Transportation industry challenges: 3 major issues to be anticipated

This article has been translated by PwC Indonesia as part of our Indonesia Infrastructure News Service. PwC Indonesia has not checked the accuracy of, and accepts no responsibility for the content.

Bisnis Indonesia - Tantangan industri transportasi: 3 isu besar perlu diantisipasi

29 December 2020

By Anitana W. Puspa


Bisnis, Jakarta – Transportation industry players must immediately anticipate new challenges and redefine their businesses to rely on safety, digitalisation, as well as eco-friendly business process as the complexity of the Covid-19 pandemic is predicted to still be haunting in 2021.

Hence, for example, the aviation industry is predicted to experience challenges in international connectivity until next year as travel bans in various countries continue.

Asian Development Bank (ADB) Vice President, Bambang Susantono said that, until next year, citizens would still live side by side with Covid-19, same as this year.

Based on ADB’s scenario, travel ban in a country correlates with its economy. Moreover, he continued that the availability of a vaccine and vaccination were two different things.

“We have yet to know nor have researched new mutations of Covid-19. Research is currently ongoing to find out how far the vaccine can handle the new mutations,” he said during the 2021 Transportation Outlook held by Indonesian Transportation Society (MTI) and Transportation and Logistics Research Centre of UGM (Gadjah Mada University) on Monday (28/12).

He reckoned that a similar condition would still occur in the transportation sector next year. Transportation is still the backbone of economic activities. In a condition with or without Covid-19, the mobility of cargo and passengers must continue from the smallest scale in the household sector to larger scales.

Hence, Bambang forecasts that, next year, there will be three issues that must be redefined in this sector, which are safety, digitalisation, and green business process.

“Covid-19 is like an F1 race. After all of this is over, everything must recover from zero, and every country must compete. They will compete for the pole position, as well as for the vaccine to recover quickly.”

Regarding the impact of the pandemic on the aviation business, Bambang said that the government of several countries had provided funding for airlines to stay relevant, including for state-owned airlines such as Garuda Indonesia.

Furthermore, several countries will boost domestic flights rather than implement a travel bubble among countries amid the pandemic.

The challenge is admitted by Indonesian Transportation Society First Chairman, Suharto Abdul Majid, who stated that the aviation sector, together with shipping, tourism, and travel, were in the potential losers category.

International Air Transport Association (IATA) predicts that the global aviation industry will recover from 2021 to 2024.

“Based on our experience in 2020, the strength of the aviation sector is in domestic [flights], which contribute by 90%. The cargo transportation or the logistics market is securing sufficient revenue,” Suharto said.

According to him, the rescue of national airlines must still be focused on by the government as the aviation industry is part of the global supply chain.

This is also required so that airlines and airports will have better survivability with various scenarios, such as recovery, short-term and medium-term survival, new adaptation survival strategy, and new normal aviation business model.

Hence, businesses that can be carried out by airlines are cargo services, charters, services that refer to the new adaptation period, as well as fleet restructuring.

Amid the dynamic, several opportunities can be grasped by the national transportation sector to provide positive sentiment on next year’s growth.

PT Samudera Indonesia Head of Economic Research, Ibrahim Kholilul Rohman said that the election of Joe Biden as the new president of the United State of America might lower the global trade tension, which would benefit the business world. “Interestingly, domestic carriers are relatively immune.”

According to him, another bright prospect is Indonesia joining RCEP (Regional Comprehensive Economic Partnership).

Hence, Air Transportation Director General of the Transportation Ministry, Novie Riyanto, said that, during the pandemic, operating air transportation was not easy. However, slowly from September to December this year, the performance of domestic routes has reached 75%.

Transportation Minister Budi Karya Sumadi said that his agency had been assigned to carry out transportation activities excellently.

The Transportation Ministry ensures that they will receive Rp1.48 trillion from the National Economic Recovery program to continue a number of incentives that have been provided this year to the tourism and the aviation sectors.

Moreover, in 2021, the Rp45.1 trillion budget will be used mostly (51%) to construct infrastructure, and the remaining budget will be used to provide subsidies in the maritime sector, the air transportation sector, and the railways sector.

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