airports of thailand: aviation industry in thai state enterprise
TRANSCRIPT
Airports of Thailand:
Aviation Industry in Thai State Enterprise
Authored By:
Miss Kaewalin Meelakchai ID 5531210032
Miss Jirakan Kaewkoed ID 5531210056
Mr. Nattapol Wattana ID 5531210128
Miss Tiwaporn Bussabong ID 5531210142
Mr. Tanade Sirinumas ID 5531210150
Miss Thunchanok Rajitvit ID 5531210151
Miss Noppasorn Amphanratana ID 5531210164
Miss Wasinee Saekoo ID 5531210311
Miss Sawarot Borriboon ID 5531210344
Section 1
Aviation Business Management
School of Management
A Term Project Advisor
Dr.Phoommhiphat Mingmalairaks
A Term Project
Submitted in Partial Fulfillment of the Requirements of
1210332 Aviation Industry in Thai State Enterprise Course
Mae Fah Luang University
First Semester, 2015
1
AOT Background
Airports of Thailand Public Company Limited, or AOT, was established from the
corporatization of the Airports Authority of Thailand that is state enterprise to corporation on 30
September 2002. There are 6 airports which are under AOT control namely Suvarnabhumi
International Airport, Don Muang International Airport, Chiang Mai International Airport, Mae
Fah Luang Chiang Rai International Airport, Hat Yai International Airport and Phuket
International Airport which serve in both domestic and international (Airports of Thailand Public
Co., Ltd., 2011).
Suvarnabhumi International Airport was built on 28 September 2006 to be major airport
of Thailand and its capacity can handle 45 million people per year, 3 million ton of cargo per
year and 76 flights per day. Its total registered capital is 14,285,700,000 THB which divided into
1,428,570,000 ordinary shares at par value, 10 THB, with major shareholder is The Ministry of
Finance with 70% of shareholders and 30% of general shareholders (Airports of Thailand Public
Co., Ltd., 2011).
AOT Head office is located at 333 Cherdwutagard Road, Don Mueang, Bangkok,
Thailand 12110. Its telephone number is +66 (0) 2535-1111 (Airports of Thailand Public Co.,
Ltd., 2011).
Importance of Airports
The main importance of airport is airports are gateway to the country (Waters, 2007).
Moreover, importance of airports can be divided into four aspects:
Economic Aspect
1. Airports can be a hub of the country which is important in term of business (Australia
Pacific Airports (Melbourne) Pty. Ltd., 2009).
2
2. The opening of Suvarnabhumi International Airport is an important part of logistic
system driver. Suvarnabhumi International Airport possesses free zone, in order to
provide ease, speediness and effectiveness of transport and product management. These
will raise amount of air transport products as well as increase the competitiveness of air
transport industry. Furthermore, AOT will improve strategy for support logistic system,
tourism industry, expand air route network around the world, become a logistics hub for
GMS countries and South Asia, and develop Chiang Mai International Airport and
Phuket International Airport to be a regional gateway of Thailand (Airports of Thailand
Public Co., Ltd., 2011).
3. Faster transport means faster trade.
4. Faster transport can increase amount of imports and exports.
5. Transportation of passenger.
6. Initiation in tourism industry (Faculty of Education, The Chinese University of Hong
Kong, 2003).
Socio-cultural Aspect
1. Airports can increase employment rate by giving people a job (Australia Pacific Airports
(Melbourne) Pty. Ltd., 2009).
2. Introduce foreign culture.
3. Local culture will be promoted to visitors and tourists.
4. Provide more communication with the West.
5. There are more information both inflow and outflow.
6. People’s mobility is increased such as they can find jobs out of their own country.
7. More opportunities in education abroad (Faculty of Education, The Chinese University of
Hong Kong, 2003).
Political Aspect
1. Political freedom is stable (western influence is unable to block out) (Faculty of
Education, The Chinese University of Hong Kong, 2003).
Military Aspect
1. Airports can be the army base (Faculty of Education, The Chinese University of Hong
Kong, 2003).
2. Airports can be the Flight School Flying Academy (Faculty of Education, The Chinese
University of Hong Kong, 2003).
3
Industry Analysis
Porter’s Diamond Model
Porter's Diamond Model presents the six factors that influence the competitiveness of
Thailand and Thai Aviation industry.
1. Factor Conditions
+ AOT uses Advance Passenger Processing System (APPS) with 6 airports. APPS
will receive and send passenger information and background that link with
immigration, customs and Office of the National Security Council of each country
(Prachachat Online, 2015).
