annual report inaca 2007

Annual Report 2007

INACA Executive Committee

Chairman Rusdi Kirana Vice Chairman Hariadi SoepangkatSecretary General Tengku Burhanuddin Finance & Administration MuchtarResearch Wismono Nitidihardjo

Commissions:Security & Safety: Capt. Novianto Herupratomo

(Chairman)Members: Iwan Hendarmin, Alexius W. Tjundo

Commercial:Jaka Pujiyono (Chairman)Members: Capt. Hendra Zayadi,Devi Yanti

Operation & Technique:Capt. Abhy Widya (Chairman)Capt. Fatahullah (Vice Chairman)Members : Eko Fipianko, Capt. Tony D. Hadi, Bambang S. Edi

Finance & Human Resources:I.G. Bambang Narayana (Chairman)Deny Fajar (Vice Chairman)Members: Guder Widodo, Krisman Tarigan

Indonesia National Air Carriers Association Annual Report 2007 2

INACA Members

Operating Members **Temporary not operate

Contents


Foreword from Secretary General page 4

Message from the Chairman 5

Activities by Association6

Results of INACA Members General Meeting 8

Business Performance 9

About the Fleet 15

International Relations 17

Infrastructure and Facilities 20

Safety and Security21

Outlook to 2008 22

Annual Report 2007Published by: INACAEditor: Arifin HutabaratResearch: Wismono NitidiharjoGraphic Design: Dimas

The statistical data used and processed to prepare this Annual Report have come from different institutions as well as from INACA’s research. There are incomplete original data obtained, and some are unavailable, but anyway we have cultivated them through maximum

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Forewords from Secretary General

Tengku Burhanuddin

his Annual Report constitutes the fourth edition, since its first publication.T

INACA have been implementing a new tradition, i.e., publishing the Annual Report, since 2004. We plan to have different and adjusted contents, formats, appearances, as well as themes and topics, from time to time, including diverse analyses, as to make them relevant with the trading air transportation businesses / industries in Indonesia. INACA Annual Report shall then be beneficial as a reference for stake-holding communities both in and out of country, for the press, even for the academicians.

During 2007, air transportation business in Indonesia seemed to run over a declining pair of railroad. One rail represented a declining growth of business volume, whereas the other, parallel, rail depicted kinds of hard issues on the world’s stage, due to its relationship with aviation safety and security

The contents of this Annual Report shall reflect how actually during 2007 it’s expected and necessary for us to immediately synergize the aviation industry performers, at one side, and the government as the regulator at another. The said synergy shall include efforts of providing inputs to each other, in that the government policies and those standards put into practices by the industries correlates one another in order to encourage effective implementations of what we mean by safety, security, services through compliance.

Being the only business asssociation of commercial air transportation in Indonesia, in 2007 INACA conducted activities both internally and externally, for the sake of its members concurrently of the aviation industry, in line with the dynamics and dialectics of business growth. And that is basically normal. By this period, the activities had increased with some involvement in responding both national and international scaled hard issues.

Therefore, we actively participated in joining many forums with influence against policy making in the framework of ruling the aviation industries, also those forums related with dialectic of growth which keeps the increment of efficiency requirements to be supported by all parties.

The process of oil fuel price fluctuation in the world market has in fact been frightening, because along with it, it also lifted the portion of fuel component up, which in the late of 2007 it approached 60% of total operating costs.

From the viewpoint of INACA, optimism lies on the join efforts among regulators, supporting elements, and the national air transportation facilities, as


well as on the service consumers and related international bodies, so that in the near future, we can cope with the hard issues in addition to pursuing a steady growth in Indonesia’s aviation business.

Jakarta, March 2008.

Messages from The Chairman

Rusdi Kirana

The facts and figures of national commercial aviation

industrial development in Indonesia during 2007 showed the growth of number of passengers at around eight percent, meaning that it is not as high as the previous year’s. It is indicated that the projection for the following year of the growth will be 10 percent. Actually, the growths in the past were averagely around 20 percent per year. The latest situation might be worrying, unless we configure some steps at many aspects of aviation industrial activities, such as regulator, operators, facility management and infrastructure, down to the service users.

The increasing fuel price all over the world has been the main cause of the decrement number of passengers at domestic routes. Even the flight operators get a new additional work, i.e., they have to collect ‘fuel surcharge’ from the passengers when they buy the ticket or deliver cargo. However, the year 2007 has presented new horizon towards Indonesian aviation industries. The operators, according to their respective planning, starts to realize the addition and replacement of their fleets, signing new commitments to buy and rent aircrafts, additional routes to different regions, some go public, and new pilots recruitment.

In line with all those, introspection while increasing the quality of professionalism among all aviation operators in Indonesia had been the top priority during 2007. The said priority related with self awareness as well as demand to effectively implement the quality safety, security and service compliances.

Within the Annual Report of 2006, we discussed the growth dynamism, whereas through the period of 2007 encouraged us to also care for growth dialectics. Some of the dialectics had been properly and directly addressed, for example the agreement to facilitate credit payment system for operators to buy avtur (aviation gas). Other dialectic, which is efficiency improvement, has been the condition sin qua non towards almost all operators, which will soon face efficiency and quality competitions from foreign operators. The competition is


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like a shadow to follow the dynamism ASEAN aviation liberalization implementation.

