A term project submitted in partial fulfillment of the requirements of 1210327 Thai Aviation Business in Global Aviation Industry course, Mae Fah Luang University, First semester, 2014

1. THAI AVIATION INDUSTRY 2014
AUTHORED BY:
MR. NATTAPOL WATTANA ID 5531210128
MR. TANADE SIRINUMAS ID 5531210150
AVIATION BUSINESS MANAGEMENT
SCHOOL OF MANAGEMENT
A TERM PROJECT
SUBMITTED IN PARTIAL FULFILLEMNT OF THE REQUIREMENTS OF
1210327 THAI AVIATION BUSINESS IN GLOBAL AVIATION INDUSTRY
COURSE
MAE FAH LUANG UNIVERSITY
FIRST SEMESTER, 2014

3. Table of Contents
Acknowledgement …………………………………………………………………... ii
Declaration ………………………………………………………………………….. iii
Executive Summary ………………………………………………………………… iv
Part I
Introduction to Aviation Industry ………………………………………………… 1
Socio-economic Benefits of Air Transport Services …………………………..... 1
Air Transport Encourages Tourism Business ………………………………........ 2
Trends in Aviation Industry ……………………………………………………... 3
External Factor that Impact the Global Aviation Industry ……………………..... 9
Part II
Thai Aviation Industry ……………………………………………………………... 16
Thai Aviation System …………………………………………………………… 16
Supply Side
- Evolution of Thai Aviation Industry ………………………………………... 17
- Thai Aircraft Maintenance and Manufacturer ……………………………… 17
- Trend of Low Cost Carrier in Thai Skies ………………………………....... 18
Demand Side
- Passenger Traffic Growth …………………………………………………... 19
- Cargo Traffic Growth ……………………………………………………… 20
Institutional Side
- Investments in the Thai Aviation Industry …………………………………. 22
- Thai Aviation’s Readiness for ASEAN Economic Community ……………. 22
- The Reasons that Thailand Should Be the Hub …………………………….. 23
- Thai Aviation’s Preparation for the ASEAN Economic Community ………. 24
- The Impacts of ASEAN Economic Community to Thai Aviation Industry ... 24
- Thailand’s Policies Promote Thai Aviation Development …………………. 25
- Opportunities for Thailand as ASEAN Logistics Hub …………………....... 26
References …………………………………………………………………………... 28
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4. Acknowledgement
We would like to thank our lecturer, Dr. Suthep Nimsai, for his beneficial guidance
and motivation. He gave the directions to find the useful information. For everything you
have done for us, Dr. Nimsai, we thank you. We would also like to thank Assoc. Prof. Dr.
Singha Chiamsiri for his special lecture that makes us understand the ASEAN Single
Aviation Market and ASEAN Open Sky Policy clearly. Especially, we would like to thank
Ms. Flavie Lepoutre who suggested the outline preparation and presented the searching for
the airlines' information.
Accomplishment this project would have been more difficult without the support of
our friends, Miss Thunchanok Rajitvit, Miss Noppasorn Amphanratana, Miss Ratchanee
Buasrikaew, Miss Kaewalin Meelakchai, Miss Jirakan Kaewkoed, and Miss Tiwaporn
Bussabong. Their sharing the information is very helpful.
Finally, we would like to thank all authors who wrote and provided good and clear
information and knowledge that easily understood.
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5. Declaration
We hereby declare that this project work entitled "Thai Aviation Industry 2014" is our
original work, and we further hereby declare that the report is based on the information
collected by us and has not formerly been submitted to any other university.
Working group
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6. Executive Summary
The Thai civil aviation is on the great position. Thailand has vision to be the regional
hub aviation industry so the upcoming ASEAN Economic Community in 2015 is the
opportunity of Thailand to achieve its goal. Moreover, the global economic growth is one of
factors to drive Thailand economy such as when world economy grow up the traveler may
need to spend their money so they may travel in other countries or the rate of export-import
product may increase according to people's assumption. Nowadays, Thailand economy was
continuously grown passenger traveled although the air freight was reduced from the global
economic slowdown
Aviation System is one of the economic system shows the effect and linkage of
supply side, demand side and institutional side to the market, besides Thai Aviation Industry
also has got the impact from this system. Furthermore, recently, the new competitive trend
from the Low Cost Carrier is aggressive multiplied to reduce the cost to gain more profit
margins in order to fight Full Service Carrier which can stimulate the Thailand economic
growth and the growth of passenger in 2013. Moreover, the Thailand government also
motivate and response the economic growth by planning to invest in the many airport in order
to expand the revenue and opportunity or increase the capacity to support the increasing
number of passenger.
Upcoming ASEAN Economic Community which is in 2015 is the key factors to
motivate economy. Thailand has the great position from location which connects with other
ASEAN member countries, and there are many amazing travelling places with the good
hospitality. Nonetheless, Thailand has to prepare and adapt of airline, airport, and aircraft
maintenance for support the increasing of economic growth in both passenger and air freight.
In addition, Thailand government has issued The Eleventh National Economic and Social
Development Plan (2012-2016) and The National Tourism Development Master Plan (2012-
2016) in order to promote Thai aviation industry. From its vision, Thailand has the good
location and infrastructure to logistic transport, however, Singapore and Malaysia, two of
ASEAN member countries as well, are also in the good location to be the regional hub
besides, they also have good infrastructure development. Thailand can achieve its goal if
government issues the right policy to support.
