SPREAD YOUR WINGS
As new boss takes over Thai Airways, he has a mammoth task to turn around the struggling flag carrier.
Sumeth Damrongchaitham, 53, was officially appointed last month as president of Thai Airways International Plc (THAI).
His challenge is to turn around the loss-making national carrier, one of six financially ailing state firms that have been placed in business rehabilitation as required by the State Enterprise Policy Commission. The others are the State Railway of Thailand, the Bangkok Mass Transit Authority, TOT Plc, CAT Telecom and the Islamic Bank of Thailand.
Mr Sumeth sat down with the Bangkok Post to talk about his plans for his new role and the progress of a new joint venture: a maintenance, repair and overhaul (MRO) facility at U-tapao airport.
When do you expect to propose THAI’s rehabilitation plan to the government?
We expect to finish the rehabilitation plan before December this year, as required by Deputy Prime Minister Somkid Jatusripitak, who visited THAI’s office in September and ordered the plan’s conclusion within three months.
THAI’s rehab plan aims to raise income from the airline business, catering, and the MRO facility at U-tapao airport, aiming to develop one of the most advanced MRO centres in the world.
The airline business sees relatively stiff competition because of rising numbers of airlines and air routes.
The market share of THAI fell to 27% this year from 37% in the past five years. The rehab plan needs to increase market share, which is possible as the airline business grows by only 3% annually.
Thai catering has high potential thanks to increasing aircraft numbers and Thailand’s status as an aviation hub in the foreseeable future.
What about THAI’s plan to buy 23 aircraft worth up to 100 billion baht?
I cannot yet reveal any details because the company is in the process of revising the purchase plan. The company’s aircraft purchase needs to be revised to conform with a business plan.
The company expects to conclude the purchase plan in 45 days before undergoing vetting by the National Economic and Social Development Board’s and cabinet approval.
The plan to buy new aircraft is a vital part of THAI’s restructuring plan. The purchase is deemed essential to increase the potential of THAI’s airline business.
How is the MRO progressing?
The Eastern Economic Corridor Committee chaired by Prime Minister Prayut Chan-o-cha approved the project on Oct 4. The project is expected to be endorsed by the cabinet next week. Terms of reference for the project will be introduced within this month, and the winning joint venture partner will be secured by February
next year.
Although THAI has already signed a memorandum of understanding with Airbus on the MRO in June, the auction is still needed because Boeing has expressed interest in joining the project.
Total investment in the project is 10.58 billion baht. The government’s investment is estimated to account for 6.33 billion baht, with the remaining 4.25 billion baht from the private sector.
What are the economic returns of the project?
The economic rate of return is projected at 22.1 billion baht, excluding jobs created for high technology experts, and revenue from offering services to foreign airlines worth 200 billion baht over 50 years.
The estimated 200 billion baht worth of
income over 50 years will play a key role in supporting THAI’s ambitious plan to become a national premium airline.
The MRO will become significant in generating income to THAI, while the internal rate of return is estimated at 14%, which is quite high.
The MRO is business has less competition compared with the airline business.
The aviation industry is likely to have steady growth over the next 5-10 years, while at the global level aircraft are expected to increase by 50% during the period, Asia is expected to account for 20% of them.
Due to its geographical position Thailand is expected to become the aviation hub for the region, for which the MRO facility is considered an appropriate investment.
The development of U-tapao aviation city is also expected to attract many companies to set up in the MRO.
When will the MRO at U-tapao airport open?
The project will begin operating within the next five years. THAI will remove the existing maintenance and repair centre at U-tapao to allocate an area for the airport’s second runway and new passenger terminal.
The MRO facility will be on a larger scale, using technology called a “smart hanger” that can offer services to five widebody aircraft and two narrow-body ones. It is to include heavy air-frame maintenance and base maintenance, line maintenance, aircraft painting and other modification, and component maintenance.