Client: Indonesia Infrastructure Initiative (IndII), funded by the Australian government, through AusAID.
The information we provided was a vital component in informing the Indonesian government of the implications of introducing an Open Skies policy, of how it would affect the national air transport industry, and also of how it should be implemented to maximise social and economic benefits while ensuring competitiveness with other ASEAN nations.
Challenges
To ensure successful delivery of the project, the team helped overcome several challenges. These included:
- Estimating the pace of growth in one of the world’s fastest growing aviation markets and the implications on the Indonesian air transport industry and associated infrastructure
- Measuring the overarching importance of aviation in the socio-economic development of an emerging economy
- Assessing the external competitive threats to Indonesian airlines from liberalisation across the ASEAN region
- Managing the legal complexity of implementing a multi-lateral agreement that will directly impact on 10 different countries within ASEAN, and have impacts across the rest of Asia Pacific
Solution
Our aviation consultants produced traffic forecasts at 12 of Indonesia’s international airports to determine the current demand/capacity balance of passenger and air cargo demand compared with available capacity.
We reviewed the competitive market position and operational readiness of the Indonesian airlines in an open skies scenario where they were for the first time exposed to unconstrained direct international competition.
We produced an analysis to demonstrate the impacts on the national air travel industry as a consequence of ASEAN Open Skies policy, benchmarking it against the experience of other liberalisation regimes in Europe and the United States. This highlighted the positive effects of aviation market liberalisation and estimated the direct and indirect economic benefits to Indonesia.
Outcome
The results of the analysis were used to derive the overall strategy and roadmap for implementing the policy.
- We helped the client understand the role economic impact studies play in evaluating the importance of the air transport industry and how it could improve their service to stakeholders.
- The study estimated that Open Skies will account for around 2.9TN Rupiah ($2.7BN) in additional direct GDP and an additional 16,000 direct jobs in 2025. If indirect and induced effects are included, these differentials increase to around 6.3TN Rupiah ($5.7BN) and 29,000 jobs in 2025.
- We assisted IndII with its strategic aim of promoting economic growth by working with government to enhance infrastructure policy, planning and investment.
- Our team provided the government with a road map to facilitate the implementation of the Open Skies policy, ensuring the best possible preparedness for the country's air transport sector.