Nevertheless, some progresses in many of our aviation industrial aspects reflect the output of our seriousness and hardworking. And it’s only through our prior projection, had the 2007 situation demanded qualitative growth, and to this direction is our national aviation industries moving.

I myself will terminate my assignment as Chairman of INACA, after having been two years working, since 2006. I would think that I have done my best, along with all Executive Committee Members. And on this occasion, I would like to extend my high appreciation as well as thanks to all parties who have supported, accepted and encouraged INACA in order to be able to hold its functions as well as roles particularly for the sake of the members, and generally for the progress of our national aviation industries.

Jakarta, March 2008.


Activities by Association

INACA has continually tried to develop public’s awareness of the circumstances faced by the Indonesian national air transportation industry, in compliance with the developing stages of our country, even the stages of overcoming the economic crisis. This constitutes one of the activities of the association. Therefore, this organization always do its utmost to fulfill any invitation to participate as the source party at different forums.

The said forums include one on national level that had been organized by EKKT (an ad hoc body on Transportation Safety and Security Evaluation), which cooperates with INACA to conduct dialogs with commercial aviation businessmen. The meeting has been for enhancing the results achieved by EKKT. Almost all of scheduled aviation operators and chartered operators as participants delivered their inputs.

Head of EKKT board had concluded that, among others: “The government needs some positive inputs prior to issue applicative regulations, in order to create atmosphere wherein we could produce positive output.”

With the government, among others, INACA has attended a workshop organized by the Department of Transportation, and several forums discussing aviation technical matters. Similarly, INACA also attended some forums at the Department of Culture and Tourism, and some other government institutions both in the head office and regions.

INACA with the Ministry of Finance reviewed some subjects on ways to revoke Value Added Tax (VAT) on airport services to international flight operation and excemption of import duty on spareparts used for aircraft maintenance, and on the regulation on aircraft re-export.

Coordinating Ministry of Economy who considered aviation industry plays a substantial role in supporting the national economic growth, with INACA, held reviewing sessions on investment rule and law, besides matters on national macro economy.

Directorate General of Air Transportation joined by PT Angkasa Pura I and PT Angkasa Pura II evaluate the normality of tariff applied towards aironautical services at airport, seen from the interest of airport operational cost and the airlines.

Moreover, INACA also participated in the forums of different kinds organized by Non-Governmental Organization,


both national and international, such as KADIN (Indonesian Chamber of Commerce), AAPA (Association of Asia Pacific Airlines, IATA, ASITA, IHRA, several universities, etc.

COMMISSIONED ACTIVITIES within INACA have been undertaken by each department, which further submitted the gathered information to fulfill the members’ needs. Externally, few field surveys have been carried out, such as to airports, to find facts about anything related with individual airport’s operational service support, i.e., those airports under the management of PT Angkasa Pura I and PT Angkasa Pura II.

INACA’s Commission recommended, among others, the necessary replacement of radar, navigating equipments, the already old fire extinguisher vehicles, necessity of cleaner and uniformed check-in counters, a stricter supervision on passenger’s baggage make up area as well as on electrical installation.

Technical findings found in the fields as well as important feedbacks would be reported both to members of INACA and PT Angkasapura I and II.

WITH PERTAMINA, INACA held some meetings which discussed, among others, about credit facilities provided for the aviation operators to buy avtur.

According to that state-owned company’s management, in very near future, on-line communication with Pertamina will enable the airline to know through computer how much fuel is filled into the planes.

THE MASS MEDIA, either printed, radio or television have considered INACA as their reference and news resources.

Journalists attending the forums where INACA play a role as resource obtained much information as well as knowledge in what’s and why’s of aviation industry that INACA presented. And even from the forums simply participated by INACA. Therefore, INACA will put into practice this kind of program more frequently. The purpose shall be to augment the journalists’ insight, so as not to let uncertain and mislead news printed and worsen the aviation image.

THE MINISTER OF TRANSPORTATION OF THE REPUBLIC OF INDONESIA and the President of the Council of International Civil Aviation Organization (ICAO) signed a Declaration on Enhancing Aviation Safety in Indonesia, at Denpasar, Bali, on July 2nd. 2007


INACA issues a statement to support the said declaration in Indonesia, in accordance to the framework of global aviation safety road map. (As generally known, European Union announced its flight banning against all Indonesian airline companies flying to Europe).

INACA supports the LSP (Institute for Indonesian Aviation Profession Certification), which takes part in any efforts of standard competence improvement. INACA maintains good relationship with LSP as its business partner, and in November 2007, LSP has received the Standard Competence Book from the Indonesian Pilot Federation. The book, that had been prepared since 1999 and completed by August 2003, would subsequently be forwarded to the Indonesian Professional Certification Authority.

Results of INACA Members General Meeting

INACA Members General Meeting took place on July 2nd

to 3rd, 2007 in Bali. Among the minutes of the said members meeting, concern had been given to Cabotage principles, fleet update, flight crews’ needs, and the human resource matters as a whole, and so on. During the period of 2007, Indonesian national airlines made up their minds and prepared ready to obtain reciprocal rights in the countries which pilots fly Indonesia. Cabotage principles shall basically be maintained. Talking about aircraft fleet updates for the Category of Passengers Air Transportation, national airlines in 2007 had gradually included and operated more efficient aircrafts, which was in line with the framework of improving the services to be provided for the customers.

