as drones for aircraft inspections and robotics for certain operational tasks such as sanding. It also envisages utilizing 3D printing for parts such as brackets and handles found in the cabin. A push toward paperless operations is anticipated by adopting digital records for component traceability, as well as increasing predictive maintenance capabilities through Airbus’ Skywise analytics platform.
However, this reliance on new technology is expected to result in a reduction in staffing. The 361 staff now at the U-Tapao site is expected to be reduced to 250 by the time the new facility opens in 2022, although possible ramp-ups could be forthcoming, depending on demand.