LONDON – Part One of our analysis identifies Indonesia as a key world aviation growth sector, and examines its developing international operations, and the financially embattled national flag carrier.
This week’s visit to Indonesia by newly appointed Australian Prime Minister Anthony Albanese together with his Foreign Minister, just 2 weeks since taking power, underscores just how strongly the Republic of Indonesia is regarded in the Oceania region.
The reinvigorating of ties between the two nations comes as a booster shot, at a time when borders are reopening and regional air travel is undergoing a boom after a two-year hiatus.
The broader world picture reveals that Indonesia has become a burgeoning force in the region, and that dynamic holds true of its rapidly growing contribution to global aviation.
According to IATA, Indonesia is set to become the fourth-largest air travel market in the world by 2030.
As the world’s largest island nation with 6,000 inhabited islands, Indonesia boasts a surprising 34 international airports and over 200 domestic airports.
On top of this, the government is planning to open a further 5 airports!
Enjoying the largest economy in South East Asia, Indonesia’s status as a key growth nation in the global aviation market makes it a sector to watch carefully in the near future.
Flag carrier Garuda Indonesia
Prior to the pandemic, the flag carrier was undertaking a program of upgrade and expansion; specifically renewing aging assets and progressively revitalized their fleet to take advantage on potential growth opportunities in the region.
This was the continuation of the 2009 redevelopment initiative the airline dubbed “The Quantum Leap”.
The strength of this upgrade program is demonstrated in Garuda’s 2018 claim of an average fleet age of 6.62 years. Compare that with an airline like British Airways with an approximated average fleet age of 12.9 years.
Garuda’s fleet includes the Boeing 737-800NG for regional routes, Airbus A330-200/300/900neo for medium-haul routes, and Boeing 777-300ER for long-haul routes.
The importance of the 2014 SkyTeam alliance
In 2014 Garuda became the 20th sign-up to the SkyTeam alliance – a global network which effectively boosts member airlines’ global reach through shared networks and hubs. It becomes just the second South East Asian airline to join the alliance.
Whilst there were clear benefits for Garuda itself, the move had deeper benefits for the broader Indonesian aviation market.
Specifically, this affiliation by the Indonesian carrier effectively boosted the fortunes of Indonesian aviation in general – both internationally and domestically – by increasing Jakarta’s profile as an alternative gateway to and from South East Asia.
The “Quantum Leap” to success after controversy
Having served as the national flag carrier for seven decades, Garuda has enjoyed a high profile in the region, albeit not always for all the right reasons.
Once described as a “menace to air safety” by the Australian Transport Safety Bureau (ATSB) following a 2008 incident involving one of their 737-400s accidentally descending to 700 feel AGL whilst inbound to Darwin in north Australia, Garuda has experienced mixed fortunes in past decades.
Through the 80s and 90s, Garuda undertook an ambitious expansion program into the international market. With it came controversy, with mismanagement and air accidents which saw the carrier banned from operating into European airspace in 2007-2009.
Over time, experience and the adherence to a strong development program has seen the airline grow into a potential force to be reckoned with in the region, and their contribution to the burgeoning Indonesian aviation growth market has been significant.
The financial blow of the pandemic
Garuda’s steady rise was delivered a blow by the global pandemic. Like many carriers, the downturn hit the airline’s financial bottom line, and it is very likely a case of the past catching up with Garuda.
The prior decades of mismanagement and misfortune may well have aggravated the current position – as of March 2022 the airline was struggling with a debt of US$4.6 billion.
Meet Indonesia’s largest airline – Lion Air
It is fair to say that Garuda Indonesia tends to hog the spotlight when people consider Indonesian airline operators.
It is a lesser known fact that, in terms of fleet size and scale, the national carrier actually comes in at second place behind the low-cost operator PT Lion Mentari Airlines – better known as Lion Air (LNI).
Based in Jakarta, Lion Air is the second largest South East Asian airline behind AirAsia, and operates internationally to 60 destinations, including Singapore. Malaysia, Saudi Arabia and China.
Fleet includes the Boeing 737-900ER, Boeing 737-800, Boeing 737 MAX 8 and Airbus A330-300.
In broad terms, Lion Air has followed a roughly similar trajectory to Garuda – suffering from a string of incidents and accidents in its formative years.
Notable was the crash of flight JT610 in 2018 with the loss of 189 souls on board. It was the first loss of a Boeing 737 MAX, and the subsequent finding of fatal flaws in Boeing’s design, including the anti-stall MCAS system.
A severe cut of 2,600 workers in 2020 may have cushioned the blow of the pandemic on Lion Air’s financial bottom line.
Will the sheer growth of Indonesia in the world aviation market save Garuda and assist its rebound from near bankruptcy?
Coming soon: Part Two of our analysis takes a deeper dive and investigates Indonesia’s colourful domestic aviation sector.