A suggestion submitted to the Government is the INACA’s inquiry to let every pilot graduated from abroad for better access to obtain license to fly a plane in Indonesia. Also, it expects that the Government would like to prolong maximum age of license, which is, hopefully, until a pilot reaches 65 years old. This idea has got positive response both from the Government and different stakeholders.

During 2007 many efforts were attempted with an end target being meeting the demand of total number of human resources comprehensively both quantity and quality. For example, to overcome difficulties in obtaining pilots to fly fixed wing aircrafts, and particularly, rotary wing ones.

It is also suggested that the Government shall obligate all national airline companies to become members of INACA, with the purpose of easier guidance programmed by the Government, and at the same time to develop unification among the national airline companies. This has also become


a consideration for projected regulation to be made by the Minister of Transportation.

It is deemed necessary to review the tariff (rate) for passengers flying with propelled aircrafts, because the operating cost of a propelled aircraft is much higher than a jet plane. The rate shall be made higher. Discussion has been under way for an implementation.

In connection with Visit Indonesia Year 2008, INACA declares its readiness to cooperate in supporting the Ministry of Culture and Tourism, R.I. The execution takes in the form of, among others, attaching the logo of ‘VIY 2008’ on their planes’ bodies, and to carry out joint projects of tourism programs.

Business performances

INACA Members:

Production of Scheduled Domestic Operation 2007 - 2006

Airline Passenger Carried (number)

PassengerLoad Factor (%)

Freight Carried (ton)

Aircraft Departure(number)

2007 2006 2007 2006 2007 2006 2007 2006Batavia Air 4,607,0

98 3,971,214

80.00

75.85 3,865 14,853

72,090

19,930

Deraya * 7,240 40,512 64.05

61.18 6,36 34 466 2,524

Dirgantara Air Service**

12,565 88,747 37.02

39.60 0.018 n.a. 1,308 9,888

Garuda Indonesia

7,371,046

6,956,437

79.78

76.02 79,149 78,020

73,933

74,496

Kartika Airlines***

59,619 263,093 69.14

66.18 1,529 3,781 872 3,550

Lion Air 6,536,276

6,638,264

90.26

92.46 58,491 57,872

42,800

44,544

Mandala Airlines

1,731,979

1,678,920

73.68

85.44 n.a. 12,510

15,433

21,956

Merpati Nusantara

2,655,526

1,701,137

78.59

75.85 82,49 14,853

29,686

19,930

Pelita Air **** 28,194 209,810 64.57

70.41 114 670 480 6,854

Sriwijaya Air 3,577,413

3,139,529

84.43

80.40 31,001 18,311

33,619

30,228

Trigana Air Service

736,027 627,979 65.33

67.75 77,585 16,123

26,879

16,987

T o t a l 27,322,9 25,315,64 252,370 204,51 297,56 250,887


83 2 7 6 Notes for 2007: * Jan~Jun; ** Jan~Mar; *** Jan~Aug; ****Jan, Mar, Apr.

Total number of INACA’s members is 25 airline companies,

with 18 members are in operation and seven are not. Those in operation consist of 11 scheduled and seven non-scheduled airlines, flying both fixed wing and rotary wing aircrafts.

The business performance of the operators during 2007 was averagely increasing very low compared to previous years, seen from the volumes they had transported, passengers and cargoes as well as number of departures. This also relates with the number of routes and flight frequencies during the year. The non-scheduled airline members are Indonesia Air Transport, Gatari, National Utility Helicopters, GT Air, Eastindo, SMAC, and Derazona AS.

The airline companies currently not operate are: Bali Air, Bayu Indonesia Air, Indonesian Airlines, Jatayu Airlines, Star Air, Bouraq Airlines, and Dayajasa Transindo Pratama.

Other national airlines performance

Production of Scheduled Domestic Operation 2007 vs 2006

AirlinePassenger Carried(number)

PassengerLoad Factor (%)

Freight Carried (ton)

Aircraft Departure(number)

2007 2006 2007

2006

2007 2006 2007 2006

Indonesia Air Asia

1,768,025

1,505,715

79.75

74,55

18,123

16,157

15,142

11,173

Riau Airlines

182,337 97,480 70.71

81.14

206 145 3,786 3,335

Adam Air

5,250,025

4,873,753

90.58

84.09

28,539

16,622

40,628

37,715

Travel Express

60,078* 201,504 59.62

68,67

374 2,110 900 2,606

Wings Abadi

2,351,703

2,021,888

92.39

94.06

17,929

4,550 12,267

14,550

Total 9,612,168

8,700,340

65,171

14,612

71,823

69,441


*(Jan-Mar 2007)

Estimated Total of Production by Scheduled National Airlines:

Domestic Operation International Operation

2007 2006 2007 2006Passenger carried (number)

37 million * 34,015,981

3,100,000 *

2,963,776

assenger Load Factor (%)

79.95 75.38

Freight Carried (ton) 360,000 * 268,495 45,000 * 76,730Note: * estimated for whole year

NATIONAL WIDE, based on some official statistical data, which had been further cultivated to become a description above, the total number of passengers of domestic flights during 2007 is assumed to be 37 million. This shall mean relatively very low progress compared to the achcieved number in 2006, which is 34.015.981. So, the 2007 growth was about eight percents against 2006. This fact shows a big difference compared to 18 percent of growth experienced in 2006 against 2005, whereas total number in 2005 increased by 21 percent compared to 2004, and total number in 2004 increased by 24 percent compared to 2003.

