Booming Aviation Industry in Indonesia Continues its Fast Pace
One of the industries that has been showing remarkable growth in recent years in Indonesia is the aviation industry. Blessed with robust macro economic growth and a burgeoning middle class, the country's population is increasingly using airplanes as means of transportation. Considering the magnitude of Indonesia, its island rich composition and underdeveloped road and rail network, air travel is an efficient option.
The number of air passengers in Indonesia has increased significantly during the last decade, turning the country in one of the fastest-growing air travel industries worldwide. Although the finalized official number has not been released yet, it is estimated that in 2012 around 72.5 million people used air transport in Indonesia, a ten percent increase compared to the previous year.
| 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
Wherever there is large demand, fierce competition for a slice of the lucrative cake will usually follow. Currently, around two dozen of commercial airlines are active in Indonesia but increased competition has taken casualties, particularly the smaller airlines which have to sell tickets at low prices to remain competitive; sometimes even selling below break-even point. One year ago, Mandala Airlines almost collapsed due to high debt woes. A takeover by private equity firm Saratoga Capital and Tiger Airways was just in time to save the airline. Last week, Batavia Air went bankrupt after it was not able to repay its debt. Tight competition might make more victims towards the future.
To stay on top, the leading airlines of Indonesia have all invested heavily in their fleets. In 2011, 2012 and 2013 Lion Air, Garuda Indonesia (and its subsidiary Citilink) and Indonesia AirAsia have all ordered hundreds of new airplanes that will be delivered in stages in the years ahead.
Market Leaders in Indonesia's Aviation Industry
| 2012 |
|
| • Lion Air |
23.9 |
| • Garuda Indonesia |
14.1 |
| • Sriwijaya Air |
8.1 |
| • Batavia Air¹ | 6.0 |
| • Merpati Nusantara Airlines | 2.1 |
in millions of passengers
¹ ceased all activities due to bankruptcy
Source: Ministry of Transportation
The rise of Indonesia's air travel also impacts heavily on its supporting infrastructure on the ground, such as airports, runways, and roads and railways to or from the airport. Many Indonesian airports are handling more passengers than they can absorb. For that reason, the two most frequent visited airports - Soekarno Hatta in Jakarta and Ngurah Rai in Bali - are being renovated by state companies Angkasa Pura I and Angkasa Pura II. Moreover, the government targets to complete the establishment of 11 new airports by 2015 as air passengers might grow to 100 million by 2015, the year that the 'ASEAN Open Sky' policy will be implemented. Under this policy ASEAN member countries will be able to fly freely from and to each member country.