KAI president director Edi Sukmoro said on Monday on the sidelines of a gathering of bond investors that 672 train cars aged more than 30 years old needed to be replaced. The old train cars comprise passenger cars, freight cars, dining cars and locomotives.

"We will replace those train [cars] gradually with new ones for a better service. In terms of amenities, safety and security, many of our facilities [and] trains need to be restored indeed," he said, adding that, by 2020, all of the old train cars would be scrapped and replaced with new ones.

KAI plans to purchase new train cars from state-owned train manufacturer PT Industri Kereta Api Indonesia (Inka), opening possibilities for imported trains as well. Funds raised from the bonds' issuance will also be used to buy 36 new locomotives and revitalize machines in its passenger and cargo train cars.

The firm was also eyeing the purchase of more environmentally friendly locomotives with biofuel mixes of B30 and B20, Edi added. Around Rp 800 billion in proceeds from the bonds issuance would be used for procuring new train cars and upgrading facilities. Meanwhile, about Rp 1.2 trillion would be used for refinancing KAI’s bank loans.

“We are optimistic that our bond offering this time will be successful just like our previous bond offering,” KAI finance director Didiek Hartantyo said. KAI previously offered its first ever bonds in 2017, raising Rp 2 trillion to finance the Soekarno-Hatta International Airport train project and procure new trains. It was oversubscribed, with demand reaching Rp 5.2 trillion.

For the second bonds issuance, KAI expects to initiate a public offering on Dec. 6, with their initial offering having come on Nov. 11.

The target to improve the quality and passenger load factor of trains is driven by the rapid growth in demand for railway transportation options in the past few years, both for transporting passengers and cargo.

According to KAI, 424 million passengers traveled by train in 2018, a 7.6 percent increase from 394 million passengers in 2017. In line with the increasing number of passengers, the firm booked a 24.3 percent hike in passenger car revenue to Rp 8.3 trillion in 2018 from Rp 7 trillion in 2017.

Revenue generated from the freight business also increased, by 12.5 percent to Rp 6.3 trillion in 2018 from Rp 5.6 trillion in 2017. KAI carried 45.2 million tons of cargo in 2018, a 12.7 percent increase from 40.1 million tons transported in 2017.

“Going forward, we want to serve [our passengers] using good trains, especially since the data shows the growth of passengers in executive segments is higher [than the economy segment]. Thus, in the future, we want to introduce more trains with luxury cars,” Didiek said.

Currently, KAI is finishing up a number of ongoing projects, including the LRT serving Greater Jakarta and the reactivation of four train routes in West Java.

Indonesia Railway Society chairman Hermanto Dwiyatmoko said more attention was needed to restore and increase the load factor of commuter trains in Greater Jakarta considering the high passenger demand.

“Even though the commuter train is still good physically, as time goes by, we need to increase the passenger load factor of the commuter train,” he said.

Hermanto also suggested that KAI add more freight cars, especially to serve crowded routes such as the Jakarta-Surabaya route, which did not meet passenger demand.

Indonesia’s railway tracks and signaling system needed a facelift by switching to electric from manual at present, he said, adding that initiating such change fell under the authority of the government.

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