So, the growth of the number of domestic passengers last year was only one digit. The said growth level decrement is clearly caused by the oil price, and it has further impact against the price paid by the consumers in terms of fuel surcharge as indicated by the current ticket price and cargo shipment cost. In line with it, the national economy was also indicating decrement in people’s buying power, despite the Indonesian macroeconomic positive growth.

The national macroeconomic growth in 2007 in fact increased with six percent, compared to 5.4% (2006), and 5.6% (2005), and even 4.8% (2004). So to say, there is no linear comparative correlation between macro economic growths with the fluctuation of number of passengers in domestic air transportation.

Cargo Business

Year Domestic Cargo (tons)

2003 217,592004 248,18


2005 275,482006 268,52007 ** 338,34

** temporary figures Jan ~ Nov 2007

The highest AVTUR PRICE since 2002 occured in December 2007, i.e., when the average price, including tax, was Rp 8.300. This price level indicates an increment of 42 percent compared to January 2007, which was averagely Rp. 5.875. And, if this price compared to the average price in January 2006, which was Rp 5.453, it has increased by 52 percent. Compare it to January 2004, when the price to be paid by an operator was Rp 2.409, the December 2007 price had increased by 245 percent.

That was the situation, as was also experienced by most parts of the worlds, which was overcome through the application of fuel surcharge, i.e., additional cost to be paid by the consumers when buying a ticket or shipping a cargo.

Though there’s oil price decrement at the world market in on-and-off base, the whole graph shows irresistible increment. Therefore, cost keeps ever-increasing, where fuel portion within the total operating cost reach 60 percent at the end of 2007. And it’s the consumers who are supposed to pay for the higher price.

In Indonesia during 2007, the people’s buying capacity generally didn’t show any increment, even worse; its position by end of 2007 was indicated as to be reversal. The combined condition clearly impacted in the decreasing growth level of number of passengers for domestic routes.

INSURANCE SECTOR has also experienced in the unavoidable tendency of premium rate increment. The subject on higher risk in Indonesian aviation insurance during 2007 had been one of the hard issues to be managed by the Indonesian aviation industries, including the fact that some foreign insurance companies extracted themselves from aviation industrial business arena.

The data from Jasindo insurance shows that the total claim payable by the insurance companies due to flight accidents in Indonesia during 2006-2007 reached a total of US$86,927,664. This value was considered to be relatively big.

PASSENGERS SECTOR, as well as other service receivers have, up to a certain lower level, been influenced by flight banning announcement, i.e., for Indonesian airlines to fly Europe.

There has been estimation that during the previous years out of, averagely, 700.000 tourists coming to Indonesia


from Europe, 35-50 percent (simply around 250.000 people) bought inter-insular tour packages in Indonesia, who will utilize domestic flight services.

The IMAGE of Indonesian airline companies has comprehensively been the issue able to let Indonesian aviation industries introspect during 2007. The Ministry of Transportation argues that the international community’s reliance against Indonesian aviation industries has something to do with weak regulations, lacking of regulation implementation, lacking of investigator independency, reactive culture of safety, inconsistent performance level, and limited reports as well as analysis results.

During 2007, the regulators, operators, and airport managements, have paid attention to the said problematic cases more seriously than the previous periods.

IATA Operational Safety Audit (IOSA) Standard had been the most rising item in the Indonesian aviation industries, during 2007. Several national airlines had reached the stage required to register their names as members of IOSA, after being audited by IATA.

The said airlines have stated their willingness to share experiences with INACA members who wish to get more on IOSA.

Reducing Long Weekends. It seems that the phenomenon arised during the previous years, i.e., the public’s behavior of taking advantage of long-weekend to go holidays flying, decreased in 2007. This sort of long weekend may last from Friday till Sunday or Saturday till Monday. Approaching the end of 2007, the Government itself had changed the policy to reduce what was popularly called as common leaves (hari-hari cuti bersama), i.e., when eventually there was a workday in between holidays, and the Government let off the workers for the day, and counted it as one more day leave.

During holiday seasons and peak season categorized as long weekend, the ticket selling prices increases and deemed as peak seasonal price. Most holiday places of destination were mostly those which are normally crowded, namely Yogyakarta, Surabaya, resort areas such as Bali, and from Medan to Jakarta.


Lebaran Flight

Total airlines passengers for Lebaran holidays

2005 2006 Increase %

20072005 Increase %

932.102 1,491,695 (revised)

60 1,677,396 12.44

The number of passengers during Lebaran season is always counted starting from Day minus 7 until Day plus 1 relatively against the Lebaran Day itself. In 2007 Lebaran Day fell on October 13th, 2007.

This special Lebaran season of 2007 recorded different from the previous five years progress. This time there had been no significant sudden increment in number of passengers as it had been in the previous year, in that the number of passengers did not exceed the average number of passengers each month during 2007. While ahead of 2007, in the month where there was Lebaran Day, the number of passengers taken away was much bigger from the months earlier. Even more passengers would be recorded, if Lebaran season fell in coincidence with tourism peak season such as those happened in November 2006.

Haj Pilgrimage

Year 2003 2004 2005 2006 2007Total

passenger179,742 192,675 189,884 187,655 193,917

What did not change much is the Hajj pilgrimage transportation from Indonesia to Mecca in Arab Saudi. The quota for Indonesia to send its hajj pilgrims to Arab Saudi is not more than 200 thousand each year. This is served by two national airlines based on bilateral agreement signed by Indonesian State, i.e., Garuda Indonesia and Saudi Arabia airlines.

