Cap­tur­ing Aero­space Mar­ket Share in Asia – Vir­tual Pres­ence Equals Ac­tual Ab­sence

Thai-American Business (T-AB) Magazine - - Contents - Writ­ten by: John Brasch and Jim Grunewald

Bot­tom line up front: You have to be here to par­tic­i­pate and the AMCHAM Aero­space Com­mit­tee should be your first place for in­for­ma­tion and as­sis­tance when it comes to set­ting up your aero­space busi­ness in Thai­land.

As re­cently re­ported by Ra­jiv Biswas, Asia- Pa­cific chief economist at IHS Markit Com­pany, “[ T] he Asia- Pa­cific’s avi­a­tion in­dus­try has ex­pe­ri­enced re­mark­able growth over the past decade. In fact, the num­ber of Asian air­lines now to­tals over 230, with an es­ti­mated 27 per­cent of the world com­mer­cial air­craft fleet, ac­cord­ing to global an­a­lyt­ics firm IHS. APAC also ac­counted for around 28 per­cent of in­ter­na­tional and 40 per­cent of do­mes­tic sched­uled air pas­sen­ger traf­fic last year.”

The pri­mary driv­ing fac­tor for this is sim­ple eco­nomics. Ac­cord­ing to Biswas, “the sharp in­crease in Asian air­line pas­sen­ger num­bers re­flects fast- ris­ing house­hold in­comes in many of these coun­tries, no­tably China and In­dia, as well as the rapid growth of Asian low- cost car­ri­ers, which have helped to make air travel much more af­ford­able in Asia.”

Be­sides just be­ing a beau­ti­ful place to live and work, Thai­land is ge­o­graph­i­cally for­tu­nate to have such a su­perb lo­ca­tion on the planet Earth, as it is phys­i­cally si­t­u­ated ad­ja­cent to both China and In­dia.

Over the next two decades, Asia- Pa­cific air­lines are fore­cast to ac­count for 38 per­cent of to­tal new com­mer­cial air­craft or­ders ac­cord­ing to Boe­ing long- term fore­casts, mak­ing the Asia- Pa­cific a key growth mar­ket for the com­mer­cial aero­space- man­u­fac­tur­ing firms such as Boe­ing, Air­bus, Rolls- Royce and Pratt & Whit­ney, among oth­ers.

As a fea­tured in­dus­try in this is­sue of Thai- Amer­i­can Busi­ness Mag­a­zine , the aero­space in­dus­try has be­come a pri­mary fo­cus of the Royal Thai Gov­ern­ment’s ( RTG) in­fra­struc­ture plans and de­vel­op­ment pro­grams. Con­se­quently, with such strate­gic lo­ca­tion in its fa­vor for all of the con­cur­rent aero­space ac­tiv­ity in the re­gion, Thai­land is well- suited to take ad­van­tage of the op­por­tu­ni­ties and is lay­ing the foun­da­tion for the de­vel­op­ment of Aero­space In­dus­trial Es­tates tar­get­ing maintenance, re­pair and over­haul ( MRO) and Tier 1,2, & 3 aero­space man­u­fac­tur­ing and re­pair seg­ments.

ARE U. S COM­PA­NIES PO­SI­TIONED TO CAP­TURE MAR­KET SHARE?

While there are plenty of re­cent aero­space in­dus­try busi­ness fore­casts that will sup­port the no­tion that the aero-

space sec­tor is poised for growth in Asia, there is less ev­i­dence of U. S. com­pa­nies that are ac­tu­ally po­si­tioned to com­pet­i­tively cap­ture that mar­ket share by hav­ing a re­gional pres­ence.

There are lots of rea­sons for this and while some will be men­tioned be­low, oth­ers are cen­tered on the old adage: “You don’t know what you don’t know.”

