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Neighbors control half of RI’s aircraft maintenance market
More than half of the demand for aircraft maintenance, repair and overhaul (MRO) services for the Indonesian market is met outside the country, an industry group says, pointing to resource constraints from human capital to available land
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span>More than half of the demand for aircraft maintenance, repair and overhaul (MRO) services for the Indonesian market is met outside the country, an industry group says, pointing to resource constraints from human capital to available land.
Indonesia’s Aircraft Maintenance Services Association (IAMSA) estimated the country’s MRO market at around US$1 billion. However, only 45 percent of this demand is handled by local players. The rest of the business goes to neighbors Singapore, Malaysia, Thailand and Taiwan.
Domestic players for MRO services, or the workshops to ensure aircraft’s airworthiness for passenger and cargo transportation, include state-owned flag carrier Garuda Indonesia’s GMF Aero Asia and Lion Air Group’s Batam Aero Technic. There is also the only foreign investor in the MRO business in the country, FL Technics Indonesia from Lithuania.
“Based on the history of the last five years, the growth of Indonesia’s MRO market is higher than the growth of the capacity and capability," said IAMSA chairman Rowin H. Mangkoesoebroto during the 7th Aviation MRO Indonesia Conference in Jakarta on Wednesday.
Indonesia stands among the top-10 largest air passenger markets in the world and is expected to be a standout performer, climbing from the 10th largest aviation market in 2017 to the fourth-largest by 2030, according to the International Air Transport Association (IATA).
Tourism is one of President Joko “Jokowi” Widodo’s top priorities as the government targets to welcome 20 million foreign travelers to Indonesia by the end of this year, more than twice as many as in 2014, when the President began his first-term administration.
Given the growing demand for air travel and air cargo in Indonesia, domestic MRO players should accelerate capacity and capability development by collaborating with foreign MRO service providers to build more products and lines, Rowin added.
"Land [availability] is the major challenge for MRO business expansion. Areas for MRO need to be in the airport area, while almost all airport area is managed by the government; only a few are under private management," said Rowin.
The MRO business climate was also challenging because of high rents, with prices surging almost six-fold recently, he added. He expressed his expectation for the government through the Finance Ministry to offer incentives in the form of a relaxation in rental fees to be paid by MRO companies.
The Indonesian National Air Carriers Association (INACA) shared the same view, with secretary-general Bayu Sutanto saying there was no space left for MRO facilities around airports today.
“Another challenge is the skilled labor required for MRO. We know that to provide MRO services, all skills must be certified, all engineers must be certified and we need more of them,” said Bayu.
Due to the limited MRO capacity in Indonesia, many airline operators are resorting to foreign MRO services, especially for heavy maintenance. Neighboring countries Singapore, Malaysia, Thailand and Taiwan have popular destinations for Indonesian airlines seeking MRO services.
Global consulting firm Oliver Wyman has projected that commercial air transportation MRO spending will jump 41 percent to $116 billion within ten years from $82 billion in 2019. Over the decade, the global air transportation MRO market is seen to grow by an average 3.5 percent per year. In Asia Pacific, the MRO market value is expected to rise 35 percent to $20.3 billion in 2029 from $15 billion in 2019.
According to Rowin, Indonesia’s MRO business could grow more robustly with the presence of more special economic zones designated for MRO, also called aeroparks. The government has initiated an aeropark in Batam, Riau Islands.
“This is a very good idea, but as a big country, hopefully we have more than one, at least four. I see that Jakarta and Batam are very promising for aeroparks. So is the central part and eastern part of Indonesia. I think Makassar and one more area in the eastern part of Indonesia would be good,” he added.
Rowin expressed hope that business in the MRO industry could be facilitated by more incentives and greater regulatory simplicity, especially with regard to tax, land and immigration policies to attract more foreign airlines.