Domestic route flights take some part of all hajj pilgrims, flying from their small cities of origin to the embarking places. Saudi Arabia Airlines flies the pilgrims from Jakarta, whereas Garuda Indonesia flies from Jakarta, Medan, Surabaya, Solo, Makassar, Balikpapan, Banda Aceh, heading Arab Saudi.


Special flight operations at every hajj pilgrim season last without recess for 40 days of flights come and go. The period always commences around 30-40 days after Lebaran day.

TKI and Umroh

Though haven’t been figured out through detailed statistic, every year these two activities: workers (TKI) transportation from Indonesia to different countries and a religious trip by Moslem communities, called Umroh, to Arab Saudi, have contributed relatively large portion toward the total international flight passengers.

The services for TKI, both embarking from Indonesia to abroad and debarking from abroad back to Indonesia, take place almost all year long, whereas Umroh trips run at times beyond hajj pilgrim season.

National and foreign airlines carried out both TKI and Umroh trips.


About the Fleet

INACA Members’ fleet at the end of 2007Airline Total Type of Aircraft

Fixed Wing Rotary WingDirgantara Air Service

16 ATR 42 (1), C212-100 (1), C212-200 (4), BN 2A (5), GA8 Airvan (5)

Deraya 5 SD3-30 (2), SD3-60 (2), C212-100 (1).

Derazona 6 BELL 206 (4), BELL 412 (2)

Gatari 3 BELL 212 (2), BK 117 A-1 (1)

Garuda Indonesia

48 B733 (13), B734 (19), B735 (5), B738NG (2), B744 (3), A330 (6)

Indonesia Air Transport

24 ATR 42 (3), F27 (1), F50 (3), Falcon 20F (1), BAC 1-11 (1), AS 365 Dauphin (4), , Beech 200 Super King Air (2), B 1900 D (1)

EC155 (3), EC135 (2), BELL 212 (2), BELL 412 (1)

Kartika Airlines

2 B732 (2)

Lion Air 32 MD82 (7), MD90 (5), B733 (2), B734 (10), B737-900ER (8)

Mandala Airlines

9 B732 (2), B734 (2), A320 (3), A319 (2)

Merpati Nusantara

32 CN235 (2), Casa 212-200 (3), DHC-6 (7), B732 (11), B733 (3), F27 (1), F28 (1), F100 (2), MA-60 (2)

National Utility Helicopters

7 BELL 412 (3), Bell 212 (1), BELL 206 ( 1), AS350-B2 (1), EC144-B4 (1)

Batavia Air 26 B732 (7), B733 (11), B734 (4), A319 (2), A320 (2)

Pelita Air 24 F-100 (2), F28 (1), Dash 7 (5), C212-200 (5), BAe RJ-85 (1).

BO-105 (3), BELL 412 (2), BELL 430 (1), Sikorsy S.76A (2), Super Puma AS332C (2)

Sriwijaya Air 16 B732 (15), B733 (1)Trigana Air Service

19 ATR42 (7), ATR72 (2), B732 (1), F27 (3), DHC-6 (3), L-382 (1), Cessna 206B (2)

SMAC 4 C212-200 (2), C212-100 (1), BN 2A (1)

TOTAL 272 238 34


There are about 48 Indonesian airline, consisting 13 scheduled airlines for passengers transportation, one scheduled airline for cargo shipment, and 34 unscheduled and/or chartered airlines. All of the 48 airlines operate 536 units of aircrafts in 2007, consisting of 448 fixed wing and 88 rotary wing aircrafts.

Total number of registered aircrafts in Indonesia as of 2007 consists of the following:

Type of AOC Total aircraftsAOC 135 (Seat Capacity < 30)

230

AOC 121 (Seat Capacity > 30)

304

AOC 91 (General Aviation) 102 According to the data kept by the Department of

Transportation, the position in 2007 was: around 70 percent of all registered fleets in Indonesia are considered ageing aircrafts.

This has been strengthening the encouragement against the flight operators to update their fleets as soon as possible.

So, in this fleet aspect, the year of 2007 has exposed a new phenomenal for aviation industries in this country. Generally, the operators, based on their respective plans, start to realize additional as well as updating their aircraft fleets, in addition to signing their new commitment to purchase and hire the aircrafts.

Among the new aircrafts provided by the national airline companies and joining the operational period of 2007, there are two MA-60 New Commuter Service aircrafts with 56 seats each, effective September 2007 from Merpati Nusantara Airlines. Mandala Airline began to replace its B737-200 fleet with A320 aircraft, totaling to 12 altogether, and has planned to become 50 within two years from now. Lion Air, currently in operation with 37 aircrafts, will increase to 122 which will be available in stages until 2014, consisting of 100 units of B737-900 ER. Indonesian Air Transport, the first chartered flight company in Indonesia, now becomes the first to ‘go public’ through listing its shares in Jakarta and


Surabaya Stock Exchange, now operating with 18 aircrafts, has announced to add three new Rotary Wing aircrafts in April 2008. Adam Air is going to add its fleet with an Airbus 320. Indonesia Air Asia will add its Airbus 320, totaling to 14 units bin 2008. Garuda Indonesia announced that effective 2007 and on until 2011, it will gradually place 25 units of B737-800, and 10 units of B787 Dreamliner. Batavia Air will add five units of A320.

