An Indonesian airline and airport marriage? Garuda and airport operators Angkasa Pura I and II could be integrated into single aviation holding company

Indonesia’s Minister of State Owned Enterprises Rini Soemarno revealed recently that the ministry is considering integrating the airline Garuda Indonesia, and airport operators Angkasa Pura I (AP I) and Angkasa Pura II (AP II), into a single aviation holding company. Ms Soemarno said the proposed holding company’s structures would be closely modelled after the state owned mining holding company Indonesia Asahan Aluminium (Inalum).


  • Garuda Indonesia, AP I and AP II could be rolled up into a single aviation holding company;
  • This is just one of many ‘strategies’ for aviation in the country, which also have included state airport operators taking on unwanted municipal airports, foreign investment both in and out, and IPOs:
  • It is something of a mish-mash and it is not clear how this proposed central holding company would benefit any participant.

From the point of view of the airport operators this is an unusual move. Both of them have taken over, sought permission to operate, been offered, or have “seen potential” in a range of local airports. Thes include Bandar Lampung Radin Inten II (regarded as a potential transit hub to alleviate congestion at Jakarta Soekarno-Hatta airport); Tanjung Pandan Buluh Tumbang; Labuan Bajo Mutiara; Palu Mutiara; Tarakan Juwata; New Samarainda; Banyuwangi Blimbingsari; Tarakan Juwata; Luwuk; Jember Noto Hadinegoro; Palangkaraya Tjilik Riwut; Jayapura Sentani and West Java Kertajati, the one that has initiated most interest.

Some of these airports did not previously offer commercial services and were under the control of the Ministry of Transportation, which wants to be free of them so it can be more focused in carrying out its role as an authority, not as an operator.

In the immediate future the transfer of management and control can be expected at Jayapura Sentani airport (to AP I before Jun-2019), along with Palu Mutiara airport while the transfer of management of the Bandar Lampung Radin Inten II airport to AP II is to be expedited, along with Tanjung Pandan and Bengkulu airports, which are scheduled by May-2019.

AP II revealed last year that the operator aims to partner with “strategic investors” to operate and develop these and other airports, within the framework of “a cooperation in the use of assets with the government, so it is like a concession”. Prior to that, AP I let it be known it planned to partner with investors for the development of Kulon Progo (New Yogyakarta) airport.

These are just several parts of the problem. Would Garuda want to become part of organisations that are taking on airports that another branch of the state wants to be rid of? And which want to enter into concession arrangements, possibly with foreign companies? Another is that a proposed IPO of AP II, the operator which owns and operates Jakarta’s Soekarno-Hatta International airport, was set to take place in 2019.

Furthermore, AP II revealed in Jan-2019 that it planned to target ASEAN countries in 2019 for airport development and management opportunities, with a focus on the Philippines, Thailand and Malaysia. The regional expansion forms part of AP II’s ‘Go Global’ initiative to boost investments abroad. AP II is also leading the X-Droid Consortium, which previously bid for the operation and maintenance contract for Clark International Airport. The question must be how Garuda, or even AP I, is supposed to benefit from that?

As part and parcel of that Asian expansion, AP II intended to establish a JV with the AirAsia Group and private companies in the Philippines and to file tender documents for the operation of Clark International Airport (a deal which concluded in Feb-2019 with the North Luzon Consortium the winner). Again, a JV agreement with another carrier would not have sat well with being rolled up into a national aviation company.

MAPS – As things stand presently, according to CAPA data, AP I has 13 airports in Central and Eastern Indonesia (top), while AP II has 13 in Western Indonesia (bottom)

Source: CAPA – Centre for Aviation

Yet another complication here is that Indonesia’s Ministry of Transport has let it be known in the past that it is willing to release up to 49% ownership in certain profitable airports to private investors to raise funds for other airport development projects, irrespective of the fact that AP I and AP II are taking over municipally operated airports.

In the Airport Privatisation & Finance Review 2018 the comment was made that “there seem to be a piecemeal and uncoordinated approach to privatisation in Indonesia, involving the expansion of the two state airport operating companies PT I and PT II (especially PT II, which is to be privatised itself) and the encouragement of private sector interests, especially those in the southeast Pacific region. Some European and other western investors still tend to be wary of opportunities in this part of the world, where the business culture is quite different and messages about prospects and the procedures to handle their sale or concession tend to be mixed.”

Despite the many cultural issues that can arise when western companies look to co-operate with eastern hemisphere companies in airport development they will do so if the circumstances otherwise are beneficial. But that wariness will only increase if these operators are now rolled up into a national state aviation company, a philosophy which is at odds with the concept of privatisation.