20 January 2022 (closed)
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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 in terms of 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 as well as 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 programs.
The table below indicates air passenger growth in recent years. It shows that numbers of both domestic and foreign air passengers are growing strongly.
|Airline Passengers Indonesia
| - Domestic (in million)
| - Foreign (in million)
Source: Ministry of Transportation
A political development will provide new opportunities (and risks) 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 compete with this increasing competition.
Matters that are frustrating efficiency of Indonesia's aviation business are shortages of human resources (for example pilots), inadequate air traffic management as well as facilitating infrastructure for air travel. The latter includes the lack of appropriate sized airports (including runways) and tollways/railway tracks to and from the airports. Fortunately, the government has been busy revamping airports in recent years. Both the international airport of Bali (Ngurah Rai) and Jakarta (Soekarno-Hatta) are being expanded, while a complete new airport has been built near Medan (Kuala Namu). This is a positive development but more investments are needed to make Indonesia's aviation industry up-to-date as well as world-class.
Another stumbling block is that fierce competition has seriously reduced profit margins for all 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.
The table below provides the numbers of domestic and international air passengers for the top ten largest Indonesian airlines for full-year 2012. The two companies that are prominent are Lion Air and state-controlled Garuda Indonesia. Together, these companies control more than 50 percent of the market. However, they are not competitors in a strict sense as Lion Air provides budget flights (the low-cost air travel industry being the largest market of air travel in the country), while Garuda Indonesia is the country's only four-star top-class airline (it serves the low-cost aviation sector through its subsidiary Citilink).
Top Ten Largest Indonesian Airlines by Air Passengers in 2012:
Source: Investor Daily
All airlines in the table above - except for Garuda Indonesia and Indonesia AirAsia - are banned from flying to the Eurozone due to safety concerns.