Flight Routes

All of Indonesian national operators fly 195 routes involving 101 cities in the country during 2007. In addition to this, there are some pioneering flight (‘perintis’) operators flying 93 routes, which during 2007 has booked 7592 times flying frequency. This number was continually increasing, starting from 7176 frequency (2006), 6656 frequency (2005) and 6032 frequency (2004).

The pioneering flight routes were served owing to the Government subsidy, because actually on the said routes the demand is still low, but the availability of flight services is assumed enable to stimulate regional economic development, under the principle of: the trade will follow the ship. The Government opens opportunities to the national air transportation companies to start their operations, through a tender. Such subsidy consists of air transportation operation and fuel transportation subsidies.

This shall show how in fact almost all remote areas of the country of Indonesia, which consists of 17 thousands small and big islands, with population of around 230 million, have been reached by the national flight operations. Furthermore, there are 25 non commercial airline companies owned by corporates, individuals, religious and social missions, operated not for commercial purposes. Their flight routes would be decided based on the owners’ needs.

International Relations

AS MANY AS NINE national airline companies operate regional flight abroad, as they also fly the country. A number of the above mentioned companies run the flights to 12 countries, namely Australia, Arab Saudi, Hong Kong, Japan, Korea, Malaysia, The Philippines, and People’s Republic of China, New Zealand, Singapore, Thailand and Vietnam, totaling altogether to 25 destination cities.


The Indonesian Government signs Bilateral Air Agreements with 71 countries, consisting of North America 2, Europe 26, Asia 14, ASEAN 10, Africa 6, Middle East/Arab 10, and Australia/Pacific 3 countries. However, during 2007 only 36 foreign airline companies from 22 countries materialize their operation to Indonesia, i.e., from 32 cities abroad fly to 11 cities in Indonesia. The cities include Medan, Padang, Pekanbaru, Palembang, Jakarta, Bandung, Solo, Surabaya, Denpasar, Mataram, and Manado. The eleven cities mentioned above represent some of the crowded routes for domestic flights.

NUMBER OF PASSENGERS on the international routes during 2007 flown by national carriers, based on the processed temporary data recorded by the Department of Transportation, is estimated at 3.100.000. Previously, number of passengers was recorded at 2.960.000 (2006), 3.360.000 (2005), 2.750.000 (2004) and 2.060.000 (2003).

Foreign airline companies carry 10.947.000 (2007), 9.790.000 (2006), 8210.000 (2005), 9.050.000 (2004) and 8.640.000 (2003).

Total passengers moving here and there handled at all Indonesian airports are recorded to be 13.930.000 in 2007 (January-November). These figures shall, of course, show the number of passengers departing and arriving in the Indonesian international airports, including transit passengers.

CARGO TRANSPORTATION in total along the international routes tends to increase. During 2007 it’s assumed to reach growth level of 17 percent. Temporary data from the Department of Transportation, after being processed, indicates that the total international cargo reached 360.000 ton.

During the previous years, total cargo on the international routes can be seen from the following statistic:

Cargo Business

Year International Cargo (tons)

2003 254,962004 272,682005 240,212006 300,822007 ** 324,67

** temporary figures Jan ~ Nov 2007


Especially in 2007, total international cargo carried by the Indonesian scheduled airline companies reached an estimated 45.000 ton. During the previous years, those cargos carried by Indonesian scheduled airline companies had fluctuating volumes as follow: 50.429 ton in 2006, 46.768 ton in 2005, 66.285 ton in 2004, and 60.555 ton in 2003.

It is shown that the volume of cargo on the international routes carried by Indonesian airline companies range between 15 and 24 percent of market shares. Several companies specializing in cargo have added up their number of freight aircrafts in 2007, and announced their plan to add more in 2008. They anticipated the demand tendency which was predicted to increase for domestic as well as international routes.

International Policyby the Government

Meanwhile, both aviation industries and the Indonesian Government show attitude and spirits to extend the international flight services.

It is worthwhile to note how the Indonesian Government gradually applies relaxation policy on the air transportation rights, while considering the following policy elements:

Freedom of the air until the fifth freedom rights for cargo special transportation as well as passengers shall base their activities on the principle that exchange of freedom rights shall be based on the traffic value of a route (not based on mirror reciprocity).

Flight routes will remain to be based on geographical location. Operating company assignment shall be more than one in every country, and principally shall apply the criteria of ‘substantial ownership and effective control’. Carrying capacity (type of the aircraft) will be left to the operator to decide.

Flight frequency will still be determined by the Government, considering that the frequency is feasible in term of economy. Tariff shall be determined by the Airlines, while referring to the principle of double disapproval. Limited co-terminal is allowed as long as Indonesia also gets the similar rights and same traffic value.

Allowing the cooperation among airlines in terms of code sharing (bilateral or third party code sharing


participation) etc. Allowing a chartered flight from abroad but the flight should go directly to the final destination area.

Regarding the decision for flying the abroad routes, this will be based on the bilateral or multilateral air transportation agreement. Bilateral principle will consist of reciprocal basis and equal opportunity treatment, whereas multilateral principle shall cover equal opportunity treatment and non-discrimination.

