Thailand is making a renewed effort to become an Asian hub for aircraft maintenance, repair and overhaul. It is also working to be an aircraft parts manufacturing center.
One key question always has been whether Thailand will establish a dedicated aerospace park. In 2009, the Abhisit Vejjajiva-led government announced the intention to turn Bangkok’s Don Mueang International Airport into an MRO center. However, nothing happened because the Abhisit government was soon out of power and later governments saw the initiative as a lesser priority.
But that has changed now, with Thailand’s military-led government. The general consensus is that Don Mueang is no longer a suitable place for MRO because its reemergence as a busy commercial airport has left too little land available for additional maintenance hangars.
Thus, the Thai government has announced a plan to turn U-Tapao International Airport—at the seaside town of Pattaya, a 1-hr. drive from Bangkok—into an MRO cluster. The airport is controlled by the Thai navy but recently reopened for commercial flights. Bangkok Airways, Kan Air and Thai AirAsia are now serving it. And a new highway is being built that will shorten travel time between the airport and Bangkok.
Industry sources say national carrier Thai Airways International is in confidential discussions with Air France KLM Engineering & Maintenance (E&M) about establishing an MRO joint venture in Thailand, possibly at U-Tapao.
Another company that is eyeing U-Tapao is Lithuanian MRO provider FL Technics, which will be moving its Asia-Pacific headquarters from Kuala Lumpur to Bangkok by mid-year. Bangkok initially will be a sales and marketing office that will coordinate activities across the region, but the company also plans to establish an airframe heavy maintenance facility in Thailand, says Simonas Sileikis, director of the Asia-Pacific division for FL Technics.
Sileikis notes that there are many carriers in need of airframe heavy maintenance in Thailand, and it is a good place from which to attract airframe maintenance work from around the region, particularly Vietnam, Cambodia and Myanmar. U-Tapao is a better location in Thailand than Don Mueang because there is more land available and the ministry of transport wants to transform U-Tapao into a commercial MRO center, says Sileikis.
An advantage for FL Technics Thailand is that it would be one of the few MRO companies in the country with European Aviation Safety Agency (EASA) certification. Sileikis says the recent downgrading by the U.S. FAA of Thailand’s safety rating will spur Thai carriers to seek high-quality fleet management services from companies that are internationally recognized. Sileikis says that if FL Technics establishes a heavy maintenance facility in Thailand, it will apply to have EASA Part 145 certification as a repair station.
FL Technics already has reached an agreement with the authorities whereby its Bangkok regional sales office can be a 100%-owned subsidiary of FL Technics. However, it has yet to decide whether the heavy maintenance base will be a wholly owned subsidiary or a joint venture. Sileikis concedes that one of the challenges will be securing a large airline customer to warrant having a heavy maintenance facility in Thailand.
This is not a concern for one of the biggest MRO players in Thailand—the U.S. company Triumph Group. Triumph chose the location for its Asian MRO facility, which opened in 2006, in large part because it secured Thai Airways International as an anchor client.
“The requirements of MRO companies investing in Asia are different than aerospace parts manufacturers,” says John Brasch, Triumph Aviation Services Asia aftermarket group president. “The latter is purely concerned about costs, whereas the MRO companies are concerned about having a customer base in the region. There is not much MRO work that can be transferred from Europe or North America. Therefore, it was important to develop a good relationship with the national carrier and with the other carriers in Thailand.”
Triumph’s facility is in Bonchuri, an area close to Bangkok’s seaport and to Suvarnabhumi Airport. It is a duty-free zone—no duty is imposed because Triumph is importing parts that are later exported rather than sold into Thailand.
Triumph also chose Thailand because it could see that the country is competitive on price, and likely to remain so, and because it has a skilled blue-collar workforce. Triumph sources engineers from Thailand’s universities, which offer aerospace engineering courses. “As for technicians, we tend to develop and train them internally,” Brasch says. “We also have some engineers that work as technicians because it is highly skilled work. In addition, we’re able to source some skilled workers, such as machinists from Thailand’s automotive industry.”
Board of Investment Thailand (BOI), which is tasked with attracting MRO companies and aerospace manufacturers, says the fact that Thailand is the automotive manufacturing center for Southeast Asia is a key advantage, as there are many synergies between the automotive and aerospace sectors.
“We are quite strong in auto parts manufacturing, which means we have metal processing skills,” says BOI’s deputy secretary general, Ajarin Pattanapanchai. Those skills are also applicable to the aerospace sector.
Pattanapanchai adds that the board can provide aerospace companies with an eight-year tax holiday. In certain cases, it can also provide a 50% reduction in Thai taxes for the subsequent five years, she says.
Senior Aerospace is another global aerospace company that has invested in Thailand. Senior’s company in Thailand, established in 2005 and formerly known as Weston SEA, makes machined aerospace components and aircraft structures at its facility at Chonburi. Weston was a third-generation family-run company from the U.K. that Senior acquired in 2011.
Senior Aerospace Thailand CEO Jamie Looker says Weston was attractive because it had top customers such as Rolls-Royce and had started to establish a global manufacturing footprint thanks to its successful Thai facility. Looker says many global aerospace companies say they will do manufacturing in Asia, but it can be hard to get customers to buy into the idea because of concerns about whether quality standards will be met. But if you are already established in Asia, it is much easier, he says.
Since Senior acquired Weston, the Thai facility has taken on more work and expanded. It started with a 6,000-sq.-meter (65,000-sq.-ft.) facility at Bonchuri but now has an additional 20,000-sq.-meter facility. The first 10,000-sq.-meter shop opened in April 2015, and the other half was scheduled to open in February.
Looker says one of the key benefits of Thailand is staff retention. “Here, it is not so much about how much people are paid, but the working environment you create,” he says. “In India, for example, people will change jobs for a small pay raise.”
There is also a talented workforce in Thailand. “All the big universities in Thailand have aerospace courses.” He adds, however, that these courses still produce insufficient numbers of aerospace engineers to support the local industry. Senior Aerospace Thailand has addressed the issue by sourcing skilled engineers from Thailand’s automotive industry as well as tapping foreign talent.
Looker notes some differences between the automotive and aerospace manufacturing industries. “In aerospace, you have more legal requirements and more details about the traceability of everything. The degree of tracking is completely different [from] the automotive industry. Another difference is IT systems are more advanced in automotive, and that is driven by the volume of work. There’s more investment made in IT to reduce manual inputs. In aerospace, there is less volume, but then there is more emphasis on quality-management systems.”
He predicts that aerospace manufacturing and MRO work will continue to shift to Asia: “Cost is becoming more and more important. Most of the growth in new aircraft sales is in Asia. So the push is to reduce costs while maintaining quality levels.”