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Boeing, Airbus cash in on Indonesia's rapid economic growth

Indonesia becomes bonanza for international plane makers

Indonesia becomes bonanza for international plane makers
Image via wikimedia.org

Apr 23, 2012

JAKARTA, Indonesia - Buoyed by rapid economic growth, Indonesia has become a bonanza for international plane makers who are booking some of the world's biggest sales as Western airlines suffer a downturn.

Europe's Airbus and US manufacturer Boeing have secured billions of dollars in orders over the past year as Southeast Asia's largest economy experiences a travel boom and looks to link its archipelago of more than 17,000 islands.

Indonesian carrier Lion Air placed the single largest contract in commercial aviation history during a November visit by US President Barack Obama, ordering 230 Boeing aircraft for a whopping $22.4 billion (Dh82.27 billion).

Last week, Airbus won a $2.5 billion contract for 11 A330-300s to national carrier Garuda International during a visit to Indonesia by British Prime Minister David Cameron.

"There's a major transformation going on, not just with Garuda but with the whole aviation industry in Indonesia," industry analyst Gerry Soejatman told AFP.

"Around 60 million, or a quarter of the population, travel domestically by air annually. That number could easily double if the price is right," he said.

Ban lifted in Europe

The deal with Airbus was part of Garuda's plans to expand services less than two years after the European Union lifted a ban on the airline from entering its airspace, citing the country's poor safety record.

"We're seeing two things meeting harmoniously — first a rise in economic power spreading across the demographic. Many more people have reached an economic threshold that allows them to fly," Sydney-based Centre for Asia Pacific Aviation chairman Peter Harbison told AFP.

"At the same time, more airlines are coming in, and are basically flying to your doorstep at a much lower price. Put those two things together and you have a recipe for enormous growth."

Western airlines meanwhile have faced a downturn, with the aviation industry in Europe taking a hit from the 2008-09 financial crisis.

Air travel demand in Europe has started to creep up again, but Fitch Ratings said in a statement earlier this year it expected poor demand in 2012 and European airlines focusing on minimising losses.

It forecast "significant retrenchment for the largest European network airlines" such as Air France-KLM, which lost €700 million (Dh3.4 trillion) in 2011.

In Indonesia, the economy is projected to grow 6.5 per cent this year and per capita income surpassing $3,000. More of its 240 million people are paying for the convenience of air travel over tiresome and often unsafe ferry rides.

Earlier this month, defunct airline Mandala made a comeback with significant investment from Singapore's Tiger Airways.

New carrier Pacific Royale Airways, flying domestic and some international routes, is expected to take off later this month.

Indonesia's aviation industry exploded after the year 2000, with domestic air travel increasing by about 500 per cent, Harbison said, adding that the industry has marked steady progress since then.

"One of the interesting things about Lion's order was that other airlines in the region were talking big orders to fly across Asia. In Lion's case, they were primarily looking to its domestic market."

Source: gulfnews.com
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