Thailand to remedy aviation sector’s regulatory shortcomings

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Increased investment in human resources and more stringent regulatory oversight are part of a wider programme aimed at bringing Thailand’s aviation sector back in line with international standards.

In particular, the government and industry officials will be looking for improved safety measures to help Thailand lift operational restrictions imposed last summer.

Safety downgrade

In June of last year, following a preliminary 90-day warning, the International Civil Aviation Organisation (ICAO) – the UN agency responsible for the industry’s technical rules and regulations – lowered its safety rating for Thailand’s Department of Civil Aviation (DCA) from Category 1 to Category 2.

The agency had repeatedly warned Thai authorities that shortages in trained and experienced DCA staff were undermining the local regulator’s capacity to supervise airline operators and operations.

When the probationary period ended, the ICAO red-flagged the country, banning Thai carriers from opening new flights or charter services to China, South Korea and Japan, and effectively slowing the rollout of the new low-cost airline NokScoot. Although the carrier, which is a joint venture between Thailand’s Nok Air and Singapore’s Scoot, inaugurated services in May 2015, the ban on opening new routes has impacted its expansion plans.

The US Federal Aviation Administration (FAA) followed suit in early December, lowering its own International Aviation Safety Assessment rating for Thai carriers to Category 2, citing similar shortcomings in legal and regulatory oversight.

As with the ICAO action, under the revised FAA rating Thai carriers will be permitted to continue operating existing routes to the US but will not be approved for new services.

For its part, the European Aviation Safety Agency (EASA) decided not to impose any sanctions on the industry or its regulators last year. The agency did, however, warn that significant reforms would be required before its next audit later this year.

Impact on tourism

The results of the upcoming EASA audit could be significant for Thailand’s tourism-dependent economy, which relies heavily on the aviation sector.

According to data issued by the International Air Transport Association (IATA) in mid-February, aviation and related activities account for some 2m jobs in Thailand and contribute about $29bn per year to GDP.

These figures could virtually double by 2035, the IATA noted, to 3.8m jobs and $53bn in GDP contributions, though this growth is contingent on industry reforms and a return to Category 1 status.

Reaching these target levels may require regulatory tightening in other areas of the industry that have seen instability in recent months.

Budget carrier Nok Air was forced to cancel nine flights in a single day in February due to a pilot strike, leaving some 1400 passengers stranded.

The cancellations prompted an immediate response from authorities, with the Ministry of Transport setting a one-month deadline for airlines to issue emergency and risk-management plans.

Failure to deal with disruptions and instances of repeated flight cancellations could lead to termination of an airline’s licence, Ormsin Chivapruck, deputy minister of transport, warned in mid-February.

Regulatory catch-up

The government has also moved to address ICAO and FAA concerns directly. In late January the cabinet announced plans to allocate BT271.5m ($7.6m) to improve safety in the aviation sector and meet the regulatory requirements set out in the ICAO’s red-flag alert.

Just over BT100m ($2.8m) will be used to train personnel from the Civil Aviation Authority of Thailand (CAAT), which replaced the DCA as the industry regulator at the start of the year.

The remaining funds will be directed to a more short-term solution to the ICAO’s concerns, which involves hiring aviation safety experts from the UK to help bridge the gap in the number of inspection and certification professionals.

This staffing shortage was one of the key concerns raised by the ICAO, with Thailand currently staffing just 49 of the requisite 86 inspectors needed to conduct safety and compliance checks for the country’s 41 registered carriers.

The government has also announced plans to draft updated regulations governing the issuance of air operator certificates and air service licences, along with new rules for transporting hazardous materials.

Nonetheless, Chula Sukmanop, director of CAAT, has warned that it will take time for the reforms to take full effect. Speaking to local media in early February, Sukmanop said it was unlikely the IACO red flag would be withdrawn this year, though Thai authorities are planning to invite the agency to conduct a new audit in December.

Growth take-off

While restrictions on new routes are set to remain in place until 2017, growing demand for existing domestic and international routes should power growth in the Thai aviation sector this year, according to a recent report by local research firm Kasikorn Research Centre.

In its January report, the group predicts the aviation industry will expand by 10% in 2016, marginally down on the 12% growth posted last year. The sector’s prospects have been buoyed by the EASA’s decision not to sanction Thailand, the report noted.

“[The] EASA’s decision…is important because European flights generate over BT48.6bn ($1.36bn) for Thai airlines, representing 27% of total international flights.”

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