Indonesia’s Tourism Booming
Having a population of around 245 million people and comprising about 17,500 islands stretching from Papua to Sumatra, Indonesia is a very promising market for the airline industry.
“The market potential that had not yet been exploited was large,” National flag carrier Garuda Indonesia President Director Emirsyah Satar stated in Jakarta last week.
Indonesia’s air traffic passengers rose to 94.9 million last year or 39 percent of the total population of the country, which was 244.5 million. While in several other countries the number of air traffic passengers was higher than the population of the countries, for example, Singapore, which had an air traffic passenger of 39 million while its population was only 5.4 million or 722 percent of its total population.
The country’s flourishing economy had also contributed to the airline industry’s improving potential. Indonesia was predicted to become the worlds seventh biggest economy by 2030.
As part of its business expansion strategies, Garuda had improved its services, convenience and security as well as established alliances with a number of other airlines by joining the SkyTeam. The airline had received the certificate of IATA Operational Safety Audit (IOSA) from IATA, meaning that Garuda had fully met the international flight security standard.
Garuda, which carried 90,108 Indonesian hajj pilgrims to Saudi Arabia last year, won the title of “The Best Airline” for the Hajj Season 1434H/2013 from the kingdoms Abdul Aziz International Airport aviation authorities. Last year, it also won “The Worlds Best Economy Class 2013″ award from Syktrax and was placed 13th in the Skytrax Global Airline Rankings. Emirates, Qatar Airways, and Singapore Airlines ranked first, second and third, respectively, in the Global Airline Rankings 2013.
“With the successes that were achieved over the past few years, Garuda Indonesia had made a quantum leap to develop and dominate the Indonesian aviation market,” he asserted. Its strategies to boost growth include expansion, fleet rejuvenation, brand strengthening, improvement of its product and service quality, efficiency in cost structure and improvement of the human resources quality and quantity.
In 2014, Garuda Indonesia had set a target to serve 30 million passengers, an increase from 25 million passengers who flew with Garuda in 2013.
“We target an increase of 15-20 percent in 2014,” Emirsyah Satar stated.
Garuda booked an operational income of US$3.72 billion in 2013, up seven percent from the previous year. However, Garuda recorded a decrease in its profit from US$168.1 million in 2012 to US$56.4 million last year, because of its investments in fleet expansion and Citilink as a low-cost carrier. The seat load factor (SLF) in 2013 marginally dropped to 74.1 percent from 75.9 percent in the previous year.
“The performance of Garuda in 2013 was severely affected by the rupiah depreciation and high growth as well as investments on improving the airlines position in the future,” he explained.
In the first quarter of last year, Garuda expanded flight networking to six new international routes to Europe and the Middle East–Frankfurt, Brussels, Milan, Dusseldorf, Munich, and Bahrain–served by Ettihad Airways. In the second quarter, Garuda signed a funding agreement for two jetliners B777-300ER using the Syariah (Islamic law) principle and paid syndicated debts worth US$55 million, which was a commercial loan from Citi Club Deal. In the third quarter, Garuda paid debts of US$75 million from Indonesia Exim Bank.
Expanding its businesses, the airlines started flying to nine domestic destinations and 25 domestic routes that contribute to an 80 percent increase in its domestic flights per day. It also plans to open three new international destinations in 2014. “The new international flight destinations were London, England; Manila, the Philippines; and Mumbai, India,” Emirsyah Satar said.
Last year, Garuda Indonesia had opened two international destinations and six international routes. The new routes were expected to develop and to strengthen the airline’s flight network as well as to meet the anticipated increase in the number of airline passengers.
The airline until the end of 2013 had 140 airplane, consisting of 23 company-owned ones and 117 leased ones. Of the total, 30 airplane were operated by Citilink, its subsidiary, with 25 leased and five company-owned airplane. He pointed out that Garuda’s aircraft were younger, from mostly 6.5 years old in 2011 to 5.8 years old in 2012.
To support its flights to new routes, Garuda planned to increase its fleet from 140 at the end of 2013 to 169 planes by the end of this year.
“We will increase our fleet to 169 in 2014,” Garudas CEO Satar said. “We will increase the number of our airplanes prudently based on growth,” he added.
Indeed, the aviation sector in the Asia-Pacific region, including Indonesia, according to Airbus research, was the fastest-growing market and was expected to need 11 thousand airplanes in the next 20 years.
“There was no doubt that the Asia Pacific market was important currently as well as in the future,” Airbus chief operating officer John Leahy said in a written statement on April 1, 2014.
In view of that, he stated that Airbus will continue dominating sales in the region because the company had the type of aircraft needed by airline companies in the region. He asserted that various airline companies in the Asia-Pacific region will receive 10,940 passenger and cargo airplanes from 2013 until 2032, worth a total of US$1.8 trillion.
“This represented 37 percent of the total deliveries across the world in the next 20 years surpassing those for Europe, North America and the Middle East,” he added.
Regionally, Garuda Indonesia was ready to compete in a free market after the implementation of the Asean Economic Community (AEC) in 2015.
“Garuda Indonesia had prepared itself with marketing and operational strategies,” General Manager of Garuda Indonesia for Manado branch Piktor Sitohang said.
Garuda’s subsidiary budget airline Citilink had also expanded its operation internationally by launching its first international flight service from Surabaya in East Java, Indonesia, to Johor Baru, Malaysia, recently. Citilink also planned to serve the routes between Surabaya and Kuala Lumpur next month, Singapore in May and later Hong Kong, Taipei and Perth.
The airline hoped to facilitate transport for migrant workers, tourists and other passengers to those cities, Citilink CEO Arif Wibowo said recently. Arif said Citilink hoped to fly 800,000 Indonesian migrant workers to and from the five cities a year.
Citilink operates a fleet of 24 units of the latest series of Airbus A320, including two units of the Sharklets type, to serve 32 domestic routes.