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The Road Ahead THE AVIATION INDUSTRY IN INDONESIA 1 October 2012

Frost Sullivan Aviation in Indonesia

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Page 1: Frost Sullivan Aviation in Indonesia

The Road Ahead

THE AVIATION INDUSTRY IN INDONESIA

1

October 2012

Page 2: Frost Sullivan Aviation in Indonesia

Frost and Sullivan is a global consulting firm with in-depth industry coverage

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gIndustry Practices Service Offerings

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Page 3: Frost Sullivan Aviation in Indonesia

Our Global Footprint 40+ Offices

Page 4: Frost Sullivan Aviation in Indonesia

We have a dedicated Public Sector Consulting Practice

Our Offerings

Page 5: Frost Sullivan Aviation in Indonesia

Our Clients

Page 6: Frost Sullivan Aviation in Indonesia

Four months ago, I went for a backpacking trip across Indonesia

Page 7: Frost Sullivan Aviation in Indonesia

Through poetic villages…

Page 8: Frost Sullivan Aviation in Indonesia

… ancient cultures

Page 9: Frost Sullivan Aviation in Indonesia

… stunning landscapes

Page 10: Frost Sullivan Aviation in Indonesia

And met wonderful people

Page 11: Frost Sullivan Aviation in Indonesia

But I realized how traveling within the country still remained so difficult

From Ende in Flores……. to Makassar in Sulawesi….. by Pelni’s KM wilis

Ende

Makassar

Labuan BajoBima

11

Ende

Kupang

Waingapu

Page 12: Frost Sullivan Aviation in Indonesia

“Will Boom” is obvious answer to “What is the long term prospect for aviation industry in Indonesia?

12

17,000islands

spread over 113,700

square miles

10 islands with

population > 1 mn,

21 islands> 100,000

Increasing decentralizat

ion of economy

Rising Spending Power + Internal

Migration

Drivers for Domestic Aviation Industry

Page 13: Frost Sullivan Aviation in Indonesia

“Will Boom” is obvious answer to “What is the long term prospect for aviation industry in Indonesia?

13

Trade & FDI Growth; FDI grew 22% in

Q3

Growing Awareness

of Tourism –Rise of China, Russia

Drivers for International Aviation Industry

Page 14: Frost Sullivan Aviation in Indonesia

The growth in Indonesia’s tourism industry will be one of the key drivers

40.0

Growth Potential

INDUSTRY MARKET SIZE (USD Bn)

0

20

40

60

80

100

120

140

160

2007 2008 2009 2010 2011 2012 2013 2,014 2015

Foreign Domestic

Mil

lio

n T

ou

ris

ts

� The tourism industry accounted for US$24.3 billion, this isforecasted to rise to US$ 34.7 billion in 2015.� In terms of quantity, international tourists accounted for

134166.7

Current Market Size US $

Domestic

International63%

37%

14

0.0

5.0

10.0

15.0

20.0

25.0

30.0

35.0

40.0

2006 2007 2008 2009 2010 2011 2012 2013 2014 2015

International Domestic

2Source: Frost & Sullivan Analysts

US

D B

n

9.28%

Year US$ (Billion)

International Domestic Total

2006 5.4 11.6 17

2011 9 15.3 24.32015 13.4 21.3 34.7

� In terms of quantity, international tourists accounted foronly 5% of total inbound tourists (predominantlyMalaysians and Singaporeans (35%)). However, theirspending is much higher than domestic tourists. In2011, average spending of international tourists wasestimated 7 times higher than local spending.

� In terms of value, international tourists to Indonesia spentUS $9 billion, increased at 22% from 2010. The spendingis predicted to reach at 13.4 billion in 2015.

� Domestic tourist spending was accounted for 63% oftotal tourists spending, increased at 8% from last year.Domestic tourist spending is predicted to increase at43% between 2011-2015, impacted by the growth ofIndonesian economy.

� Forecasted CAGR (2006 – 2015) is predicted to reach 8-10%driven by increasing average spend by domestic tourist.

Page 15: Frost Sullivan Aviation in Indonesia

Historic trends support the story on prospects for the industry (1/2)

30

35

40

45

50

55

Domestic +11%

Passengers (Million)

15

0

5

10

15

20

25

30

2006 2007 2008 2009 2010

Internation +13%

Page 16: Frost Sullivan Aviation in Indonesia

Historic trends support the story on prospects for the industry (2/2)

300

350

400

450

500

550

600

Domestic +8%

Internation +8%

Cargo (000Tonnes)

16

0

50

100

150

200

250

300

2006 2007 2008 2009 2010

Page 17: Frost Sullivan Aviation in Indonesia

In less than 20 years, Indonesia may have over 250 million people taking flights every year

0.6

0.7

0.8

0.9

1.0

1.1A

nnual A

ir P

assengers

/Popula

tion

Malaysia

0.0

0.1

0.2

0.3

0.4

0.5

0 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20

China

India

Brazil

GDP Per Capita PPP ($ 000)

Annual A

ir P

assengers

/Popula

tion

Indonesia

Page 18: Frost Sullivan Aviation in Indonesia

The Indonesian government is actively promoting this space

Sea-planes to be launched soon to smaller remote islands

Government allocated Rp 3 trillion ($321 million) in 2012 to improve airport infrastructure and safety

Working with local and international airlines to promote tourism

Actively involved in enhancing safety and security perception

Page 19: Frost Sullivan Aviation in Indonesia

The airports in Indonesia are gearing up for this growth..

