Thai Airways International is pressing on with multi-pronged plans to further develop its cargo operations, a senior official told Asia Cargo News.
The multi-pronged plan starts from the ground up, Dumrungchai Sawangcharoen, managing director of Thai’s cargo and mail department, told reporters on the inaugural flight of Thai’s sixth Airbus A350 XWB from Toulouse. The new aircraft will not bring much extra cargo capacity to TG – a key part of its overall strategy.
The new plan instead emphasizes new lines of business, such as temperature-controlled products, and clever use of resources, such as IT and staff, to tap those new business lines.
Among the upgrades planned is one to acquire good distribution practices (GDP) certification for pharmaceuticals, which it expects to have by the end of 2018, Sawangcharoen said.
Another business line likely to pay handsome dividends, given the potential scale of the trade, are the airline’s plans for perishables, which call for its refrigerated facilities, which are now scattered throughout the system, to be consolidated at one place and their use better coordinated with other companies.
“We can plan that area to be ‘Perishables Village,’” said Sawangcharoen.
Under study is a plan for a direct order wing. This would see Thai would move goods which a partner would pick-up from the facility and move to the end user’s door at the other end.
The carrier is also working to develop more, and better, use of information technology. Seeking more efficient revenue management via web-based technology, Thai introduced a new IT system, including a mobile app, in 2015 which gives it “more messages, earlier,” as Sawangcharoen put it.
Although all of these upgrades help with the bottom line, airline executives credit declining oil prices with boosting the airline to profitability in recent years. “We have been profitable, coming back from a ฿1.3 billion (US$39.3 million) loss in 2014. By the end of 2016, we recorded ฿2.8 billion (US$84.7 million) of profit. The revenue contribution from the cargo department is approximately 13% of the corporation’s total revenue,” Sawangcharoen said.
This has been done despite Thai moving only a small amount more of cargo.
January to July this year have seen it ship 253,842 tons. It is expecting a year-end total of between 435,000 tons and 450,000 tons, or growth of 3% to 4%. This is consistent with the previous year when Thai moved 419,477 tons, approximately 3% more than in 2015.
Also consistent is what it moves, which includes machinery, household goods, industrial equipment and products, perishables and special cargoes such as live animals, dangerous goods and valuables.
What Thai is also seeing is some “slight changes on cargo commodities,” as Sawangcharoen put it. These changes are consistent with what airlines in other countries are seeing, as well as with its own track record.
As manufacturing has shifted out of Thailand into other countries in upper Southeast Asia, such as Vietnam and Cambodia, Thai has noticed that “the import of machineries and industrial equipment has decreased. The export of garments and fabrics has also shrunk,” said Sawangcharoen.
Offsetting this, Thai, like other carriers, is noticing that IT goods and supplies, including e-commerce items, have been growing, especially on the import sector.
None of this is likely to force a change in Thai’s plans to offload its two freighters. “We are parking our Boeing 747-400BCFs for economic reasons,” Sawangcharoen said. Nor will it step up new acquisitions. Thai currently operates 78 widebodies, and will have 81 by the end of the year.
Instead, the opportunity for Thai’s cargo operations lies not so much with its newer fleet but in new infrastructure in Thailand. Of this, there is going to be plenty.
Chief among infrastructure plans is the Eastern Economic Corridor, which would give the Northeast Gulf of Thailand a new industrial hub, one of high-tech value-adding industries which need air cargo support. This will come from the development of the airport at U-Tapao.
Again, the approach the airline is taking is multi-pronged, with some infrastructure planning and strategic thinking already underway.
“We are going to be building up the small warehouse. The first one is going to be one-third [the size] of the Suvarnabhumi warehouse,” Sawangcharoen said.
There are two things to note here. First, U-Tapao, as a facility, is owned by the Royal Thai Navy, whose ownership might, even under a military government, complicate things.
Within Thai, two specific problems have arisen. The government wants a study on what Thai plans for U-Tapao and wants it quickly – finished by the end of this year and implemented next, one Thai official, who asked not to be named, said. “I’m not sure we can do it,” the official added.
Another challenge lies in Thailand’s complicated public private partnership process, which is the next step, which the official said has the potential to be “quite hard” and “long.”
That said, other Thai officials are looking at what the airline needs to do to tap the market that may well exist. “We will have to build up the demand at U-Tapao,” acknowledged Sawangcharoen.
On the cards are strategic alliances with other freight companies, with overseas carriers very much to the fore. This is very much fresh territory for Thai.
“We have to look at freighter airlines that want to fly into U-Tapao and carry goods from the EEC, said Sawangcharoen who added that Chinese firms were very much on the top of the list. “We have talked to [e-commerce company] Lazada – but it’s very early stages,” he said.
Nor does it stop there. Already under consideration is a new airport in Thailand’s south; the transport minister has already named Phang Nga as the site. Phuket has limited space especially for logistics but a good many flights supporting the tourist trade.
By Michael Mackey
Southeast Asia Correspondent | Bangkok
