Arif Wibowo, General Chairman of the INACA, said that despite the low price of jet fuel (avtur) air passenger growth in Indonesia next year will be limited (single-digit only) as low oil prices tend to go hand in hand with lower economic growth (resulting in people's weaker purchasing power).

Wibowo added that domestic airlines not need to be concerned ahead of implementation of the ASEAN Economic Community (AEC) with its ASEAN Open Skies policy (also known as the ASEAN Single Aviation Market). The ASEAN Open Skies policy involves the multilateral agreement between all ten ASEAN countries to unite their skies into one single aviation market (hence liberalizing regulations to a large degree) in an effort to boost flight frequency in the region, enhance connectivity between the region’s aviation markets, and encourage higher service quality, while lowering ticket prices for air passengers amid increased competition.

There has been concern whether Indonesian airlines are strong enough to face increased competition from foreign airlines, particularly those from Singapore and Malaysia. However, foreign airlines will only have access to five international Indonesian airports. As such, Wibowo advises Indonesian airlines to improve their network across the hundreds of airports in the archipelago to boost connectivity.

The government's push for infrastructure development should also boost the number of air passengers in Indonesia in the years ahead. The government under the leadership of Joko Widodo is eager to construct new airports (in cooperation with the private sector) and rejuvenate existing ones as well as boosting supporting infrastructure around local airports such as roads, railways and property development.

Air passenger growth in Indonesia at 8 percent (y/y) in the January-October 2015 period is regarded a positive result given that several challenges occurred in the aviation industry this year. One particular challenge is the fragile rupiah (which depreciated heavily since mid-2013 due to monetary tightening in the USA) and made imports of avtur and aircraft spare parts expensive (although the negative impact of a weak rupiah on avtur was moderate due to falling oil prices).

Air Passengers in Indonesia:

Period       2013       2014       2015
January-October         n.a.  59.8 million  67.5 million
January-December  68.5 million  72.6 million         n.a.

Source: Indonesia National Air Carrier Association (INACA)