Market outlook 2012 slideshare

Market Outlook 2012

CSE Aviation www.cse-aviation.biz

Passenger Trend (Indonesia)Trend On Regional Airline Business

Passenger Trend (Indonesia)

Air transportation industry in Indonesia has started to recover in year 2000 after suffering from the monetary crisis in 1997. The number of passenger in domestic air transport shows a very significant growth.

The average annual passenger growth up to year 2003 is 32% or almost triple than the growth in just before the crisis. The high growth of domestic air transportation is the result of the goverment deregulation, encouraging more private sector to participate in the indusutry, and the introduction of Low Cost Carrier (LCC) approach. This LCC is made possible with the use of advance information technology.

In 2003 there were 26 airlines operated in the sky of Indonesia – compared with only 7 (seven) airlines before the crisis.


Flight route

Airport



The chart above shows that the growth in passenger carried have increased over the year. Declining in total number of passenger carried occurred in 1998 and 1999, this is due to the crisis that hit Indonesia. In 1999 Indonesia still recovering from the crisis, however following that year the growth in passengers carried is increasing every year up until now.

The chart above shows the forecast of growth in passenger carried with three possible growth rate, i.e., 3%, 5% and 10%.. By considering the GDP rate of growth for the year 2011 which is about 6.5%, and the average rate of growth domestic passenger which is about 16.8%, therefore the prediction analysis are carried out based on growth rate of the worst scenario (3%), maintaining GDP growth rate of aproximetly 5% and the optimistic growth rate scenerio of 10%.

Trend On Regional Airline BusinessBy Edwin Soedarmo - President Director CSE Aviation

Regional airline business development in recent years has quite frequently become topics of discussion, particularly in Indonesia where many of the air operator found that it is a promising business but mostly ended up with difficulties. Re-collecting from several references and data base owned by CSE Aviation, the materials obtained are reviewed and presented in this brief market study.

Regional airline operators provide flight services between small cities within a country and also to small cities in the neighboring countries where it should also have a strong relationship with one of the region’s major airlines as a complement for the base network. However, there are also regional point to point services provided by the mainline carriers themselves that blur the distinction between regional and mainline aircraft.

Some turboprop manufactures already

discussing potential New Generation

Turboprop (NGTP), 90 to 100 seats capacity,

with regional air operators

The regional operations in Indonesia are diverse, they fly mix between turboprops and regional jets, and generally most of them serve niche markets where profitability can only be achieved through strong financial discipline. The keys success in the typical niche markets operation for regional airline business are the efficient connectivity, the right capacity and the right cost.

• Average aircraft capacity, average stage length and block time have risen in the last decade (global trend)

• With fuel price rising and turboprop aircraft’s growth to 60 seats, regional jet sales have decreasing while turboprop sales increases (see chart of Global Regional Aircraft Seats)

• Based on the above data, it would be rather logical to predict that the trend of aircraft demand would be for turboprop with 90 to 100 seat capacity

• Some turboprop manufactures already discussing potential New Generation Turboprop (NGTP), 90 to 100 seats capacity, with regional air operators

• The regional airline business in Indonesia (niche markets, with the biggest regional operators in the region), typically generates low margin. Therefore it is logical to expect that there will be a certain consolidation as to seek for the economic of scale

Business Trend

• Typically private held• Tend to be smaller niche player that interline with major carriers• Tied into long-term, fixed fee contract with major carriers. The major airline

typically pay for the fuel • Regional carriers can set their own schedule and pricing but take the risk by paying

for their own fuel • Some countries may granting Public Service Obligation (PSO) tenders for routes

that would not otherwise be commercially viable. The PSO is divided into many smaller tenders and renewed every four (4) to five (5) years. The smaller the tender, the more difficult it is to operate commercially

• Other regional operators may operate under “Capacity Purchase Agreement”

Business Model (Global)