To mit­i­gate this line of think­ing, AMCHAM’S Aero­space Com­mit­tee ac­tively seeks par­tic­i­pa­tion of aero­space in­dus­try lead­ers and pro­fes­sion­als to fill the void of the un­known, and re­place it with solid busi­ness in­for­ma­tion from which in­formed de­ci­sions and risk eval­u­a­tion can be cod­i­fied and acted upon. To put that in Com­mit­tee jar­gon, “You don’t know what you could know, or should know, if you had the es­sen­tial in­for­ma­tion.”

The AMCHAM Thai­land Aero­space Com­mit­tee’s mem­ber­ship is made up of busi­ness lead­ers that have ‘ cracked the code’ and are cur­rently work­ing in the re­gion. Our mis­sion is to sup­port and pro­mote aero­space- ori­ented in­dus­tries and con­tin­u­ally de­velop ef­fec­tive pro­grams of Cham­ber sup­port for aero­space- re­lated projects in the re­gion by im­prov­ing gov­ern­ment- to- in­dus­try re­la­tion­ships, in­creas­ing un­der­stand­ing of U. S. and Thai­land/ ASEAN aero­space reg­u­la­tions, and in­creas­ing the mem­bers com­pa­nies’ abil­ity to com­pete for global busi­ness.

KNOWL­EDGE IS POWER

While the Board of In­vest­ment ( BOI) has de­vised sig­nif­i­cant in­cen­tives to at­tract for­eign aero­space in­vest­ment, the Com­mit­tee be­lieves that there is scarcity of knowl­edge on what it takes to es­tab­lish, op­er­ate, and sus­tain a suc­cess­ful aero­space en­ter­prise in Thai­land.

Granted, “knowl­edge is power,” and armed with in­for­ma­tion, Thai­land’s aero­space de­vel­op­ment prospects will go from ‘ hope­ful’ to ‘ a con­tender’ for the savvy en­tre­pre­neur.

Ask any Amer­i­can aero­space com­pany about where the po­ten­tial growth will come from in the next decade and you will find that it is ‘ com­mon knowl­edge’ that the Asia- Pa­cific mar­ket is escalating and will con­tinue to out­pace any of the ‘ tra­di­tional’ mar­ket sec­tors. So, why is there a lack of knowl­edge about how to cap­i­tal­ize on aero­space de­vel­op­ment op­por­tu­ni­ties in Asia and, more specif­i­cally, Thai­land, when the in­cen­tives are so en­tic­ing?

While it is a com­plex ques­tion, the an­swer first and fore­most is that it takes a ‘ whole Gov­ern­ment’ ap­proach to es­tab­lish longterm com­mit­ment for the de­vel­op­ment of the aero­space in­dus­try. While it is the re­spon­si­bil­ity of the BOI to prop­erly pro­mote the in­cen­tives, that de­cree must be echoed by all lev­els of the RTG. The prin­ci­pal im­por­tance of that edict is that it demon­strates to for­eign in­vestors that the gov­ern­ment is “in it to win it” and the Thai busi­ness cli­mate is such that the RTG rec­og­nizes that in­fra­struc­ture sup­port, high qual­ity pub­lic ser­vices, and suit­able schools that pro­duce a well- trained work­force are es­sen­tial el­e­ments to in­sti­tute such an as­sur­ance.

With that pledge in place, and with U. S. com­pa­nies presently op­er­at­ing in Thai­land that can at­test to those el­e­ments, it is ab­so­lutely im­per­a­tive to get the word out to the aero­space com­mu­nity of com­pa­nies, so they can bet­ter un­der­stand the ad­van­tages of hav­ing a pres­ence in Asia for the ben­e­fit of par­tic­i­pat­ing in the op­por­tu­ni­ties on the ground. To as­sist in that pro­mo­tion to com­pa­nies that never con­sid­ered a busi­ness in Asia or Thai­land, the AMCHAM Aero­space Com­mit­tee has a stand­ing of­fer to the BOI that our team of sea­soned pro­fes­sion­als will read­ily con­trib­ute in those ef­forts.

