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Aerospace Industry

May 8th, 2019

Mr. Vorachart Choochom

Thailand Board of Investment

Agenda

2

Introduction to Aerospace Industry

Aircraft Industry

Airline Services

Incentives and Supporting Factors

Overview for Aerospace Value Chain

3

Tier 4 Tier 3 Tier 2 Tier 1Sub-Systems :- Engine Module - Propulsion Sub-

System- Sattelite

System Integration:- Engine Assy- Airframe Assy- Avionic System

Aircraft Final Assembly, Finish,

and Delivery

Assembly

Processing/ Material Supply:- Special

Processes - Materials

Components : - Engine parts- Circuit Boards- Cabin Interiors

Supporting Industries

MRO: - Aircraft MRO- Airframe/ Components MROOthers Related Services: - R&D- Training Center- Scientific Lab - Air Transportation

- Machines - Tooling - Testing Equipment

Services

End Customers:- Airlines - Military- Cargo

Aerospace Manufacturing

Various Components In Industry Supply Chain

4

Related Fields in Aerospace Industry

5

Civil Aviation

Army Aviation

Air Transported Operation

Procurement

R&D

Manufacture

Logistics

Marketing and Distribution

After-sales Service

Research and Development for Operation used in airplane such as Navigation

System, Real-time Operating System etc.

Example of Transit Related Services

• Aerodrome Control • Approach Control • Air Traffic Control• Aviation News Service• Telecommunication Services• Meteorological Service• Air Search and Rescue Service• Aeromedical Evacuation

Aircraft Composite Repair

Thailand has capacity on• Airframe MRO• Component MRO

System OEM Suppliers

Aircraft OEM Suppliers

Airline Operators

TransitRelated Service

MRO Services Providers• Pre-Flight Service

• In-Flight Service• Post-Flight Service

6

Companies in the aircraft industry tend to look for lower cost parts

for their manufacturing and repair plants. Thailand can offer this

price advantage when compared with neighboring countries.

Other regional locations, such as Singapore, may have a

limitation regarding the ability to facilitate the expansion of aircraft part manufacturing investment.

Major aircraft and parts manufacturers

❑ 24 companies have been

promoted under aircraft part

manufacturing activity

❑ 12 companies have been

promoted under aircraft and

part maintenance and repair activity

BOI promoted activities

Investment Opportunities for Aviation Industry

7

✓ Linkage industries such as

automotive and electronics

✓ Competitive wage compared

with Singapore and Malaysia.

✓ Lower aircraft landing/takeoff/

parking fees than some

countries, such as Singapore

✓ Obtain BOI privileges to reduce

the financial burden of starting

business

✓ Strategic location among AEC ✓ Government policy to promote

Thailand as an aircraft

maintenance and

manufacturing center

Advantages

Aerospace Industry in Thailand

Agenda

8


Aircraft Industry

Airline Services


Global Commercial Air Transport Fleet in 2018

Source: Oliver Wyman

9

57%20%

13%

10%

30%

28%

20%

7%

6%5% 4%

In 2018, the air transport fleet around the world consists of 26,307 aircraft. Most of them are located in North America, followed by Asia-Pacific Region.

Narrow-Body

Wide-Body

Regional Jet

Turboprop

North America

Asia-Pacific

Western Europe

Middle East

Latin America

Eastern Europe

Africa

2018By Regional

2018By Type

Thailand’s Trade of Aircraft-related Products

Source: International Trade CenterNote: Aircraft-related products mean any commodities under ISIC 303 Manufacture of air and spacecraft and related machinery

10

Import

Export

1 367 984 2 311

3 251

5 680 4 323 4 554 3 949

5 824 4 747

0

2 000

4 000

6 000

8 000

2009 2010 2011 2012 2013 2014 2015 2016 2017 2018

1 956 1 869 2 166 1 897 1 848 1 801 1 676 2 228

2 825 3 184

0

1 000

2 000

3 000

4 000

2009 2010 2011 2012 2013 2014 2015 2016 2017 2018

Unit: Million USD

Unit: Million USD

CAGR Growth2009-18 = 14.83%

CAGR Growth2009-18 = 5.56%

Thailand’s import had an upward trend over 10 years, hitting a peak at 5,824 Million USD in 2018

Thailand’s export had strong growth during 2015-2018, reaching a peak with 12.07% growth in 2018.

Key International Manufacturing Companies in Thailand

11

• Leader in Tier II industry: swaged tubular products and wire rope mechanical cables.

• Producer of structural and electronic components and subassemblies for a wide range of aircraft

• Specializes in structures components and assemblies, and compressor aero foils for high volume aero-engine programs.

