THE AVIATION INDUSTRY IN INDONESIA

The Road Ahead

October 2012

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Four months ago, I went for a backpacking trip across Indonesia

Through poetic villages

 ancient cultures

 stunning landscapes

And met wonderful people

But I realized how traveling within the country still remained so difficult

From Ende in Flores. to Makassar in Sulawesi.. by Pelnis KM wilis

Makassar

Labuan Bajo
Bima
Ende

Kupang
Waingapu

11

Will Boom is obvious answer to What is the long term prospect for
aviation industry in Indonesia?

Drivers for Domestic Aviation Industry

17,000
islands
spread over
113,700
square miles

10 islands
with
population >
1 mn,
21 islands>
100,000

Increasing
decentralizat
ion of
economy

Rising
Spending
Power +
Internal
Migration

12

Will Boom is obvious answer to What is the long term prospect for
aviation industry in Indonesia?

Drivers for International Aviation Industry

Trade & FDI

Growth; FDI
grew 22% in
Q3

Growing
Awareness
of Tourism
Rise of
China,
Russia

13

The growth in Indonesias tourism industry will be one of the key drivers
Growth Potential

Current Market Size US $

63%

Million Tourists

37%

Domestic
International

166.7

160
140
120
100
80
60
40
20
0

134

2007 2008 2009 2010 2011 2012 2013 2,014 2015

Source: Frost & Sullivan Analysts

Foreign

Domestic

INDUSTRY MARKET SIZE (USD Bn)

40.0
35.0

9.28%

30.0
25.0
20.0
15.0

USD Bn

The tourism industry accounted for US$24.3 billion, this is

forecasted to rise to US$ 34.7 billion in 2015.

In terms of quantity, international tourists accounted for
only 5% of total inbound tourists (predominantly
Malaysians and Singaporeans (35%)). However, their
spending is much higher than domestic tourists. In
2011, average spending of international tourists was
estimated 7 times higher than local spending.

In terms of value, international tourists to Indonesia spent
US $9 billion, increased at 22% from 2010. The spending
is predicted to reach at 13.4 billion in 2015.

Domestic tourist spending was accounted for 63% of
total tourists spending, increased at 8% from last year.
Domestic tourist spending is predicted to increase at
43% between 2011-2015, impacted by the growth of
Indonesian economy.

Forecasted CAGR (2006 2015) is predicted to reach 8-10%
driven by increasing average spend by domestic tourist.

10.0
5.0
0.0
2006 2007 2008 2009 2010 2011 2012 2013 2014 2015
International
Domestic
Year
2006
2011
2015

International
5.4
9
13.4

US$ (Billion)
Domestic
11.6
15.3
21.3

Total
17
24.3
34.7

14

Historic trends support the story on prospects for the industry (1/2)
Passengers (Million)
55
Domestic +11%

50
45
40
35
30
25
20

Internation +13%

15
10
5
0
2006

2007

2008

2009

2010

15

Historic trends support the story on prospects for the industry (2/2)
Cargo (000Tonnes)
600
Domestic +8%

550
500
450
400
350

Internation +8%

300
250
200
150
100
50
0
2006

2007

2008

2009

2010

16

In less than 20 years, Indonesia may have over 250 million people taking
flights every year
1.1

Annual Air Passengers/Population

1.0

Malaysia

0.9
0.8
0.7
0.6
0.5

Brazil

0.4
0.3

Indonesia

0.2

China

0.1
India

0.0
0

1 2

5 6

8 9 10 11 12 13 14 15 16 17 18 19 20

GDP Per Capita PPP ($ 000)

The Indonesian government is actively promoting this space

Government allocated Rp 3 trillion ($321 million) in 2012 to improve

airport infrastructure and safety

Sea-planes to be launched soon to smaller remote islands

Actively involved in enhancing safety and security perception

Working with local and international airlines to promote tourism

The airports in Indonesia are gearing up for this growth..

Indonesia boasts of more than 170 airports out of which more than 56 of them are hosting
scheduled airline services

More than 16 airports in Indonesia have international services including CGK which
accounts for more than 50% of all international capacity.

Airports apart from Jakarta (CGK) handling more than 1 million passengers are good in
number. Prominent airports in this category are Bali, Surabaya, Medan, Yogyakarta to
mention a few.

Could Indonesian airports emerge as international hubs?

