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Opening Bangkok.

Putzger, Ian

Air Cargo World. Dec2003, Vol. 93 Issue 12, p18-19. 2p. 1 Color Photograph.

Article

*AIRLINE industry *FINANCIAL crises *GROSS domestic product THAILAND -- Economic conditions

THAILAND

THAI Airways International PCL

481110 Scheduled air transportation 481111 Scheduled Passenger Air Transportation

It was only one baht, about 25 cents in U.S. currency, but for Thai Airways Co. it was an important milestone. At the end of October the carrier proudly announced that it would pay shareholders an interim dividend the first since the Asian financial crisis of 1997/98. With the country's economy on the upswing, Thai Airways certainly has reason to be optimistic. Steven Lee, vice president for Southeast Asia at DHL Danzas Air & Ocean, notes the carrier has yet to make an announcement about freighter plans even as Asian heavy-weights like EVA Air and Korean Air have expanded their maindeck capacity into Thailand. Thailand's GDP grew 6.7 percent in the first quarter of 2003 and 5.8 percent in the second, despite the outbreak of SARS. Besides traditional pillars of growth like tourism, the automotive industry has been a major driver of the economy. Car production is aimed at the regional markets, while the electronics makers concentrate on producing parts, which are then shipped to other Asian destinations for final assembly.

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Opening Bangkok

Thailand's economy is growing and the trade is more open, so when will the freighters start landing? It was only one baht (about 25 cents in U.S. currency), but for Thai Airways it was an important milestone. At the end of October the carrier proudly announced that it would pay shareholders an interim dividend, the first since the Asian financial crisis of 1997/98. For the first nine months of its

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fiscal 2003 year, the airline posted net earnings of $175.9 million, and management has projected an "impressive" profit for the full fiscal year. The upbeat mood extends to the carrier's cargo division. Even though Thai Air hasn't got any freighters in its fleet so far, airline president Kanok Abhiradee intends to take advantage of negotiations among a number of Asian countries about open skies for cargo.

"Our cargo business will shoot up because there is a freer flow of products between countries," he said.

With the country's economy on the upswing, Thai Airways certainly has reason to be optimistic. Some observers in the region caution that Thai Air itself won't be the primary beneficiary of liberalized air trade, however. Us cargo division has improved recently, but not dramatically, said Steven Lee, vice president for Southeast Asia at DHL Danzas Air & Ocean.

Lee notes the carrier has yet to make an announcement about freighter plans even as Asian heavy-weights like EVA Air and Korean Air have expanded their maindeck capacity into Thailand.

Air cargo trade with the United States should grow under an open skies agreement for cargo the Thai government signed with the U.S. in October. Thai authorities believe this would help boost the country's export volume to North America, but so far U.S. freighter operators haven't exactly stampeded in.

With that deal in the bag, the Thais moved on to the next step in relations with the U.S., a push for a free trade agreement. Trade industry observers believe such a deal is possible, but it is causing some anxiety on the U.S. side of the Pacific. One worry is that once tariffs disappear U.S. automakers could be tempted to take advantage of lower labor costs in Southeast Asia and end up shipping their made-in-Thailand vehicles to their home market, further eroding manufacturing jobs in the US.

Growing GDP For their part, the Thais are on a roll with free trade, having recently signed such an agreement with Australia. And, like the fortunes of the national carrier, the economy has been going strong. The country's GDP grew 6.7 percent in the first quarter of 2003 and 5.8 percent in the second, despite the outbreak of SARS.

In September the International Monetary Fund raised its 2003 GDP forecast for Thailand from 4.2 to 5 percent and ratcheted up its 2004 projection from 4.3 to 5.1 percent — strong growth by any standards.

Besides traditional pillars of growth like tourism, the automotive industry has been a major driver of the economy. Nowadays, Thailand is often referred to as the "Detroit of the East". Other sectors, such as electronics, have also been doing well, said Lee. After the SARS outbreak, some manufacturers figured it would be wiser not to put all eggs into one basket — China — but place some facilities elsewhere in the region, chiefly in Thailand.

Mighty Muang Logistics operators are also boosting their presence in the country, spearheaded by the express operators. In the summer DHL set up an air express hub at Bangkok's Don Muang International Airport and rival TNT Express opened its express hub at the airport in October.

It is probably a good reflection of the sense of urgency of these companies that they invested in Don Muang even though it will be replaced as Bangkok's international gateway in 2005 by the new Suvaniabhumi airport. That airport is slated to have a cargo capacity of 1.46 million tonnes a year.

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But then, it remains to be decided what will happen with Don Muang when the new gateway comes on stream. The political wrangling over the new airport has been epic and no one is willing to close the old airport just yet. U.S. freighter operators certainly have not been falling over one another to mount flights to Bangkok.

According to Lee, the lion's share of Thai exports is to other Asian countries rather than to the U.S. or Europe.

Car production is aimed at the regional markets, while the electronics makers concentrate on producing parts, which are then shipped to other Asian destinations for final assembly.

... Briefly The first air services treaty between the United States and Vietnam includes unlimited scheduled and charter all-cargo frequencies.... China's Xiamen International Airport opened an air freight terminal that is 49 percent owned by Taiwanese airlines, the first direct investment by Taiwan's air carriers in mainland China air freight infrastructure. ... Korean Air signed a contract for three firm orders of the Airbus "superjumbo" A380 and three options. ... Menziex Aviation Group signed a joint venture to provide passenger, cargo and aircraft handling and maintenance services at Chengdu Shuangliu International Airport in China's Sichuan province. The airport handled 210,000 tonnes of freight last year. ... Oragonair, which added a freighter to its fleet late last year, saw cargo traffic grow 48 percent in the first eight months of 2003, including 21 percent in August. ... Ground handler Hong Kong Air Cargo Terminals Ltd. won ISO 9001-2000 quality certification for its operations in Hong Kong. HACTL set a single-day record Oct. 31 with 7,694 tonnes handled and the 198,704 tonnes handled in October, a 4.7 percent gain over the year before, was a monthly record. ... China Eastern Airlines took delivery of the first of five A340-600s it has on order. ... General sales agent ACP Worldwide opened its first office in New Zealand, naming former Air New Zealand regional cargo manager Wendy Jolly to manage the station. ... Kenya Airways launched service to Hong Kong from Nairobi through Rangkok and named HACTL as its handler at Hong Kong. ... Container management company Unitpool named DRH Logistics its sales representative for the Indian sub-continent. ... DHL Danzas will operate a distribution center for automaker BMW at the port area of Incheon in South Korea. ... Cargo facility manager ProLogis signed an agreement to build a distribution center at Japan's Nagoya market, to be known as ProLogis Pare Tokai, near the site where a new airport is to be built in a couple of years. ProLogis also signed a lease agreement with forwarder Exel for space at the ProLogis Parc Narita. ... Schenker extended its relationship with auto parts maker Bosch Trading with a three-year outsourcing contract in China.... Semiconductor maker Integrated Device Technology awarded Menlo Worldwide Forwarding a multi-million dollar contract to handle traffic through Hong Kong, Manila, Penang, San Francisco and Shanghai. Menlo is providing a streamlined billing process with predictable assessorial charges and like methods, regardless of shipment origin or destination. ... Qatar Airways will start passenger service to Singapore and to Cebu in the Philippines this month after launching direct flights to Shanghai and Seoul in October.

PHOTO (COLOR)

~~~~~~~~ By Ian Putzger

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