Grounded Carriers


Economic News

22 Jul 2010
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As the European Union (EU) imposed a blanket ban on Indonesian airlines flying through its territory on July 6, the Indonesian government promptly adopted a series of measures to address security concerns.

Two months after the US Federal Aviation Administration (FAA) advised US citizens not to fly on any Indonesian airline, saying the archipelago's airlines did not comply with the safety standards of the International Civil Aviation Organisation (ICAO), a panel of European transportation safety experts added Indonesia's 51 airlines to the EU's no-fly blacklist.

Although no Indonesian airline has scheduled flights to Europe, the move comes as Garuda, the national carrier, was considering re-opening routes to Amsterdam and London next year, three years after they were originally closed. There are also no Indonesian air carriers with flights to the US.

Following the liberalisation of the domestic air transport segment, passenger numbers have grown from 8m a year in 2000 to 34m in 2006. Growth is expected to carry on at a rate of 15% a year, with passengers increasingly using low-cost airlines rather than ferries or long-distance buses. With South-East Asia's skies due to open in 2010, the strain on resources is expected to further increase.

The ban comes after two high-profile accidents this year. In January, a flight operated by low-cost route carrier Adam Air crashed, killing all 102 passengers on board. Then in March, a flight operated by Garuda, burst into flames in Yogyakarta, killing 32 passengers. While the global average for fatal accidents for every million take-offs is 0.25, the rate in Indonesia has reached 3.77 over the past three years.

Tourism agencies in the EU are required to tell customers that Indonesian airlines are on the blacklist if they are selling package tours that include flights on such carriers. Travellers who have already purchased holidays from EU travel companies that include flights on Indonesian airlines will be able to exchange their travel for alternative transportation or be reimbursed for their trip.

"We reckon about 800,000 EU tourists come to Indonesia every year, and possibly 30% of those usually like to visit other parts of Indonesia rather than only Bali and Jakarta," Al Purwa, chairman of the Bali branch of the Association of Indonesian Tours and Travel (ASITA), told OBG.

More than 400,000 American and EU tourists who visited Indonesia in 2006 flew domestically, according to ASITA. They spent almost $200m, according an extrapolation of figures from Visa International.

The ban could pose difficulties to Indonesia's ambition of attracting 6m tourist arrivals in 2007.

"The positive thing is that it will make us more introspective about flight safety," Indonesian Vice-President Jusuf Kalla said upon the announcement of the ban. "There is only a psychological effect for the time being."

While there has been domestic pressure for Indonesia to adopt retaliatory measures, the government and private airlines have adopted a series of measures to address the EU's ban, which could be lifted in three months at the earliest.

Thus last week, the ministry of transport revoked the licenses of four domestic carriers, Jatayu Gelang Sejahtera, Aviasi Upataraksa, Alfa Trans Dirgantara and Prodexim, after they failed an air safety audit. Five other airlines had their licenses suspended for three months until safety improvements can be implemented.

The national carrier has also joined efforts to prove its safety credentials.

"As a member of the International Air Transport Association (IATA), Garuda is in the process of earning its IATA Safety Audit certificate," Pujobroto, vice-president of corporate communications at Garuda, told OBG. "The audit should be complete in August 2007."

Meanwhile, Indonesia organised an air safety conference on July 3 in Bali. It brought together representatives from ICAO, IATA and the FAA, among others.

"The Indonesian government is being proactive in improving safety among its airlines," Albert Tjoeng, Asia Pacific manager at IATA, told OBG. "On our part, IATA has also included Indonesia in our partnership for safety programme." The goal, announced at the Bali conference, is to raise airline operating standards and safety in Indonesia.

A joint declaration was also signed with the ICAO to improve safety and meet international standards, while strengthening and restructuring the air transport directorate.

In addition to these programmes, Australia is providing $19.8m for a bilateral transport safety assistance programme to provide for training and technical cooperation to address aviation and maritime transportation safety issues.

Roberto Kobeh Gonzales, president of the ICAO council, said on July 5 in Jakarta that Indonesia was on the right track to improving its air safety standards and that the ban might have resulted from 'misinformation'.

"We hope that [the EU decision-makers] can get more transparent information on what Indonesia is doing with its aviation industry," Gonzales said at a press conference after inspecting an aircraft maintenance hangar run by Garuda in Jakarta.

Air safety has long been a thorn in the development of Indonesia's transport sector. Although Indonesian airlines have suffered bad press this week, the new measures will bring significant improvements to both the operations and audit mechanisms of the airline industry.

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