The aspects covered in the Government’s consideration include the national necessity, networking and domestic flight routes aspects, air transportation service demand, and of regional potentials, while integrating inter and across transportation modes.

For the 3rd and 4th freedom, it may open office in all province capitals. Beyond that, there will be other five big cities to open gradually. For the 5th freedom, non-capital city will be allowed to open if it positively creates result to other sectors, and has no negative impact against domestic flights.

Regarding cargo transportation, from the government point of view, policy strategy is under preparation. What is targeted is the improvement in capacity building: anticipating rules on liberalization within national regulation, and the seven cities offered within ASEAN MoU on Air Freight, which is the main focus determined by the government in developing infrastructures for cargo transportation in Indonesia.

Infrastructure and Facilities There are three main projects in the field of infrastructure under development during 2007. The construction of Medan new airport, in order to replace Polonia – Medan. This project worth of Rp 2.057 trillion or equivalent to US$228.6 million. Hasanuddin airport facility development project in Makassar, worth of Rp 1.408 trillion or equivalent to US$156.4 million, which was expected to finish in 2007. And the development of Central Lombok airport expansion valued to Rp 665 billion or US$73.9 million which is expected to complete by 2009. The latest mentioned is

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the project of removing the existing airport to a new location, with longer runway and wider facilities, aiming at encouraging foreign airlines to operate directly to Lombok.

The new airport in Medan, called Kuala Namu, and Soekarno-Hatta airport in Jakarta, both have plans to construct railway system to serve people going to and from the airport.

Soekarno-Hatta airport is presently constructing its 3rd terminal building, with its main function soon to serve TKI (Indonesian Workers) flights. The airport operates terminal 1 for domestic flights and terminal 2 for international ones.

One of the most constraints faced in Jakarta is the access to and from the airport, which is eventually inundated by the mid of rainy season. This barrier causes disturbance against crew picking timetable, and even to the passengers as well as flight schedules.

As a flight operator faces competition against others, airport management in Indonesia, all are under control of the government, also needs to compete at two fronts. First, ability to anticipate significant increment of the number of passengers, and the demand for better safety and security quality for the service users in the country. Second, technical ability as well as image protection toward the outer world, so that it may be attractive enough to invite foreign aviation companies to develop commercial flight operations in Indonesia. Or else, many operators will choose other airports to cooperate with.

Structural and infrastructural technologies in the airport, including number and conditions of equipment such as navigation aid, X-Ray, detector, remain considered inadequate to meet the higher standard. The high maintenance cost has been one of the constraints until 2007.

Starting from 2007, there would be gradual replacements and renewals of radar system, which was initiated from four airports, namely: Bali, Surabaya, Makassar, and Balikpapan. In Adi Sumarmo airport, Solo, the passengers terminal is replaced by a new one.

During 2007, more than one million aircrafts movements registered in domestic flight routes, based on departure and arrival, using a total number of airports of 187, serving the operations of 50 registered airlines companies. That shall be relatively big number.

As many as 13 airports are managed by the state-owned company called PT Angkasa Pura I, they are: Ngurah Rai (Denpasar), Juanda (Surabaya), Hasanuddin (Makassar), Sepinggan (Balikpapan), Frans Kaisiepo (Biak), Sam Ratulangi (Manado), Adi Sutjipto (Yogyakarta), Adi Sumarmo (Solo), Syamsuddin Noor (Banjarmasin), Achmad Yani (Semarang), Selaparang (Lombok), Pattimura (Ambon), and El Tari (Kupang).

Another State-owned company, PT Angkasa Pura II manages 12 airports, namely : Soekarno-Hatta (Jakarta), Sultan Mahmud Badaruddin II (Palembang), Husein Sastranegara (Bandung), Kijang (Tanjung Pinang), Halim Perdanakusuma (Jakarta), Supadio (Pontianak), Sultan Syarif Kasim II (Pekanbaru), Sultan Iskandar Muda (Banda Aceh), Minangkabau International Airport (Padang), Sultan Thaha (Jambi), Polonia (Medan), Depati Amir (Pangkal Pinang).

Meanwhile, other airports are managed by government teams called Technical Performing Units established by the Department of Transportation of the Republic of Indonesia.

Safety and SecurityThe scheduled airlines, if counted based on 100.000 departures,

recorded accidents of averagely 5.12 times during 2007. The highest number of accident based on this calculation in fact happened in 1997, when the average was round 11.7.


Per 100.000 departures, there is an average of 1.77 accidents in 2006, average of 4.64 accidents in 2005, then 4.09 in 2004, and 4.15 in 2003. Similar graphic curve will appear if the accident is measured based on 100.000 flying-hour calculation.

As described earlier, all INACA members have signed the declaration of Flight Safety Management Improvement, when it was signed collectively by 37 domestic airline companies and two airport managements on September 15, 2007 in Jakarta.

No wonder if the safety management challenges keep increasing as faced by the Indonesian aviation industries, due to the fact that more than one million flight departures and arrivals take place in one year, or averagely it approaches 3000 aircraft movements per day, or averagely 166 flights per hour, assuming that each airport averagely operates 18 hours a day.

The Regulator announces that, in connection with improvement efforts on safety and security, it has taken 17 kinds of comprehensive actions, covering different kinds of aspects.

