Aviation industry ready to support 8% economic growth

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.

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18 October 2024

By Ichsan Amin

Jakarta, ID – The aviation industry in Indonesia, represented by the Indonesia National Air Carriers Association (INACA), is prepared to support economic growth to reach 8%, in line with the target set by President-elect Prabowo Subianto.

INACA Chairperson Denon Prawiraatmadja stated that his association, which includes scheduled commercial airlines, will collaborate with the new government under the leadership of Prabowo-Gibran to achieve the target of 8% economic growth.

"With this, we, along with other INACA members, based on the meeting of INACA members, are supporting the new government to optimise the aviation industry by collaborating with the new administration," Denon said after attending an INACA member meeting in Jakarta on Thursday (17/10/2024).

Denon mentioned that, under the new government, his association would coordinate with eight relevant ministries that act as regulators. These include the National Development

Planning Ministry/Bappenas, Finance Ministry, Transportation Ministry, Industry Ministry, Trade Ministry, State-owned Enterprises Ministry, Energy and Mineral Resources Ministry, Tourism Ministry, as well as coordinating ministries.

These ministries are expected to contribute to the increase in national domestic flight traffic.

“The more important aspect is how national domestic airlines can develop and improve compared to their performance before the Covid-19 pandemic,” he stated.

Denon stated that the aviation industry is currently facing significant challenges, including the recovery process from the Covid-19 pandemic and the exchange rate of the rupiah against the US dollar.

“Furthermore, the uncertain geopolitical climate presents additional difficulties for the aviation industry. It is challenging to obtain leverage from manufacturers due to the current global geopolitical situation, which is marked by several ongoing conflicts,” he revealed.

According to Denon, the national aviation industry is currently not in a good state, facing various pressures both domestically and internationally. Domestically, flight operational costs are still burdened by factors such as import excise duties and taxes, which place a strain on both airlines and passengers.

Internationally, the global geopolitical crisis is affecting many aspects of the aviation industry. These include high jet fuel costs, uncertain currency exchange rates, difficulties in procuring aircraft and spare parts, and disrupted flight routes.

To address these challenges, INACA believes that better collaboration among all flight stakeholders is essential. This includes not only airlines, but also regulatory authorities, airport operators, jet fuel suppliers, ground handling services, MRO (maintenance, repair, and overhaul) services, academicians, the media, and passengers.

“For aviation businesses, when it rains, it pours. Despite not having fully recovered from the Covid-19 pandemic during 2020-2022, they are now being impacted by the global geopolitical crisis,” he added.

Denon explained that national airlines have been increasing their production to boost their income, but they are hindered by high costs. Additionally, with the current weakening of purchasing power, the results have been unsatisfactory.

“The various problems affecting the aviation industry make us realise that if we want to survive, we have to cooperate. This is an era of collaboration, not competition. The challenges are too severe to be faced alone,” Denon emphasised.

This collaboration is not just the usual kind found within a company, but rather a partnership among various stakeholders. By sharing their experiences, they can provide the best services for customers, expand market size, and achieve profitability.

As a national airline association, INACA has been engaging with various stakeholders to hold serious discussions aimed at developing the national aviation industry.

Several initiatives undertaken by INACA include advocating for the issuance of Trade Minister Regulation Number 3 of 2024 on Policy and Regulation of Import and influencing Bank

Indonesia's policy to approve the postponement of the implementation of the obligation to use rupiah for charter flight transactions, which allows for foreign exchange quotations and rupiah payments.

“INACA has also conducted a study and submitted a letter to the Trade Minister requesting a 0% import excise for aircraft spare parts,” Denon explained.
 

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