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7. Introduction to Aviation Industry
Nowadays, air transport has become an important economic and social connective
network all over the world owing to the benefits of quick and inexpensive transcontinental
travel. Airliner capacity has significantly grown for the last 60 years, Douglas DC-3 with a
capability of carrying 32 passengers and a maximum load of 4.6 tons was used in the past,
presently, developed to recently version Airbus A 380 with a seating capacity of 525 and, for
the freight version, a maximum load of 338 tons (The World Bank Group, 2011). Every 15
years, since 1972, the global aviation industry has been honorably grown twice. This growth
is anticipated to continue throughout the next twenty years.
During 2010 to 2050, the number of passenger travelled may grow triply. Thus the number of
aircraft used in service may increase doubly from 20,000 to 42,000 and 1,500 aircraft should
be produced every year until 2050 to meet this expected demand (Crespigny, 2014).
Socio-economic Benefits of Air Transport Services
Sustainable development is generated by air transport. It creates economic growth,
provides occupations, improves living standards, relieves poverty and increases revenues
from taxes by supporting tourism and trade. The closer relationships progressing between
countries, both from individual aspect and at a country level is reflected by accruing
international travel. Moreover, the aviation industry encourages 58.1 million jobs all over the
world that some of these people work directly in the industry itself and other jobs which need
air transport for their economic activities and generates $2.4 trillion (3.4%) of global GDP
which are represented in following diagrams.
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8. Distribution of global employment in the aviation sector
From these diagrams, the global aviation industry directly generated an estimated
8.7million jobs in 2012.
 Airlines: 2.3 million of those people or 26% of the total.
 Airport operator: 470,000 people or 5% of the total.
 Other on-airport: 4.6 million people or 53% of the total.
 Civil aerospace: 1.2 million of people or 14% of the total.
 Air navigation service providers: 195,000 people or 2% of the total.
Moreover, air transport also faces with ‘multiplier’ effect which means that they may
receive the impact on global employment and GDP more than its direct impact alone (Air
Transport Action Group, 2014, p. 10).
Air Transport Encourages Tourism Business
Transport is an important component of tourism, giving the key joint between the
tourist origins and destinations. A basic condition for the progress of any tourist destination is
‘good accessibility’ which is determined by the transport services provided. Furthermore, by
reason of the increasing passenger demand that may be generated, the transport industry can
be a major beneficiary of tourism. Aviation is an increasingly essential mode of transport for
tourism markets. While geography has meant that, in modern times, air travel has always
been the notable mode for long haul and much international tourism, moves towards
deregulation, and in specific the occurrence of the low cost carrier sector, have also increased
aviation's essential for short and medium haul tourism trips (Papatheodorou & Forsyth,
2010).
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9. Trends in Aviation Industry
Comparison of the key parameters in passengers and air freight for global aviation
industry between 2013 and 2014 are represented in the following table.
Global Passenger Growth Trend (2014 vs. 2013)
Global Cargo Growth Trend (2014 vs. 2013)
Overall, passenger's demand for travel is growing in line with expectations. However,
the increasing growth rate in September was largely driven by economic factors. The
economic weakness in Europe and Latin America was the restrained factor although
strengthening of the US and Asian economies supported the global economy (Tyler, 2014).
The growth in passenger traffic was motivated by Indian domestic travel greatly grew in
September compared to a year ago due to market motivation measures introduced by carriers
while previous improvements in growth rates potentially were attributable to restored
confidence over the new business-supportive government. However, European airlines was
drop for international demand indicating the effect of the Air France crew calling for a strike
and a general weakening of European economic aspects. Russian's domestic demand fell in
September from the economic impact of the Russia-Ukraine crisis reflected by the effect of
price stimulus wore-off and the weakness revealed for economy.
The air freight growth rate was on the positive trend has been led by, from China, the
increasing growth shipment rate came from the release of the iPhone 6. Moreover, there also
were many regions strongly grow namely Middle Eastern (grew by 17.0%), African (expand
by 11.5%), and North American (increasing 5.4%) although the decreasing demand of
European was reflected the worrying uncertainty in European economy which affected by the
Ukraine-Russia conflict. The details concerning regional passenger and cargo traffic are
represented in the following table.
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10. International and domestic passenger traffic growth trends by region (2014 vs. 2013)
Regional international cargo traffic growth trends (2014 vs. 2013)
It has been observed that even though there are plentiful of risk in environment, for
example, highly weakening key economies such as in Brazil and Europe, an outbreak of
Ebola to harm people's confidence to fly, and effect of political instability in many part of the
world. However, the positive progress in Asia and United States still continually has
profitability (International Air Transport Association, 2014).
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11. Forecasting passenger and air freight traffic trends
 Passenger Traffic - During 2008 and 2009, financial crisis radically affected
passenger traffic, yet the revival over period 2009-2013 has proven its resiliency
years. Latest traffic forecast suggests that World RPKs may again double in the next
15 years. This presents a 4.7% annually average growth in the next 20 years, 5.2%
over 2013-2023 and 4.2% over 2023-2033(Airbus, 2014, p. 62).
Moreover, Asia-Pacific may remain to be the leader for origin-and-destination traffic
which is represented in the following diagram
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12. The distribution of global traffic growth by region is likely to evolve continually.
Origin-and-destination traffic from/ to/ within Asia-Pacific may remain the largest, in 2033,
accounting for greater than 40% of the World traffic, ahead of Europe and North America
together around 37%. Emerging regions may consequently represent almost two thirds of the
World traffic in 2033. Middle East, African, CIS and Asia-Pacific may be the rapidest
growing regions with traffic more than tripling for these regions in the next twenty years.