• Specializes in designing and manufacturing high quality galleys, galley equipment and cargo equipment

• Manufacture a wide range of products, components, and parts for aerospace and industrial applications

• Global supplier of components, manufacturing turbine blades for aircraft and rocket engines, gas and steam turbines

Overview of MRO Sector

Source: Q-Tech Synergy and SCB Economic Intelligence Center

12

MRO Market Segmentation & Type of MRO Check

Line Maintenance• Perform approximately every 100-150 flights • Usually finished overnight

Engine Overhaul• Perform approximately every 12-18 months • After every 5,000 hours

Airframe Maintenance & Modification• Most comprehensive check• Approximately every 4-5 years

Components MRO• Perform approximately every 3 months • Every 500-600 fit hours

• Maintenance of the engine and components is mostly done by Original Equipment Manufacturers (OEMs), which the parts are usually under warrantees

• Airframe maintenance is usually completed by independent MRO

World MRO Market Forecast

Source: Global Fleet & MRO Market Forecast Commentary 2018-2018, Oliver Wyman

13

19 23,5

32,752,6

12,9

2012,8

18,5

0

20

40

60

80

100

120

140

2018 2028

Airframe Engine Component Line

Unit: Billion USD

Expected Global MRO Expenditure 2018-2028 Growth Rate 4.0%

China and India will be next challenger in MRO industry with 10.6% and 5.6% growth rate respectively.

North America will be a largest market for MRO in 2028 with 23.8 billion USD spend, followed by Western Europe.

The total MRO spend in 2028 is expected to be 114.7 billion USD, raised from 77.4 billion USD in 2018.

Capacity of Thailand’s MRO sector

Source: SCB Economic Intelligence Center Insight, February 2018

14

1

3At present, there are 7 players in the aircraft maintenance business in Thailand, making up of 20 billion THB or about 1% of the total revenue in the global aircraft maintenance market per year.

Line Maintenance Service Providers• Austrain Technik• Delta TechOps• KASE aviation

3 Base Maintenance and Engines or Aircraft Parts Maintenance• Technical department of Thai Airways• Thai aviation industries • SAMTHAI

Aircraft Parts Supplier• Triumph aviation service

Thailand’s Targeted Sectors for MRO

• Airframe MRO including A320 or NEO B737NG, or B737 MAX

• Engine MRO including CFM56-5B/LEAP 1A , CFM56-7/LEAP 1B, etc.

• Component MRO especially on landing gear, wheels and brakes, APU, engine fuel and control, and IFE

U-Tapao Aviation Hub: To be World Class MRO Center

Source: Prachachart and Aviation Week Database, Frost & Sullivan

15

390 372 396 421 447

475571

775

1 052

390 372 396 421 447 494647

878

1 182

0

200

400

600

800

1 000

1 200

1 400

2017 2018 2019 2020 2021 2022 2025 2030 2035

Thailand Insourced MRO as usual

Thailand Insourced MRO with U-Tapao Project

Unit: Million USDExpected MRO Value in the Future

Thai Airways-Airbus Coordination

MRO Center Establishment

Technician Training School

Aircraft Composite Repair Shop

Technology Support for Smart Hangar

Parts Store and Logistic Center

Design for Building and Construction

Equipment Maintenance Office

Expected Finished Period in 2021

Agenda

16


Aircraft Industry

Airline Services


Location of Airports in Thailand

Source: The Civil Aviation Authority in Thailand

17

38airports

38 airports have been operated under main 3 organizations including:

international airports covering all key destinations in Thailand.

• Department of Airports• Bangkok Airways Public

Company Limited• Airport of Thailand Public

Company Limited

International Airport Domestic Airport

Mae Fah Luang-Chiang RaiInternational Airport (CEI)

Chiang Mai International Airport (CNX)

Udon Thani International Airport (UTH)

Ubon RatchathaniInternational Airport (UBP)

Don Mueang International Airport (DMK)

Suvarnabhumi Airport (BKK)

Samui International Airport (USM)

Surat Thani International Airport (URT)

Phuket International Airport (HKT)

Krabi International Airport (KBV)

Hat Yai International Airport (HDY)12

U-Tapao International Airport

U-Tapao International Airport: A New Commercial Gateway

Source: Eastern Economic Corridor Office

18

Located in Rayong, approximately 1,040 hectares

Project Components include:

• Passenger Terminal 3 and the Commercial Gateway • Phase II Air Cargo facilities • Phase II Maintenance, Repair and Overhaul (MRO)

facilities • Phase II Aviation Training Center • Free Trade Zone

Currently 1 passenger terminal which can support 700,000 domestic and international passengers per yearChachoengsao

Chonburi

Rayong

New Project under EEC: Establish the third main international airport in Thailand for business expansions to facilitate an expansion of EEC.

