by Michael O'Neill
October 9th, 2012

Five year’s ago, the Indonesian aviation industry was seriously in the doldrums. Its airlines were banned from flying to the US and European Union countries and Indonesia’s reputation for air travel was at serious risk.

Fast-forward to 2012, however, and the difference is dramatic. The shifting of AirAsia’s Southeast Asia base from Malaysia to Jakarta is just one reflection of the growing importance — and influence — of the Indonesian aviation market. Alongside budget carrier Lion Air, full-service player Garuda Indonesia, and a number of smaller challenger brands, AirAsia Indonesia is tapping into a booming market. The number of air passengers in the country has increased from 42.68 million in 2007 to over 66 million last year, and a rising middle class, affordable prices and services to remote areas suggest the industry is likely to continue its upward trend.

Safety and reputation have over the past several years been major problems for the nation’s airlines and has tarnished the industry’s reputation on a global scale. The industry suffered from a series of accidents that rattled international trust, resulting in the EU Commission and the US Federal Aviation Administration (FAA) lowering the country’s airline-oversight rating to Category 2 in 2007, which effectively banned Indonesian airlines from flying to those territories.

But the response from the airlines and regulators has been highly encouraging. The Transportation Ministry has performed a series of efforts to restore the industry’s reputation. The ministry introduced a new strict system of safety rating, with Level One indicating no serious issues, Level Two highlighting problems to be fixed and Level Three enforcing the termination of flight operations. At the beginning of the process, none of the airlines were able to receive the Level One ranking, but now, after performing an extensive safety upgrades on their fleet and improving their services, all the country’s airlines are rated Level One.

The ministry also urged all airlines to conduct the mandatory IATA (International Air Transport Associations) Operational Safety Audit (IOSA) to assess all operational management and control systems as more airlines purchased new aircrafts to regain the public’s confidence. As a result, EU finally revoked the ban for Indonesian airlines, including Garuda Indonesia, Mandala Airlines, Batavia Air and Indonesia AirAsia, while a Transportation Ministry source recently said he expects Garuda Indonesia to resume serving US routes by the end of 2014.

More airlines have also pushed their limits to expand their business. In 2010, Garuda Indonesia showed an example of effective re-branding strategy by redesigning its corporate identity and launching a new service concept ‘The Garuda Experience’. The airline was named  ‘Most Improved Airline 2011’ and ‘World’s Best Regional Airline 2012’ UK-based SkyTrax, a consultancy for in-flight research services. In the low-cost carrier segment, Lion Air is now Boeing’s largest Asia Pacific client, having recently making a purchase of 230 Boeing 737 Next Generation aircraft — the biggest order in Boeing’s history.

It is just a matter of time until Indonesia finally has one of world’s largest aviation industries. The country’s economic strength and growing middle class will continue to make it a strong market for air travel, with improved safety and infrastructure investment only adding to the industry’s potential.

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