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Press Release No.: 11

Date: 12 March 2015

Developing the Potential of Indonesia’s Aviation Sector

Jakarta – The International Air Transport Association (IATA) has called on Indonesia’s stakeholders to partner in the development of an aviation masterplan based on global standards to ensure that the country is served by an aviation industry performing at its best. IATA identified three potential elements to be addressed in the masterplan: improving safety, ensuring capacity and a smart regulation framework.

“Indonesia’s aviation potential is huge. By 2034, it is expected to be the sixth largest market for air travel. By then some 270 million passengers are expected to fly to, from and within the country. That’s three times the size of today’s market. There is a big role for collective leadership among industry partners – including the government – to make the aviation sector flourish. Indonesia needs an aviation masterplan based on global standards and developed in partnership by aviation stakeholders including the government. Such a plan should set a common vision for addressing top priorities such as safety, capacity and regulation. And of course it must be followed by real actions,” said Tony Tyler, IATA’s Director General and CEO, in his keynote address to the IATA Aviation Day in Jakarta.

Improving Safety

Safety is aviation’s top priority and the biggest concern for the successful development of aviation in Indonesia. Indonesia has had at least one hull loss every year since 2010. In the International Civil Aviation Organization’s (ICAO) Universal Safety Oversight Audit Program (USOAP), Indonesia was assessed as below the global average. The US Federation Aviation Administration downgraded Indonesia to Category 2 in its International Aviation Safety Assessment program. And the EU continues to have a ban on all but five Indonesian carriers.

IATA is investing resources to improve safety in Indonesia. The most recent being a partnership for quality workshop that was held in Jakarta last week with the support of Garuda. “Indonesia is not, however, taking full advantage of IATA’s resources. The IATA Operational Safety Audit (IOSA) is a global standard and is at the core of our efforts to improve safety. But of the 62 Indonesian airlines operating scheduled or chartered flights, only Garuda is in the IOSA registry. Making IOSA compulsory for an Indonesian AOC will send a very strong signal of commitment to improve safety. And experience shows us that it will make a difference in safety performance,” said Tyler.

Since 2009, IOSA registered carriers recorded better safety performance than those not on the registry. In 2014, IOSA registered airlines had one accident for every 900,000 flights, compared to one accident for every 300,000 flights for those not on the registry (all accidents, all aircraft types). Carriers not eligible for IOSA because their fleet is under 5,700kg can participate in the IATA Standard Safety Assessment.

“Turning around a safety record is not easy. The best laid ‘plans’ need to be followed-up with concrete actions. Where this has been done—in Latin America, China, and Nigeria for example—we have seen significant and sustainable improvements. Setting IOSA as one of the standards required for an Indonesian AOC is but one of many needed actions,” said Tyler.

Capacity

Indonesia’s traffic growth needs to be supported by the aviation infrastructure, both on the ground and in the air. For Indonesia this means building a world-class hub, managing scarce capacity to global standards and modernizing air traffic management.

Building a World Class Hub: Indonesia’s airports are in urgent need of additional capacity. By 2034, Indonesia’s airports are expected to handle an additional 183 million passengers compared to today. Tyler commended the government for its plans to expand infrastructure –building another 62 airports over the next five years, and terminal expansions at Jakarta’s Soekarno-Hatta International Airport. “But the capacity problem in Jakarta is nowhere near being solved even with the terminal upgrades. Indonesia needs a hub. The most efficient solution is to maximize the potential of one airport – Soekarno Hatta where significant investment has already been made,” said Tyler.

Soekarno-Hatta has the possibility to grow. There is plenty of land and the basic runway structure is relatively efficient. The terminal areas will, however, need a major re-development. “The vision would be something like the super-terminals that we see in Beijing, Hong Kong or Incheon. By starting from scratch and working in close consultation with the airlines I am confident that we would achieve a world-class facility designed around key new technological innovations such as those in the IATA Fast Travel program or the new risk-based process innovations that Smart Security is developing,” said Tyler.

Managing Scarce Capacity: “Soekarno-Hatta cannot be re-developed over-night. So the airport’s scarce existing capacity must be allocated based on the IATA Worldwide Slot Guidelines. The network nature of the airline business means that global standards are critical. Unfortunately there are a large number of instances where Indonesia is not playing by established international rules” said Tyler.  There are two slot management processes at Indonesian airports – one for domestic flights and another for international flights even though both are managing the same runway capacity. There is also no independent slot coordinator at the airports.

“The IATA team is ready to assist with the introduction of professional and independent slot coordination, who could bring the working procedures in line with global standards,” said Tyler.

Modernizing Air Traffic Management: “Increasing traffic puts pressure on air traffic management. There are over 800 aircraft on order by Indonesian airlines. As they are delivered, Indonesia’s already busy skies will become even more crowded. The imminent full introduction of Automated Dependent Surveillance—Broadcast (ADS-B) will be a major step forward. But there is lot more work to be done,” said Tyler. He urged Indonesia to improve the skills of air traffic controllers, to move forward with the implementation of Performance Based Navigation and introduce Air Traffic Flow Management (AFTM).

Regulation

It is important to have government regulations which are consistent with global standards and facilitate success and growth. “But Indonesia has several regulations which are counter-productive and which treat airlines unlike any other comparable business,” said Tyler.

Tyler questioned the following examples:

  • Airlines are required to sell air tickets in Indonesian Rupiah, yet their suppliers – ground handlers and fuel suppliers - can bill them in US dollars.
  • Despite the competition in the market, airlines must price within regulated limits
  • Airlines are forbidden from selling tickets at airports when train tickets can be purchased at a train station
  • Indonesia has mandated a 2% biofuel blend for aviation jet fuel uplifted in Indonesia by 2016. Yet there is no control on the price or subsidies on the production side.

Tyler encouraged Indonesia to apply smarter regulation principles when establishing new regulations. These include clearly defining the problem to be solved, consulting with the industry, conducting rigorous cost-benefit analysis and ensuring consistency with global standards where they exist.

Tyler also encouraged Indonesia to implement international conventions which help integrate the country into the global system. He cited the example of the Montreal Convention 1999 (MC99). MC99 is a comprehensive instrument which governs liability in 110 states. Under MC99, the compensation limit for personal injury or death is set at around $160,000.

“The AirAsia accident provides a very sad example of the consequences of Indonesia’s failure to implement the Montreal Convention 99 (MC99). The families of passengers who had bought return tickets from Singapore were covered under the MC99 limit. But the families of those who had purchased their tickets and started their journeys in Indonesia have a treaty cap of around $12,000. I understand that the Indonesian government took special measures to increase this amount. Having a treaty in place would have been a better solution,” said Tyler, who urged the government to make it a priority to ratify MC99.

Read Tony Tyler's speech

For more information, please contact:
Corporate Communications
Tel: +41 22 770 2967
Email: corpcomms@iata.org

Notes for Editors:

  • IATA (International Air Transport Association) represents some 250 airlines comprising 84% of global air traffic. 
  • You can follow us at http://twitter.com/iata2press for news specially catered for the media.

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