Growth Opportunities and Manpower Development in Thailand’s Aerospace Industry

Published: 6 Sep 2017

Thailand has been one of the major markets driving the growth of Southeast Asian aviation industry. Thailand's popularity as a tourist destination, the implementation of ASEAN Economic Corridor, and the economic growth in Cambodia, Laos, Myanmar, Vietnam (CLMV) have kept Thailand’s sky filled with aircrafts from every corner of the world in the past decade. Thailand’s aviation growth is seeing greater impetus as the centre of gravity for global aviation shifts to the Asia-Pacific region. This is reflected in the steady growth of total air traffic in the country over the past several years. The prominence of Thailand’s aviation industry is highlighted by significant growth in the amount of airline traffic, cargo movements and number of passengers passing through Thailand’s international airports.

Thailand’s air passenger traffic grew threefold in the past 10 years from 2006 to 2016. The growth, which was modest until 2010, took off in 2010 and has been going up at a steady rate since then.

As per Frost & Sullivan estimates, the annual passenger traffic is expected to become twice the 2016 number by 2029 and three times by 2017.

The primary factors that have led to and will continue to lead to the growth in demand for air travel are discussed below:

  • Low cost carriers: The emergence of low cost carriers has led to a sizeable drop in the cost of air travel. Therefore, a larger section of the population can now afford to travel by air.
  • Growth of middle class: Thailand, like most other developing economies, is seeing people move up into the middle class. At the same time, the per capita income of the middle class is also increasing. This means more disposable income for a larger section of the society.
  • Ease of airline operations: The low cost of fuel and initiatives such as the ASEAN Open Skies Policy have made life a bit easier for airlines. They can now fly to more destinations and can use competitive pricing strategies to attract passengers.

The growth in air travel has also meant that the number of aircrafts operating in Thailand has grown. The two big low cost players in the region, Air Asia and Lion Air, have grown their operations significantly in the past few years.  A number of local low cost carriers, such as Bangkok Airways, Nok Air and NewGen Airways, too have sprung up, thereby adding to the operating fleet in the country.

With demand for air travel set to grow, the low cost operators seem set to increase their presence, leading to further expansion of the operating fleet.

The fleet in Thailand is forecast to grow at 4.86% year-on-year over the next 20 years. The fleet of narrow-body aircrafts will grow the most with the Airbus A320 and Boeing 737 leading the way. Thai Air Asia is expected to be the fastest growing airline in the country in the period from 2017 to 2037. Its fleet is expected to overtake that of Thai Airways, the current largest operator in terms of fleet size. However, Thai Airways will continue to be the biggest wide-body operator in the country.

The robust expansion of the aircraft fleet holds promise for the multi-million dollar maintenance, repair and overhaul (MRO) sector in Thailand. The MRO spending in Thailand in 2016 was around $974 million across all segments. This sector should have an upward trend, as the demand for MRO services will grow with the growth in fleet. The presence of an extensive network of international airports in the country coupled with the advantageous location of Thailand in the heart of the ASEAN region will propel the MRO industry to grow with new investments in Research & Development (R&D) and high technology machineries.
Thailand also offers a favourable manufacturing base for companies because of its competitive wages, strong logistic systems, and extensive supporting facilities. Thailand’s aircraft and aircraft parts and equipment market have seen a positive growth in 2017 after a slight decline in 2016.

Thailand is forecast to spend $36.3 billion in total on commercial airline MRO in the period 2017-2037. In the same period, the total aerospace manufacturing output is expected to be around $48 billion. While MRO is forecast to grow at a CAGR of 5.4%, the aerospace manufacturing segment will grow at around 3.5% year-on-year.

As the industry expands, the requirement of skilled workforce will also come to the fore. Specific human capital programs for aerospace industry will be needed to fulfil demands of skilled manpower. Collaboration between the industry and academia is needed to ensure the graduating talent has the right skillsets to deliver as per the job requirements.

The manufacturing segment’s growth will be driven by Thailand’s expertise on Tier 3 and Tier 4 manufacturing for OEMs. The MRO segment, however, will create jobs at a greater rate than manufacturing due to its faster growth rate.

The growth in insourced MRO spending in Thailand will lead to the creation of new jobs in the sector. The insourced MRO spending corresponds to 40% of Thailand’s overall MRO spending. This implies that 60% of Thailand’s MRO needs are outsourced. This presents an opportunity for local players to expand their capabilities and also for global players to set up a base in Thailand. The next part of the analysis in this document looks at the number of jobs that will be created if the MRO industry within Thailand wants to tap the growth in the insourced MRO spending and maintain the 40% share of the country’s MRO spending.

Currently, the MRO sector employs about 3,750 engineers and technicians. The aerospace manufacturing sector, meanwhile, employs about 7,976 people. Going forward, the number of jobs in the MRO segment is expected to grow at a faster rate that the number jobs in manufacturing.

The total workforce in the aerospace industry is expected to double over the next 20 years with 10,109 new jobs being created. The MRO sector is expected to lead the job creation as it grows rapidly over the next 20 years. A total of 7,690 new jobs are expected to be created for technicians and engineers in the MRO industry. At the same time, the manufacturing segment will add around 2,419 new jobs.

With the government taking increasing interest in promoting the aerospace sector, the time is ripe for investors to setup a footprint in Thailand. Thailand’s location in the heart of the ASEAN region and its proximity to the booming economies of China and India make it a perfect location to tap the growing economies. The Asia-Pacific region is poised to become the next hub for the aerospace industry and the early movers will reap the greatest benefits in the future.

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