Aviation Sector Outlook

More room to grow as the penetration of airline is still low

With low air travel penetration rate coupled with resilient economic growth, we believe Indonesia’s airline passenger to continue to pick up as domestic air travel for leisure as well as business still has more room to grow. Based on the Transportation Ministry data, Indonesia has a low airline penetration rate of only 42%, significantly well below other countries. This is the foundation of GIAA’s strong growth in the past and going forward.

Supported by some major airport development

We believe the current Indonesia government is serious to develop Indonesia infrastructure to pump prime the economy, one of them are the development of airports around the archipelago of Indonesia. In 2015, the government plans to open 6 new airports, 4 of them already in construction stage and the rest is still in planning stage. In 2016, the government plans to have at least 3 airports to be opened in the pipeline.

Low jet fuel price to offset impact from weak rupiah

We are aware that 70% of the airline’s cost was USD denominated. With Rupiah has depreciated by more than 10% from the beginning of the year, we believe there will be pressure on airline margin in 2016. Airline coast was greatly helped lower jet fuel that already decreased by more than 40% YTD. We believe in 2016 the price of jet fuel will not significantly increase as we still expect low oil price environment.