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Accelerating Indonesia’s aviation finance in 2023
Given the airline's ties with international creditors like Airbus and several lessors, Garuda Indonesia must still anticipate potential losses from fluctuating foreign exchange rates in a debt restructuring.
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A Garuda Indonesia Boeing 737 Max 8 airplane parks at the Garuda Maintenance Facility AeroAsia at Soekarno-Hatta International airport in Tangerang, Banten on March 13, 2019. (Reuters/Willy Kurniawan)
T
he global aviation industry, which was severely hit by the COVID-19 pandemic, has started to rebound. According to data from the International Air Transport Association (IATA), global airline revenues in 2022 reached 87 percent of the pre-pandemic 2019 revenue level.
The steep rise in flight traffic compared with prior years illustrates the skyrocketing international aviation business. The association also forecast that by 2023, the revenue of all airlines would equal 93 percent of that of 2019. According to IATA research, this year will mark the first time the industry has returned to profitability since the pandemic era, with a profit of US$4.6 billion.
The global phenomenon reveals that following the pandemic's exhausting effects in the last few years, people are longing to travel. Given its enormous tourism potential, Indonesia has a promising future in terms of air travel. The Air Transportation Directorate of the Transportation Ministry projects that Indonesia's domestic and international passenger traffic will increase by 18.7 percent and 4.2 percent respectively this year from the 2019 level.
Experts and regulators discussed the subject at the Group of 20 Aviation Dialogue that took place in Bali last October. Airlines make up the industry that enjoyed the strongest recovery from the pandemic.
Government officials and renowned aviation industry professionals worldwide have developed a series of suggestions to support the theme Financial Measures for Aviation Recovery. The chair's summary highlights some significant achievements for the future global aviation recovery. It is intriguing to learn from the standpoint of Indonesia's aviation sector.
Current COVID-19 restrictions and regulatory limitations represent the first significant indicator of aviation finance success. The Transportation Ministry has promoted a 100 percent load factor of the aircraft on domestic flights in Indonesia, which will increase the sector's future profitability. Meanwhile, the government has simplified the rules for foreigners entering Indonesia. On Dec. 30, 2022, President Joko “Jokowi” Widodo announced the termination of community activities restriction enforcement (PPKM) that ended PCR test as one of the air travel requirements.
The air travel market is the second measure of Indonesia's aviation industry's financial success. The domestic passenger traffic growth comparison between January and October 2022 indicates only a fluctuating 18 percent growth, according to data from Statistics Indonesia (BPS). On the other hand, the volume of international travelers experienced a massive increase of 1,032 percent between January and October 2022. This fact demonstrates that Indonesia's tourist industry is expanding, particularly in foreign tourist arrivals.