+ The 5 main airlines which are AAV, BA, NOK, Lion Air and Thai smile will
expand fleet approximately 1.2 times in 3 years (Wattanapornprom, 2015).
+ In 2014, Don Mueang International Airport was awarded that is the most
increasing number of passengers who travel by air in Pacific region that
increasing 30.8 percent comparing in 2013 (Bangkok Post, 2015).
- Most of aviation staff is substandard, moreover, Thai aviation industry also lack
of pilot, crew, and maintenance technician, and especially aviation staffs who
need to attend specialized training courses which take long time (Asian
Knowledge Institute, 2013).
4
2. Demand Conditions
+ In 2015, Low Cost Carrier in domestic is increasing 29.18% from 2014 that
means the domestic demand of using air travel has been increasing every year.
Thus it shows that Aviation Industry has to develop themselves to meet increasing
demand (Airports of Thailand Public Co., Ltd., 2015).
+ Trend of cargo movement is also increasing about 2.5% from 2013 to 2015
(Airports of Thailand Public Co., Ltd., 2015).
3. Related and Supporting Industries
+ According to Department of Tourism (2015), the statistic during 2012 - 2014
showed that tourism trend increased from 22,353,903 to 24,809,683 (10.99%).
4. Firm Strategy, Structure and Rivalry
+ Bangkok Airways is expanding its cooperation with 6 airline alliances in Europe,
for example Air France, Finnair, KLM, and British Airways for sharing flight and
promoting European passenger to visit Thailand. If EASA does not allow airlines
from Thailand, Bangkok Airways does not get any effect because of no flight fly
to Europe (Prachachat Online, 2015).
5. Government
+ AOT support government’s policies which is continual growth.
+ AOT has been supported from Ministry of Finance, biggest shareholder, for
reliable credit (Airports of Thailand Public Co., Ltd., 2013).
+ To promote Thailand to become maintenance hub of aviation (Thailand Board of
Investment, 2014).
6. Chance
- DCA was examined about standard by ICAO which found that Thailand did a
dissatisfied. So Thailand was downgraded from grade A to grade B that come
with negative effect from other countries such as United States, Europe and Japan.
Those 3 countries do not allow charter aircraft from Thailand. In addition, this
problem also affects new air route and international outbound (Skycanner, 2015).
- Federal Aviation Administration (FAA) declared that Thailand’s safety of air
transport standard is demoted from Category 1 (CAT1) to Category 2 (CAT2) that
can affect to aviation industry (Manager Online, 2015).
5
Summary of Porter's Diamond Model
Thai Aviation Industry is in positive way by the reason of following.
1. Nowadays, trend of the number of passengers has been increasing as well as air freight.
Thus the fleet of major airlines is also increase to meet demand. The one factor that
encourages number of passengers is tourism policy of government that enhances
tourists coming to Thailand.
2. Moreover Thai government also helps State Enterprise, AOT and TG, in finance and
promoting Thailand as maintenance hub.
However, it also has some weaknesses as following
1. Thailand still lack of skilled labors in aviation field
2. In addition, Thailand was downgraded from ICAO and FAA in term of security so it
can affect tourists’ reliability. Moreover, Europe may degrade us as well but Bangkok
Airways has the strategy to protect itself and AOT also use new technology to improve
its security standard.
Value
Vision
“AOT Operates The World’s
Smartest Airports”
Mission
Deliver services of higher standards with Corporate Social
Responsibility (CSR) toward the environment and community.
Core Value
1. Service minded: providing meaningful services.
2. Precaution of safety and security: Be aware of safety and security which is a heart of
operation.
3. Communication and participation both internal and external organization: building
teamwork, giving organization’s goals more important than individual’s goal as well as
increasing an efficient communication, management and decision making.
4. Learning continuation: encourage learning while support initiative thought and self-
development.
5. Transparency with Corporate Social Responsibility (CSR): transparent operation and has
responsibility to shareholders, customers, society and nation.
6. Operate in advantageous location: Located in main destinations in Central, Northern and
Southern of Thailand (Airports of Thailand Public Co., Ltd., 2011).
6
Rare
Nowadays, aviation industry has been changed and developed rapidly; moreover it has
competition which can imitate such as service, standard, facility, technology and innovation. If
compare AOT with DCA, it can be informed that AOT has strong organizational culture which is
hard to imitate. There are 2 main values:
1. Human resource development program such as Airport management program, Airport
operation management program, Business administration program, and Leadership
development program.