ARE IN­CEN­TIVES ENOUGH?

Af­ter the glossy brochure is read and the sales pitch is pre­sented, the hard ques­tions get asked and the an­swers need to be fact- based. Aero­space ex­ec­u­tives are no­to­ri­ous for drilling down and get­ting to the de­tails that make for a suc­cess­ful busi­ness ven­ture. In ad­di­tion to the stan­dard list of pro­mo­tional ma­te­rial, there is a gen­uine thirst for risk mit­i­ga­tion com­pre­hen­sion. That con­cept of risk man­age­ment is in­grained in the aero­space in­dus­try and that is pre­cisely where the Aero­space Com­mit­tee’s value can best be re­al­ized. Our mem­ber­ship is liv­ing it ev­ery day!

One of the main hur­dles for the RTG to over­come is that it has only been re­cently an­nounced that Thai­land has made the strate­gic decision to pro­mote aero­space as a coun­try pri­or­ity. Prior to this, a few of the ASEAN coun­tries made aero­space de­vel­op­ment a na­tional pri­or­ity. Con­se­quently, coun­tries such as Sin­ga­pore and Malaysia are out in front of Thai­land, due pri­mar­ily to ‘ brand’ recog­ni­tion.

This is im­por­tant be­cause of ‘ herd men­tal­ity’ and if oth­ers are there, then maybe they have al­ready fig­ured out how to mit­i­gate the risk. How­ever, what is re­ally at stake is, again, the un­known. A wise man once said, “Know­ing and feel­ing are two dif­fer­ent things, and feel­ing is what counts.” There­fore, it is highly rec­om­mended that the RTG aero­space in­dus­try pro­mo­tional pack­age also ad­dress that crit­i­cal as­pect.

The rea­sons for tar­get­ing this mind­set are le­gion, but here are just a few:

• Com­pa­nies of­ten do not know where to be­gin when it comes to green- field op­er­a­tions in for­eign lo­ca­tions. At the on­set, the per­ceived risks can of­ten out­weigh the ap­par­ent gains. Both are sim­ply per­cep­tions and need to be re­duced to facts. There are prob­a­bly less than half a dozen peo­ple in the USA aero­space com­mu­nity that have ‘ been there and done that’ in Thai­land in any mea­sur­able way and, as a re­sult, any ven­ture be­comes a leap of faith. This is in stark con­trast to the elec­tron­ics or au­to­mo­tive in­dus­try, for ex­am­ple. How do you take that leap of faith and make it a cal­cu­lated busi­ness decision? It has been highly rec­om­mended that the an­swers to ad­dress those “feel­ings” must be wo­ven into the RTG pitch. This is not a Low Cost Mar­ket ( LCM) ven­ture for a U. S. based op­er­a­tion to ser­vice the U. S. mar­ket. Rather, the ab­so­lute fun­da­men­tal point to be high­lighted is that with all the ad­van­tages that the RTG has laid out, and given the mar­ket ac­cess that this lo­ca­tion has to of­fer, Thai­land is the ab­so­lute best lo­cale to cap­ture the MRO aero­space busi­ness of Asia, in Asia.

