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Civil Aviation

Starting in 2000, the aviation industry in Indonesia experienced tremendous development. In 1999, there were only five airlines companies. As of end 2006, there are 18 scheduled and 35-chartered airlines operating in Indonesia, with total fleet of 431 aircraft serving more than 300 routes. Some of them are operating as budget airlines, such as Adam Air, Lion Air/Wing Air, Indonesia Air Asia, and Garuda City Link. There were four airline companies reapplying for their licenses: Star Air, Jatayu Gelang Sejahtera, Seulawah Air and Air Paradise International. Several airlines stopped their operations due to increased operational costs such as Bouraq Airlines, Bayu Indonesia, Indonesia Airlines, Bali International Air Services and Efata Papua Airlines.

Indonesia's 27 provinces stretch 5,000 kilometers across the equator on a total of 17,508 islands. Indonesia's population is 190 million people. Scattered across the archipelago are 23 international airports, 159 domestic airports, and 494 airstrips. These numbers will climb rapidly as the government steps up its initiatives to develop the country's remote eastern islands.

The increase in the number of airline passengers has been quite impressive. The number of domestic passengers reached 23.7 million in 2004 and 28.9 million in 2005. Based on data from October 2006, the number of passengers was projected to reach 34 million in 2006. In 2007, the Indonesia National Air Carriers Association (INACA) predicted that the industry would grow by 15% and reach 39 million. International passengers reached 14.4 million in 2006, an increased of 11% from 2005's figure. In 2007, international passengers were predicted to reach 16.3 million.

There were 573 units of aircraft operating in Indonesia, of which 431 units were fixed wing and 142 rotary wing. Several airlines have more than 15 units of aircraft such as Garuda (58 units), Lion Air (47 units), Merpati Nusantara (42 units), Batavia Air (23 units), and Adam Air (19 units). Garuda owns the newest aircraft fleet with an average age of 10 years, followed by Lion Air (17.3 years), and Adam Air (18.1 years). Merpati, Batavia and Mandala's fleets average more than 20 years of age. In 2006, the Ministry of Communications issued a new regulation (Permenhub No.KM5/2006) that restricts the use of aircraft which have been used for more than 70,000 cycles or more than 30 years. The Directorate General of Air Communications (DGAC) predicted that Indonesia would need additional 254 aircraft until 2009 including the largest order for 70 units of B-737-900ER by Lion Air.

From 2001 through 2007 there were 73 aircraft accidents in Indonesia, including the Adam Air incident in January 2007. This situation forced the GOI to review regulations regarding air safety. The Ministry of Communications has adopted new regulations, which increased the frequency for safety audits from once a year to twice a year. The GOI will conduct the safety audit for operators and their aircraft, including their pilots.

There are promising business opportunities in aircraft maintenance services in Indonesia. By 2008, around 65% of the total aircraft operating in Indonesia are sent for maintenance service overseas. According to the Indonesian Association of Aircraft Maintenance Companies, the potential market for Maintenance, Repair and Overhaul (MRO) is worth around $240 million per year. The GOI is offering foreign investors the opportunity to join with Indonesian companies to establish aircraft maintenance facilities, aircraft leasing, and training companies. By having those businesses in Indonesia, the GOI believes there will be a reduced need to send aircraft for maintenance or to send crews for training to other countries.