Despite Thailand boasting a top-rated airport and a flagship carrier ranked in the top 20 globally, the country’s aviation sector was hit in 2015 by a series of negative reviews and downgrades by a foreign regulator and an international aviation organisation. The assessments surprised the travelling public and gave rise to a number of practical concerns and considerations. While the downgrades had no immediate impact on the country, over the long term they have the potential to harm not only the business of Thailand’s airlines, but also damage the prospects of one of the country’s most important sectors. Tourism numbers could drop as visitors worry about the safety of travelling to the country, and that could feed into the rest of the economy.
The government is taking the problem seriously, and has directed the relevant officials to address the deficiencies and restore faith in the sector. The response has been rapid and is being supported at the highest levels of the administration. It is expected that the situation will return to normal in 2016 or 2017, as the country upgrades the current system.
Doubt, Then Downgrade
The string of negative reviews started with a warning from the International Civil Aviation Organisation (ICAO). In March 2015, the Montreal-based UN specialised agency issued an alert on Thailand. The organisation warned that the country was not adequately managing its airlines, and that the awarding of air operator’s certificates (AOC) and the issuing certifications for hazardous goods transportation were not being properly carried out. Thailand, it noted, had an insufficient number of technical officers, and this was leading to weaknesses in terms of inspections and certifications.
Countries receiving Thai aircraft responded in a number of ways. A few jurisdictions, such as the EU, Australia and Singapore, chose to conduct their own physical inspections of Thai aircraft. Other countries, such as China, Korea and Japan, banned the addition of new services from Thai-based airlines, while over 100 charter flights to Japan were cancelled.
Later in the year, the situation worsened. After 90 days, the ICAO officially “red flagged” the country for failing to address the concerns earlier expressed. The ICAO said that it had identified “significant safety concerns”. As a result Thailand was thus downgraded from a Category 1 country to Category 2. Other countries similarly red flagged include: Angola, Botswana, Djibouti, Eritrea, Georgia, Haiti, Kazakhstan, Lebanon, Malawi, Nepal, Sierra Leone and Uruguay. Thai Airways, the country’s flag carrier, insisted that it was flying safely, and had been instructing civil aviation services in other countries to make sure its fleet was in good order. Analysts at the time also pointed out that it was the country’s regulator and not the airlines themselves that had been brought into question.
Thailand is, to some extent, a victim of its own success. Tourism has been growing rapidly, and Thailand has become a regional and international hub over time and a key destination globally. Bangkok is the world’s second-most visited city, after London. Thais are increasingly travelling more, and Thai-based airlines have been expanding rapidly. Thai Airways currently services 74 airports globally.
Air traffic, which nearly doubled in the five years leading up to 2015, has increased beyond the ability of the country to properly supervise that traffic, while political conflicts have made the situation more difficult. The protests and the 2014 coup slowed the development of the relevant capacity, as social instability and the changing governments have led to inconsistent leadership and shifting priorities.
In December 2015, the US Federal Aviation Administration (FAA) issued its own downgrade, assigning the country a Category 2 rating. Thailand was initially assigned this rating in 1996. It was upgraded to Category 1 in 1997 and held that rating through two rounds of reassessments. A Category 2 The EU provided Thailand carrier is banned from opening new routes to the US or expanding service on existing routes. Category 2 carriers are also prevented from codesharing with US carriers. Other FAA Category 2 countries are Bangladesh, Barbados, Curaçao, Ghana, Indonesia and Uruguay. The FAA downgrade was potentially worse than the ICAO move, as the UN body has no enforcement powers, so its reclassification had no direct impact.
Impact & Response
According to analysts, the ICAO and FAA downgrades could have a significant effect on the sector. They could increase costs for the carriers, help their competition gain market share as travellers gravitate to carriers from high-rated countries and result in charter airlines losing their rights, which are issued case by case, according to Siam Commercial Bank’s Economic Intelligence Centre. Expansion plans by Thai airlines may have to be put on hold, while the downgrade could result in fewer airlines wanting to partner with Thai carriers. The negative designations are seen as having a knock-on effect, as other safety agencies globally tend to follow the lead of the US and the UN. When the FAA downgraded Philippine Airlines in 2008, that led to restrictions elsewhere, with the carrier being banned from at least three additional jurisdictions. The loss of goodwill is a serious concern. When countries are downgraded by the international agency or national bodies, the reputational damage can be severe and long lasting, especially as travellers become more concerned about safety. Analysts also note that the path back to acceptance requires a commitment from the national authorities and time. It took the Philippines a full six years to get back on the FAA’s Category 1 list, and four years for the ICAO.
After the FAA downgrade, Prime Minister Prayuth Chan-ocha ordered officials to address the problems. Arkhom Termpittayapaisith, minister of transport, said that recertification of the 28 carriers in the country flying international routes would be completed by August. The deputy prime minister said that the financial impact of the downgrade would be minimal, but he was concerned about how it would impact sentiment. No Thai carrier currently flies to the US; Thai Airways stopped flying to Los Angeles, its only US destination, in October 2015. Observers suggest that given the right sort of directed response, Thailand could be back in Category 1 in short order. In the past, countries that have taken the right steps have been upgraded quickly, and the offending air transport systems are not always stuck at Category 2 for years. India was able to regain its FAA Category 1 status in one year and Mexico in a matter of months.
Reforms & Inspection
A number of reforms have been undertaken. In September 2015, draft legislation was approved by the Cabinet to split the Department of Civil Aviation into two new bodies: the Office of Civil Aviation and the Airport Department, the former being the regulator and the latter running the country’s 28 provincial airports. The legislation was drafted with the help of the ICAO. A command centre was set up in September 2015 to lead the efforts to address the shortcomings in the aviation sector. In early 2016, the Civil Aviation Authority of Thailand devised a plan to reissue air operator’s certificates in order to get the Category 2 status upgraded back to Category 1. The hope is to invite the ICAO to return to the country in December to conduct a Coordinated Validation Mission, which should be completed by March 2017. Some press reports in early 2016 suggested that the red flag could be lifted by the end of the year. Air safety experts were scheduled to be brought in from the UK to help the country regain its Category 1 status from the ICAO. The company sending the experts, CAA International, is a subsidiary of UK Civil Aviation Authority. It will provide training to personnel, who will be granting the AOCs. A schedule has been set for the reissuance of AOCs, beginning in June 2016 with the 28 carriers flying international routes, according the Bangkok Post. That process is set to be finished by November 2016.
The EU provided Thailand with a positive surprise at the end of the year. In December 2015, just after the FAA announcement, the European Aviation Safety Agency (EASA) announced that the country’s Thai Airways would not be included on its 228-carrier Air Safety List, though inclusion on the list was not ruled out. Later in December 2015, it was announced that Thai Airways had passed the EASA’s Third Country Operator Audit. This is a new requirement that all carriers will need in order to fly to the EU after November 2016. Thai Airways was the first non-EU carrier to received the authorisation.
A negative judgment from the EU could have had an immediate and significant impact on the business of carriers in Thailand. Thai Airways serves 11 destination in Europe, and the possibility of being shut out from the union was a matter of serious concern, more so than the threat of an FAA downgrade. Bangkok Airways does not fly to Europe, but it has codeshare arrangements with six carriers based in the EU.