• There can be a “per­ceived feel­ing,” or real lack of busi­ness trust in Asia. How­ever, for Thai­land, Amer­i­can com­pa­nies can have a wholly owned busi­ness, or have a Thai part­ner to re­duce cul­tural risk, but there are proven op­tions for how this can be ac­com­plished. • At present, these ven­tures re­quire nu­mer­ous vis­its by cor­po­rate decision- mak­ers tak­ing them away from their pri­mary busi­ness re­spon­si­bil­i­ties in the USA. The Com­mit­tee and the ex­pe­ri­ence of the mem­ber­ship can as­sist with this dilemma. Ad­di­tion­ally, an­swers to is­sues such as how to mea­sure vari­able costs and what does it ac­tu­ally cost to run a busi­ness in Thai­land are sub­jects that are the core com­pe­ten­cies of the Com­mit­tee’s mem­ber­ship and that ex­per­tise is avail­able for com­pa­nies seek­ing to launch op­er­a­tions in Thai­land. • Al­beit there are RTG min­is­te­rial of­fices that will be help­ful in field­ing ques­tions, there is no one place to gain a clear un­der­stand­ing of the process for es­tab­lish­ing an aero­space com­pany in Thai­land. Is­sues such as those listed be­low are an­other ca­pac­ity in which the AMCHAM Aero­space Com­mit­tee mem­ber­ship stands ready to sup­port and as­sist:

Busi­ness Li­censes op­tions ( ad­van­tages & dis­ad­van­tages of each) Builders and sourc­ing of sup­pli­ers for con­struc­tion Cer­ti­fi­ca­tions ( ISO, DCAA, FAA, EASA, NADCAP)

Given the pri­or­ity that the RTG has placed on es­tab­lish­ing and de­vel­op­ing the aero­space in­dus­trial sec­tor, your take­away from this ar­ti­cle should be that Thai­land is open for busi­ness and your com­pany’s chance to par­tic­i­pate in the Asian aero­space mar­ket is not go­ing to be founded on some un­for­tu­nate gam­ble. There is a process in place, you are not alone, and we are here to help.

Ad­di­tion­ally, in the case of the U. S. MRO aero­space in­dus­try, the no­tion that this un­der­tak­ing would be ex­port­ing Amer­i­can jobs over­seas for low cost maintenance mo­ti­va­tions is un­equiv­o­cally un­true. As stated up­front, you have to be here to par­tic­i­pate and the in­vest­ment that U. S. com­pa­nies make to set up in Thai­land would be an ex­pan­sion of the U. S.- based com­pany abil­ity to ser­vice the Asian customer base. The Com­mit­tee has nu­mer­ous mem­ber com­pa­nies do­ing just that and their cus­tomers are for­eign air­lines lo­cated in the Asia- Pa­cific mar­ket, not the U. S. mar­ket.

No mat­ter how much of a share of the Asian mar­ket you think your com­pany cur­rently has back in the USA, to achieve more of that seg­ment and cap- ture ad­di­tional mar­ket share, your com­pany needs to es­tab­lish a phys­i­cal pres­ence in Asia. Be­sides the tan­gi­ble BOI in­cen­tives that now make it ex­tremely com­pet­i­tive to op­er­ate in Thai­land, the cost off­sets in ship­ping alone will most cer­tainly en­hance any U. S.- based com­pany’s com­pet­i­tive edge when con­sid­er­ing serv­ing cus­tomers based in the Asia- Pa­cific.

Whether you think your com­pany is truly ready to ex­pand to com­pete in the Asia-Pa­cific aero­space mar­ket or not, you are right! The AMCHAM Aero­space Com­mit­tee’s mem­bers are the in­dus­try pathfind­ers and are more than will­ing to help as­suage your “feel­ings” and help cod­ify busi­ness de­ci­sions based on sound in­for­ma­tion as to why Thai­land would be the best choice for your ex­pan­sion plans and par­take in the Asia- Pa­cific re­gional aero­space busi­ness.

Ev­ery aero­space en­tre­pre­neur can agree that the se­cret to get­ting ahead is to get started, and for that quest, the AMCHAM Thai­land Aero­space Com­mit­tee stands ready to help.

John Brasch and Jim Grunewald are aero­space in­dus­try spe­cial­ists and Co- Chair­men of AMCHAM Thai­land’s Aero­space Com­mit­tee. They can be con­tacted at jm­brasch@icloud.com and jcg4747@gmail.com, re­spec­tively. For more info please visit the Aero­space Com­mit­tee web­page at www.am­chamthai­land.com/com­mit­tees.

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