 Air Freight Traffic -One of the key drivers for the forecasting of the air freight
market is trade volume. Trade was more impacted than GDP during the last financial
crisis, for example, from the trade volume increased at a 5.9% during 2000-2008,
trade growth decreased to a 2.8% from 2008-2013. On the other hand, the GDP grew
at a 2.1% annually at the same period of time (Airbus, 2014, p. 74). From this method,
it is represented in the following diagram.
It has been showed that over the twenty years, the trade may grow at a 4.3% annual
pace. From those trends, the new aircrafts are expected to be built more for increasing
number of passenger and freight. The following show the distribution of new aircrafts by
region.
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13. Global aircrafts deliveries by region
Regional distribution of 36,770 new deliveries during 2014-2033
Global fleet and fleet required in the future
World fleet may double from 20,910 airplanes in 2013 to 42,180 airplanes in 2033
categorized by types of aircrafts
The distribution and the global fleet strongly encouraged trend in the aviation sector.
The world’s fleet is maintained to dominate by the single-aisle airplanes. In 2013, 65 percent
of the fleet consists of single-aisle category. And the single-aisle category is approximated
that its share may increase to 70 percent by 2033. Demand forecasting of 35,680 new single-
aisle airplanes estimate that 62 percent may enlarge the fleet while 38 percent may substitute
for the older airplanes. The demand for single-aisle airplanes are impelled by the emerging
markets. By 2033, Asia Pacific airlines may need 9,540 new single-aisle airplanes to enlarge
their fleets from 3,820 to 10,850 airplanes. The demand for single-aisle airplanes are also
driven by the low-cost carrier that use the business models that concentrate on fleet
commonality. Trend of Low Cost Carrier has affected the aircrafts deliveries much in the
single-aisle used in the low cost airlines that are represented in the following diagrams.
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14. The business model of LCC tends to be increasing according to new aircrafts
required. Moreover, the region which may need most new single-aisle aircraft is Asia Pacific.
From 2010 to 2050, the totally number of aircraft tends to double. 533,000 new commercial
airline pilots tend to be required to fly the new aircraft over the next twenty years (2014-
2033) (Boeing, 2014, p. 17).
Commercial pilots and technicians, the jobs required in aviation industry
Carbary (2014) stated that the challenge of facing with the global requirement for
airline personnel, which is a world issue that can only be solved by all of the groups involved
include with airlines, aircraft and training equipment manufacturers, training delivery
organizations, regulatory agencies and educational institutions around the world, cannot be
solved by one organization or in one region of the world. Overall, steadily increasing aircraft
deliveries drive the global demand, particularly wide-body aircrafts, and display a global
demand for about 27,000 new pilots and 29,000 new technicians for each year (Boeing,
2014). In addition, trend which can be applied to make the travelling process easier, simpler
and more controllable according to rapid growth of the aviation industry is Fast Travel.
Fast Travel new process for passenger
The Fast Travel program is self-service initiatives which respond to passenger demand for a
more consecutive travel experience and more control through six time-saving. Include with:
 Self check-in and/or automatic check-in  Flight re-booking
 Bags ready-to-go  Self-boarding
 Document check  Bag recovery
In IATA’s 2014 Global Passenger Survey, passengers would prefer to check in online
or automatically by receiving a text message or email greater 75% of total passengers.
Only15% prefers to receive their boarding passes from an agent at an airport check-in
counter. The industry’s target is to apply Fast Travel projects covering 27% of eligible
passengers this year until 2020, the goal is to have 80% of passengers used a complete self-
service suite based on common industry standards (International Air Transport Association,
2014). Furthermore, on the other side, air freight has been developed as E-Freight in order to
reduce the cost and protect the environment.
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15. The end of paper-based in air cargo by E-Freight
Some 50 million tonnes of cargo are carried of each year. It does not need another
7,800 tonnes of paperwork to make it occur. The Global Air Cargo Advisory Group
(GACAG) has emerged a roadmap to 100% e-freight that defines the guideline, structure, and
goals for the e-freight program to ensure the success of e-freight. The first element of e-
freight roadmap is engaging regulator to ensure that regulation supports the paperless cargo
although some country has never used electronic documentation. The second element of e-
freight roadmap is using electronic air waybill by supporting of IATA Multilateral e-AWB
Agreement The third element of e-freight roadmap calls for the entire cargo pouch of
documentation convert to go electronic. Once 100%, e-freight has been succeeded,
government and partners may receive benefits of data, reliability and security. Freight
forwarder can save the cost of document handling process (International Air Transport
Association, 2013, p. 40).
External Factor that Impact the Global Aviation Industry
The aviation industry has led to the globalization of the global economy. It connects
buyers and sellers. Goods are also carried across nations. It breaks the obstacle of distance
and time. However, like any other business, the aviation industry is affected by varying in its
external environment namely Political, Economic, Social, Technological, Environmental, and
Legal to analyze the aviation industry. Many businesses are very sensitive to vary in those
factors. They cannot be controlled and can force companies to change their business model.
 Political and legal factors
Government interference on a special industry or the economic operation is the
political and legal factors. To protect the passengers’ interests and airline operations’ safety
standards, the government interference can be necessary. Airlines operate in the political
surroundings that are plentifully restrained and regulated (Cederholm, 2014).
Why political and legal factors impact the airline industry?
Political and legal factors that impact the airline industry
Cederholm (2014) said that the restrictions and regulations related to tax policy,
international trade, and competition normally impact the airline industry. Furthermore, the
political issues such as terrorism, war, the disease outbreaks, for instance, Ebola, are also
impact the airline industry.
