THAILAND’S SMART AVIATION OPERATORS FOCUS ON THE FUNDAMENTALS TO IMPROVE THEIR BUSINESSES
Written By: Ronald Brickerd and Albert Valentine. Originally Published in the Thai American Business Magazine Journal of The American Chamber of Commerce 1 May 2017.
The birth of aviation in Thailand began in January of 1911 at the site of what is now the Royal Bangkok Sports Club. From that date until June 2015, aviation in Thailand had followed a fairly steady trajectory much in-line with the global aviation industry. However, in that month, the International Civil Aviation Organization (ICAO) issued a red flag against the Thai aviation authorities, thereby launching Thailand into one of the most challenging times in the history of Thai aviation.
The response of the aviation operators in Thailand has fallen into three categories: deniers, pessimists, and the strategists, each with their own response style. The deniers are ignoring the situation simply blaming the regulatory authorities and attempting to conduct business as usual hoping that things quickly return to normal. The pessimists are hunkering down, trying to trim every cost to the last baht and hope they have the resources to outlast the situation. Meanwhile, the strategists are reacting deliberately and making use of this time to reset and improve their operations.
Strategically thinking operators within the Thai aviation sector are recognizing the red flag situation for what it is: a temporary situation. They recognize that other Southeast Asian nations have received and later successfully cleared ICAO red flags issued against their aviation authorities.
While no one can definitively state with certainty that the red flag will be cleared in any specific period of time, what is clear within the aviation industry is those operators thinking along a strategic basis are taking clear and positive steps to ensure that when Thailand finally emerges from the red flag situation, they are stronger, healthier, and better equipped to expand their operations than those whose who are choosing the alternatives.
Strategically thinking operators are focusing on the basic elements of the airline business. They are using this period to focus on Team Development, Safety Systems as well as the Airline Efficiency and Economics.
TEAM DEVELOPMENT
First and foremost, aviation operators who are thinking strategically are acting purposefully by investing not only in their hard skills, but are embracing and focusing on their softer skills, the people aspects of operations. They are doing so by looking at their organizational health and improving team development. Operators are realizing that investing in team development has a positive effect on organizational health. Organizational health relates to the ability of an organization to align, execute, and renew itself faster than the competition so that it can sustain exceptional performance over time.
Companies are realizing that performance is not solely based on net operating profit, total returns to shareholders, net operating costs, and stock turn. It also includes return on capital employed. A recipe for excellence includes their history as an organization, their employees’ capabilities and passions, their internal and external environment, along with the aspirations of the company. Organizations are embracing coaching and consulting to develop teams in the area of operational excellence, continuous improvement, and safety.
SAFETY
While the ICAO red flag specifically pertains to the governmental regulatory authorities, and not the airlines, operators are awakening to the reality that they need to take bold steps towards reaching international standards in the area of safety. Their Safety Management Systems (SMS) are undergoing significant revisions. They are taking critical evaluations of their SMS and one of the key things they are doing is implementing fully integrated safety systems.
They are taking an extensive look at their organizational safety culture. They are taking the time to ensure that they are building a culture of safety in their organizations with special emphasis on individual and group attitudes, values, competencies, and patterns of behavior. These organizations are taking a systematic approach to their cultures by focusing on the entire system vice simply developing a set of checklists to comply with the Thai regulatory requirements.
These operators are seeking international endorsement of their practices through programs such the International Air Transport Association Operational Safety Audit (IOSA) program. They are treating the required “minimums” as exactly that, the minimum required, and seeking ways to exceed them and establish themselves as benchmark organizations. They are accomplishing this by incorporating the four minimum components of a true Safety Management System: Safety Policy, Safety Risk Management,
Safety Assurance, and Safety Promotion.
AIRLINE EFFICIENCY AND ECONOMICS
Strategic operators are focusing on their economic basics, paying special attention to both increasing revenue while at the same time focusing on their costs.
On the revenue side, they are paying special attention to their load factors and utilization rates for aircraft. They are creating meaningful changes to increase both through a combination of marketing adjustments and detailed effective route analysis. Increasingly, these actions are resulting in a corresponding increase in their overall yields.
On the cost side, operators are developing detailed cost savings strategies based on an analysis of individual cost centers as opposed to a “slash and burn” overall percentage reduction approach.
Their finance teams are conducting detailed reviews of their overall airframe costs and leasing agreements, as well as engaging in fleet and network rationalization studies. They are instituting comprehensive fuel savings plans not focused solely on pricing and hedging options but leveraging newly available technologies to generate significant savings.
These operators are working on creative solutions to reduce their daily maintenance costs, parts and logistics operations. They are discovering alternate sources of outside maintenance, parts and new spares distributors who offer them spares of equivalent or higher quality at lower overall costs.
LOOKING TOWARDS THE FUTURE IN THAILAND
In spite of the ICAO red flag, aviation business opportunities abound. According to the Thai Board of Investment, “Thailand’s air traffic is rising at three times the global market rate. It has increased at an average annual rate of 13.14% to 13.54% for total aircraft movement over the last four years”.
The business potential for both Thai and American aviation companies continues to expand unabated across the spectrum to support this projected growth.
Aviation operators in Thailand are actively seeking assistance to fully develop their potential. There are numerous opportunities in maintenance & repair operations (MRO), safety management, forward supply point and distributorship operations, and many more areas.
As a result of this projected growth, which some experts consider to be the largest in Asia over the next decade, smart aviation operators are preparing their organizations to capitalize on this expanding opportunity. They are ensuring their future success in the market which will emerge from this red flag situation.
Local operators are taking the long view of the situation and maximizing on their efforts by focusing on the fundamentals of the aviation business. After all, those haven’t changed. Only the environment where they are being exercised is temporarily altered.
RONALD BRICKERD IS MANAGING DIRECTOR AT THAYAAN AVIATION AND ALBERT VALENTINE IS A SENIOR EXECUTIVE CONSULTANT AT THAYAAN AVIATION. THEY CAN BE CONTACTED AT INFO@THAYAAN-AVIATION.COM
Written By: Ronald Brickerd and Albert Valentine. Originally Published in the Thai American Business Magazine Journal of The American Chamber of Commerce May 2017.
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