T

he main gateway to Indonesia, Soekarno-Hatta International Airport, just outside of Jakarta, will get a major facelift in the next five years to make it a five-star airport and international transit hub.

The airport’s operator, state-owned Angkasa Pura II (AP II), recently offered its first ever bond to the public to raise Rp 2 trillion (US$149.5 million) to help fund the Rp 4.7 trillion expansion of Terminal 3.

The modern, minimalist Terminal 3 will serve international flights by the end of this year, as well as all flights by flag carrier Garuda Indonesia. The new terminal is hoped to put Soekarno-Hatta on par with Singapore’s Changi and South Korea’s Incheon international.

But that is just the beginning. AP II finance director Andra Agussalam said the company planned to spend a total of Rp 30 trillion over the next five years to develop its 13 airports, 85 percent of which would be for Soekarno-Hatta, which accounts for three quarters of the company’s revenue, said finance director Andra Y. Agussalam.

Soekarno-Hatta Terminal 1 and Terminal 2 will get a facelift of airsides, taxiways, runways as well as transit and cargo areas. The international airport will also receive a third runway to increase its capacity to accommodate more incoming and outgoing flights.

“Looking ahead five years, the President is already asking for a fourth terminal for Soekarno-Hatta. Maybe by then we can go public,” AP II president director Budi Karya Sumadi told The Jakarta Post in a recent interview, unveiling a Rp 10 trillion plan for the airport’s fourth terminal.

The big picture is encouraging. Indonesia, poised to become one of the world’s top ten airline markets in the next decade, is among the world’s most rapidly growing markets in terms of passenger figures, data from the International Air Transport Association (IATA) show. The number of air passengers in Southeast Asia’s largest economy grew 8 percent last year.

President Joko “Jokowi” Widodo is pushing for a boost in tourism, with the government waiving visa requirements for citizens of 169 countries visiting Indonesia for up to 30 days in a bid to attract 20 million foreign tourists by 2019, double the figure seen last year.

“Airports are a profitable business. Indonesian airports are currently undersupplied. Demand for the services is booming, whereas facilities are lacking. In the future, especially with the development of Terminal 3 Ultimate, demand for airport services will be huge,” said Kahlil Rowter, chief economist at Danareksa Sekuritas.

Kahlil, whose company is the underwriter of the bonds, said he believed the bonds would sell “like hot cakes” because of the high business potential of AP II. The bonds carry an AAA rating from Pefindo, with the coupon ranging from 8.5 percent to 9.25 percent for maturity periods of five, seven years and 10 years.

Budi, an engineer by training who spent more than 25 years in the property business before taking up the top post at AP II earlier last year, envisions Soekarno-Hatta as a global transit hub for international
travelers.

“We want to push Soekarno-Hatta to be a five-star airport. A lot of effort will go into it,” said Budi, conveying his dream for Soekarno-Hatta to be aligned with Singapore’s Changi, Seoul’s Incheon, Tokyo’s Haneda and Munich international Airport as a five star-rated airport in Skytrax.

The capital expenditure for these plans was “extensive”, Budi said, adding the measures would require investment of Rp 10 trillion for each of the first two years and another Rp 10 trillion in the next three years.

Budi foresees that the number of transit passengers at Soekarno-Hatta will quickly reach 15 million, up from 12 million today. The airport operator is hoping that 10 to 30 percent of the transit passengers could spur tourism in Indonesia.

“AP II is building international class airports, and flights will continue to increase in Indonesia. They are running a very profitable business,” said Investa Saran Mandiri analyst Hans Kwee.

In 2015, AP II achieved revenue of Rp 4.01 trillion, down from Rp 4.87 trillion in 2014, but up from just over Rp 1 trillion a year in the period of 2002 to 2006.

Aside of Soekarno-Hatta, AP II also has big plans for the other airports it operates, including Bali’s Ngurah Rai Internional Airport, Medan’s Kualanamu, North Tapanuli’s Silangit, Padang’s Minangkabau and Pangkal Pinang’s Depati Amir.

“I’m all excited,” said 59-year-old Budi of his company’s expansion plans.
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