Executive column: Boeing sees solid market in RI despite depreciation of rupiah
The Jakarta Post
The Jakarta Post
Despite a slowing global economy, US-based aircraft manufacturer Boeing predicts that global airlines will need 38,000 new airplanes worth US$5.2 trillion between 2015 and 2034. It says Asian countries, including Indonesia, will need a total 14,330 new aircraft worth $2.2 trillion to meet growing demand. Boeing senior vice president of sales for the Asia-Pacific & India, Dinesh Keskar, talked to The Jakarta Post's Haeril Halim about the promise of the Indonesian market, despite the weakening rupiah against the US dollar, on the sidelines of the recent official delivery of two new Boeing Next-Generation 737-900ER airplanes to the country's third-largest carrier, Sriwijaya Air, in Seattle, Washington. Here are excerpts from the interview:
Question: What does the current market look like in Indonesia, is it promising or gloomy?
Answer: Indonesia is a growing economy. It is very strong for two reasons. The first one is that the country has good GDP growth. Secondly, the country is very wide. It is wider than the United States of America. It has 17,000 islands and because of that air travel is more predominant.
That is what causes airlines in Indonesia to continuously go and buy more airplanes and that is why we have lots of customers and we are glad to [recently] have welcomed Sriwijaya as our newest customer in Indonesia for a brand new airplane. It has already usied Boeing [airplanes] before.
So basically we have already sold over 400 airplanes in Indonesia. We will continue to deliver those airplanes and the outlook in Indonesia continues to be good for the reasons I just outlined.
In the future, we are coming up with a new airplane called the Boeing 737 MAX [which is expected to have its first delivery in 2017], which is 14 percent more fuel efficient than these airplanes [Next-Generation 737]. We think there is a great market for [737 MAX] airplanes in Indonesia.
[Second-largest Indonesian airline] Lion Air has already purchased 201 of those airplanes [737-MAX] and we think Sriwijaya will very soon look at them [as well] and hopefully the company will be interested in buying them too.
How many airplanes have Boeing delivered to its Indonesian costumers during the first semester of this year?
You know we have been delivering according to the schedule and we typically deliver 30 to 40 airplanes in a year. We do it by calendar year. So, in 2015 we will deliver around 36 airplanes to Indonesia. It is a good number because not many countries can take this many airplanes.
Does the weakening rupiah affect Boeing's sales to Indonesia?
No and I am telling you why. The US dollar is strong everywhere around the world. But if you look at the rupiah ' with respect to other countries in Asia ' it is not that different.
Because, if you look at the Singapore dollar and the US dollar, yes the US dollar is very strong but the Singapore dollar to Indonesian rupiah does not change much. So, the economy within the Asia-Pacific is not being affected. The revenue of many airlines is typically in local currency and we will have to watch how long the US dollar stays very strong.
Nobody is expecting it to stay strong for a very long time but suddenly having the rupiah close to 13,800 or 13,900 per US dollar is a difficult situation right now. But airplanes are bought for the long term, they are not bought for six months or a year or something like that. I think the key thing will be the profitability and [whether] the [slowing] economy in Indonesia affects [Boeing's sales] to Indonesia and I could say that the answer is no.
Profitability is good and the economy will be good, so we think we will continue to do well in Indonesia. Airlines in Indonesia will do well in the country because many Indonesians have good incomes and they want to fly and these low-cost airlines are offering very attractive fares, so you and I can fly. It will continue to be better because the growth will be even better.
Which airline is Boeing's biggest customer in Indonesia?
Well, right now it is Lion Air which bought 150 NG [Next-Generation] airplanes like these ones here [Sriwijaya's newly acquired airplanes] and Lion will have 737 MAXes coming up [first delivery in 2017] and, of course, Sriwijaya is also our new customer in Indonesia. [National flag carrier] Garuda Indonesia is of course a big customer both for bigger airplanes like the Boeing 777 and it has already flown the Boeing 787 [Dreamliner family] and it has also bought 737 MAXes.
So we are doing very well with national carriers [from Indonesia] like Lion Air and Sriwijaya Air. There are other carriers [in Indonesia] which operate Boeing airplanes and as soon as they have better balances they will be tempted [to buy] after seeing Sriwijaya buying new airplanes from us.
How many aircraft have Garuda recently ordered from Boeing?
It already bought last year 50 Boeing 737 MAXes. Not one has been delivered because these are MAXes [which are still being built]. The delivery will be in the future [in 2017]. But we already delivered six 777-300 ERs and we will be delivering four more [soon to Garuda]. As you know at the Paris Airshow [in June], Garuda signed a memorandum of collaboration with us to look at purchasing 30 Boeing 787-9 Dreamliners so it is a great market in Indonesia, every type of airplane.
The Indonesian government has waived taxes for airplane engines and some aircraft spare parts. Does this policy help Boeing's sales to Indonesia? Have regulations in Indonesia been supportive of Boeing?
There are always ways to improve things but we let the government decide that and [with regard to the tax waiver for aircraft components] of course it is good for the market because anytime you reduce the costs, it increases the profitability and airlines can do more and better.
Is there any agreement between Boeing and any local agency in Indonesia to produce spare parts locally in order to reduce the price of spare parts for Boeing's customers in Indonesia?
We are working in cooperation with Indonesia and in fact we just signed an memorandum of understanding with the government of Indonesia. It is about air traffic control and training as well as infrastructure, something in those areas. We don't yet have any agreement [to locally produce spare parts] but you have a great company called [Indonesia's state-owned aircraft manufacturer] IPTN [PT Dirgantara Indonesia] which has been there for long time.
We work with it but we are not producing spare parts as of now in Indonesia but we want to see a general improvement of aerospace infrastructure in Indonesia.
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