In the end of August 2013, an MRO subsidiary of Lion Air, the largest privately owned airline in Indonesia, revealed its plans to establish a new MRO centre on a Batam island, which is only about 30 km away from the major aviation hub - Singapore. The latest plans reflect yet another Indonesia’s attempt to become the leading player in the Asia Pacific region. But despite its eagerness and drive, it seems that the local industry might just end up following the steps of China, which had to pacify the ambitions of its carriers due to the shortage of manpower.
Being the world’s largest archipelago state, Indonesia comprises over 17,500 islands populated by almost 240 million people. With no major changes in the economy and the current annual GDP growth staying at approx. 5.9-6%, the country’s consuming class is to double by the end of the decade. According to Boston Consulting Group, over 140 million of Indonesians will be considered as belonging to the middle class by 2020. That is almost twice as many as the current 74 million.
“Today Indonesia serves 70 million air passengers per year. Courtesy of the strong economic development of the country, more and more of its people are able to afford both domestic and international air transportation. The overall Indonesian passenger traffic is expected to almost triple in the following decade. In a few years Indonesia will be amongst the TOP10 countries with the largest air travel markets,” comments Kestutis Volungevicius, the Head of FL Technics Training.
Meanwhile, local airlines are eagerly placing new orders. Garuda Indonesia, the flag carrier of Indonesia, along with its subsidiaries is anticipating over 110 new aircraft to reach its fleet in the following several years. Its main competitor, a privately owned Lion Air is expecting even larger deliveries. According to CAPA reports, by the end of 2013 Garuda’s and Lion Air’s fleets will already include 139 and 145 aircraft, respectively, thus making the two carriers the largest in the Asia Pacific region.
Another factor contributing to the extending national fleet is the rapid development of local businesses and private aviation. According to Forbes, Indonesia has over 30 dollar billionaires while the TOP40 wealthiest Indonesians hold over $86 billion worth of assets. Geographical peculiarities of the country trigger the demand for corporate air transportation between islands as well as across the entire region. Local market players estimate that the annual delivery of business jets in Indonesia is worth around $300-500 million.
Along with the expanding fleet the local industry will definitely require proper infrastructure to satisfy the demand for MRO support. However, due to the lack of experience and qualified staff until only recently the absolute majority of MRO works had been conducted outside the country. It is being estimated that by the end of the previous decade only approx. one third of the entire MRO services was rendered by local companies. But in the past several years the situation started to change.
“Without any doubt, rising oil prices have largely contributed to the fact that Indonesian carriers are increasingly seeking for ways to service their aircraft at home. And there are no obvious signs that the trend should change any time soon. The uncertainty over Syria, continuing unrest in Egypt and strikes in other neighbouring countries – all of these factors affect the entire Middle East. During the past 5 weeks jet fuel prices have risen by over 5%, and there is no certainty that the prices will go down any time soon. This is also one of the trends which support the development of local MRO industry,” explained the Head of FL Technics Training.
The Boeing 737-400 was built in 1992 and would have exceeded the 10-year age limit the Government has talked about placing on jetliners operated by local carriers.