Indonesia - AviationIndonesia - Aviation

Overview

                                                                                                                                Unit: USD millions

Data Sources: Central Bureau of Statistics Indonesia, Trade Stats Express USA
 

Leading Sub-Sectors

Indonesia’s Central Bank predicted the country’s economy will increase this year in the range of 5.1-5.5%. This figure is better than the two previous years, which were 5.05% in 2017 and 5.02% in 2016. Finance Minister Sri Mulyani has already targeted growth of 5.4% in the State Budget and she is optimistic that all components will grow positively, in terms of investment and exports helped by the upward trend in world commodity prices.

The aviation sector offers huge investment opportunities as Indonesia is the largest market in South East Asia with a population that makes up 40% of the 625 million of combined ASEAN countries. Indonesia currently has 61 scheduled and unscheduled commercial airlines. The country is ranked as having the second-fastest growing aviation industry in the world after China in terms of aircraft orders and business value.  Being an archipelago comprised of 17,000 islands, Indonesia naturally needs air travel for the mobility of its people and goods. The challenges are how the country's infrastructure can follow the rapid development of aviation and how the government will manage its human resources to meet market demands.

According to the Indonesia Central Statistics Agency (BPS), from January to September 2017, the number of domestic air passengers grew by 11.36% to 66 million compared to the same period the previous year. Meanwhile, international air passengers increased by 14.47% to 12.5 million. Airports Director at the Ministry Transportation, Bintang Hidayat, predicted the number of air passengers would climb 29.6% to 140 million in 2018, much higher than the estimated 108 million passengers in 2017. Bintang explained that the growth would be supported by airlines expanding their fleet in the following year. The country's largest low-cost carrier, Lion Air, has expressed their intention to add 17 new aircraft next year if growth can reach 10 percent. President Director of low-cost carrier Citilink, Juliandra Nurtjahjo, said the airline also expected 10 per cent growth next year with the expansion of new routes, although Citilink will not add to their fleet next year, rounding the total of the remaining fleet to 50 aircraft. Its parent group, Garuda Indonesia, has postponed delivery of its aircraft orders in a bid to cut costs amid financial woes.

Bayu Sutanto, Scheduled Flight Division Head of the Indonesian National Air Carriers Association (INACA), also voiced similar sentiments about next year's predicted double-digit growth. Hence, if Indonesia's economic growth in 2018 reaches 5.4 percent as targeted by the government, then the aviation industry will grow typically 2.5 times that of the overall economic growth. He also pointed to the busy run-up to the April 2019 presidential elections prompting extra travel.

Opportunities
Indonesia is ranked 72 out of 190 countries in the Ease of Doing Business 2018 report by the World Bank, a huge increase over the previous year’s ranking of 109.up from 91 in 2017.  According to the World Bank, real GDP growth is estimated at 5.1 percent for 2017 and will strengthen to 5.3 percent in 2018, driven by a continuation of strong investment growth and a modest, but continued recovery in consumption. Indonesia’s under-developed public infrastructure could present significant opportunities in aviation. With Indonesian airports already heavily burdened and the increasing growth in air traffic, investments and developments in new airports closest to tourist destinations, refurbishment of existing airports, and construction and improvements to ground infrastructure, runway, and air traffic systems are promising areas for future growth.
In 2017 Indonesia President Joko Widodo agreed to prioritize 5 sectors: Infrastructure, Tourism, Maritime, Energy and Food sectors. The Ministry of Transportation will prioritize infrastructure development programs, especially accessibility that supports the tourism sector, including developing airports close to the leading tourist destinations. However, the government cannot afford to build all required infrastructure across the country, hence it welcomes the private sector, both local and foreign to play a key role in Indonesia's infrastructure development. It was estimated that Indonesia needs up to USD $450 billion in infrastructure development investment up to 2019.  With more aircraft in operation in Indonesia, there will be a greater need for aircraft parts and maintenance services. According to the Indonesian Aircraft Maintenance Service Association (IAMSA), the potential market for Maintenance, Repair and Overhaul (MRO) in the next five years is predicted to reach 2 billion US dollars per year, or double this year's figure. Foreign investors can partner with local firms to establish aircraft maintenance facilities. With the growth of the aviation sector, Indonesia needs adequate training for its workforce ranging from technical to leadership training. IAMSA noted that the 62 MRO facilities in Indonesia will not be able to accommodate the needs of around 1600 national aircrafts due to the lack of human resource capability. This opens opportunities for companies with expertise in the field of aviation to share their knowledge and experience.

U.S. – Indonesia Aviation Working Group Program
On April 20, 2015, with the support of the U.S. Commerce Department and the FAA, Minister of Transportation Ignatius Jonan and U.S. Ambassador Robert O. Blake signed an MOU to officially commence establishment of the U.S. – Indonesia Aviation Working Group.  The AWG provides a platform for the U.S. government and companies to engage with Indonesian aviation stakeholders from government agencies, state-owned enterprises, and the private sector in order to share best practices from around the world, and to propose and provide innovative solutions and services to support the growth of the Indonesian aviation sector.
 
The AWG’s activities focus on policy and technical issues facing the Indonesian aviation sector that include:
1)         Air Traffic Management Modernization
2)         Airport Infrastructure
3)         Aviation Safety and Security
4)         Development and Growth of Aviation Support Services
5)         Airspace and Airport Capacity Analysis, Development, and Planning
6)        General Aviation Access and Integration
7)         Cargo Security
There is activity under the platform of the AWG held this year:
•Aviation Cyber Security: On July 11, 2018, Director General of Civil Aviation Agus Santoso and FCS hosted an event to hear Ministry of Transportation’s including the SoE’s plan on the prevention actions from cyber-attacks. The FAA and TSA presented on what it is doing in the region to support the upgrade of cyber security system. Key people in the Indonesian MoT, airport operators and airlines attended the event. A networking reception at DCM residence was held afterwards.

Web Resources

(A) Government and Statutory Agencies:
Directorate General of Civil Aviation: http://dephub.go.id/
AirNav Indonesia: www.airnavindonesia.co.id
Angkasa Pura I: www.angkasapura1.co.id  
Angkasa Pura II: www.angkasapura2.co.id
Indonesia Central Bureau of Statistic: www.bps.go.id
 
(B) Airlines:
PT. Garuda Indonesia: www.garuda-indonesia.com
PT. Lion Airlines: www.lionair.co.id
PT. Citilink Airlines: www.citilink.co.id
PT. Sriwijaya Air: www.sriwijayaair.co.id
 
(C) Trade Association:
Indonesian Chamber of Commerce & Industry (KADIN): www.kadin-indonesia.or.id
Amcham Indonesia: www.amcham.or.id
Indonesia Nasional Air Carrier Assosication (INACA):  http://inaca.or.id/
 
For questions or more information, please contact Commercial Specialist Melissa Wijaya at Melissa.Wijaya@trade.gov