The strategy to upgrade its operations and capabilities across the board is a bid to improve revenues and positioning, with any expansion of business coming later, Sawangcharoen explained.
Among the improvements planned is getting the Good Distribution Practices (GDP) Certification for pharmaceuticals, which it expects to have by the end of 2018, Sawangcharoen said. THAI believes this will strengthen its position as a carrier of value-added products and in turn also strengthen Thailand as a hub.
To underpin this THAI is working to better its operations across the board. “We are focusing on different areas of HR, such as training and improving the working space environment in our warehouse at SBIA,” said Sawangcharoen. Similar initiatives are also being undertaken in Chiang Mai and Phuket.
Already in place is a new IT system including a mobile app, introduced in 2015 which gives it “more message earlier,” as Sawangcharoen put it.
What this is unlikely to lead to is THAI’s emergence as a major cargo carrier. THAI’s strategy is to improve cargo to consolidate its reputation and stabilize the company’s sometimes troubled balance sheet.
“We have been profitable; coming back from a 1.3 billion baht loss in 2014, by the end of 2016 we recorded 2.8 billion baht in profit. The revenue contribution from the Cargo Department is approximately 13% of the corporation’s total revenue,” Sawangcharoen said.
This has been done by THAI moving a little more cargo, as the carrier was helped by jet fuel prices. During the first seven month of this calendar year (i.e. January to July) it shipped 253,842 tons and is expecting a year-end total of between 435,000 tons and 450,000 tons.
This represents modest, incremental growth of three to four percent, an amount similar to the previous year when THAI moved 419,477 tons, only three percent more than in 2015.
None of this is likely to force THAI’s plans to sell its two freighters. “We are parking B747-400BCFs for economic reasons,” Sawangcharoen said. Nor will it be looking to change its fleet for cargo reasons. Or even more passengers. THAI currently has 78 wide-bodies and will have 81 by the end of the year
Among the goods it moves regularly are machinery, household goods, perishables, industrial equipment and products. Less regularly its special cargo includes live animals, dangerous goods and valuables.
But things do change and as Sawangcahroen put it, the mix is altering a bit with some “slight changes on cargo commodities.”
The explanation is that as development spreads to countries in Upper South East Asia, Vietnam and Cambodia being good examples as they’ve become manufacturers of clothes and footwear. As a result “the import of machinery and industrial equipment has decreased, but the export of garments and fabrics has also shrunk,” said Sawangcharoen.
Against this THAI is noticing “IT goods and supplies, including e-commerce items have been growing especially on the import sector.”
The opportunity for THAI’s cargo operations lies in new infrastructure in Thailand and not so much with an upgraded fleet.
The Eastern Economic Corridor will be a significant contributing factor to this mid-long term plan being achieved. Basically the North East Gulf of Thailand is to become a new industrial hub, packed with high-tech industries, that thrive because of air cargo facilities. This will be provided by the development of the airport at U-Tapao.
However, there are some misgivings about this. Some feel U-Tapao and the EEC programme, which are being pushed through by the government using its special powers, might not work. Within the company itself, some officials have complained that the end-of -year timeline on the MRO programme they are doing with Airbus is too tight.
Opening a fresh facility, such as U-Tapao, is a challenge for anyone, THAI acknowledges. “We have to look at freighter airlines that want to fly into U-Tapao and carry goods from the EEC,” said Sawangcharoen who added Chinese firms were on the top of the list for some sort of cooperation deal. “We have talked to Lazada –but it’s still very early stages,” he said.
Nor is the only big development in the offing. Phuket Airport, in the south of Thailand, is tight for space to develop, especially for logistics. To remedy this, the government has committed to develop a second airport at Phang Nga. It offers a niche but potentially lucrative opportunity to THAI: seafood.