Expansion plans in the pipeline for Indonesia's airports

 

In recent years the number of air passengers in Indonesia has risen rapidly, from 30m in 2009 to more than 115m in 2018. This was largely driven by two factors: the fast-growing middle class, which comprises an estimated 52m people; and the emergence of low-cost carriers, which have significantly improved regional connectivity. The country’s growing popularity as a holiday destination for international tourists has also contributed to this growth, with 10.1m international arrivals by air in 2018 – a 4.3% increase from 2017.

As a result of this rising demand, a number of airport expansion plans are currently in the pipeline. Although the air travel industry was severely disrupted by the global Covid-19 pandemic in the first half of 2020, the popular tourist destinations are keen to reopen as soon as possible. In April 2020 Bali revealed plans to welcome visitors as early as the following month, although as of early May 2020 no further updates had been made.

Making Moves

As a result of this rapid rise in traffic, many of the country’s domestic and international airports have been operating above capacity. The government has identified reducing the infrastructure gap as a priority, with major spending plans under way. Major upgrades are planned for existing airports, while the marketing of new tourism destinations is also likely to result in the development of new airports (see Tourism chapter). Soekarno-Hatta International Airport, which serves Jakarta, has been under pressure for many years. The airport received 112m passengers in 2018, significantly over its capacity of 70m. In December 2019 a third runway opened at the airport as part of plans to ease congestion, but more ambitious measures include plans to build a new airport to serve the capital.

Discussions regarding a new airport for Jakarta first began in 2011, but the project has faced numerous delays. Nevertheless, state-run Angkasa Pura II, which oversees 17 airports in the country, was reportedly conducting a feasibility study into this development as of April 2020, with current plans including the reclamation of land 15 km north of Soekarno-Hatta. The project will cost an estimated $7bn-10bn and is likely to be conducted as a public-private partnership (PPP) between Angkasa Pura II and private companies, with an expected completion date of 2024.

Capacity Boost

Upgrades are planned at other airports around the country, including Kualanamu International Airport, which serves Medan. In early 2020 Angkasa Pura II invited private companies to submit proposals to help transform the airport into a major hub for airlines from South-east Asia, East Asia and the Middle East. The project offers considerable investment potential given that Sumatra is Indonesia’s second-largest island in terms of population, with around 60m residents. In 2019 operations also began at the New Yogyakarta International Airport, which aims to ease pressure on the city’s Adisucipto International Airport.

There are also plans to construct a new airport on Bali to ease pressure on the existing Ngurah Rai Airport in Denpasar. Although a site has been proposed on the north of the island, Bali has been placed under considerable environmental pressure due to its popularity as a tourism destination, with issues surrounding safe and efficient sewage disposal and water availability.

To relieve this pressure, the government has invested heavily in its 10 New Balis programme, which aims to market alternative destinations across the country. The government is hoping to attract $10bn in investment for the initiative, which will be used to improve access, including air infrastructure. The destinations include Lake Toba in North Sumatra, Borobudur in Central Java and Likupang in North Sulawesi.

Although Angkasa Pura II has traditionally dominated the segment, the recent drive to upgrade airports has encouraged collaboration with private companies, particularly in the form of PPPs. This is a welcome step as it helps to boost the private sector while also serving to fill the financial gap left by the relative shortage of government funding for these large-scale projects.

You have reached the limit of premium articles you can view for free. 

Choose from the options below to purchase print or digital editions of our Reports. You can also purchase a website subscription giving you unlimited access to all of our Reports online for 12 months.

If you have already purchased this Report or have a website subscription, please login to continue.

The Report: Indonesia 2020

Infrastructure & Transport chapter from The Report: Indonesia 2020

Previous article from this chapter and report
China invests in Indonesia's infrastructure sector
Next article from this chapter and report
Liew Mun Leong, Chairman, Changi Airport Group: Interview
Cover of The Report: Indonesia 2020

The Report

This article is from the Infrastructure & Transport chapter of The Report: Indonesia 2020. Explore other chapters from this report.

Covid-19 Economic Impact Assessments

Stay updated on how some of the world’s most promising markets are being affected by the Covid-19 pandemic, and what actions governments and private businesses are taking to mitigate challenges and ensure their long-term growth story continues.

Register now and also receive a complimentary 2-month licence to the OBG Research Terminal.

Register Here×