Indonesia’s demand for air travel will grow along with its economic development and Open Skies will make this demand grow even faster. But is aviation infrastructure ready? In the latest issue of Prakarsa, the journal of the Indonesia Infrastructure Initiative, I attempt to provide some of the answers.

Some fascinating data and charts show that Indonesia’s demand for air transport is higher than would be expected from looking at its GDP per capita. This is not surprising given Indonesia’s island geography and long distances between major cities. As Indonesia continues to develop, baseline growth in demand can be expected to grow by as much as 6 to 10 percent annually. Past experience with Open Skies agreements suggests that the introduction of ASEAN Open Skies could add another 6 to 10 percent growth in demand. Therefore, in the period immediately following Open Skies, growth in unconstrained demand for international air travel in Indonesia might, optimistically, be as high as 20 percent per annum, but it is very likely to be greater than 10 percent.

As well as being a consequence of economic growth, air transport services can also be an important driver of growth. These services produce wider impacts than simply the effects on airlines and airport operators. This is known as the “virtuous circle” of air travel:

The Air Transport "Virtuous Circle"

This is particularly relevant in Indonesia, where the petroleum and extraction industries (both of which are highly reliant on air transport compared to many other industries) are significant contributors to economic growth. However, projections of increased demand for air transport assume that sufficient infrastructure capacity will be available. But Jakarta’s Soekarno-Hatta Airport is already capacity constrained and will remain so for the foreseeable future, even with planned developments.

Indonesia’s other airports and air traffic control infrastructure will also need upgrading to meet projected demand, and institutional and regulatory systems will need to develop alongside infrastructure.

Contact the author

Mike Fairbanks
Director
Tel: +44 7900 584 039
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