INDONESIA IS A COUNTRY unmatched by any of its South-East Asian neighbours. With an expanding population of some 190 million, a rich and bountiful supply of natural resources and a growing industrial capability, it is best described as a slumbering economic giant which is now only just beginning to stir.
The Indonesian archipelago is of major strategic significance, consisting of 13,700 islands extending 4,000km (2,500 miles) along the equator. As the fourth most populous nation in the world, trailing just behind the USA, it is the geographical gateway between the Pacific and Indian Oceans, and between Australia and Asia.
The country boasts one of the most rapidly growing economies in the region, topping 8.07% growth in 1995, according to official accounts. As a result of faster-than-expected economic acceleration, its per capita gross domestic product is now expected to reach $1,000 by 1997, three years ahead of earlier Government projections.
INFRASTRUCTURE IMPROVEMENTS
Indonesia's increasing affluence is, in turn, putting added pressure on the country's over-stretched transport infrastructure. Demand for international transport is expected to rise by 12% and that for domestic air transport by 9%, while overall air freight will grow by 12.2%, estimates Indonesian communications minister Haryonto Dhanutirto.
Fuelling this demand is an increasing number of Indonesian travelers venturing overseas, along with a steady rise in the number of inbound foreign tourists. International arrivals totaled 4.07 million in 1994/5, up by nearly 20% on the previous year, while departures were up by 15%, to 3.44 million.
Tourism brought in about $4.6 billion in 1994/5 and is expected to be the country's third-largest exchange earner by the turn of the century. The Indonesian Government has set a target of 11 million foreign visitors by the year 2005, generating $15 billion in income, according to estimates by the country's director-general of tourism.
To try to keep pace with projected growth, the Government has embarked on a major programme of airport development and expansion. Indonesia has 146 airports, including 23 handling international flights and 418 "pioneer" airstrips, three-quarters of which are in remote Irian Jaya.
Numerous as these airports are, only seven are large enough to handle a Boeing 747, while five others are restricted to Airbus A300-/ McDonnell Douglas (MDC) DC-10- and MD-11-sized aircraft. Indonesia has 25 airports large enough for Boeing 737s and MDC DC-9s and 65 suitable for the smaller Fokker 100/F28. The majority are limited to Fokker F27, CASA/IPTN CN-235 and Bombardier de Havilland DHC-6 turboprops.
The Indonesian Government has set a budget of $5.25 billion for air-transport infrastructure development during the current, sixth, five-year plan up until 2000. About 32% of the required amount will be provided directly from the Government, with the remainder being supplied by state-owned enterprises and private companies.
To help attract private funding, the Government is trying to encourage foreign companies to invest by relaxing existing regulations on airport development. Private investors will be allowed to participate in the development of airport passenger and cargo terminals, ground handling, in-flight catering, support equipment and training.
Indonesia is basing its airport development programme on a hub-and-spoke type of network. Three main hubs have been designated, at Jakarta; Medan, in Sumatra; and Ujung Pandang, in Sulawesi, with the remainder of the country's airports acting as feeders.
New construction projects include the planned relocation of airports from Selaparang-Mataram to Central Lombok, Polenia-Medan to Kwalanamu and Tabing- Padang to Ketaping. Runway improvements are being carried out at capital Jakarta's Soekarno-Hatta International Airport, Juanda-Surabaya, Hasanuddin-Ujung Pandang, Sam Ratulangi-Manado, Pattimura-Ambon, Adi Sumarmo- Solo and Husein Sastranegara-Bandung.
Air-traffic-control coverage - particularly under-developed at the eastern end of the archipelago - is also to be upgraded. New surveillance radars are being installed at ten different locations, instrument-landing systems added at 12 airports, 21 new airport control towers are to be built and UHF communications will be extended to 50 airports.
According to the Indonesian Directorate General of Air Communications (DGAC), there is a total of 288 commercial passenger aircraft in the country, ranging from 747-size down to DHC-6 Twin Otters. As of late 1995, some 160 were in regular service, mostly with flag carrier Garuda Indonesia and regional and domestic operators Merpati Nusantara Airlines, Sempati Air Transport, Bouraq Indonesia Airlines and Mandala Airlines.
REDUCING RESTRICTIONS
The number of aircraft is expected to expand markedly as traffic demand increases. A DGAC 25-year-forward projection envisages the Indonesian civil fleet growing to some 443 aircraft, consisting of 108 with 320 or more seats, 65 in the 200-seat class, 95 regional 100-seaters and 175 50- to 70-seat turboprops.
Many recognise that simply adding more aircraft is not the real answer. For Indonesia to cope with the projected increase in traffic, a major overhaul of the country's tightly regulated operating environment and protectionist airline industry, is essential.
The Government, accordingly, has begun to lift restrictions on international and regional services. The move has permitted Indonesia's smaller carriers to begin venturing overseas and has also allowed more competing foreign carriers in, despite frequent objections from Garuda.
