frost sullivan aviation in indonesia
DESCRIPTION
gTRANSCRIPT
The Road Ahead
THE AVIATION INDUSTRY IN INDONESIA
1
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 Pelni’s KM wilis
Ende
Makassar
Labuan BajoBima
11
Ende
Kupang
Waingapu
“Will Boom” is obvious answer to “What is the long term prospect for aviation industry in Indonesia?
12
17,000islands
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
Drivers for Domestic Aviation Industry
“Will Boom” is obvious answer to “What is the long term prospect for aviation industry in Indonesia?
13
Trade & FDI Growth; FDI grew 22% in
Q3
Growing Awareness
of Tourism –Rise of China, Russia
Drivers for International Aviation Industry
The growth in Indonesia’s tourism industry will be one of the key drivers
40.0
Growth Potential
INDUSTRY MARKET SIZE (USD Bn)
0
20
40
60
80
100
120
140
160
2007 2008 2009 2010 2011 2012 2013 2,014 2015
Foreign Domestic
Mil
lio
n T
ou
ris
ts
� The tourism industry accounted for US$24.3 billion, this isforecasted to rise to US$ 34.7 billion in 2015.� In terms of quantity, international tourists accounted for
134166.7
Current Market Size US $
Domestic
International63%
37%
14
0.0
5.0
10.0
15.0
20.0
25.0
30.0
35.0
40.0
2006 2007 2008 2009 2010 2011 2012 2013 2014 2015
International Domestic
2Source: Frost & Sullivan Analysts
US
D B
n
9.28%
Year US$ (Billion)
International Domestic Total
2006 5.4 11.6 17
2011 9 15.3 24.32015 13.4 21.3 34.7
� In terms of quantity, international tourists accounted foronly 5% of total inbound tourists (predominantlyMalaysians and Singaporeans (35%)). However, theirspending is much higher than domestic tourists. In2011, average spending of international tourists wasestimated 7 times higher than local spending.
� In terms of value, international tourists to Indonesia spentUS $9 billion, increased at 22% from 2010. The spendingis predicted to reach at 13.4 billion in 2015.
� Domestic tourist spending was accounted for 63% oftotal tourists spending, increased at 8% from last year.Domestic tourist spending is predicted to increase at43% between 2011-2015, impacted by the growth ofIndonesian economy.
� Forecasted CAGR (2006 – 2015) is predicted to reach 8-10%driven by increasing average spend by domestic tourist.
Historic trends support the story on prospects for the industry (1/2)
30
35
40
45
50
55
Domestic +11%
Passengers (Million)
15
0
5
10
15
20
25
30
2006 2007 2008 2009 2010
Internation +13%
Historic trends support the story on prospects for the industry (2/2)
300
350
400
450
500
550
600
Domestic +8%
Internation +8%
Cargo (000Tonnes)
16
0
50
100
150
200
250
300
2006 2007 2008 2009 2010
In less than 20 years, Indonesia may have over 250 million people taking flights every year
0.6
0.7
0.8
0.9
1.0
1.1A
nnual A
ir P
assengers
/Popula
tion
Malaysia
0.0
0.1
0.2
0.3
0.4
0.5
0 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20
China
India
Brazil
GDP Per Capita PPP ($ 000)
Annual A
ir P
assengers
/Popula
tion
Indonesia
The Indonesian government is actively promoting this space
Sea-planes to be launched soon to smaller remote islands
Government allocated Rp 3 trillion ($321 million) in 2012 to improve airport infrastructure and safety
Working with local and international airlines to promote tourism
Actively involved in enhancing safety and security perception
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 hostingscheduled airline services
• More than 16 airports in Indonesia have international services including CGK whichaccounts for more than 50% of all international capacity.
• Airports apart from Jakarta (CGK) handling more than 1 million passengers are good innumber. Prominent airports in this category are Bali, Surabaya, Medan, Yogyakarta tomention a few.
Could Indonesian airports emerge as international hubs?
Soekarno-HattaInternational Airport, Jakarta
• Handled 51.5 million passengers last year, making it the 12th busiest airport in the world.
• 2012 witnessed the groundbreaking of a major project to overhaul Soekarno-Hatta, that is expected to triple
• Will be the second largest airport in Indonesia
Kuala NamuInternational Airport, Medan
expected to triple passenger handling capacity
• Being positioned as an “Aerotropolis,” expected to be a major driver of economic growth and investment in the country
Indonesia
• It will be able to handle 8 million passengers per year
• Expected to be operational in March 2013
Source: The Jakarta Post
• 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
Local and international airlines are investing aggressively in this space
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.
Fleet Size: 15 Fleet Size: 7
• For private jets, flying times inIndonesia are double that ofadvanced markets such as theUSA
• 18 jet charter companies andgrowing
• Leading suppliers such as
Fleet Size: 44
Fleet Size: 6
Fleet Size: 6
• Leading suppliers such asEmbraer and Hawker Beechcraftremain upbeat on future prospects
• Strong demand also expectedfrom leisure segment with over100,000 millionaires expected by2015
Land Transport Operators
Significant opportunities also exist for related industries
Ticketing Agents
Caterers
Solution Providers
Trainingand
Staffing
MROsRetail
Solution Providers
For instance, the MRO industry is witnessing strong growth
Components
40%
Engine24%
Line20%
Base12%
Modifications4%
MRO spending in Indonesia (US$ Millions), 2011
$216 11.1%10.0%
12.0%
$200
$250
20
20
)
Sp
en
din
g (
US
$ M
illio
n)
Indonesia MRO spending, 2011
US $0.54 Billion
Indonesia
CAGR 5.7% (2011-2020)
Source: Frost & Sullivan Analysis
$23
$111
$64
$130 6.4%
2.2%
-0.2%
8.2%
-2.0%
0.0%
2.0%
4.0%
6.0%
8.0%
10.0%
$-
$50
$100
$150
$200
Modifications Components LineMaintenance
AirframeHeavy
Maintenance
EngineMaintenance
CA
GR
(20
11-2
020
)
Sp
en
din
g (
US
$ M
illio
n)
Indonesia Spending, 2011 CAGR (2011-2020)
Narrow$433
Narrow$697
Wide$111
Wide$201
2011 2020
MRO Spending by Aircraft Type(US$ Million)
However, the industry would need to overcome certain challenges to realize its potential
Safety Traffic Management Lack of Pilots
• 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
The Concerns…
• 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
• 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
The Response…
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 areasIndustry 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
Donna Jeremiah
Director Corporate Communications, Asia [email protected]: +61 (02) 8247 8927
Shivaji Das
Global Head and Vice PresidentPublic Sector and Consulting, Asia [email protected]
Jessie Loh
ManagerCorporate Communications, Asia [email protected]. (65) 6890 0942
Carrie Low
ExecutiveCorporate Communications, Asia [email protected]. (603) 6204 5910
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