Thailand looks to challenge S'pore as aircraft repair hub

An AirAsia aircraft flies past a Thai national flag in Bangkok, Thailand on June 15, 2016.
An AirAsia aircraft flies past a Thai national flag in Bangkok, Thailand on June 15, 2016. PHOTO: REUTERS

It has drawn interest from Lockheed Martin, Airbus with $7.9b airport revamp plan

TORONTO • Thailand is seeking to take on Singapore's dominance in aircraft maintenance, repair and overhaul (MRO) with a US$5.7 billion (S$7.9 billion) upgrade of a Vietnam War-era airport.

Lockheed Martin's Sikorsky Aircraft is the latest firm to study a possible increase in MRO spending in Thailand in the wake of the planned revamp of U-Tapao International Airport, said Ms Ajarin Pattanapanchai, deputy secretary-general of Thailand's Board of Investment.

In March, Airbus signed an agreement with Thai Airways International to evaluate the development of MRO facilities at the civil-military airport near Bangkok.

"Singapore is quite tight right now," said Ms Ajarin in an interview at Bloomberg's Toronto office last week, during a visit to Canada to woo investment.

Get The Straits Times
newsletters in your inbox

Singapore is Asia-Pacific's leading aviation hub, contributing over a quarter of the region's MRO output. Its aerospace industry had a record output worth $8.7 billion in 2012.

"To catch up with the demand of airlines in the region - especially new demand from Myanmar, Vietnam and Cambodia - and given that we have existing strengths with automotives and engineering, Thailand will be the second choice to be the MRO hub," said Ms Ajarin.

  • $8.7b

    Record output of Singapore's aerospace industry in 2012. It is Asia-Pacific's leading aviation hub, contributing over a quarter share of the region's MRO output.

    $60.9b

    Planned amount to be invested between this year and 2021 to develop Thailand's eastern seaboard. The airport project is a key component of the plan.

The airport project is part of junta leader Prayut Chan-o-cha's goal of boosting the economy. Its expansion has lagged behind Thailand's neighbours since the military seized power three years ago. The airport project is also a key component of a plan to invest 1.5 trillion baht (S$60.9 billion) between this year and 2021 to develop the country's eastern seaboard.

Apart from the airport in the Eastern Economic Corridor, the plan calls for a US$4.5 billion investment in high-speed rail, US$11.5 billion for new cities and US$14 billion for industry. The government will control and maintain the airport and a port. Other projects will be public-private partnerships or privately held.

The government has already allocated its budget for this year, she said, declining to provide a figure for the administration's outlay on the corridor or an estimate of the MRO business Thailand is targeting.

Foreign direct investment (FDI) has revived after sliding following the coup, especially in digital and high-technology sectors, said Ms Ajarin. She gave as an example Toronto-based Canadian Solar, which applied for a licence in 2015 and opened its Thai factory two years later. As for electric vehicles, a "big player - but not Tesla - is waiting to come in", said Ms Ajarin.

FDI increased to US$8.6 billion last year from US$2.7 billion in 2015, according to data provided by the Board of Investment.

While the board offers incentives to foreign companies, it remains unclear how quickly the Thai government can implement its ambitious vision for the eastern seaboard.

Challenges include a shortage of skilled workers, as well as concern that Thailand is prone to harmful episodes of political volatility.

Ms Ajarin acknowledged that the risk of political turmoil is a worry for new investors, but argued that companies have weathered such bouts in the past.

BLOOMBERG

A version of this article appeared in the print edition of The Straits Times on May 30, 2017, with the headline 'Thailand looks to challenge S'pore as aircraft repair hub'. Print Edition | Subscribe