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8/8/2019 Indonesia Progress Toward Next Wave
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Indonesia Progress Toward The NextWave
Airline Industry PerspectiveElisa Lumbantoruan - EVP Corporate Strategy & IT/Act. EVP Finance - Group CFO
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Contents
1. Indonesia / Industry Overview
2. ASEAN Open Sky
3. Garuda Indonesia Today
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Indonesia: GDP per capita
Most populous country in the South East Asia (4th largest in the world)with people distributed across a number of medium - large cities andhigh density provinces
Largest archipelago in the world lending greater importance to air travel;potential for taking market-share from land / sea travel
High growth economy with GDP per capita showing a growth of 12% inthe period 2000 2009
Most populated cities in the region
Source: IMF, World Economic Outlook (WEO), 2009
(1) 2009 estimatesSource: IMF, World Economic Outlook (WEO), 2009
Medan2.0 million
South East Asia GDP Forecasts
(%)
GDP percapita(1)(US$)
2,224 1,052 34,346 1,721 1,052 7,469
Kuala Lumpur
1.6 millionPetaling1.5 million
Bandung4.0 million
Jarkarta8.0 million
Singapore
4.6 million
Manila1.7 million
Indonesia: unique opportunity within Asia
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Airline penetration levels
496
Population(m)
232 87 92 28 67 5
13.1 14.715.9
39.1 37.4
43.5
52.2 52.1
59.4
-
10.0
20.0
30.0
40.0
50.0
60.0
70.0
2007 2008 2009
Domestic International
Aviation Industry: Indonesia to register tremendous growth
Source: Company
Airline passenger volume
One of the fastest growing airline markets in Asia
Source: Euromonitor
Largely underpenetrated market with significantpotential for growth
0709 CAGR
10.1%International5.4%Domestic
Total 6.6%
International
Domestic
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In 2009, Asia-Pacific overtook North America to become the largest air travel market with 647 million passengers andis expected to grow more rapidly than that of the rest of the world, with an average annual growth rate of 6.5%between 2009 and 2028
Source: Airbus, Global Market Forecast, 2009
% of 2028 world RPKs: 20%
0 1,000 2,000 3,000 4,000
Asia
Europe
NorthAmerica
MiddleEast
LatinAmerica
CIS
Africa
RPKs(1) (bn)
2008 traffic 2009 - 2028 growth
% of 2028 world RPKs: 26% % of 2028 world RPKs: 4%
% of 2028 world RPKs: 6% % of 2028 world RPKs: 8% % of 2028 world RPKs: 33%
% of 2028 world RPKs: 3%
CIS
2009-2018 2019-202820-yeargrowth
6.2% 5.6% 5.9%
Asia Pacific
2009-2018 2019-202820-yeargrowth
6.6% 5.5% 6.0%
Africa
2009-2018 2019-202820-yeargrowth
5.4% 5.1% 5.2%
Latin America
2009-2018 2019-202820-yeargrowth
5.9% 5.6% 5.8%
Middle East
2009-2018 2019-202820-yeargrowth
7.6% 6.3% 6.9%
North America
2009-2018 2019-202820-yeargrowth
1.9% 2.9% 2.4%
Europe
2009-2018 2019-202820-yeargrowth
4.0% 4.7% 4.3%
World
2009-2018 2019-202820-yeargrowth
4.6% 4.8% 4.7%
Aviation Industry: Asia to lead would traffic growth
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Indonesia (Domestic) Market & Forecast
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International market overview(in/out Indonesia)
The growth of International market in 2008 are increased by 10% however slowdown to 5%
in 2009. Projected the annual market growth from 2008 to 2013 is 6.0%
Market Size (mio)
Sources : IATA, PT. AP, PATA
8
0
5
10
15
20
25
2006 2007 2008 2009 2010 2011 2012 2013 20140
10
20
30
40
50
60
Leisure Traveler Business Traveler
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Tourism Forecasts
Tourism forecasts show modest
growth Growth potential expected to be
driven by a mixture of European,Asian and Australasian markets
Malaysia, Indonesia and Thailand plan
to boost tourism among the threecountries under the IndonesiaMalaysia Thailand Growth Triangle(IMT-GT).
Bali is the main destination fortourists (around 1/3 of total) and has
grown faster than the averagerecently
Forecast of Number of Tourists Visiting Indonesia
2010 - 2014
Year Pessimist Moderate Optimist
2010 6,421,665 6,759,647 7,097,630
2011 6,627,275 6,976,079 7,324,883
2012 6,832,884 7,192,510 7,552,135
2013 7,038,494 7,408,941 7,779,3882014 7,244,103 7,625,372 8,006,641
Source: ID Ministry of Tourism
April 2010
(Note that all assume an average
growth rate of3.1%p.a and onlyvary on base year assumption)
Despite the huge tourism market potential forIndonesia, growth prospects are seen as below therate of GDP growth.Source : Ascend
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Contents
1. Indonesia / Industry Overview
2. ASEAN Open Sky
3. Garuda Indonesia Today
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Airlines Perspective Related
to the ASEAN Open Sky
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Open Sky
Open Sky is a bilateral or multilateralagreementwithin two or more countries
whichallowsforeign airlines to operateinternational routes above other countriesregions
without any limitationon routes, frequencies,capacities and other airlines restrictions
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General Impacts on Airline IndustryUnder Open Sky
more capacities will be available for airlines to access
additional markets
more airline productivity and flexibility
lower prices benefiting the consumers
more competitive airline industry.
