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SRPP Publication l 12 May 2021
Passawan Navanithikul (Founding Partner) and Viparvee Chaemchaeng (Associate)
Introduction to Thailand Aviation Law (Part I)
The principal legislation and regulatory bodies
The aviation regime in Thailand is mainly governed by the following legislation:
The Air Navigation Act B.E. 2497 (1954) (Air Navigation Act), as amended;
Notification of the Revolutionary Council No. 58 B.E. 2515 (1972);
The International Air Carriage Act B.E. 2558 (2015) (International Air Carriage Act);
The Air Navigation Contravention Law B.E. 2553 (2010) (Air Navigation Contravention Law); and
The Act on Certain Offences Against Air Navigation B.E. 2558 (2015) (Offences Against Air Navigation Act).
The regulatory bodies that ensure compliance with the legislation are set out below:
The Ministry of Transport (MOT), whose responsibility is to supervise the overall transportation sector in Thailand.
The Civil Aviation Authority of Thailand (CAAT), which is the main regulatory body governing aviation businesses, including regulating the operation and safety of air navigation as well as issuing aircraft and airport licences, certificates and granting permissions.
The Department of Airports (DOA), whose scope of responsibility is narrower than the CAAT; i.e., the DOA is responsible for airports.
Airports of Thailand Public Co., Ltd (AOT), which is a state enterprise that operates the main airports in Thailand (including Suvarnabhumi and Don Muang Airport).
The steps which air carriers need to take in order to obtain an operating licence
Two main licences are required for air carriers: an Air Operating Licence (AOL); and an Air Operator Certificate (AOC).
Air operation is considered a public amenities business under the Declaration of the Revolutionary Council No. 58, operation of which requires a licence from the MOT. Thus, an AOL is issued to certify that the licensee is qualified and has no prohibited characteristics to operate an air trading business.
On the other hand, an AOC is required to certify the competency of the certificate holder with regard to the safety of the air operation. An AOL must be obtained prior to applying for an AOC, the latter being required at least 90 days in advance of commencement of air operations. Obtaining an AOC is more complex than an AOL, as it requires consultation, evaluation and onsite inspection by the CAAT.
Note that the main qualification for an AOL is that the applicant must be held by a Thai national and have a board composition with a Thai majority; i.e. the business has: capital more than 51% held by Thai nationals; a board 2/3 composed of Thai directors; and its management power belonging to Thai nationals. One of the main qualifications for an AOC is the competency of the operator to secure the safe operation of the business in accordance with the Air Operator Certificate Requirements of the CAAT.
The principal pieces of legislation which govern air safety, and who administers air safety
Regulations on air safety are mainly governed by the Air Navigation Act and the Offences Against Air Navigation Act, as well as the sub-legislation issued thereunder, which is mainly monitored by the CAAT.
Air safety regulation for commercial, cargo and private carriers
There are no separate regulations for commercial, cargo and private carriers. However, certain safety requirements may apply differently depending on the type of carrier. For example, carriers of hazardous cargo may be subject to a higher standard of safety under the CAAT Regulation No. 4 concerning the Transportation of Dangerous Goods by Air.
Air charters regulation for commercial, cargo and private carriers
All types of air carriers are subject to the Air Navigation Act. However, there may be certain requirements which vary depending on the type of carriage, e.g. insurance limits for carriage of passengers and cargo.
Limitations to be aware of, in particular when compared with ‘domestic’ or local operators as regards international air carriers operating in Thailand
In general, under Thai law, international air carriers operating in Thailand are not required to obtain an AOL prior to its operation in Thailand, provided that such international carrier has obtained a registration licence under the carrier’s own domestic law. However, the international air carrier can also acquire a licence under Thai law. In both cases, there exist no rules applying restrictions or limitations on international air carriers compared to domestic air carriers. Note that there are also no specific distinctions under Thai tax law with respect to international and domestic air carriers.
The ownership of the airports
The main airports in Thailand are state-owned; i.e., owned by either AOT or the DOA. However, there are some airports which are privately owned, such as Samui Airport, Trat Airport and Sukhothai Airport, which are currently owned and operated by Bangkok Airways Public Company Limited.
The airports' requirements on carriers flying to and from the airports
Generally, airport operators do not impose specific requirements on aircraft flying to and from the airports in Thailand. However, due to the COVID-19 pandemic, in addition to the usual route permission, the CAAT issued the Notification on Conditions for Aircraft Permission to Enter Thailand on 2 July 2020, which prohibits aircraft carrying passengers to fly into Thai airports with certain exceptions, e.g., emergency landings, cargo aircraft or state and military aircraft.
Air accidents
The Air Navigation Act provides that upon the occurrence of air accidents, the Aircraft Accident Investigation Committee (AAIC) has the authority to conduct an investigation into such accidents. The AAIC has adopted a work manual for itself to comply with, which provides clear steps and procedures for its investigations.