Handled 51.5 million

passengers last year,
making it the 12th busiest
airport in the world.

Soekarno-Hatta
International Airport,
Jakarta

2012 witnessed the

groundbreaking of a major
project to overhaul
Soekarno-Hatta, that is
expected to triple
passenger handling
capacity

Will be the second

largest airport in
Indonesia
It will be able to handle 8
million passengers per
year

Being positioned as an
Aerotropolis, expected to
be a major driver of
economic growth and
investment in the country

Expected to be
operational in March
2013
Kuala Namu
International
Airport, Medan

Source: The Jakarta Post

Local and international airlines are investing aggressively in this space

Mega fleet-expansion: Lion Air 230 Boeing 737s and 5 Boeing 787-8s,
Garuda increasing fleet from less than 100 to 150 by 2015

Expanding Routes: E.g. Air Asia KL Lombok

Enhancing Service Levels: e.g. Garuda Premium check-in counters,

onboard immigration

Acquisitions and Partnerships: Tiger Mandala, Air Asia - Batavia

New Entrants: New entrants actively seeking funds from private investors

Airlines are also looking at niche segments.

For private jets, flying times in

Indonesia are double that of
advanced markets such as the
USA

18 jet charter companies and

growing

Leading suppliers such as

Embraer and Hawker Beechcraft
remain upbeat on future prospects

Fleet Size: 15

Fleet Size: 7

Fleet Size: 6

Fleet Size: 44

Strong demand also expected

from leisure segment with over
100,000 millionaires expected by
2015
Fleet Size: 6

Significant opportunities also exist for related industries

Solution
Providers

Land
Transport
Operators

Ticketing
Agents
Caterers

Solution
Providers

Training
and
Staffing

Retail
MROs

For instance, the MRO industry is witnessing strong growth

MRO spending in Indonesia
(US$ Millions), 2011
Modificati
Base ons
12% 4%

Indonesia
US $0.54 Billion

Compone
nts
40%

Line
20%

CAGR 5.7% (2011-2020)

$250

11.1%

10.0%

$200

8.2% 8.0%

$150

6.4%

$130

$111

6.0%
4.0%

$100
2.2%
$50

Engine
24%

12.0%

$216

$23

$64
-0.2%

$-

2.0%
0.0%

CAGR (2011-2020)
2020)

Spending (US$ Million)

Indonesia MRO spending, 2011

MRO Spending by Aircraft Type

(US$ Million)

Wide
$201

Wide
$111

-2.0%
Modifications Components

Line
Maintenance

Indonesia Spending, 2011

Source: Frost & Sullivan Analysis

Airframe
Engine
Heavy
Maintenance
Maintenance

Narrow
$697
Narrow
$433

CAGR (2011-2020)
2011

2020

However, the industry would need to overcome certain challenges to realize

its potential

Safety

Traffic Management

Lack of Pilots

The Concerns
Indonesia is 1.4% of global traffic but accounted for 4% of all accidents in 2010
Indonesia requires over 18,000 pilots in the near future to meet the growing demand at the
country's fast growing aviation industry
Indonesia only has 13 pilot schools, lower than that in the Philippines of 53 schools. The United
States whose population nearly similar with Indonesia had more than 1,000 pilot schools

The Response
Government and Industry initiatives to enhance safety
Partnerships and collaborations with leading international players such as Boeing etc.
Investments are pouring into training and skill development

Key Takeaways

In less than 20 years, Indonesia may have over 250 million people taking flights every
year

This growth is supported by both government and private led initiatives

Industry players are aggressively investing in this space, including in niche areas

Significant opportunities also exist for related industries such as MRO

However, the industry would need to overcome certain challenges to realize its
potential with respect to Safety, Traffic Management and Lack of trained pilots

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Additional Information

Shivaji Das

Donna Jeremiah

Global Head and Vice President

Public Sector and Consulting, Asia Pacific
Shivaji.das@frost.com

Director
Corporate Communications, Asia Pacific
djeremiah@frost.com
Tel: +61 (02) 8247 8927

Jessie Loh
Manager
Corporate Communications, Asia Pacific
jessie.loh@frost.com
Tel. (65) 6890 0942

Carrie Low
Executive
Corporate Communications, Asia Pacific
carrie.low@frost.com
Tel. (603) 6204 5910

THANK YOU