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16. Financial impact of September 11, 2001, on the airline industry
According to Cederholm (2014), the 9/11 attacks or 2001 terror attack negatively
affected all companies in the airline industry along with the top U.S. airlines such Delta
(DAL), American (AAL), JetBlue (JBLU), Southwest (LUV), and United (UAL). IATA (or
the International Air Transport Association) reported that the financial impacts on U.S. and
the worldwide industry are as follows:
 The global airline industry took three years to regain the 6 percent decline in their
income during 2000 to 2001. After the September 11, 2001 terror attack, the global
airline industry took five years to report its first net profit. 22 billion dollars of the
revenue decreased from 329 billion dollars in 2000 to 307 billion dollars in 2001. The
global airline industry reported its losses of 13 billion dollars in 2001. After four
continual years of losses, it recorded the first profit of 5 billion dollars in 2006.
 The revenue of U.S. airline industry declined from 130.2 billion dollars in 2000 to
107.1 billion dollars in 2002. 5.9 percent of passenger traffic year-over-year (or YoY)
declined in 2001 and 1.4 percent declined in 2002. Airlines were impelled to cut
capacity to match the decreased demand by 2.8 percent in 2001 and 3.9 percent in
2002.
Changes in the US airline industry’s competitive landscape
Deregulation in the U.S. airline industry
All regulations ruling the airfares, airline routes, entry and exit of the commercial
airlines that used to be supervised by the Civil Aeronautics Board (or CAB) previously were
dismissed by the Airline Deregulation Act of 1978. Demand and supply market forces would
determine the airfares and all entire factors. The passengers got the advantages from the
further routes through the hub and spoke model after the deregulation. This decreased
airfares, whereas this increased the competition. The fare of all low-cost carriers was brought
down repeatedly. To bring down the operation costs, airline operated no frills services to
passengers (Cederholm, 2014).
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17.  Economic factors
A strong economy represent as an impetus for industrial growth. A variety of economic
indicators is also used to measure the economic health. GDP (or growth in gross domestic
product), disposable income, per capita income, consumer confidence, level of business, and
industrial production, for instance, are the sample of economic indicators. Some other main
factor that affects airlines’ profitability is the undulation of oil prices (Cederholm, 2014).
Economic factors support aviation industry
The aviation industry, like many industries, is affected by the economic cycle’s peaks
and troughs. The current growth in developed economies—such as United States that is
driven by the loosening monetary policy—has contributed to an increase in business
confidence, industrial production, and international trade. All of these results energize as
catalysts for airline industry. Air transport results are dealt with global economic growth.
Economic indicator trends can be met with air passenger and freight volumes. The volumes
of passengers carried by an airline are measured by revenue passenger kilometers called
RPK. It is estimated by multiplying the distance of travel by the number of revenue
passengers. Freight traffic is measured by Freight Tonne Kilometers called FTK. The FTK is
greatly associated with business confidence driven by severe demand for products.
Businesses can choose cheaper transport to operate during weak demand period to reduce
costs and maintain margins by using the substituted transport that leads to increased volumes.
Consequently, global economic growth can bring down the FTKs and RPKs. It is represented
in the following graphs.
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18.  Social and demographic factors
The demand for air travel, over the years, has grown considerably. The changing of
travel preferences among the modern generation implies this. An essential role in forecasting
demand and future travel preferences is performed by the demographic factors. The growth in
the Gen Y (or the millennial generation) may determine the future of United States of
America’s tourism and travel, for instance. The Gen Y includes 16–34 year olds. The
spending of the retiring Gen B’s (the baby boomer generation) people, who were born
between 1946 and 1964, is predicted to decrease (Cederholm, 2014).
Social and demographic factors
Categorizing generations in the United States categorized by the year of birth offers
idea in changing trends in the travel and tourism industry. Indicator shows changing travel
satisfactions among the latest generation in the desire for air travel have risen importantly
over the years. The United States population is categorized as follows:
 Baby boom generation – Born between 1946–1964
 Generation X – Born between 1965–1979
 Generation Y or Millennial generation – Born between 1980–1999
 Generation Z – Born after 2000
In forecasting demand, Demographic factors also have an important role. The factors
meet customer's expectations in relate to value-added service providing and frequency of
customers fly in order to adapt themselves or generate strategy for survive. According to
Boston Consulting Group’s research, the millennial generation may become the main market
for tourism and travel industry replaces the baby boom generation’s need, the currently main
market for business travel. Growth by 50% of the total by 2020 and remain strong over 15
years later is the expected result from their spending on business travel.
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19.  Technological and environmental factors
The firms have to apply the newest technology to use in the company to survive the
violent competition among the airline industry. One of the four pillars under the IATA’s (or
the International Airline Transport Association) strategy to address climate change is also the
technology. The lower fuel spending is the outcome of using the advanced aircraft
technology. This enhances the operation cost and the airline’s efficiency. The old aircrafts
have replaced with new fuel efficient aircrafts by all airlines, for instance, the low-cost
carriers like JetBlue (JBLU) and Southwest (LUV), and the legacy carriers like American
(AAL), Delta (DAL), and United (UAL) (Cederholm, 2014).
The importance of technology in the aviation industry
The role of technology
According to Cederholm (2014), the driving factor for the airlines’ operational
capability development has been the advanced technology. Using mobile technology, IT
solution and the modern aircraft engine technology have been the ways to enhance the
operations and decrease the costs of airlines. The passengers’ travel experience has been
improved and the connection has been created by the technology.
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20. Use of technology to reduce fuel cost
Cederholm (2014) claimed that the greatest cost of component of an airline is fuel.
The fuel expense is currently considered more than 30 percent of the total operation costs.