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ASEAN Open Sky (AOS)
Began in 1997; ASEAN VISION ( ASEAN as anIntegration)
1998; HANOI PLAN OF ACTION
3 years programs for ASEAN Integration
2003; BALI CONCORD3 Pillars of ASEAN Integration
1. ASEAN Security Community2.ASEAN Economy Community
(One of the topic issues is about Air Travel Integration)3. ASEAN socio-cultural Community
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European vs ASEAN Open SKY
European ASEANLiberalization in Europe wasdecided upon by a judge in acentral court
ASEAN doesnt have a central
court
European airports are highlyovercrowded and have slotcapacities that need to beaddressed in the transition
Most ASEAN countries would notface that kind of difficulty
European countries entered at thesame or very similar levels ofindustry development, GDP, sizeand policies
ASEAN countries have a widerange of industry development,GDP and size
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National Airlines SWOT
Implementing SWOT analysis to perceive national airlines positionFacing AOS
Strengths
Indonesia has many tourism objects which seen interesting notonly by domestic but also international tourists
Large numbers of Indonesian Populations
National Airlines Commitment to enlarge number of fleet
Government arrangement for the continuity of Visit Indonesia
program
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National Airlines SWOT
Weaknesses
According to Federal Aviation Administration (FAA), published 8th June 2009 InternationalAviation Safety Assessment Program (IASA) result shows Indonesian appointed on 2ndcategory, which means insecure
Masyarakat Transportasi Indonesia (MTI) evaluation on 16 Indonesian airlines reveals thatmost of them only achieve 30%-50% of OTP (On Time Performance). These figures are farless than IATA standard , which is 70%.
Weak national airlines competitiveness compared to foreign airlines
Limitations of Qualified Pilots and Cabin Crews
Weak economic infrastructure. Since Airlines now rely heavily on telecommunication for theirinformation system and to market and conduct operations
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National Airlines SWOT
Opportunities
Nevertheless, Indonesia should perceive AOS as the opportunity to
expand its airline industry globally . Therefore;
National airlines will gain additional profits from obtaining increased
market access
Leads to improvements on national airlines services and productivities
Forces national airlines build agreement among them to enhance their
business competitiveness against foreign airlines
Drives national airlines agreements with foreign airlines to expandservice networks
Opportunity for national airlines to develop or boost their HUB
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National Airlines SWOT
Threats
More capacity between the countries will lead to more intense competition
and pressure to low fares
There is no longer fair competition
Domestic passengers prefer foreign airlines instead of national airlines, due to
their credibility and reliabilities
Lack ofcompetition policy
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i i i i
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International Air Transport CapacitiesNational Airlines (Per December 2009)
AIRLINES COUNTRIES ROUTE FREQUENCIES /week
CAPACITIES/week
1. Garuda 10 23 205 77.421
2. Merpati 2 2 14 3.752
3. Lion 4 4 61 25.906
4. Batavia 4 4 24 8.536
5. IndonesiaAirAsia
5 5 196 65.592
6. Sriwijaya 2 2 14 4.2847. Kalstar 1 1 7 672
8. Riau Air 1 1 10 1000
Source: Indonesian Ministry ofTransportation
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International Air Transport Capacities
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International Air Transport CapacitiesASEAN AirlinesPer December 2009
Source: Indonesian Ministry ofTransportation
AIRLINES Cities inIndonesia
RUTE FREQUENCIES /week
CAPACITIES /week
1. SQ 2 2 119 77.826
2. Malaysian A/S 4 4 67 24.772
3. Thai A/W 2 2 14 8.540
4. Royal Brunei 2 2 12 5.346
5. Philippines A/L 1 1 7 3.352
6. Vietnam A/L 1 1 7 1.6737. AirAsia (MAL) 12 13 127 44.280
8. Firefly (MAL) 4 5 23 4.320
9. Tiger A/W (SIN) 2 2 17 3.240
10. Value Air (SIN) 4 4 43 13.932
11. Silk Air (SIN) 7 7 50 12.736
12. Cebu Pacific (Phil) 1 1 3 1.074
13. Thai AirAsia (Thai) 1 1 7 2.520
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Additional Facts of Open Sky
From the 26 international airports, Indonesia has prepared its 5 international
airports available for Open Sky. There are:1.Soekarno-Hatta (Jakarta)
2.Kualanamu (Medan)
3.Juanda (Surabaya)
4.Ngurah Rai (Bali)
5.Hasanuddin (Makasar)
Hang Nadim (Batam), Sam Ratulangi (Manado) and Frans Kaisiepo (Biak)airports have been appointed for Open sky Cargo, along with the fourairports which are still proposed for Open Sky
On March 30 08 Open Sky agreement between Europe and US had been
settled. Allows airlines based in Europe and US to fly between any twoairports in each region
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ASEAN (Regional) MES Sumatera & kep
SUB Jawa, Kalimantan, NusaTenggara
UPG Sulawesi, Maluku
JKT Seluruh Indonesia
DPS Indonesia Timur
ASEAN
Indonesia Hub
InternationalRoute
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Several Competition Issues arise fromOpen Sky
Merger and Strategic Alliances: Firms avoided competition by merging, orby forming strategic alliances to increase efficiency and product mix
Collusive Behaviors and Price Fixing: Airlines might agree to fix prices,keeping them high, instead of competing between themselves as well as theexistence of market sharing; agreement so serve different market, and not
compete one to another Predator Behavior: Imbalance competitive strengths of the different airlines.
Established, experienced, financially secure and profitable airlines vs smallor new entrant airlines
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Thank you