It’s a week of quiet bliss in the office, the usual hustle bustle of work has faded into a quiet hum. This marks the last week before Christmas holiday. The in-between time, where the office vibe is far from Monday blues, and the only stress involved is choosing between diving into the holiday playlist or start drafting an itinerary.
In contrast, this is a long chaotic month for the airport and airlines industry. As we can analyze from the 1H23 data, Asia Pacific airlines saw a sharp recovery with 12.7% growth rate, passenger traffic surged by 125.6% compared to 2022 levels. This is mainly supported by domestic traffic with 8% increase over pre-pandemic levels.
Indonesia's aviation industry is also on a trajectory to return to pre-pandemic levels. In June 2023, domestic flight departures from Soekarno-Hatta Airport saw approximately 1.6 mn passengers, a remarkable surge of over 1.43 mn compared to June 2020.
Source: Statista
GIAA has readied 1.8 mn flight seats this year for the Christmas and New Year passenger surge, with 74% allocated to domestic flights. This month, they anticipate operating ~11,454 flights per week, marking a growth of over 22% compared to December 2022.
Erick Thohir emphasized Indonesia's ideally needs a total of 750 aircraft, as the current fleet stands at only 350 units. Citing that’s he magic number to ensure affordable airfare. As the largest state-owned airline, the government will fully support GIAA fleet expansion plan, be it from merger or international investment. GIAA conservatively targets of adding 20 new fleet next year.
In addition to expanding domestic flight routes to key cities to increase connectivity, GIAA is optimizing by adding Umroh flights from various major cities in Indonesia. Moreover, the company is poised to receive three out of the five narrow-body aircraft ordered since the conclusion of the 3Q23.
GIAA also plans to switch from PSAK 73 to PSAK 106 accounting methods. Initially, provisions were made during the pandemic due to the dramatic decline in flight risks, but now they aim to reverse them. This is expected to reduce GIAA’s operating expenses, as the new accounting method evens out depreciation, improving the overall financial outcome.
Moreover, following what could be deemed as a relatively successful restructuring, GIAA has successfully reduced aircraft leasing costs by ~30% to 50%. The aircraft financing will be switched from a pay-by-hour model to a fixed rate, which will be beneficial considering the anticipated increase in flight frequency.
We hold a positive outlook on the Indonesia airline industry's path to recovery, buoyed by Indonesia's sizable population, expanding GDP, and the country's reliance on air travel, considering its numerous islands.
Source: Sucor Sekuritas
With the IKN project progressing as planned, 3,246 civil servants are anticipated to relocate there starting July 2024- not counting their family members. GIAA's emphasis on expanding domestic flights aligns with this vision and is poised to generate more sales as the industry rebounds, especially in this high season.