Overview

Unit: USD millions

Data Sources: Indonesian Central Bureau of Statistics, Global Trade Atlas, UN Comtrade Analytics, and unofficial estimates. Average exchange rate of Indonesian rupiah to U.S. dollars from the World Bank

Leading Sub-Sectors

The Indonesian aviation sector offers significant opportunities due to it being the largest in Southeast Asia, as Indonesia’s population comprises of 41% of Southeast Asia’s total population. In terms of total travelers, the country is ranked as having the 7th fastest growing aviation industry in the world, but in terms of aircraft orders and business value, it is ranked 2nd, only behind China. Due to Indonesia being an archipelago comprising more than 17,000 islands, air travel is necessary for the mobility of both people and goods. Current challenges include a lack of infrastructure for the rapid development of the aviation industry as well as the government’s management of its human resources to meet market demands.

The domestic aviation industry was hit hard during the COVID-19 pandemic. According to Statistics Indonesia, the number of domestic air passengers in 2020 was 35.3 million, a 44% decrease from the previous year, which was 79.5 million. However, Indonesia’s aviation industry will likely return to normal as the world begins to recover from the pandemic. Indonesia’s domestic flight volume is projected to fully recover by 2024 and according to the Indonesian National Air Carrier Association (INACA), its international flight volume will recover in 2026.

The International Air Transport Association (IATA) has predicted that Indonesia will become the world’s fourth largest air travel market by 2030, jumping up from 10th position in 2019. They also projected that 390 million passengers will fly from and within Indonesia by 2037. This large travel demand is mostly driven by Indonesia’s expanding middle class. According to the World Bank report “Aspiring Indonesia: Expanding the Middle Class”, Indonesia’s middle-class population is the fastest growing in the country, as there are currently 52 million Indonesians who belong to the group, or about every one in five Indonesians.

Currently, Indonesia has 683 airports, with 34 of them being commercial airports managed by State-Owned Enterprise PT, known as Angkasa Pura I and Angkasa Pura II(AP2). Angkasa Pura I, which mostly operates airports in Eastern Indonesia, experienced a decrease in passenger movements in 2020, as it dropped from 81.5 million in 2019 to 32.7 million in 2020, which constituted a 35.81% decrease. Furthermore, their total aircraft movements also decreased from 707,202 in 2019 to 426,186 in 2020. 

Angkasa Pura II, which operates many airports in Western Indonesia, including Jakarta’s main international airport, has received many international awards for its achievements in the industry. In fact, Jakarta’s Soekarno Hatta International Airport received an award from Skytrax as the world’s most improved airport in 2019, as well as the 2nd best airport in Southeast Asia. More recently, it also won an award in 2021 for airport excellence regarding the COVID-19 pandemic. In 2018, Soekarno Hatto was the 6th busiest airport in the world, as more than 111 million passengers and 856,000 aircraft transited through the airport. In the long run, AP2 plans on making a smart connected airport, which is a combination of technology and information with customer-centric operations and stakeholder governance. The goal of these objectives is to provide comfort to passengers while also increasing airport capacity and reducing costs. Currently, AP2 is in the process of making a Digitally Ready for Operational and Infrastructure Development model to integrate into their current system for customer experimentation, increasing operational efficiency, and general business enhancement. AP2’s main programs in 2019 included both flight operation and airport safety and security, passenger and cargo services, business development, and other supporting programs that in total, will require an investment of 13 trillion Rupiah.

Despite experiencing a massive decline in passenger transport due to the pandemic, the cargo transport industry remained relatively stable. In 2020, Angkasa Pura I airports recorded total air cargo traffic as 436,049 tons, which was only a 9.38 percent decrease from the previous year’s mark of 481,180 tons. Although Angkasa Pura II’s airports recorded a 6.17% decrease in air cargo traffic in 2020 (from 759,923 tons to 712,989), this figure increased 20% in 2021, up to 859,330 tons of air cargo. Soekarno-Hatta airport alone can accommodate 700,000 tons of cargo per year and is currently developing a new cargo village to increase this figure up to 1.5-2 million tons a year, which is a necessary investment, as Soekarno-Hatta  is the 4th busiest airport in Southeast Asia and the busiest in the Southern Hemisphere.

Opportunities

Indonesia’s under-developed public infrastructure could present significant opportunities for the aviation market With Indonesian airports already heavily burdened and the increasing growth in air traffic, investments, and developments in new airports closest to tourist destinations, the refurbishment of existing airports, construction and improvements to ground infrastructure, runway, and air traffic systems are all promising areas for future growth.

Based on their 2019 investment plan data, PT. Air Navigation Indonesia already has 535 navigation tools, 122 surveillance devices, and 24 ATC automation systems. By 2021, they will need an additional 12 navigation tools, 1 surveillance device and 4 ATC automations. Some improvement programs are also budgeted, such as restructuring the airspace, airline slot time management, departure and arrival flow management, surface radar operations, ATC training, rapid taxiway exit and pilot reaction time.

U.S. – Indonesia Aviation Working Group Program

On April 20th, 2015, with the support of the U.S. Department of Commerce and the FAA, the Minister of transportation Ignatius Jonan and U.S. Ambassador to Indonesia Rober O. Blake signed an MOU to officially commence the establishment of the U.S.-Indonesia Aviation Working Group. The AWG provides a platform for the U.S. government and U.S. companies to engage with Indonesia aviation stakeholders from government agencies, state-owned enterprises, and the private sector to share the best practices from all over the world, as well as to propose and provide innovative solutions and services to support the growth of the Indonesian aviation industry.

The AWG’s activities focus on policy and technical issues facing the Indonesian aviation sector that include:

1)  Air Traffic Management Modernization

2)  Airport Infrastructure

3)  Aviation Safety and Security

4)  Development and Growth of Aviation Support Services

5)  Airspace and Airport Capacity Analysis, Development, and Planning

6)  General Aviation Access and Integration

7)  Cargo Security

Resources

• Directorate General of Civil Aviation, Ministry of Transportation
• AirNav Indonesia

Interested parties may contact Commercial Specialist Kalung Riang at Kalung.Riang@trade.gov