Boeing, the largest aircraft manufacturing company, presented that the advanced aircraft
technology offers the following advantages:
 New aircraft such as the Boeing-787, 747-8, 737 MAX able to decrease fuel
consumption by double-digit percentages compared to the older aircrafts. Using
advanced technology winglets also enhances the aircraft performance.
 The efficiency way to reduce noise by over 30 percent is using the technology. The
technologies also enhance payload, carrying ability of the aircraft counted by weight,
and range, distance that the aircraft can fly with the given fuel quantity, hence the
airlines are able to extend their network and connectivity because of increasing the
range. Moreover, the payload makes the airline’s revenue and profitability increase.
Some of the advanced aircraft design, for instance, the 777-300ER, is able to expand
the payload by adding ten seats of economy class.
The innovative technology solutions are also used in the other airline operation such as
maintenance and engineering and in-flight operations.
Environmental realization in the aviation industry
Annually, the worldwide aviation industry spends over 200 million tons of fuel. The
industry’s carbon emissions could be affected the increasing desire for air travel and the
mounting crude oil prices. The environmental effect could also manipulate stability the
environmental impact of aviation industry is as follows:
 12% of the total emissions from the transportation industry come from air transport.
 To drop the aviation carbon footprint of fuel by 80%, Alternative fuels, sustainable
biofuels, are one of the choices.
 There is no alternative mode of transport for flights that are further than 1,500
kilometers which caused 80% of the CO2 emissions.
The IATA’s Carbon Neutral Growth or CNG’s goal is improvement in aviation
industry CO2 emissions in 2020. The factors consist of new aircrafts, the growth of biofuels,
and improvement of air traffic management (Cederholm, 2014).
Current developments in alternative fuel
More than ten airlines and several aircraft manufacturers showed flight tests with
various blends containing up to 50% biojet fuel during 2008 and 2011. All over the world,
many projects are taking place in China, New Zealand, Qatar, Scandinavia, Romania and
more and initiatives for the usability of biojet fuels have been cooperated by multi-
stakeholder groups namely airlines, airports, aircraft manufacturers, governments, biomass
and biofuel producers and suppliers (International Air Transport Association, 2014).
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21. Aviation industry under the cooperate social responsibility
The concept of welfare of the society and do not destroy the environment is more
becoming famous and affected the aviation industry for the customers’ view that whether
business is eco-friendly. Thus many airlines have integrated the CSR into their strategy and
made the CSR activities such as:
 To upcycle discarded or old material to make it valuable – some airlines, like
Air France upcycled old life jackets to become the case or old advertising
poster to be a fashionable bag or another case is Boeing that transform its
carbon fiber to sports gear or Southwest Airline that change their useless seats
on aircraft to be soccer balls.
 To use alternative fuel to operate – Most of airlines change to use biofuel to
their aircraft to reduce CO2 emission
 To promote through campaign or activities – At the San Francisco
International Airport, passengers are encouraged to carry the empty bottle of
water through security check and stop at the hydration stations to refill their
water for free in order to reduce the waste from security check (Kollau, 2014).
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22. Thai Aviation Industry
Thailand is introduced to become a full-service aviation hub and a major
player in the multi-billion dollar aircraft maintenance industry of region. The possibility for
growth in this industry is very high with its geographic location and aggressive encouraging
industries. Between the 2009 to 2028 period, the Boeing Company forecasts a market for the
Asia-Pacific region of around 8,960 new aircrafts worth US$1,130 billion. Thailand’s
aviation sector recently includes air transport services, which consists of passenger and
freight flights, and ground-based infrastructure, which consists of all of the activities at
airports. Combined, these functions recently bring about 1.6% of the gross national product
or GNP. In its Economic Benefits from Air Transport, Oxford Economics forecasts that the
aviation industry may support 393,000 jobs in Thailand: 79,000 directly, 185,000 through the
supply chain and 130,000 from employee spending. A greater 1,802,000 jobs are created
from the effects of aviation on tourism. Furthermore, the report shows that in 2010, in the
Asia-Pacific region, air transport can enhance a total of 24 million jobs within region The
Board of Investment of Thailand, 2012). In Thai aviation industry, besides in global aviation
industry, there are three players in the aviation system as following figure.
Thai Aviation System
There are three major player groups included with:
1. The aviation industry is in supply side (Airline, Airport, Aircraft Maintenance)
2. The customers are in demand side (Passenger, Air Freight)
3. The regulatory and others are in institutional side (Government Policy,
International Agreement) (Wittmer & Bieger, 2011, p. 1)
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23. The aviation system is the economic driver of Thai aviation industry as it is shown in
following.
 Supply Side:
Evolution of Thai Aviation Industry
In 2013, air traffic continuously grew to 582,411 movement of aircraft or 16.60%
YoY (Year-over-Year). From statistic, Suvarnabhumi airport declined the movement 5.28%
YoY while Don Mueang airport increased 121.30% significantly. Since Air Asia relocated
operating service from Suvarnabhumi airport to Don Mueang airport to establish more
frequency flight (Airports of Thailand, 2013, p. 1).
Thai Aircraft Maintenance and Manufacturer
The aircraft industry in Thailand can trail its origins to the early 20th century when a
professional pilot, trained in France, backed to the Kingdom in 1913 and the first airfield was
established at Sra Pathum Airfield. By reason of need of more space, the airfield at Don
Mueang was opened two years later. Thailand began generating its own airplane at same
year, as reserve parts for foreign models were difficult to come by owing to inefficient
logistics. Thus the Thai airplane parts industry was born. One hundred years later, Thailand
has become aircraft maintenance's regional hub and the manufacturer of parts and
constituents for the aviation industry. In current years, as air transport activity has grown,
Thailand has become a major player in aircraft maintenance industry, and a regional service
and maintenance center for refueling, retrieving, nurturing and refitting airplane. Air freight
and passenger volumes are constant to grow; opportunities in the aircraft maintenance
industry are becoming more tremendous and more profitable The Board of Investment of
Thailand, 2014).
