Aviation to Indonesia
Trends and opportunities
Indonesia's rapidly expanding middle class is increasingly using air transportation to travel across the numerous islands within the Indonesian archipelago. McKinsey Global Institute estimates that Indonesia’s ‘consuming class’ now numbers 45 million and is forecast to increase to 135 million people by 2030. The Central Bureau of Statistics stated a total 82.44 million passengers in 2015, an increase of 13.6 per cent from 72.54 million in 2014 dominated by domestic passengers. The Indonesian local passenger market growth is projected to increase up to 130 million by 2020.
In 2015, there are 66 commercial airlines comprises of 17 scheduled flights and 49 chartered flights serving three different flight routes; main routes (hub airports), Feeder routes (support for main routes), and pioneer routes (isolated areas development supported by government). Top Indonesian scheduled airlines servicing domestic and international flights are Garuda Indonesia, Air Asia Indonesia, Lion Air, Wings Air, and Sriwijaya Air among others. Major key players in the business of non-scheduled airlines / charter flights are Susi Air, Pelita Air Service, Airfast Indonesia, Trigana Air Service, Transnusa Aviation Mandiri, and Tri Mg Intra Asia which main users largely from the oil and gas companies. With the downfall of the oil and gas industry however, these airlines has diversify business servicing plantation, tourism, logistic, and medivac.
In total there are 750 aircrafts which are largely operated by Garuda Group and Lion Air as two major players. Most local airlines procurement of aircraft generally done by leasing and buying through a fleet plan scheme. Airbus and Boeing are the main supplier with fleet type ranging from B737-900ER, B747-400, B737-400, B737-800NG, B777-300ER, A330-300, A330-200, CRJ 1000 NextGen, ATR 72, ATR 42, amongst other types. Charter flights operators generally use fixed wing aircraft and rotary wing aircraft.
To cater the market, Indonesia through its aircraft manufacturer PT Dirgantara Indonesia (DI) together with Regio Aviasi Industri, a local player, plans to produce passenger aircrafts, N-219, light transport aircraft designed by Indonesian Aerospace for pioneer routes.
The ownership and management of airports in Indonesia is complex and divided amongst several organisations. There are 233 state owned and operated airports in Indonesia. Twenty-five of these are managed by two stated owned enterprises - Angkasa Pura (AP1) Angkasa Pura 2 (AP2). Combined they account for approximately 90 per cent of total market revenue (source: KPMG, A guide to Airports in the Asia Pacific, January 2007).
AP2 is responsible for the operations of twelve airports in the western regions and AP1 for the other thirteen in the east, including two cargo warehouses and one air traffic control centre in the eastern region of Indonesia. The majority of the other airports are owned and operated by local governments or through technical executive units under the Ministry of Transportation (164 smaller airports are operated directly by the Directorate General of Civil Aviation).
In developing some of these airports, AP1 and AP2 has partnered with foreign companies including India’s GVK Group and Korean’s Incheon Airport.
Current regulations permit foreign investors to partner with local entities when entering the non-formal education sector in Indonesia, as long as the ownership stake does not exceed 49 per cent.
The Indonesian air space traffic is managed by state owned enterprise, Air Navigation Indonesia (AirNav) through Jakarta Air Traffic Service Centre and Makassar Air Traffic Service Centre.
The newly elected Indonesian government priorities include the urgent development of infrastructure across the archipelago, aiming to develop 46 new airports by 2030, as stated in the Indonesian Ministry of Transport 2030 Airport Master Plan.
The large air traffic market will drive higher demand for maintenance repair and overhaul (MRO) and manufacturing. 70 per cent of Indonesia’s MRO is currently done in Singapore with only 30 per cent done domestically, of which 80 per cent is dominated by GMF, part of Garuda Group.
However, Indonesia is looking to further develop their MRO industry with a plan for a Hub in Batam and Bintan, just off Singapore. A growing MRO market will also increase the need for qualified aircraft engineers, technicians and mechanics. The need for MRO is set to increase at such a pace that foreign companies will continue to play a major role in providing maintenance services to Indonesian carriers.
Indonesia’s aviation industry in general is still under capacity and rapid growth is outpacing the recruitment of an adequately skilled workforce. This skills deficit is even more pressing given the upcoming ASEAN Open Skies agreement which will come into force in 2015. By 2015, Indonesia will require an additional 4000 new pilots, 7500 new engineers and 1000 new Air Traffic Controllers.
Australia, with an advanced and mature aerospace industry are well positioned to support Indonesia in this growth phase through areas as diverse as airport construction and management, aircraft maintenance, and vocational training.
Air traffic control officers and safety inspectors are in short supply offering opportunities for qualified foreign experts and technicians in this field. There are competing issues in the need for foreign talent and the desire by the Indonesian however to have positions filled by Indonesians despite a supply gap.
Tariffs, regulations and customs
In late 2015 through the eighth Economic Policy Package, the government has deregulated the process of sending spare parts into Indonesia with zero per cent tax. This policy hope to ease the process of maintenance and repair within the country.
Marketing your products and services
In general, to successfully market to Indonesia’s aviation industry, you may wish to consider:
- participating in major local aviation trade exhibitions
- highlighting your international track record to customers
- engaging a local distributor (crucial to effective business penetration)
- visiting the market on a regular basis and investing time (relationship based market)
- consider opening a representative office or presence
- engaging Austrade in tailored services to help you identify opportunities or connect you with key distributors and buyers.
Representative office set up application is done through to the Indonesian Investment Coordinating Board or BKPM and for your line of business, the Ministry of Trade. Clarity around business purpose is important particularly for registration and tax purposes. We can refer you to local notaries who can advise in these areas.
Based on our close interaction with Indonesian customers, Austrade notes that some would prefer to cooperate with foreign companies that have local representative office or distributors based in market. This will increase their confidence when engaging with foreign partners in terms of after sales service.
Indonesia’s aviation industry and manufacturing base is concentrated in Java and Batam. For distribution of components and parts, Austrade can assist in connecting companies to Tier 1 and Tier 2 suppliers in market.
Links and industry contacts
Air Navigation Indonesia
Angkasa Pura 1
Angkasa Pura 2
Angkasa Pura Logistic
Angkasa Pura Support
Directorate General of Civil Avition, Ministry of Transport
Garuda Maintenance Facility
Indonesian Air Traffic Controllers Association (IATCA)
Indonesian Aircraft Maintenance Service Association (IAMSA)
Indonesian National Air Carriers Association (INACA)
The Investment Coordinating Board
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