INDONESIAN CIVIL AVIATION INDUSTRY
Indonesia, the 4th most populous country in the world after the People’s Republic of China, the USA and India, is the largest archipelago in the world to form a single state; it consists of more than 17.500 islands, out of which around 6.000 islands are inhabited. The archipelago has a unique and strategic geographical position, it forms a crossroad between two world oceans, the Indian and the Pacific Ocean and bridges between two continents, Asia and Australia. This typical geographical position gives the transportation sector, particularly the sea and air transportation, a crucial and important role in the country’s national and economic development; it has a role of not only as a proponent of economic activities and providing transportation facilities and services for people and goods, moreover, it is a tool to politically, socially and culturally keep the country united in its diversity.
Indonesia’s civil aviation industry started shortly after its independence in 1945 from the former Dutch colonial rule, with the incorporation of its national flag carrier GARUDA INDONESIA, followed in the subsequent years by the incorporation of several private air transportation companies. This particular industry during the next three decades became a heavily government-controlled and strict regulated industry with only a hand full of airline companies operating. Air transportation industry became an exclusive, expensive means of traveling and only affordable to the medium-up level of air travelers. Drastic change in the Indonesian civil aviation industry came simultaneously after the economic and financial crisis hit the country in 1997/1998. Practically all airline operators were badly hit by this economic turmoil and few were either forced to stop the business or restructure their financial condition at the height of the crisis in 1998. This heavily import-oriented transportation sector was faced by the fact that the local currency Rupiah, in which its revenues and income were made, was depreciated tremendously against the US Dollar. Various efforts made such as reducing the number of aircrafts in operation, closing down uneconomical routes and debt restructuring rescued the airline operators and with the domestic economic, financial and political condition gaining more stability, signs of recovery were sighted during 2000 with improvement of the business indicators such as number of air passengers and freight load factor.
Simultaneously, the government deregulated this sector by issuing regulations and measures relaxing entry restrictions especially for new airline operators as well as adapting a more open policy for the air transportation industry. After many aircrafts were grounded as a result of bankruptcy of several major western airline operators as the aftermath of the September 11, 2001 in the USA, aircrafts leasing or rental has been so low as never before, which in turn, gave new airline operators in Indonesia the opportunity to get a share of this potential air transportation market. The industry underwent a drastic development since 2001 with airfares far below the normal air fares consumers used to pay and since then, traveling by air has opened up new horizon for the air travelers in terms of affordability and availability. The Indonesian helicopter and aircraft manufacturer, PT DIRGANTARA INDONESIA, established to develop the Indonesian aviation industry and supply the market demand for regional aircrafts manufactured under license from Spain and Germany, e.g. CASA and MBB, went into heavy turbulence during the period of the economic crisis and due to heavy losses, was forced, in order to survive, to terminate more than 6000 workers, equal to 60% of its total labor force.
Cheap air fares currently offered to the domestic air travelers within Indonesia as well as to selected international destinations within the region of South East Asia is made possible due to the low maintenance cost of such aircrafts, whereby no maintenance reserve cost for big overhauls of these aircrafts is required. The aircrafts, mostly of the types Boeing B 737-200, B 727-200, MD 82 or MD 83 are considered “old” aircrafts and already more than 25 years in operation; they will be operated up until the end of its usage period, normally within an additional period of 3 to 5 years. This condition, therefore, will not last forever, since after the usage period the airline operators will have to consider the strategy of what types of aircrafts should be used for the future operation of the company.
Typical geographical condition and position of Indonesia pretty much determines the air transportation route characteristics as well as the demand for aircraft types. Indonesia’s air transportation routes are short distance, non-stop and point to point service; ideally, the most suitable aircraft types are single aisle, narrow body aircrafts with seating capacity, depending on the seating configuration, ranging from 50 to 150 seats. Regional jets, therefore, are the most suitable aircraft type for this particular market region. This regional jet aircraft type is even predicted to clear the way for major hub airlines, add service during the so-called off peak hour normally operated by wide-body aircrafts as well as replacing propeller aircrafts.
Based on data obtained from the Directorate of Air Transportation of the Ministry of Transportation in Jakarta, some 15 million domestic air travelers were transported during 2003, a nearly 30% increase compared to the previous year’s total passengers number transported. For 2004, this number is expected to reach 18 million air travelers, another 25% increase compared to the previous year and ideally, 250 such regional jet aircrafts would be required to carry these air travelers within Indonesia. The civil aviation industry registers currently 224 such aircrafts, out of which only 165 are in active operation. These figures show the market potential of the Indonesian civil aviation industry and with expected economic growth and better income as well as the purchasing power of the people, the civil aviation industry is looking forward to a promising potential industry for the near future to come. The current trend in the Indonesian civil aviation industry and market with low budget airfares does not automatically mean flying with “worn-out” aircrafts, it has to do more with operational efficiency and productivity and to achieve this goal, the type of aircraft is one of the decisive key factors among other influencing factors.