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24. Trend of Low Cost Carrier in Thai Skies
During the past five years, low cost airlines' competitive capacities were rapidly
mounted, conquering market share at the cost of full service airlines. During 2009-2013, Thai
airlines have been grown, according to global trends. Thai airline players' average revenue
growth was 9.1%, nonetheless, most of the growth was from low cost airlines, whose average
revenue growth was 31.5% compared to average revenue growth of full service airlines was
6.9%.
In 2013, Thai airline market share computed from revenue received from domestic
routes of low cost airlines held 46% while full service airlines held 54%. Thai Airways was
still a leader of the market with 31.6% of the domestic market share, followed by Thai
AirAsia, Nok Air, and Bangkok Airways at 23.2%, 22.7%, and 22.5%, respectively. During
2011-2013, from a market share growth perspective, low cost airlines' market share growth
increased 9%, whereas market share growth of full service airlines decreased by 6%. The
airline with the greatest market share growth was Nok Air at 16.5%
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25. Low cost airlines' performance was better than full service airlines with higher
EBITDAR, used for finding the performance of operation by margin of revenue and
operating cost, growth of 42% whereas for full service airlines the average rate decreased by
4%. Owing to efficient cost management, especially cost from fuel, airplane O&M, and staff
related expenses, low cost airlines' EBITDAR growth was greater than revenue growth. Thus,
low cost airlines were able to cut cost more than 10% and leading to better operating results
than full service airlines (Srisamran & Sintanabodee, 2014). It is represented in as following
chart.
Not only in the supply side can drive the Thai economy alone, but the factors in
demand side (or customer) are the factors that should be given the value to make customer
value.
 Demand Side:
Passenger Traffic Growth
In 2013, the overall passenger traffic grew continuously from both domestic and
international travel. In comparing Year over Year between 2012 and 2013, it is represented in
as following table (Airports of Thailand, 2013, p. 1).
19

26. Cargo Traffic Growth
In 2013, the air freight traffic was reduced for 7.2% comparing Year over Year with
2012 by reason of the deceleration of global economic growth. It is presented in as following
table (Airports of Thailand, 2013, p. 1).
Importance of net export toward Thai aviation industry
Since 2012, Thailand international trade has not been energetic due to the slowdown
of global economy.
20

27. Top 10 exported product of Thailand are in the following figure.
From the figure, it can be observed that three products, highlighted with star, are
transported by air. The proportion of exported products by air is calculated approximately
32% of the total value of exported products or one third of top 10 exported products.
From the figure, it can be observed that three products, highlighted with star, are
transported by air. The proportion of imported products by air is calculated approximately
27% of the total value of imported products or one third of top 10 imported products
(Ministry of Commerce, 2014).
21

28.  Institutional Side:
Investments in the Thai Aviation Industry
The projects which are supported by government in Thai aviation industry are in
follow:
Suvarnabhumi Airport: Mr. Prasong Poontaneat, AOT chairman, revealed that the
AOT is in the process of analyzing, to support for about 65 million passengers, the new
Suvarnabhumi Airport development project up from the present around 45 million
passengers, to surrogate the 2nd
phase Suvarnabhumi International Airport structuring project
after it was rejected. In the new investment plan, it is expected to have the budget cost 40,000
billion baht in order to invest in the new passenger terminal, parking lots, runway and more
28 aprons (National News Bureau of Thailand, 2014).
Trend to build more airports to receive more opportunities
Building six provincial airports to motivate air connectivity: So as to advocate
transport connectivity between Thailand and its neighboring countries, support an exchange
of visits and encourage Thailand's economic growth, the Ministry of Transport is looking into
a feasibility of building six new provincial airports (National News Bureau of Thailand,
2014).
Big projects to promote Thailand as a regional hub of air transport
The Government of Thailand promoted the mega infrastructure plan in 2020. It
needed the budget of 2 trillion baht or $70 billion, moreover, Nakhon Ratchasima is one of
the major centers of this development plans in the northeastern. An advancement of
"Aviation Industrial Area" has currently been approved by the cabinet. There is a chance to
build in Nakhon Ratchasima. One of the objectives of Aviation Industrial Area is to attract
industrialists especially from related aviation industry namely manufacturing of aircraft tires
and other rubber elements so as to motivate strong growth in rubber industry. Areas which
are interesting for the Government to be turned into Aviation Zones include: Nakhon
Ratchasima, U Tapao at Rayong province, Takhlee at Nakhon Sawan province, and
Khampaeng Saen at Nakhon Pathom province. The Department of Civil Aviation (or DCA)
and Industrial Estate Authority of Thailand agreed that owing to the availability of land of
4,000 Rai, Nakhon Ratchasima Airport is the most appropriate location. Thus it became clear
that Nakhon Ratchasima is one of the top choices (Bechegoo, 2013).
Thai Aviation’s Readiness for ASEAN Economic Community
Thailand has many positive factors which can attract international travelers to visit for
a meeting, incentive, conference or exhibition. With many good atmosphere and amazing
places, Thailand is in a good location in both leisure and business travel. This topic is
explained in the next part (Queen Sirikit National Convention Center, 2011).
22

29. The Reasons that Thailand Should Be the Hub
Thailand has various positive characteristics to attract the international tourists to visit
for an encouragement, meeting, convention, or exhibition held in Thailand, from kindly
welcomes of Thais, prominent venues and lodging, to the numerous striking destinations.