Thailand’s Aerospace Market: Aircraft Movement

Note: Only flights handled at airport operated by AOTSource: Air Transport Information Division, AOT

19

220,7 196,7 215,7 248,4 268,6 316,5 324,8 365,3 402,7 415,3 462,2173,4 149,9 170,1 193,1 211,7

242,9 285,1342,0

374,2 408,2412,8

-

200,0

400,0

600,0

800,0

1 000,0

2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018

International Domestic

Unit: 1,000 flights

Thailand’s air traffic has continuously increased over the past 10 years. It reached a peak in 2018 with874,997 flights from both

domestic and international aircraft movement.

CAGR Growth2008-18 = 8.30%

Thailand’s Aerospace Market: Passenger Movement

Source: Air Transport Information Division, AOT

20

Unit: Million Persons

58,3

50,1

57,4

66,3

71,5

86,1

87,6

106,8

119,9

129,2

138,774

0 20 40 60 80 100 120 140

2008

2009

2010

2011

2012

2013

2014

2015

2016

2017

2018

InternationalDomestic

2018

SuvarnabhumiDon MueangPhuketChiang MaiHat YaiChiang Rai

2018

57%

43%

45%

29%

13%

8%

3% 2%

Growth of Air Traffic Flights and Passengers in 2018

Source: AOT Annual Report 2017

21

Chiang Mai Airport

Passenger Volume 8.38%

Number of Flights 4.93%

Gateway to Lanna Heritage

Hat Yai Airport



Gateway to Southern-most ThailandPhuket Airport



Gateway to the Andaman

Don Mueang Airport



Fast and Hassle-free Airport

Suvarnabhumi Airport



International Gateway

Mae Fah Luang - Chiang Rai Airport



Regional Center for Aviation-related Business

Market Share of Major Airlines for Domestic Flight Routes

Source: Thai Air Asia

22

Others

2015 2016 2017 2015 2016 2017

28.5% 29.5% 31.2%

24.8% 20.3% 18.8%

13.9% 18.7% 18.6%

12.3% 11.0% 10.8%

8.7% 10.5% 9.8%

11.0% 9.1% 8.3%

- - 2.4%

0.8% 0.9% 0.1%

Operational and Financial Information of Main Airlines in Thailand

Note: Only Airlines in Stock Exchange MarketSource: Airline Annual Report 2014-2017 and Stock Exchange of Thailand

23

Total RevenueUnit: Million Persons Unit: Billion THB

26,3 30,5 33,1 37,3 40,212,3 14,3 16,9 20,4 19,7

204,0 192,7 181,4 190,5 200,6

22,6 25,4 27,529,3 28,7

0

50

100

150

200

250

300

350

2014 2015 2016 2017 2018

Air Asia Nok Air

Thai Airways Bangkok Airways

12,2 14,8 17,2 19,87,6

8,8 8,6 8,819,1

21,2 22,324,64,8

5,15,6

6,0

0

10

20

30

40

50

60

70

2014 2015 2016 2017

Number of Passengers

Air Asia Nok Air

Thai Airways Bangkok Airways

Related Law and Regulation for Operating an Airline Business

Source: Weerawong, Chinnavat & Partners Ltd. and The Civil Aviation Authority of Thailand

24

Air Transportation Licensing (ATL)

In the case of a regular flight service operation, there must be a plan to acquire at least two aircraft for the fleet.

The air carrier shall submit an application form along with a corporate authorization document, an operation plan and an analysis of the feasibility of such operation plan to the MOT through the CAAT.

Qualification

1 Must be a Thai company (i.e. at least 51% of the shares are owned by Thai nationals or Thai government agencies, or Thai companies) 2 The majority of the directors

must be Thai nationals

3 The registered capital (which has been fully paid up) must be not less than 200 million THB 4

Related Law and Regulation for Operating an Airline Business

Source: The Civil Aviation Authority of Thailand

25

Air Operator Certificate (AOC)

In order to operate an aircraft for the purpose of public transport/commercial air transport, the operator is required to hold an Air Operator Certificate (AOC) before the anticipated start of operations.

The AOC will be granted to an air carrier which has obtained an ATL and followed these processes.