Indonesia has been, or is, in the process of revising some its 46 international air-service agreements, to provide more capacity. In a recent deal with Australia, the two governments agreed to expand air-traffic capacity by 38% over 18 months. As a result, Merpati will be allowed, for the first time, to launch a service between Jakarta and Melbourne. Merpati, together with Bouraq, already operates to Darwin, while Sempati flies to Perth The Government has granted Merpati and Sempati licences to fly to London, in an attempt to bolster Garuda's twice-weekly service between Indonesia and the UK. Indonesia, in return, has suggested that British Airways increase its frequencies and that two other UK-based carriers be given access, such as Virgin Atlantic Airways or British Midland.
At a regional level, the establishment of a series of South-East Asian economic-growth triangles between Brunei, Indonesia, the Philippines and Singapore promises to create new opportunities for local carriers. An open-skies type of policy will be applied within three designated growth areas bordering Kalimantan, Sumatra and the Riau Islands.
In concert with the Government's partial liberalisation, plans are being drawn up to separate and privatise both Garuda and Merpati. The latest timetable calls for a public listing of the national carrier by the end of the year, or in early 1997, with Merpati planned to follow at a later date.
Garuda's pending privatisation has been held up repeatedly by changes in senior management and delays in restructuring the airline. In a recent step forward, the Government has said that it will now assume responsibility for some of Garuda's debt - reportedly as high as $1.6 billion rupiah ($68 million) - in exchange for equity.
Much of this debt has been run up as the result of new-aircraft purchases. Garuda's fleet now numbers 55: three 747-400s, six 747-200s, six MD-11s, six DC-10-30s, ten A300-600Rs, nine A300B4s, seven 737-400s and eight 737-300s, while three of its early-build MD-11s will be replaced by three new, extended-range, versions leased from MDC.
In an effort to reduce its liability, while at the same continuing to modernise its fleet, the airline has begun to convert its outstanding aircraft orders into leases. Garuda recently concluded a finance-leasing deal with Deutsche Morgan Grenfell for six of the nine Rolls-Royce Trent 700-powered Airbus A330-300s on order, the first of which is due for delivery in December.
The airline has renegotiated outstanding orders with Boeing for six 747-400s and nine 737-400s. It will trade in its fourth 747-400 on order for five 737-500s and defer the remaining five aircraft, possibly to swap at a later date for six 777s. Boeing has also agreed to exchange Garuda's 737-400 orders for 12, smaller, 737-300/500s Other restructuring measures in the pipeline are the hiving off of some airline operations into financially independent subsidiaries. The planned new strategic-business units are eventually to include ground handling, training, cargo handling and information services, as well as the airline's medical centre.
At the top of the list of divisions to be spun off is the 3,200-strong Garuda Maintenance Facility (GMF). The US Federal Aviation Administration recently extended GMF's repair-station certification to cover the 747-100 and -300, DC-9, DC-10 and MD-11. GMF has also applied to Europe's Joint Aviation Authorities for similar approval. Notable capabilities include a three-month four-in-one 747 overhaul deal, consisting of a D-check, section 41 and engine pylon and cabin modification. Other continuing work includes A300B4 cockpit upgrades, F28 three-week E checks and complete R-R Spey 555 engine overhauls.
While Garuda appears finally to be making progress towards partial privatisation, sister carrier Merpati still has a long way to go. It operates a diverse fleet of 70 aircraft, consisting mainly of ex-Lufthansa 737-200s and Garuda F28 cast-offs. Some 40% of its 386 routes are made up of subsidised "pioneer routes", designed to support development in remote parts of Irian Jaya, Kalimantan and Sumatra.
Merpati is still the subject of frequent interference from the Government. Its president, Ridwan Subroto, was removed in early November 1995 after refusing to lease 16 new Indonesian-built CN-235s which he considered over-priced. The lease rate was subsequently lowered and the deal eventually went through.
SOCIAL SERVICES
The move has been interpreted as a clear message from the Government that, while airlines have increasingly been expected to stand on their own financial feet, they are still expected to meet certain social obligations. This includes, supporting Indonesia's home grown aerospace industry and products, such as the CN-235 and new N250 turboprop.
Privately owned Sempati, by contrast, appears to be relatively free to do as it wishes. The politically well connected carrier, operates a smaller, 25-strong, fleet of some 25 A300B4s, 737-200s and Fokker 100s, 70s and F27s. It made of a net profit in 1995 of 26 billion rupiah, up 8.3% on the year before.
The carrier is also planning to offer 15-20% of its stock for sale to the public, according to Sempati president Hasan Soedjono. Malaysia's Asean Aviation recently acquired a 40% stake in the carrier, boosting its capitalisation to $850 million. The share sales are expected to underwrite a needed fleet modernisation, including new, longer-range, passenger aircraft for European flights.
Source: Flight International