These are five excellent reasons that Thailand should be the hub (Queen Sirikit National
Convention Center, 2011).
Gateway to ASEAN
Thailand is the true gateway to the emerging markets of the Greater Mekong Sub-
region, because it is located in the middle of Southeast Asia, while other ASEAN’s (or
Association of Southeast Asian Nations) member countries look for the easy passage to this
fast growing economic area. Ten ASEAN’s member countries intend to create AEC (or
ASEAN Economic Community) by 2015, the common market that may have an integrated
population close to 600 million people. The free flow of labor, investment, capital, goods and
services within the community and creating the ASEAN Single Aviation Market (ASAM)
along with open-sky policy may be generated by the AEC (Queen Sirikit National
Convention Center, 2011).
Regional MICE Hub
To become the leader in global MICE (Meetings, Incentives, Conferences and
Exhibitions) industry, Thailand has improved the infrastructure, human resources,
accommodation, and experience through previous 20 years. The major venues for exhibitions
and conferences in Thailand succeed in managing domestic, regional, and world events by
using the advanced technology and communications equipment, and having perfect MICE
supplier development (Queen Sirikit National Convention Center, 2011).
Easily Accessible
Thailand may become the main aviation hub with the entry point of Suvarnabhumi
Airport because of its location in the hearth of Asia. Suvarnabhumi Airport supports over 100
flights of the airlines around the world to serving connections to the major cities in every
continent. Moreover, it planned to increase the capacity from 45 million passengers a year to
60 million passengers by 2014. The airlines in Thailand also provide links from the capital to
26 destinations with taking time less than an hour (Queen Sirikit National Convention Center,
2011).
Friendly Hospitality
Thai people are world well known for their friendly hospitality, their courteous
reception to guests. Moreover, the good resorts and hotels in the major provinces and
travelling places of Thailand make this country a famous place to visit. The guests who come
to the hotel in Thailand are assured of a very kindly welcome (Queen Sirikit National
Convention Center, 2011).
23

30. Great Travel Destination
Thailand is greatly favorite travelling place with 15 million foreign travelers a year
because of wonderful beach and island, national parks and rain forests, hill tribes’ villages,
eco-tourism, adventure tourism, outstanding culture, and world renowned spicy flavor
cuisine. The elephant trekking, diving in southern sea, shopping in the street markets, for
instance, are the interesting activities for the visitors. Thailand also has the Asian spa to
revitalize the tourist’s body (Queen Sirikit National Convention Center, 2011).
Thai Aviation’s Preparation for the ASEAN Economic Community
The Thai aviation industry has prepared to deal with the growth of domestic and
international demand when open the AEC (or the ASEAN Economic Community) in end of
2015. Thailand aimed to be the aircraft service and maintenance center of the region and
struggled to come to be the regional aviation hub. The challenge for Thailand is the initiation
of the ASEAN Single Aviation Market (or ASAM), which has the benefit in terms of the
geological of Thailand. The opening of plentiful new carriers and aviation routes may be led
by the coming ASEAN Economic Community in 2015. Therefore, the great demand of the
airlines is the pilots, and the airline may try to hire experienced pilots. The Civil Aviation
Training Center (CATC) planned to produce more pilots to serve the aviation industry. The
Ministry of Transport believes that the pilots for ASEAN’s member countries may come
from Thailand’s training center (The Government Public Relations Department, 2013).
The Impacts of ASEAN Economic Community to Thai Aviation Industry
 Airline
The competition among airlines in Thailand, particularly in the low cost carriers, has
become stronger. The low cost airlines severely mounted their competitive capacities pending
previous five years as seen from the key market share, they have earned at the expenditure of
full service players. The revenues of the low cost carriers rose at a higher pace pending 2009-
2013, with average EBITDAR (Earnings before Income Tax, Depreciation, Amortization and
Rent) increase of 42%. The regional competition and investment in Thailand’s airline
industry may be risen by the enter into force of the ASEAN Open Sky Policy in 2015, as it is
a growing tourism destination with high capability as the Southeast Asian aviation hub. Thai
airline companies should frequently observe the business landscape and adapt their strategies
correspondingly to deal with this anticipated competition (Srisamran & Sintanabodee, 2014).
 Airport
To Prepare the readiness for the AEC (or ASEAN Economic Community), the
Transport Ministry may control the feasibility study of connecting with the neighboring
countries by constructing six more airports. The Deputy Transport Minister Arkhom
Termpittayapaisit appointed the Aranyaprathet airport, Betong airport, Kanchanaburi airport,
Mae Sot airport, Muk Dahan airport, and Uttradit airport for the six potential airports to
connect with Malaysia and Indonesia by Betong airport, Myanmar by Mae Sot airport, Laos
24

31. and Vietnam by Muk Dahan airport, Dawei project in Myanmar by Kanchanaburi airport, and
Cambodia by Aranyaprathet airport. It may take two months for the feasibility study. If the
government approves the projects, the construction of each airport, which takes
approximately five year, may be started in 2015. Meanwhile, the second phase project of the
extension of Suvarnabhumi international airport which has 62 billion baht in cost would go
forward. To determine the AOT (Airports of Thailand) Company’s plan to create the new
multi-function terminal and study the phase two project of the extension of Suvarnabhumi
international airport at once, committee was set. The new runway, the enlargement of the
passenger’s terminal, 28 parking bays for aircrafts, and the monorail train link between new
and old terminals are included in the second phase expansion project for Suvarnabhumi
international airport (Thai Public Broadcasting Service, 2014).
