Fast expansion of Citilink is in line with the vision of its parent company, Garuda Indonesia, that intends to tackle Indonesia's lucrative low budget air transport sector in a more aggressive manner in order not to lose out to Citilink's rivals Lion Air and Indonesia AirAsia. 

    2011   2012
  2013
Number of Passengers
(in millions)
   1.3    3.8    7.8¹

¹ indicates a forecast

Future Outlook of the Indonesian Aviation Business

The aviation industry in the Asia-Pacific region has shown robust growth in recent years. This region is one of the world's fastest growing regions regarding air travel. In the next 20 years, an average annual seven percent growth of air traffic is expected. Indonesia, the current engine of economic growth in Southeast Asia and one of the largest economies in the Asia-Pacific, contains a burgeoning middle class that is increasingly using airplanes for domestic and international transport. Being the world's largest archipelago (containing thousands of islands), air travel is a logical option for fast travel across the country. Moreover, Indonesia's investment grade status makes it cheaper for domestic companies to finance expansion.

    2010   2011   2012
Airline Passengers Indonesia
  58.3   66.0   72.5
 - Domestic (in million)
  51.7   58.8   63.6
 - Foreign (in million)
   6.6    7.2    8.9

Source: Ministry of Transportation

Moreover, a political development will provide new opportunities in Southeast Asia's aviation sector from 2015 onwards. The establishment of the ASEAN Economic Community, which aims for the member countries to become a more cohesive political and economic unity, stipulates the liberalization of air travel between its member countries starting from 2015. As other ASEAN countries contain competitive airline companies, such as Malaysia's AirAsia and Singapore Airlines, it will be vital for Indonesian airlines to be fully prepared to meet this competition.

Matters that are frustrating efficiency of Indonesia's aviation business are shortages of human resources (for example pilots), inadequate air traffic management and facilitating infrastructure for air travel. The latter includes the lack of appropriate sized airports (including runways) and tollways/railway tracks to and from airports.

Another stumbling block is that tough competition has seriously reduced profit margins for airlines, while capital investments remain high. In combination with poor management, this has taken a few victims in recent years: Mandala Airlines (a takeover by private equity firm Saratoga Capital and Tiger Airways eventually saved the company), Pacific Royale, and Batavia Air.

Bahas