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 Indonesia National Air Carriers Association
estimates Indonesia's passenger growth will be around 15 per cent in 2017, to 104
million passengers, and by 2034, Indonesia is expected to be the sixth
largest aviation nation in the world by passenger volume with growth
expected to reach 270 million passengers annually. Add to this, the
government’s plan to build or upgrade an additional 62 airports by 2021 and
it is clear the Indonesian aviation industry is one to watch.
In 2015, there are 66 commercial airlines comprising 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 or charter flights are Susi Air, Pelita Air Service, Airfast Indonesia,
Trigana Air Service, Transnusa Aviation Mandiri, and Tri Mg Intra Asia
which uses largely from oil and gas companies. With the downfall
of the oil and gas industry however, these airlines has diversified business
servicing plantation, tourism, logistic, and medivac.
In total there are 750 aircrafts which are largely operated by Garuda Group
and Lion Air. However, this is set to expand rapidly
with Lion Air having ordered 443 new aircrafts to satisfy its aggressive
local and regional expanision plans (the biggest airline order of any
company on earth). Most local airlines' procurement of aircrafts is 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 and ATR
42, among many other types. Charter flight 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 among several organisations. There are 233 state owned and
operated airports in Indonesia. Twenty-five of these organisations are managed by two
state-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 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. Currently in
Indonesia, there are 62 airports either being built or upgraded across the
country to satisfy the growth demands of the Indonesian aviation sector.
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.
Australian capability being sought for Indonesian airport operations across
staff rostering, flight scheduling, air traffic control technologies and
airspace monitoring. There are also training opportunities in the fields of
aviation management, pilot training (Asia-Pacific is short 9000 pilots
annually, with Indonesia estimated to have a shortfall of between 700-1000
annually) and general middle-management training.
Australia, with an advanced and mature aerospace industry is well
positioned to support Indonesia in this growth phase through areas as
diverse as airport construction and management and aircraft maintenance to vocational training.
Air traffic control officers and safety inspectors are also in short supply
offering opportunities for qualified foreign experts and technicians in
this field. There are competing issues in the need for foreign talent but there is a desire by Indonesia to have these positions filled by
Indonesians despite a supply gap.
Tariffs, regulations and customs
To find out the specific tariffs pertaining to the export of your product
to Indonesia, you may enter the unique HS product code at
(ASEAN) Tariff Finder.
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 hopes 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
visiting the market on a regular basis and investing time (relationship
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 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 offices or distributors based in market. This will increase
their confidence when engaging with foreign partners in terms of after
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 Aviation, 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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