 Aircraft maintenance
Thailand Board of Investment, (2014) stated that the Thai aircraft industry was born
in the early 20th
century. In 1913, the pilots who trained in France came back to Thailand and
instituted an air unit at Sra Pathum Airfield. Because of more space requirement, Don
Mueang Airport was opened in two year later, the same year that Thai aircraft manufacturing
was set up (p. 1). Nowadays, Thailand has become an important player in the aircraft
maintenance industry and the service and maintenance center of the region recently.
Moreover, the Government of Thailand aims to set up the aerospace industrial estate and
repair center in country to service the region in order to support the opening of ASEAN
Economic Community (AEC) in 2015 (Thailand Board of Investment, 2014, p. 3). A report
by Mahitthirook (2014), the aerospace industrial estate and repair center resembles to be
located at the Nakhon Ratchasima Airport because the Nakhon Ratchasima Airport is not
presently used for commercial airport, can be connected to the main provinces by
construction of the motorways, is reachable by train, and has a large runway to support the
large airplane such as a Boeing 747 and several empty spaces. According to Thailand Board
of Investment (2014) Thailand's aircraft maintenance industry is expected to grow continually
after the opening of the AEC. Especially "CLMV" countries (Cambodia, Laos, Myanmar, and
Vietnam) may become the major Thailand's aircraft maintenance industry’s market (p. 2).
Thailand’s Policies Promote Thai Aviation Development
The Eleventh National Economic and Social Development Plan (2012-2016) promote
Thai aviation development
National Economic and Social Development Board (2012) announced that Thailand
planned to encourage improvement of multimodal transportation for both domestic and
international uses by link the roads, railways and water and air transportation together for
creating the international standards for speed, punctuality, and safety, and supporting the
economic collaboration of the region, and build the effective distribution systems to reduce
the cost of logistics. Thailand also planned to increase the efficiency of logistics management
by developing professional human resources and define the strategic role play by major
airports and seaports in order to enlarge the nation’s competitiveness and decrease
transportation costs in the long run (p. 87).
25

32. The National Tourism Development Master Plan (2012-2016) promote Thai aviation
development
National Tourism Policy Committee (2012) announced that Thailand planned to
improve and develop the logistics systems in order to support the tourism by developing the
air routes. In addition, Thailand planned to build the telecommunication network and
transportation system between neighboring countries and within the region by pushing
forward to create the Liberal Air Policy, for instance, reducing air passenger duty, to
reinforce the potential of Suvarnabhumi Airport to be the regional hub and develop Phuket
International Airport, Chiang Mai International Airport, Mae Fah Luang Chiang Rai
International Airport, Hat Yai International Airport, Krabi Airport, and Trang Airport to have
the potential to be the hub of sub-region (p. 29).
Opportunities for Thailand as ASEAN Logistics Hub
Thailand has a specified benefit because of its geological location. It offers the easy
accession to all main ports in the neighborhood along with China, Japan, and India, moreover
emerging economies such Lao PDR, Vietnam, and Cambodia. Thailand has also pledged to
the Indo-Thai Free Trade Agreement and the South Asia Free Trade Agreement (SAFTA),
which have developed the its trade relationship within the region. These factors have
appeared in the increase of some main ports such Klong Toey, Laem Chabang and Bangkok.
Thailand also has the vast road network. Nowadays, Thailand ranks No. 3 in the
ASEAN region with a road density of approximately 125.7 kilometers per thousand square
kilometers. Thailand could come to be the regional logistics hub of ASEAN as it is adjoining
with Myanmar, Lao PDR, Malaysia, and Cambodia, with the chance of a Trans-Asian
highway link up most countries on the Asian midland. Furthermore, the Government has
taken the initiatives to develop the rail and road infrastructure network to meet the
international standards.
The increase of air transport infrastructure also has the potency to make Thailand get
the logistic benefit. Thailand’s position in the air freight market of the region is boosted by
serving the eminent Suvarnabhumi international airport.
Thailand may be chosen to be the regional operations hub of the international logistics
companies because of Thailand’s outstanding geological location and prosperous industrial
activities. Thailand has already chosen as the regional manufacturing hub of some foreign
automotive companies, for instance, Toyota and General Motors. The additional momentum
to the logistics segment of Thailand could be added by the growth of exports of clothing and
furniture industries (Buranasomphop, 2013).
Challenges
Thailand also needs to conquer some challenges in order to become the regional
logistics hub. It has to compete with the other effective logistics hub that located in the same
region. The Thailand’s prime competitor may be Singapore, which provides the logistics hub
26

33. in Southeast Asia for numerous companies presently. The good air and ocean transport
infrastructure of Singapore has set up already. The port in Singapore is the most vivid port
with the capacity to support approximately 20 million TEUs (twenty-foot equivalent units) a
year. There is also the state-of-the art airport in Singapore which has the global connection
and the good logistics support.
In the competition to become the ASEAN’s logistics hub, the other major competitor
of Thailand is Malaysia. The efficient infrastructure in Malaysia is being developed swiftly.
Malaysia is able to serve the state-of-the-art logistics support infrastructure such huge
logistics parks within the region with its two seaports and five international airports which
connected altogether with the good road network. Moreover, the government of Malaysia
attempts to smarten up the infrastructure further.
In comparison, the infrastructure development of Thailand is behind the infrastructure
of Singapore and Malaysia. Although it needs to achieve current challenges, Thailand has
good opportunities to motivate as a regional logistics hub. It has to develop ahead of its rivals
first and to achieve in its quest (Buranasomphop, 2013).
27

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