Aviation’s eastward shift continues with Indonesia to become the world’s fourth largest market by the early 2030s

The International Air Transport Association (IATA) anticipates global air passenger traffic will increase at a compound annual growth rate (CAGR) of approximately 3.5% over the next 20 years, with passenger numbers doubling to 8.2 billion in 2037. Key to this growth will be the Asia-Pacific region, which will have an estimated CAGR of 4.8%, according to IATA, and is expected to see annual figures increase to approximately 3.9 billion passengers.


Summary:

  • Asia-Pacific region will key to IATA’s passenger growth forecasts for the next 20 years with an anticipated CAGR of 4.8% between now and 2037;
  • IATA highlights Indonesia as a standout market in its growth forecast with the expectation it will rise to the world’s four largest aviation market during this period;
  • Over the past couple of years Indonesia has made vast improvements to its safety rating and has implemented plans to facilitate the growth in air traffic.

IATA highlights Indonesia as a standout market in its growth forecast, with the country expected to rise from its current position of tenth largest aviation market to fourth largest in 15 years with approximately 411 million passengers. But, the airline association retains some concerns with Indonesia’s aviation potential.

Back in 2015, IATA called for improved collaboration between Indonesian stakeholders and the development of an aviation master plan based on global standards. The association recommended improving safety, ensuring capacity is available to support industry growth and a regulation framework that supports the needs of airlines.

CHART – Indonesia is set to rise from being the world’s tenth largest aviation market today to being its fourth largest by 2031Source: International Air Transport Association (IATA) and Tourism Economics

Indonesia has not taken IATA’s concerns lightly and the country’s air transport authorities have implemented some key developments to improve its air traffic system over the past three years.

In 2015, Garuda Indonesia was the sole Indonesian operator with an IATA Operational Safety Audit (IOSA) registration, but now four additional Indonesian carriers have passed the safety auditing programme including Lion Air Group subsidiaries – Batik Air, Lion Air and Wings Air. This has been valuable for the airlines concerned – Lion Air Group states IOSA registration has facilitated its entry into the European market.

Meanwhile, AirAsia Indonesia, which secured IOSA accreditation recently in Aug-2018, says the process has been completed to boost its appeal to international markets. The progress meant that in Jun-2018, the European Commission cleared all air carriers from Indonesia from the EU Air Safety list citing improvements in aviation safety.

In terms of infrastructure, IATA states the modernisation of Jakarta Soekarno-Hatta International Airport as an efficient solution. In Oct-2018, Indonesia’s Government announced plans to the develop the New Jakarta Airport on reclaimed land approximately 15km north of Soekarno-Hatta. The USD10 billion airport will operate as an overflow facility for the existing hub and potentially will be operated as public private partnership between Angkasa Pura II and private investors.

PT Angkasa Pura II and West Java Government also opened Kertajati International Airport in Apr-2018, a new regional hub capable of handling up to 5.6 million passengers p/a. Further developments such as the new Bali Buleleng Airport, Kulon Progo Airport and the expansion of Surabaya Airport, Bali Denpasar Airport and Pekanbaru Airport are expected to facilitate growth in passenger traffic in the region.

AirNav Indonesia and MoT have also implemented the Indonesian Modernisation of Air Navigation Services (IMANS) programme to improve air traffic and navigational services to be on “par with neighbouring countries”. AirNav formed a five-year partnership with MITRE Corp to assist with the programme, and the Indonesian government is working with UK’s NATS on modernising its air traffic system.

Indonesia has made vast improvements to improve its safety rating and has implemented plans to facilitate the growth in air traffic. Clearing the EU Air Safety list is an achievement for the country. However, the region is synonymous with geological disruptions given the range and volume of volcanic and earthquake activity. With increasing traffic, sustaining its improved record will require stringent regulatory controls and improvements in air navigation.