Phase 1Pre Application

Phase 2Formal Application

Phase 3Document Evaluation

Phase 4Demonstrate and Evaluate

Phase 5Certification

The applicants meet with CAAT to discuss the plans

The applicants submit the completed forms required manuals and exposition documents

Evaluation of all the manuals document and attachments

The applicants demonstrate to CAAT an ability to comply

with regulations and safe operating practices

AOC will be issued with the corresponding

operations specifications

Agenda

26


Aircraft Industry

Airline Services


BOI Promoted Activities by Location


27

• Bangkok- MRO : Aircraft, Helicopter, Engine, Landing Gear, Seat (6 Companies)

• Patumthani- Manufacturing : Fitting, Wing Tip Lens, Seal & Fabric Edge for window,

Aircraft Tire (3 Companies)- MRO : Aircraft, Propeller, Oil Jet Valve, Aircraft Window, Gas Turbine,

Engine (3 Companies)• Nonthaburi

- Manufacturing : Housing, Washer, Spacer, Bracket, Connector (1 Companies)

• Chonburi- Manufacturing : UAV, Propeller, Engine Blade, Galley Parts

(9 companies)- MRO : Aircraft, APU, Composite Part, Landing Gear (3 Companies)

• Rayong- Manufacturing : UAV, Ground Control Station, Air Cargo Equipment,

Composite Airframe, Wing Flap, Antenna System, Static Discharger (3 Companies)

- MRO : Avionics, Engine (2 Companies)• Samutprakan

- Manufacturing : UAV, Ground Control Station, Aircraft Seat, Flight Control Dashboard Frame (3 Companies)

• Lopburi- Manufacturing : Bearing (1 Companies)

• Saraburi- Manufacturing : Aircraft Tire, Satellite Parts(1 Companies)

• Lampun- Manufacturing : Air catering Equipment(1 Companies)

• Chachoengsao- Manufacturing : Metal Parts for Aircraft Chair (1 Companies)

Organization Related to Aerospace Industry

28

• Thai Public Company• Operate and promote airport business including

other related activities associate with airport basis to enhance sustainable development

• Manages six of Thailand's international airports

• Independent Thai agency under the oversight of the Minister of Transport

• Responsible for any tasks prescribing, regulating, and auditing Thai civil aviation.

International Air Transport Association

• International trade association for the world’s airlines with 290 members

• Support many areas of aviation activity and formulate industry policy on critical issues.

International Civil Aviation Organization

• UN agency with 192 member states• Manage the administration of the

Convention on International Civil Aviation• Support members to reach civil aviation

Standards and Recommended Practices

Training Schools Approved By CAAT


29

• Civil Aviation Training Center• Bangkok Aviation Center Co.,LTD

• International Aviation College Nakhon Phanom University

• Thai General Aviation Technology School

• Sriracha Aviation Co.,Ltd • D-0507 Flight Training

Company Limited.• Chiang Rai Rajabhat

University

There are 13 training centers around country approved by Civil Aviation Authority of Thailand (CAAT)

8 located in Bangkok

• Royal Sky Aviation Center Flying School• Thai Flight Training Co., Ltd.• Asia Aviation And Technology Co., Ltd.• Thai Inter Flying.,Co.LTD.• Premium Airlines Co.,LTD.• King Mongkut’s Institute of Technology

Ladkrabang

1 located in Prachinburi,

closed to the EEC

BOI Investment Incentives for Aerospace Industry

30

Group Activities Tax IncentivesExemption of import duty *

A1

Manufacture of aircraft or aircraft parts such as airframe, critical parts (e.g. engine and parts, propeller), appliance (e.g. flight recorder, radar), equipment and other components

8 years CIT exemption (no cap)

✓Manufacture of aerospace devices and equipment such as devices or equipment related to rockets/spacecraft/ space vehicles/propulsion units and auxiliary equipment, etc.

Aerospace operating systems such as search, detection, navigation, guidance, aeronautical, nautical systems and instruments, etc.

A2 Repair of aircraft or aircraft parts8 years CIT exemption ✓

A3Manufacture of onboard devices and equipment (except disposable and reusable aircraft utilities and supplies) such as seats, life vests, trolley, galley, etc. 5 years CIT

exemption ✓

Aircraft or Aerospace Industrial Zone or Industrial Estate

A4 Repair of onboard devices and equipment (except disposable and reusable aircraft utilities and supplies)

3 years CIT exemption ✓

Office of the Board of Investment555 Vibhavadi-Rangsit Road, ChatuchakBangkok 10900 Thailand

Tel. : (+66) 2553 8111Fax : (+66) 2553 8222E-mail : [email protected] : http://www.boi.go.th/ GPS : 13.818517, 100.558074

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