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ANALYSIS: The five realities of Thailand's aerospace push

Thailand is poised to be a major hub for the aerospace industry, with advantages such as existing links to the automobile and electronics industry, and competitive wages.

Building on these advantages, Thai authorities are keen to grow the country's aerospace sector and have lined up a suite of measures to do just that. These include developing an Eastern Economic Corridor in three provinces just east of Bangkok, establishing aerospace as a targeted growth industry, as well as expanding and improving infrastructure.

There are 12 players in Thailand's MRO sector, making up about 1% of total revenue in the global aircraft maintenance market per year, says Vorachart Choochom from the Thailand Board of Investment.

He adds that the country has registered growth increase for imports and exports of aerospace-related products.

At an MRO and Aerospace Summit held in Bangkok on 8 May, speakers from across the industry discussed how best to position the country to ride growth in the aerospace sector, and what challenges and trends lie ahead. Five key themes emerged:

THAI IS DEVELOPING ITS WORKFORCE – BUT IT HAS COMPETITION

A key issue facing Thailand's burgeoning aerospace sector is its human resources. According to Boonmee Piampring from the Civil Aviation Authority of Thailand (CAAT), the workforce in the sector looks set to double over the next 20 years.

Piampring also notes the high levels of interest among young Thais in the aviation sector, a sign he says is promising for the industry.

The Thai government is also supportive of growing and promoting the industry, he adds.

However, as strategically located as Thailand is, the country is also in a highly competitive environment, with other countries in the region also looking to grow their aerospace sectors.

An area of improvement Piampring cites is in the training currently afforded to students. Currently, most students take a longer route to get certification, involving gaining years of work experience first, before taking an examination to qualify.

Piampring, who is the inspector of airworthiness and aircraft engineering at CAAT, acknowledges that more can be done to align the current curriculum with international standards, and to expand the number of places for students. In Thailand, at least six universities offer aeronautical/aerospace engineering courses.

On the issue of training, Rolls-Royce Thailand regional director Hugh Vanijprabha adds: "We do see good engineers coming out of the universities, but not enough in manufacturing… [as well as] technicians, qualified ones."

To this end, Vanijprabha says there should be a focus on science, technology, engineering and mathematics education in English.

"We need more technical schools, especially in the aerospace [sector]. The technical schools do not have enough funding to invest in the aerospace programmes…[and] need to be provided with the support, either from [companies] or the government," he adds.

STRENGTH IN UNITY

Smaller firms could put aside their differences and band together, so as to attain better economies of scale and save on costs and time. Kensuke Saito, from Japan's Ministry of Economy, Trade and Industry, says that in Japan, a group of 10 small and medium-sized enterprises (SMEs) came together to form the Matsusaka Cluster, an association for "efficient aircraft parts production".

It used to be smaller companies having to secure different contracts from different tier one suppliers, but with the cluster now, these companies can leverage on each other's strengths to jointly secure contracts from larger players.

Saito, the director of the aircraft component and material industries office in the Manufacturing Industries Bureau, adds that the alliance of the smaller firms helped them save costs "significantly". These companies were looking to make the pivot from the automotive industry into aerospace.

One issue the smaller companies encountered was the lack of specialised workers. This was mitigated when the authorities worked with larger companies to create industry experts to help the SMEs. Such a move, says Saito, has borne fruit over the past few years.

"ONE-STOP SHOP" SOON TO BE THE NORM?

The highest growth in MRO lies in components, says Triumph Aviation Services Asia's regional director for business development in Asia, Terry Lim. As a result, MRO companies are gradually heading in the direction of a "one-stop shop", or a "nose to tail" service, as Lim puts it.

Drawing parallels with online retail powerhouses Alibaba and Amazon, Lim says the ideal one-stop MRO centre should have presence, ample logistics services, integrated solutions, as well as accessibility to spare parts.

He notes that larger companies such as ST Aerospace are already going for the concept of a one-stop shop. For smaller companies hoping to do likewise, Lim believes that a sense of "collaboration and partnership", bolstered by a set of "good [working] guidelines" will help them.

Lim adds that OEMs such as Airbus and Boeing are similarly dipping their toes into the one-stop shop concept. OEMs might also "package together" MRO services with delivery, leading to competition with existing MRO companies.

"We could consolidate or expand our capabilities. The reason why most MRO [companies] could not compete is because we don't have enough capabilities," says Lim.

"No man is an island. MRO [companies] need to look outward to explore how to work with airlines, various stakeholders [and] partners."

Lim adds that to compete more effectively, MRO companies need to think about how to differentiate themselves from the others.

THE DIGITAL WORLD OF THE FUTURE

From Artificial Intelligence, to Big Data, to Blockchain, technological disruption making inroads in other industries has not circumvented aerospace and MRO.

To this end, the mantra at the summit was to embrace technology – and embrace it quickly. This includes innovations such as using drones for maintenance work, using augmented reality to train engineers, or using Big Data to predict when an aircraft will need to undergo maintenance.

Lim says that for MRO companies contemplating if they should digitalise, it is a "worthwhile" venture, because it is a trend that "cuts across" the supply chain and can reap benefits.

Cyrille Schwob, Airbus's technology head for the Asia-Pacific region, says that "the convergence of the digital and physical world" will make up the "maintenance of the future".

This will encompass "less hangar time, more flying time" and is underscored by automation and the use of data to create what Schwob calls "streamlined maintenance".

"When you receive the part, you don't need to inspect it. The part is speaking to you; it is attached with some sort of a digital datasheet that can be easily accessible with technology," Schwob says.

Vanijprabha adds: "Investment in the world-leading technologies would be the key differentiator between yourselves, whether it be your neighbours, or countries in the other parts of the world."

Vanijprabha also says technology will help connect multiple stakeholders in the supply chain together, including airframers, engine shops, airlines and even users.

But some speakers caution against adopting technology for its sake. Lim says: "Whatever technology you create [or use]...you have to create value and efficiency to your business."

NEW-GENERATION AIRCRAFT = NEW GENERATION ISSUES

Lim kicked off his presentation talking about the impact of fuel prices on the segments of the aerospace industry. He contends that these prices will, among other things, lead airlines to retain their older aircraft.

"While new aircraft will come with fuel efficiency, the airline [might] think [that they] can retain the old aircraft because the fuel [price] is low," he says.

The effect on MRO companies would be an increase in aftermarket business, as aircraft stay in service longer. Lim adds that MRO companies "have had a good run from the last 10 years" helped recently by lower fuel prices.

Looking forward, Lim predicts that overall MRO spending will go up, and countries in the region are positioning themselves to capture this growth.

Lim says that with the advent of newer generation aircraft, MRO companies could face certain challenges.

Given that these aircraft are mainly made up of composite parts, MRO companies will need to learn how to deal with new materials. This involves rethinking equipment, processes and manpower, Lim says.

Another issue with new-generation aircraft is the reduced frequency for maintenance required, says Lim. He predicts that spending on line and engine maintenance will go down.

"Next-generation platforms [will] have longer maintenance cycles, but might be more costly to service," he adds.

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