[140216.EN.BIZ] Indonesian Air Freight To Surge 50pc Thanks To ASEAN Open Skies

INDONESIA’s air cargo volume to spike by 50 per cent this year following the multilateral agreement on the opening of freight services between ASEAN countries, according to Indonesia National Air Carriers Association (INACA) cargo chief Boyke Soebroto.

Mr Soebroto said the multilateral agreement would broaden the market for Indonesian air cargo service providers, adding that "this is a chance for Indonesian air cargo service providers to get into ASEAN industrial centres, both for imports and exports."

Citing data, he said the country's international air cargo shipping volume stood at around 80,000 tonnes in 2014, just one-fifth of domestic air cargo shipping which booked 400,000 tonnes during the same year, the Jakarta Post reported.

Air cargo volume decreased five per cent in 2015 due to the slowing economy, according to INACA data. "But for this year, as we will have direct flights, I think it [volume] will increase by 40,000 tonnes," Mr Soebroto said.

Prior to ASEAN Open Skies, also known as the ASEAN Single Aviation Market (ASEAN-SAM), Indonesian cargo planes were required to stop over in countries like Singapore, as a hub, en route to a final destination. "For example, there wasn't a direct [air cargo] flight from Jakarta to Hanoi but, with the liberalisation, we can fly directly from Surabaya to Hanoi," he said.

Service providers in the country, according to Mr Soebroto, would likely aim to increase air cargo shipping to Hanoi and Saigon, among others. Indonesia ratified the multilateral agreement on the full liberation of air freight services in July last year.

The agreement, first approved by ASEAN in 2009, was implemented with the ASEAN Economic Community (AEC) this year. In the agreement, Indonesia is to open seven cities to incoming and outgoing freight services, including Palembang, South Sumatra; Manado, North Sulawesi; Makassar, South Sulawesi and Biak, Papua.

Meanwhile, the Philippines has promised to open six of its cities, including Cebu, while Thailand plans to open seven cities, including Bangkok and Phuket.

The agreement grants fifth freedom to freight service providers, meaning that an airline from one country has the right to fly between two different ASEAN countries, carrying revenue traffic between the two.

"Before ASEAN Open Skies, cargo shipping had been focused in Singapore, Thailand and Malaysia. Indonesia was left behind," he said.

However, he admitted that the cargo service in Indonesia had been limited, with only half of 27 registered freight planes currently in operation. The main operational area for cargo airlines was also limited to Papua, in cities like Jayapura and Wamena. "I think there will be two additional cargo service planes this year," Mr Soebroto said.

He said that the agreement could help producers to sell products at a competitive price. "Tuna producers, for example, they can export from Manado to Manila, which is already close to Japan, making the product cheaper to sell," he said.

However, the country recorded its first trade deficit in November last year, with exports dropping 7.9 per cent to US$11.16 billion.

Aviation expert Arista Atmadjati said that the INACA estimate was overly optimistic, citing that fierce competition from foreign airlines and the country's lack of scheduled cargo airlines were factors likely to hamper growth. A reasonable volume increase estimate would be around 15 per cent to 20 per cent, according to Mr Atmadjati.

"We are still limited to the domestic market, but we should maximise that too," he added.

Source : HKSG.