U-Tapao airport project: Thailand approves BBS Joint Venture
Thailand's cabinet has approved the selection of BBS Joint Venture for the public private partnership under the project, which includes an ‘airport city’, as well as the delegation of authority to the Eastern Economic Corridor (EEC) Office of Thailand to enter into the agreement with the private party. It will be led by Bangkok Airways, which has experience with three smaller Thai airports, and there has been a suggestion that Tokyo Narita Airport could also become involved.
BBS JV consists of Bangkok Airways, BTS Group Holdings and Sino-Thai Engineering and Construction Company.
The U-Tapao airport, close to the leading Thai beach resort area in and around Pattaya, is also expected to become Bangkok’s third airport, supplementing the existing Suvarnabhumi and Don Mueang airports.
- Thailand's cabinet has approved the selection of BBS Joint Venture for the PPP under the U-Tapao International Airport Project.
- The Thai regional airline Bangkok Airways is the main driver.
- The Royal Thai Navy will decide who builds the airport’s runways.
- U-Tapao will also be Bangkok’s third airport.
- The airport has been heavily used by Russian charter flights.
U-Tapao development comprises six projects
Bangkok Airways reports that Thailand's cabinet has approved the selection of BBS Joint Venture for the public private partnership under the U-Tapao International Airport Project, which includes an ‘airport city’, as well as the delegation of authority to the Eastern Economic Corridor (EEC) Office of Thailand to enter into the agreement with the private party.
The development of the U-Tapao and Eastern Airport City comprises six projects, namely a third airport terminal; commercial gateway; air cargo and maintenance, repair and overhaul sections; free trade zone; and training centre for aeronautical personnel.
A second terminal, which increased airport capacity from 800,000 to three million ppa was officially opened in Feb-2019. In the second phase, the government will boost the capacity further, to 15 million ppa.
BBS JV consists of Bangkok Airways, BTS Group Holdings and Sino-Thai Engineering and Construction Company. Bangkok Airways noted that the U-Tapao International Aviation Co, a JV company incorporated under the BBS JV agreement, “is well equipped to enter into the public private partnership with the EEC office. The agreement is expected to be executed in Jun-2020.”
The contract will reportedly be signed on 19-Jun-2020. The Cabinet has also set aside a budget of THB889.2 million (USD28.2 million) for investment in related projects such as aviation meteorology and electricity.
Royal Thai Navy to decide who builds runways
The navy will decide who builds the airport’s runways, after an Environmental Impact Assessment (EIA) has been conducted. There is an existing 3,000m x 60m runway.
The development is expected to be completed by 2023 and will create 15,600 new jobs.
BBS proposed a return on investment of at least THB305 billion (USD9.7 billion) over 50 years of operation.
U-Tapao to be Bangkok’s third airport
The U-Tapao airport, close to the leading Thai beach resort area in and around Pattaya, is also expected to become Bangkok’s third airport, supplementing the existing Suvarnabhumi and Don Mueang airports, to which it will be connected by a high speed rail line. To what extent that previous need for a third airport will be realised in the wake of current circumstances remains to be seen.
(With the temporary closure of Suvarnabhumi Airport and Don Mueang Airport in late Nov-2008 because they had been occupied by anti-government protestors, U-Tapao briefly became Thailand's main supplementary international gateway).
U-Tapao lies approximately 90 miles (140 km) southeast of Bangkok, near Sattahip on the Gulf of Thailand, about a 45-minute drive from Pattaya, which is still Thailand's most popular beach resort.
The airport was built by the United States to accommodate B-52 bombers for missions in Vietnam, Laos, and Cambodia during the Vietnam War and has retained its military connections since. It serves as the U-Tapao Royal Thai Navy Airfield, home of the Royal Thai Navy First Air Wing. U-Tapao is also the home of a large Thai Airways maintenance facility, servicing that airline's aircraft as well as those of other clients.
Perhaps because of its military connections, civilian statistics are not readily accessible.
U-Tapao has the opportunity to become a major point of international entry to Thailand, relieving congestion at the two Bangkok airports.
At present, approximately two million passengers are using the airport each year and the majority of the capacity is split between scheduled low cost carriers and charter operators, with a similar split between domestic and foreign airlines.
This is the chart for seat capacity by business model for week commencing 03-Feb-2020 (charts after that date are meaningless).
Seat capacity at U-Tapao airport, by business model: week commencing 03-Feb-2020
Russian charters predominate
Before the close-down Bangkok Airways was operating flights to and from its owned airport at Koh Samui and also Phuket, but the largest airline, at least seasonally, was the Russian charter airline Azur Air, with flights from 12 Russian airports.
There are at least three other Russian charter airlines active at U-Tapao under normal circumstances, and TUI has seasonal charters from three UK airports.
Otherwise, airlines are of the low-cost variety; there are no flag carriers or full service/network/alliance airlines. That may change once this expansion is complete, the high speed rail line is completed, and U-Tapao is embraced into the Bangkok airports system.
Bangkok Airways is the only consortium member with aviation experience
The BBS Joint Venture includes Bangkok Airways (which has a 45% stake), BTS Group Holdings (35%) and Sino-Thai Engineering and Construction (20%).
The regional Thai airline Bangkok Airways - several times winners of CAPA's Asia Pacific Regional Airline of the Year - is something of a pioneer in the airline business, having managed its own airports at Koh Samui, Sukhothai, and Trat for many years.
The major investor is the Samui Property Fund, which is the leaseholder, with Phatra Asset Management Company as the managing entity.
The main driver towards Bangkok Airways’ entry into the airport sector was a level of dissatisfaction in some quarters with Airports of Thailand, which manages the largest airports but was focused mainly on Bangkok, the much-needed second stage of Suvarnabhumi Airport, and the integration of that airport with the Don Mueang facility.
Another driver was possibly Thailand’s Ministry of Transport’s plans to construct a new state-owned airport at Koh Samui to end the current monopoly held by the existing Koh Samui Airport, managed by Bangkok Airways.
Therefore there was an opportunity for Bangkok Airways to make further selective investments in vacation or isolated city airports. However, having looked at 28 provincial airports run by the Department of Civil Aviation, it did not do so, entering instead into this consortium, which will manage what will become another Bangkok airport.
Nor did Bangkok Airways engage in the business in other countries, as it had suggested it might.
The other two consortium members have no experience of the air transport business, although BTS Group Holdings PCL is in the business of mass transit. The company operates Bangkok's BTS SkyTrain system and the Bus Rapid Transit (BRT) System.
Sino-Thai Engineering is a construction company.
As reported in a Feb-2020 CAPA article (Narita Airport considers three major foreign airport opportunities), the BBS Consortium has suggested that executives of Tokyo Narita Airport could operate U-Tapao Rayong-Pattaya International Airport.