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Press Release: Challenges and Opportunities for Airlines, Airports, and Authorities in the Era of ASEAN Open Skies

March 29, 2016

Media Briefing HPRP Lawyers
Jakarta, March 23, 2016

In the first few months of the ASEAN Open Skies era, customers have not seen many changes. However, business people in the industry, both from airlines and airports, and the authorities have had many things to prepare to be able to compete and get maximum benefits from the ASEAN Open Skies. It aims to create a healthy competition.

Airlines Expansion

To be competitive, airline companies expand their business overseas and open new domestic routes. Up until the present, Lion Group is the only Indonesian airline company which has expanded overseas by establishing Malindo (Malaysia) and Thai Lion Air (Thailand). Other major airlines, such as Sriwijaya Indonesia and Garuda Group have strengthened their business in the domestic market.

The first stage of the ASEAN Open Skies is only associated with Freedoms nos. 3 and 4 regarding freedom of traffic rights within ASEAN sub-regions, which is in Protocol 1 of the MAAS, 2009. The Indonesian government has also stated that it will only open five primary airports according to Ministerial Regulation (Peraturan Menteri or PM) No.69 / 2013: Soekarno-Hatta International Airport in Cengkareng, Juanda International Airport in Surabaya, Medan Kuala Namu International Airport, International Airport I Gusti Ngurah Rai in Bali, and Sultan Hasanuddin International Airport Makassar. This makes a foreign strategy of establishing an airline company in Indonesia more beneficial for the Indonesian airlines (as the home airlines) since Indonesian airlines can fly their aircraft to international destinations from other airports, besides the primary ones.

The second phase will bring Freedom no. 5, which allows airlines in one country to fly passengers between two other countries. At this point, Indonesian airlines will have to compete more with airlines from other ASEAN member countries, which we know have the world’s best airlines and broad international coverage.

Preparation of Airport Operators

Currently, commercial airports in Indonesia are still managed by Angkasa Pura (AP) 1 and AP2, but the Indonesian government has also developed several airports through the Airport Operator Unit (UPBU) in areas with a great number of potential passengers. Security and safety standards with high qualifications are challenges for some of the airports in Indonesia, especially airports which are opened up under the ASEAN Open Skies other than the five primary ones.

Indonesia, as the largest country in ASEAN with the highest number of secondary airports, needs to be careful in airport planning. Lately we have seen issues arise related to the management of the airport, as has happened at Halim Perdanakusuma airport, Kertajati airport, and Lebak airport.

The Aviation Act (Undang-undang Penerbangan) governs the mechanisms of airport management, and the Minister of Transport has also set technical specifications for airports. At the operation stage, these regulations must comply with the provisions and standards of airport management in ASEAN countries. In cases of congestion or over-capacity or in cases of competitive rates, it is possible that Indonesian airlines will divert some of their airport operations (hub) to airports in other countries. With our geographical conditions and the number of airports we have, we are the ones who should take advantage of this opportunity.

The Role of the Authority

One of our important challenges is the role of the authority. Already the Ministry of Transportation has done many things to improve the quality and role of the authority, by among others complying with the provisions of the International Civil Aviation Organization (ICAO) and the Federal Aviation Administration (FAA). The government has made various efforts to raise Indonesia’s ranking, which is now still in the FAA’s rank 2 and it is trying to become a board member of the ICAO. However, there are still many things that can be improved. It is time for Indonesia to demonstrate a respected and powerful authority within ASEAN countries, which also understands the needs of businesses.

In the navigation sector, there are also many things to be improved, among others limited radar capabilities, and civil radar coverage and integration. If we do not improve our navigation, it is possible ICAO would give rights to another country the navigation authority to regulate air traffic in Indonesian territory. This would not only be embarrassing but also dangerous to the sovereignty of our country.

There are still many challenges to be faced as the results of the implementation of the ASEAN Open Skies. However, there are also widespread opportunities for Indonesia to improve its capabilities to be able to compete with other countries.

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Media Contacts

Andre Rahadian, S.H., LL.M., M.Sc.
Partner
E: arahadian@hplaw.co.id

Rachmawati
Marketing and Communications Manager
E: rachmawati@hplaw.co.id

Hanafiah Ponggawa & Partners
Wisma 46 Kota BNI, 41st  floor Jl. Jend Sudirman Kav 1 Jakarta 10220 – Indonesia
T: +6221  5746545,  5701837

For Bahasa version, please download the document here