INACA Banking on ASEAN Open Sky for Growth

The Indonesian National Air Carriers Association (INACA) has predicted that passenger growth in the industry will grow up to 15 percent this year aided by government regulations and new opportunities offered by ASEAN Open Sky.

“The year 2016 is showing better prospects than last year with positive signals, including the [release of the] eighth economic package accommodating business interests,” INACA chairman and national flag carrier Garuda Indonesia president director Arif Wibowo said, referring to the scrapping of import duties on aircraft components and maintenance and spare parts in the stimulus package.

He said that it would have a significant impact on airlines in the country as maintenance costs made up between 10 percent and 15 percent of their total operational costs.

According to him, the regulations would also put the country in a similar playing field with other ASEAN countries with the ongoing ASEAN Open Sky policy.

“We just hope that the implementation this year will also go well,” he added.

The association also cited last year’s passenger growth as encouraging, with the total number of passengers between January and October 12.75 percent larger than the same period the previous year, according to Central Statistics Agency (BPS) data.

He also said that the anticipated economic uptick this year would be another boost for airlines after the sluggish growth last year.

“Airline growth usually stands at 1.5 times to two times higher than [overall] economic growth,” he said.

Indonesia’s economy grew by 4.73 percent in the third quarter of 2015, a slower rate compared to the 5.01 percent seen in the same period last year, according to the BPS.

INACA scheduled airline division head Bayu Sutanto said that growth also depended on the continuing development of infrastructure, such as airports and navigation equipment, this year.

The Transportation Ministry aims to start construction of new airports in 15 cities as well as extend runways in 30 locations this year, according to ministry data. Last year, it started building 17 airports and extended runways in 35 airports.

The influential organization was also of the view that the ongoing ASEAN Open Sky policy, as part of the ASEAN Economic Community (AEC), would provide more benefits for airlines.

“Our expansion to ASEAN countries will be stronger. We will connect the entry and exit points from the open sky to all over Indonesia,” Arif said.

The Open Sky policy, that came into effect along with the AEC this year, is intended to enhance regional connectivity and trade by allowing airlines from ASEAN member states to fly freely throughout the region.

Indonesia opened up international airports in five cities, namely Jakarta, Surabaya, Medan, Denpasar and Makassar, to be connected with around 45 cities in the region.

Arif urged the country’s airlines to expand their routes within Indonesia, especially to eastern areas, to establish a strong backbone of connectivity inside the country to anticipate the entry of foreign airlines with the Open Sky policy. 

He added that airlines had ventured into airports in less central locations in a bid to expand their reach.

INACA secretary general Tengku Burhanuddin also added that with the Open Sky policy, the government needed to reconsider the plan to impose a levy on sales of fossil-based fuels, with fears that it would also be applied to aviation turbine fuel.

“If it is truly applied, operational costs will go up again,” he said.

The fund, which is currently postponed, became controversial over the absence of a legal basis for its implementation.

Source:, 09/01/16
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