Recent developments involving air operators and/or airports
Due to the COVID-19 pandemic, state authorities have adopted a number of measures and orders to assist air operators, such as reductions of service charges, lease fees, landing and parking charges and other types of fees applicable to airline operators. Additionally, the government (led by the MOT) are in talks to provide soft loans to airline operators during the crisis.
Aircraft Trading, Finance and Leasing
Registration of ownership in the aircraft register
The operator of aircraft, either the owner or rightful possessor, may submit registration of the aircraft to the CAAT to issue a certificate recognising such registration (Certificate of Registration). The Certificate of Registration does not constitute proof of ownership. Evidence of aircraft ownership can be proved by the underlying agreements that transfer the title of the aircraft, such as the bill of sale.
Aircraft mortgages
Registration of an aircraft mortgage is not applicable in Thailand, as an aircraft mortgage is not recognised under Thai law. In principle, only immovable property and certain movable property specified by legislation can be mortgaged. Common types of security for aircraft financing include pledge of an aircraft or creation of a business security over the aircraft under the Business Security Act B.E. 2558 (2015) (BSA).
Regulatory requirements which a lessor or a financier needs to be aware of as regards aircraft operation
It is important to note that for aircraft to be eligible for registration, they must be no more than 16 years old in case of aircraft that transport passengers and no more than 22 years old for aircraft that transport cargo. Another important requirement is deregistration of an aircraft, which can now be done by the rightful owner in certain circumstances (whom may not be situated in Thailand nor registered as the air operator in Thailand).
Title annexation, whereby ownership or security interests in a single engine are at risk of automatic transfer or other prejudice when installed ‘on-wing’ on an aircraft owned by another party
As a general principle under Thai law, the owner of a property will have ownership over the property’s components, which is defined as a part, which by nature or local custom, is essential to the existence of such property and cannot be separated without destroying, damaging or altering the property’s form. If many components, owned by different parties, were used to form a property, the relevant owners shall become co-owners of such property. However, in case of a principal component, the owner of the principal component will be the owner of the entire property, but he must compensate the costs of the other components to the remaining owners.
Based on the foregoing, if an aircraft is comprised of many engines and parts, owned by different parties, it must be considered whether such engine or part is a “component” of such aircraft to determine its rightful owner. If such engine or part is not a component, any security interest created over the aircraft would not cover such engine or part since a security interest may only be created by the owner of a property.
While the answer to the issue is unclear under Thai law, owners and financiers of engines should clearly agree and specify which engines or parts belong to which party. For example, by: (a) stating in the underlying agreement for all parties to agree that the owner has title to the engine or parts at all times; (b) requesting the owner of the other aircraft to issue a letter of recognition of ownership in case the engine or part is installed in another aircraft; and (c) ensuring that an engine or part, which may be installed in another aircraft, is clearly marked as the property of the owner.
Tax in general
Value-added tax will be collected upon: (i) the sale of goods or the provision of service by an operator; or (ii) importation of goods by an importer. A VAT rate of 10% is generally imposed; however, this rate has been reduced to 7% until 30 September 2021. Note that there are certain exemptions or reductions to VAT obligations such as a VAT rate of 0% for providers of international transport services by aircraft and an exemption of VAT for providers of domestic transport.
An aircraft lease agreement is subject to a stamp duty rate of 0.01% without a maximum limit, while an aircraft pledge agreement is subject to a stamp duty rate of 0.01% without a maximum limit, unless the underlying loan agreement has been duly stamped. A loan agreement is subject to a stamp duty rate of 0.02% with a limit of THB 10,000. Aircraft charter agreements and sale and purchase agreements are not subject to stamp duty.
Thailand's signatory to the main international Conventions (Montreal, Geneva and Cape Town)
Thailand ratified:
the Montreal Convention on 4 August 2017, which came into force in Thailand on 2 October 2017; and
the Geneva Convention on 10 October 1967, which came into force in Thailand on 1 August 1968.
Thailand has not signed and ratified the Cape Town Convention.
The application of the Conventions
Ratified treaties or conventions are not automatically binding in Thailand. That is, the provisions in the treaties or conventions must be incorporated or enacted into domestic law. The Montreal Convention is incorporated into the International Air Carriage Act B.E. 2558 (2015) (as amended by the International Air Carriage Act B.E. 2560 (2017)), which came into force in Thailand on 2 October 2017. The Geneva Convention has not been incorporated into Thai domestic law and, therefore, the provisions under such convention are not enforceable in Thailand.
Double Tax Treaties
Thailand has entered into various double tax treaties with at least 60 countries, which covers tax on income and capital of individual and juristic entities.
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