Indonesia’s civil aviation industry started shortly after its independence in 1945 from the former Dutch colonial rule, with the incorporation of its national flag carrier GARUDA INDONESIA, followed in the subsequent years by the incorporation of several private air transportation companies. This particular industry during the next three decades became a heavily government-controlled and strict regulated industry with only a hand full of airline companies operating. Air transportation industry became an exclusive, expensive means of traveling and only affordable to the medium-up level of air travelers. Drastic change in the Indonesian civil aviation industry came simultaneously after the economic and financial crisis hit the country in 1997/1998. Practically all airline operators were badly hit by this economic turmoil and few were either forced to stop the business or restructure their financial condition at the height of the crisis in 1998. This heavily import-oriented transportation sector was faced by the fact that the local currency Rupiah, in which its revenues and income were made, was depreciated tremendously against the US Dollar. Various efforts made such as reducing the number of aircrafts in operation, closing down uneconomical routes and debt restructuring rescued the airline operators and with the domestic economic, financial and political condition gaining more stability, signs of recovery were sighted during 2000 with improvement of the business indicators such as number of air passengers and freight load factor.
Simultaneously, the government deregulated this sector by issuing regulations and measures relaxing entry restrictions especially for new airline operators as well as adapting a more open policy for the air transportation industry. After many aircrafts were grounded as a result of bankruptcy of several major western airline operators as the aftermath of the September 11, 2001 in the USA, aircrafts leasing or rental has been so low as never before, which in turn, gave new airline operators in Indonesia the opportunity to get a share of this potential air transportation market. The industry underwent a drastic development since 2001 with airfares far below the normal air fares consumers used to pay and since then, traveling by air has opened up new horizon for the air travelers in terms of affordability and availability. The Indonesian helicopter and aircraft manufacturer, PT DIRGANTARA INDONESIA, established to develop the Indonesian aviation industry and supply the market demand for regional aircrafts manufactured under license from Spain and Germany, e.g. CASA and MBB, went into heavy turbulence during the period of the economic crisis and due to heavy losses, was forced, in order to survive, to terminate more than 6000 workers, equal to 60% of its total labor force.
Cheap air fares currently offered to the domestic air travelers within Indonesia as well as to selected international destinations within the region of South East Asia is made possible due to the low maintenance cost of such aircrafts, whereby no maintenance reserve cost for big overhauls of these aircrafts is required. The aircrafts, mostly of the types Boeing B 737-200, B 727-200, MD 82 or MD 83 are considered “old” aircrafts and already more than 25 years in operation; they will be operated up until the end of its usage period, normally within an additional period of 3 to 5 years. This condition, therefore, will not last forever, since after the usage period the airline operators will have to consider the strategy of what types of aircrafts should be used for the future operation of the company.
Typical geographical condition and position of Indonesia pretty much determines the air transportation route characteristics as well as the demand for aircraft types. Indonesia’s air transportation routes are short distance, non-stop and point to point service; ideally, the most suitable aircraft types are single aisle, narrow body aircrafts with seating capacity, depending on the seating configuration, ranging from 50 to 150 seats. Regional jets, therefore, are the most suitable aircraft type for this particular market region. This regional jet aircraft type is even predicted to clear the way for major hub airlines, add service during the so-called off peak hour normally operated by wide-body aircrafts as well as replacing propeller aircrafts.
Based on data obtained from the Directorate of Air Transportation of the Ministry of Transportation in Jakarta, some 15 million domestic air travelers were transported during 2003, a nearly 30% increase compared to the previous year’s total passengers number transported. For 2004, this number is expected to reach 18 million air travelers, another 25% increase compared to the previous year and ideally, 250 such regional jet aircrafts would be required to carry these air travelers within Indonesia. The civil aviation industry registers currently 224 such aircrafts, out of which only 165 are in active operation. These figures show the market potential of the Indonesian civil aviation industry and with expected economic growth and better income as well as the purchasing power of the people, the civil aviation industry is looking forward to a promising potential industry for the near future to come. The current trend in the Indonesian civil aviation industry and market with low budget airfares does not automatically mean flying with “worn-out” aircrafts, it has to do more with operational efficiency and productivity and to achieve this goal, the type of aircraft is one of the decisive key factors among other influencing factors.
posted by Zumrowi Yunus at
9:30 AM
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