Citilink Indonesia, the low budget carrier of national airline Garuda Indonesia, expects to transport around 7.8 million air passengers in 2013. This constitutes a sharp rise compared to last year's result of 3.8 million passengers. The airline, which handles 140 flights per day to 22 Indonesian cities, expects the increase to be in line with the growth of its armada to 29 aircrafts in 2013 (including 22 new Airbus A320 planes). These types of aircrafts are designed to serve short or middle-long distance flights.
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.
|Number of Passengers
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.
|Airline Passengers Indonesia
| - Domestic (in million)
| - Foreign (in million)
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.