2. Establish reasonable regulations and easily to perform along the core value of the
organization until they change into organizational culture that are:
a. Service minded
b. Safety and security: provide safety standard
c. Teamwork: listen to other co-workers’ opinions
d. Innovation: develop an innovation rapidly
e. Integrity: pride of organization (Airports of Thailand Public Co., Ltd., 2014).
Difficult to Imitate
1. The investment of airport is over 1 billion baht because of using high technology, having
high operating cost, having commercial activities to meet customers’ need, and having
land development around airport. Moreover, there are maintenance cost and
administrative cost (Riddhagni, 2014).
2. The airport must require extensive space.
2.1. The airport needs to spend huge amount of money to bring back the area from
people who live near airport (Manager Online, 2012).
2.2. Perhaps, for building new airport, the airport may destroy environment (Manager
Online, 2012).
2.3. If you build airport in poor location, the airport may be useless (Manager Online,
2013).
3. Commercial aviation has so many activities including safety and security, air traffic
control, airport electricity, communication and mass transportation (Riddhagni, 2014).
4. The airport is kind of monopoly business because most airports are under control of
government in order to protect sustainability of country including political aspect,
economic aspect, or social and environmental aspect (Riddhagni, 2014).
7
Difficult to Substitutes
Passengers
Domestic Travel
Proportion of domestic travel, in 2013, is following: by road is 53.44 percent, by rail is
21.25 percent, by ship is 16.96 percent and by air is 8.35 percent (Information Technology and
Communication Center, 2015).
International travel
Proportion of international travel, in 2013, is following: by air is 81 percent, by road is
16.4 percent and by sea is 2.7 percent (The Tourism Authority of Thailand, 2015).
For international travel, most people use air transport to travel abroad but they can use
road transport for traveling in neighboring country.
8
Freight
According to Office of National Economic and Social Development Board (2015), it shows that
Proportion of domestic transportation, in 2013, is following: by road is 80.38 percent, by
ship is 17.4 percent, by rail is 2.2 percent and by air 0.02 percent.
Proportion of international transportation, in 2013, is following: by ship is 87.36 percent,
by road is 12.3 percent, by air 0.3 percent and by rail is 0.05 percent.
Each transportation mode has the different purpose; for example, by sea is the cheapest
way to deliver goods in international but slowest. On the other hand, by air is the most expensive
but it is fastest. Moreover, by road is efficient if it is used to deliver in the short haul and by rail
has the restriction about the rout it can provide.
In summary, if the customers do not use air transportation mode to deliver goods or
travel, the airports of Thailand will not be used. Airport can be substituted, especially for
domestic, by port, rail station, or depot. However, for international, it tends to grow up each
year because of the lower cost.
9
Competitive Advantage
Considering the Source of Competitive Advantage of AOT presents that it is
Differentiation, not Cost Leadership, because AOT sets the price twice as Department of Civil
Aviation (DCA)'s price, for example, AOT's international passenger service charge is 700 Baht
but DCA's international passenger service charge is only 400 baht. In addition, AOT's domestic
passenger service charge is 100 Baht but DCA's domestic passenger service charge is only 50
baht. (Department of Civil Aviation (Thailand), 2015). Competitive Advantage, Differentiation
of AOT is to aim at creating beyond expectation quality of service and serve all of customer
segments' demand (Airports of Thailand Public Co., Ltd., 2013).
Considering the Competitive Scope of AOT presents that AOT focuses on Broad Market.
Because only Suvarnabhumi International Airport, a subordinate airport of AOT, serves
international passenger to/from more than 200 cities around the world. Moreover, AOT serves
the 137 scheduled airlines, which include 126 passenger airlines and 11 air cargo carriers
(Airports of Thailand Public Co., Ltd., 2014).
So AOT is using Differentiate Strategy – Make it to be different from competitors to
respond customers’ need
10
Conclusion
Airports of Thailand Public Company Limited, or AOT, is a state enterprise. It controls 6
international airports of Thailand. Each airport is compared as gateway to the country and
significant in economic, socio-cultural, political, and military aspect.
Thai Aviation Industry is in positive way because of increasing of demand and supporting from
government. However, it also has some weaknesses because of lack of skilled labor and
downgrades from FAA.
Sustainable Competitive Analysis shows that AOT has sustainable competitive advantage as
follow:
Criteria for Sustainable Competitive Advantage and Strategic Implication
Resources of AOT
Valuable Rare Difficult to
Imitate
Without
Substance
Implication for
Competitiveness
Yes Yes Yes No Sustainable
competitive
advantage
which makes AOT's airports more successful than other airports.
Moreover, AOT is using Differentiate Strategy to help itself in competition in Aviation Industry.
11
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12
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13
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