The Thai government recently amended the Air Navigation Act B.E. 2497 (1954) by enacting the Air Navigation Act No. 11 B.E. 2551 (2008) (the "Act") which came into effect on 3 September 2008. From 7 March 2009 certain relevant manufacturing licences and product design approvals will be required for existing and new manufacturers of aircraft and aircraft parts in Thailand. Importantly, certain types of these manufacturing licences will be available only to companies which have a minimum 51% Thai shareholding. Unfortunately, the true impact of this new law on existing and future manufacturers can only be measured after the Civil Aviation Department has issued ancillary regulations which are as of today's date outstanding.
The Thai government's updating of the Act, which regulates the civil aviation industry, is said to be designed to upgrade the quality of the Thai aviation industry to meet international standards. Clearly some investors will view these as prohibitive protectionist measures.
Pursuant to the Act, a manufacturer of aircraft or aircraft parts must obtain one or more of four manufacturing licences from the Director-General of Civil Aviation Department. The Act categorises the licences into four types depending on the products manufactured:
- Production Certificate for Aircraft which allows licencees to produce aircraft and aircraft parts as specified in the Production Certificate;
- Production Certificate for Aircraft's Important Components which allows licencees to produce aircraft's "important" (our emphasis) components including its parts as specified in the Production Certificate;
- Production Authorisation for Parts Manufacturer Approval ("PMA") which allows licencees to produce PMAs; and
- Production Authorisation for Technical Standards Order ("TSO") which allows licencees to produce TSOs.
Unfortunately, the Thai Technical Board has yet to issue the supporting regulations which, amongst other things, will list the types of parts which will require licences. It is expected that the Civil Aviation Department will adopt standard international practices to identify the list of parts falling into each type of manufacturing licences
There will be an exemption for manufacturing certain types of standard parts which will not require a manufacturing licence. The list of standard parts will be announced by the Thai Technical Board in due course. The failure to provide these lists is creating considerable uncertainty.
Qualifications of Eligible Applicants
The Act clearly defines the requirements for eligible applicants for Licences in 1 and 2 above. Two significant qualifications relate to the foreign shareholding limitations and the management control, which require that:
(i) at least 51% of the total registered capital of an applicant must be held by Thai nationals; and
(ii) management decisions must be under the control of Thai nationals.
Requirements for applicants for Licences in 3 and 4 will be announced in future ministerial regulations.
Approvals of Product Design
The Act also requires that designs of aircraft and aircraft parts manufactured in Thailand must be approved by the Civil Aviation Department. Alternatively, the designs may be approved by the competent government authorities of a country party to the Convention on International Civil Aviation dated 7 December 1944 or a country having an agreement with Thailand and is duly certified by the Civil Aviation Department.
Transitional Period for Current Manufacturers
Current manufacturers of aircrafts, aircraft's important components and PMAs must apply for the relevant licences on or before 6 September 2009. In the interim, applicants may continue operating and manufacturing aircrafts and aircraft parts. Meanwhile, TSO Production Authorisations shall remain valid until their expiration date.
The Impact of the Act
The new amendments in the Act will have an impact on the operations of companies manufacturing aircraft and aircraft parts as it requires these manufacturers to meet the qualifications required not only relating to the foreign shareholding restrictions but also to the management control. The qualifications for the Production Authorisation for PMA and TSO are still unclear at this time and we will update upon the announcement of any further information.
For further information, please contact:
Gary Biesty (firstname.lastname@example.org)
Chitanong Poomipark (email@example.com)
Sirirat Kongkiattiwong (firstname.lastname@example.org)
Swangchit Tricharoenwiwat (email@example.com)