Flying higher: With greater focus on safety, the industry is poised for expansion

The Indonesian air transport industry has gone from an international pariah banned in the EU to one of the most interesting globally for airlines, manufacturers, travellers and investors. The economy is growing, leading to an increase in travel and higher capital expenditures in the sector, as the government makes efforts to strengthen players and related infrastructure. International manufacturers are also undertaking initiatives to support the domestic airlines.

Garuda Indonesia is leading the turnaround. The flag carrier was subject to the 2007 EU ban, but was quickly removed from the list in 2009 and resumed serving Amsterdam in 2010 – although it reduced the frequency of flights to the European city in 2012 from daily to four a week due to the economic downturn in the West. In July 2009 the airline initiated its Quantum Leap programme, in an effort to lift the carrier to world-class status in five years’ time. Garuda changed its livery, updated its uniforms, worked on improving its service, added routes and started to rapidly upgrade its fleet. Between 2005 and 2010, its number of aircraft flown grew by 56% and the average age of its planes dropped from 11.2 years to 8.1 years. In 2010 it was named the “World’s Most Improved Airline” at the Skytrax World Airline Awards. The airline also received the delivery of 11 new aircraft in both 2011 and 2012, and went public in 2011. From 2010 to 2011, total passengers carried increased by 29.2% internationally and 37.9% domestically. On-time operations jumped 7.3 percentage points to 85.7% for domestic flights and 3.9 percentage points to 85.2% for international. It seems 2012 was also fruitful for the airline. Total passengers carried rose 20% in the first nine months of 2012 and operating income grew 140% in that period, while the average aircraft age dropped from 6.5 years at the end of 2011 to 6.23 years in September 2012.

EXPANSION PROGRAMME: Garuda is preparing for aggressive expansion after signing a code-sharing agreement with Etihad Airways in October 2012 and plans to spend Rp21trn ($2.1bn) in 2013 to acquire 24 new aircraft, including 10 B737-800 Boeing jets, four B777-300ER planes, three A330 airbuses and seven Bombardier CRJ1000NextGen aircraft. In February 2012 Citilink, wholly owned by Garuda Indonesia, received an air operator’s certificate and became an independent airline. The certificate allows it to serve up to 70 domestic and 16 international cities.

Indonesia AirAsia also opened four new routes in December 2012 – Medan-Banda Aceh, Medan-Pekanbaru, Surabaya-Jakarta and Surabaya-Semarang – and would like to open more. Its parent company, Malaysia’s AirAsia, is also upping service to Indonesia, increasing frequencies on the Kuala Lumpur-Lombok route in 2012 from three a week to four a week, while Cebu Pacific will start Manila-Denpasar flights in 2013. Lion Mentari Airlines, or Lion Air, made the largest Boeing order ever in February, for 230 aircraft worth $22bn.

NEW AIRLINES: Four new domestic airlines will start service in 2013. Batik Air, a Lion Air subsidiary, has received approval to fly 66 domestic routes and 20 international. The other carriers are Nam Air, a subsidiary of Sriwijaya Air, Kartika Airlines and Jatayu Airlines, a carrier that was founded in 2000 but lost its air operator’s certificate in 2007. While not a domestic carrier, Malindo Air, a joint venture between Lion Air (49%) and Malaysia’s National Aerospace and Defence Industries (51%) that is based and licensed in Malaysia, will become operational in 2013 and provide service to Indonesia.

SAFETY FIRST: To aid in the expansion of the industry, Boeing signed a memorandum of understanding in June 2012 with the Ministry of Transportation to improve flight and dispatch training in Indonesia. The US firm will help the country get its pilot and flight technician schools to comply with US Federal Aviation Authority and EU Aviation Safety Agency standards. Boeing said it believed that over the next 20 years the country would need an additional 47,000 commercial airline pilots and 60,000 maintenance technicians. In September 2012 a law was passed that put air traffic control in the hands of a semi-private firm to improve safety.


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The Report: Indonesia 2013

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