• Indonesia boasts of more than 170 airports out of which more than 56 of them are hostingscheduled airline services

• More than 16 airports in Indonesia have international services including CGK whichaccounts for more than 50% of all international capacity.

• Airports apart from Jakarta (CGK) handling more than 1 million passengers are good innumber. Prominent airports in this category are Bali, Surabaya, Medan, Yogyakarta tomention a few.

Page 20: Frost Sullivan Aviation in Indonesia

Could Indonesian airports emerge as international hubs?

Soekarno-HattaInternational Airport, Jakarta

• Handled 51.5 million passengers last year, making it the 12th busiest airport in the world.

• 2012 witnessed the groundbreaking of a major project to overhaul Soekarno-Hatta, that is expected to triple

• Will be the second largest airport in Indonesia

Kuala NamuInternational Airport, Medan

expected to triple passenger handling capacity

• Being positioned as an “Aerotropolis,” expected to be a major driver of economic growth and investment in the country

Indonesia

• It will be able to handle 8 million passengers per year

• Expected to be operational in March 2013

Source: The Jakarta Post

Page 21: Frost Sullivan Aviation in Indonesia

• Mega fleet-expansion: Lion Air 230 Boeing 737s and 5 Boeing 787-8s,Garuda increasing fleet from less than 100 to 150 by 2015

• Expanding Routes: E.g. Air Asia – KL – Lombok

• Enhancing Service Levels: e.g. Garuda – Premium check-in counters,onboard immigration

Local and international airlines are investing aggressively in this space

onboard immigration

• Acquisitions and Partnerships: Tiger – Mandala, Air Asia - Batavia

• New Entrants: New entrants actively seeking funds from private investors

Page 22: Frost Sullivan Aviation in Indonesia

Airlines are also looking at niche segments.

Fleet Size: 15 Fleet Size: 7

• For private jets, flying times inIndonesia are double that ofadvanced markets such as theUSA

• 18 jet charter companies andgrowing

• Leading suppliers such as

Fleet Size: 44

Fleet Size: 6

Fleet Size: 6

• Leading suppliers such asEmbraer and Hawker Beechcraftremain upbeat on future prospects

• Strong demand also expectedfrom leisure segment with over100,000 millionaires expected by2015

Page 23: Frost Sullivan Aviation in Indonesia

Land Transport Operators

Significant opportunities also exist for related industries

Ticketing Agents

Caterers

Solution Providers

Trainingand

Staffing

MROsRetail

Solution Providers

Page 24: Frost Sullivan Aviation in Indonesia

For instance, the MRO industry is witnessing strong growth

Components

40%

Engine24%

Line20%

Base12%

Modifications4%

MRO spending in Indonesia (US$ Millions), 2011

$216 11.1%10.0%

12.0%

$200

$250

20

20

)

Sp

en

din

g (

US

$ M

illio

n)

Indonesia MRO spending, 2011

US $0.54 Billion

Indonesia

CAGR 5.7% (2011-2020)

Source: Frost & Sullivan Analysis

$23

$111

$64

$130 6.4%

2.2%

-0.2%

8.2%

-2.0%

0.0%

2.0%

4.0%

6.0%

8.0%

10.0%

$-

$50

$100

$150

$200

Modifications Components LineMaintenance

AirframeHeavy

Maintenance

EngineMaintenance

CA

GR

(20

11-2

020

)

Sp

en

din

g (

US

$ M

illio

n)

Indonesia Spending, 2011 CAGR (2011-2020)

Narrow$433

Narrow$697

Wide$111

Wide$201

2011 2020

MRO Spending by Aircraft Type(US$ Million)

Page 25: Frost Sullivan Aviation in Indonesia

However, the industry would need to overcome certain challenges to realize its potential

Safety Traffic Management Lack of Pilots

• Indonesia is 1.4% of global traffic but accounted for 4% of all accidents in 2010

• Indonesia requires over 18,000 pilots in the near future to meet the growing demand at the country's fast growing aviation industry

• Indonesia only has 13 pilot schools, lower than that in the Philippines of 53 schools. The United

The Concerns…

• Indonesia only has 13 pilot schools, lower than that in the Philippines of 53 schools. The United States whose population nearly similar with Indonesia had more than 1,000 pilot schools

• Government and Industry initiatives to enhance safety

• Partnerships and collaborations with leading international players such as Boeing etc.

• Investments are pouring into training and skill development

The Response…

Page 26: Frost Sullivan Aviation in Indonesia

Key Takeaways

In less than 20 years, Indonesia may have over 250 million people taking flights every year

This growth is supported by both government and private led initiatives

Industry players are aggressively investing in this space, including in niche areasIndustry players are aggressively investing in this space, including in niche areas

Significant opportunities also exist for related industries such as MRO

However, the industry would need to overcome certain challenges to realize its potential with respect to Safety, Traffic Management and Lack of trained pilots

Page 27: Frost Sullivan Aviation in Indonesia

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Page 28: Frost Sullivan Aviation in Indonesia

Additional Information

Donna Jeremiah

Director Corporate Communications, Asia [email protected]: +61 (02) 8247 8927

Shivaji Das

Global Head and Vice PresidentPublic Sector and Consulting, Asia [email protected]

Jessie Loh

ManagerCorporate Communications, Asia [email protected]. (65) 6890 0942

Carrie Low

ExecutiveCorporate Communications, Asia [email protected]. (603) 6204 5910

Page 29: Frost Sullivan Aviation in Indonesia

THANK YOU