In addition to this, there are other actions still in implementation process, they are:

Further evaluation on the follow up action of the audit results of FAA (Federal Aviation Administration, USA), ICAO (International Civil Aviation Organization) and the European Union, which was achieved so that it can soon be accomplished as scheduled, to realize improvement in accordance with audit findings so that the case of banned flight to European Union can soon be lifted , to improve the supervision function more intensively through Ramp Check implementation, Audit, Surveillance and Enroute Check.

To reevaluate in details the implementation of safety commitment by airlines CEO’s as provided in the Company Manual. To evaluate the internal audit function process and safety review against every operator.

More strict and consistent law enforcement is being performed in accordance to the prevailing norms/standard/regulations. The Indonesian Government actively participates in every international activities held by ICAO, FAA, bilateral meeting, regulation harmonizing and BAP (Bridging Aviation Project), of Europe. To revise the Norms/Standard/ Regulations and adjust them to the ICAO Annex development.

In addition, the regulator also gives sanction against violation on the authority and responsibility to Pilots in Command/Technicians, and to apply the function of CASO more effective. Safety Director of every operator must monitor the implementation of Safety Management System, to make effective the functions of Flight Operational Control/Flight Following/Flight Watch on flight routes.

Outlook to 2008


What is left to be expected in the Indonesian aviation world, other than improvement in efficiency, professionalism, and the quality of human resources, improvement in the quality of safety and security management, which will all come to an estuary called competing power improvement?

Indeed, a brightening condition has taken place: number of domestic passengers increases incredibly from 19.2 million (2003), 23.8 million (20024), 28.8 million (2005), 34 million (2006). Unfortunately, in 2007 the growth was below 10 percent due mainly to the impact of increased fuel price.

On another side there’s a challenge arising related with performance and standard quality regarding flight safety and security in 2007.

The capability of managing significant increment of the number of passengers should of course relate with the capability of managing route expansion and frequency as well as fleet increment, and human resource. However it also brings questions regarding adequate adjustment in term of the capability to manage the infrastructures, starting from airport and aviation equipment management, arrangement of the supporting facilities on land which connects the airport, up to fleet management, marketing, and the sales of air transportation itself.

Shall the above mentioned matters actually be addressed, there’s still something left, an ‘urgent home work’ to be done by the Indonesian aviation industries. That is, to cope with the gradual process of aviation liberalization in ASEAN that has been partly implemented.

The Roadmap for Integration of Air Travel in ASEAN has been simplified by the Government as: To reach an Open Sky in ASEAN region; gradual and progressive implementation; ASEAN-X formula, i.e., another member country may join when it’s ready; and the flexibility of the proposed time limit for implementation.

Relaxation in air cargo business has been materialized, which is the liberalization of the 3rd and 4th freedom by increasing the tonnage and additional cities since December 2006. Full liberalization of ASEAN cargo will start in December 2008.

It’s also starting as of the year of 2008 the full liberalization until the 5th freedom is going to be effective for the predetermined cities. Liberalization of the 3rd and 4th freedom in the capital of each country will also start in December 2008. And the Liberalization of the 5th freedom in each of ASEAN country’s capital will be in effect starting December 2010.

In other words, face-to-face competition among the operators within and out of a country will take place in Indonesia’s own market. This way, the Indonesian Government deserves support, regarding its policy which will implement direct open sky only for cities with high market demand, such as Jakarta, Denpasar, Surabaya, Medan, Padang, and Makassar. Potential demand in most of the international-airport owning cities in Indonesia is still low.

Fleet aspect has the role in determining the efficiency competition. Therefore, Indonesian airline companies must renew their fleet, because old aircraft will normally consume more fuel and inefficient compared to newer aircrafts.

Arrangement pattern of home-base system for airline companies, and the idea of practicing hub-spoke system would depend on the availability of supporting infrastructures. Subsequently, at its turn, the home-base and hub & spoke systems would support the improvement of operators’ efficiency as well as competing power.

One of the positive sides so far lies on the capability of the airline companies, which within a relatively short time period (less than one decade) have been able to adjust its capability to manage the significant


increment of passengers as well as cargo, ever-increasing of frequency and departures.Reflecting the hardworking results, in 2008 it’s predicted that the number of domestic passengers will increase by around 10%, putting in mind the Indonesian economic condition, the people’s buying capacity, and the capacity of flight fleets in operation.

As has been observed last year, the efforts were expected to be taken together by regulator and all operators, even the stakeholders, in order to balance quantitative growth with qualitative growth, to balance the growth in Indonesian aviation industries. Then the next period shall demand the adjustment of efficiency capability, safety and security, competing power, and this shall not be postponed any longer than the year of 2008, and so on.

Using effective communication phrase, we might say: “We will show, not only we say.”

Members General Meeting 2007

INACA Members General Meeting was held on July 2nd – 3rd, 2007, in Nusa Dua, Bali. The event looked different from the previous ones. There was no new committee election. Rather, the meeting renewed the deal of committee working period, which previously it was one year now becomes two year. So, the committee members elected in 2006 shall continue their term for another year until 2008.

Among the discussion contents during the general meeting, of course the safety issue related with the threat of flight banning against Indonesian airline companies by European Union. Further, much discussion related with development as well as other challenges being and forecasted to be faced by the members of INACA. So, the General Meeting takes a central theme of: “Balancing the Growth in Indonesian Aviation Industry”.

And, there was a new agenda firstly introduced during the General Meeting, i.e., the episode of selecting The Best Stewardess of INACA 2007.


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