Business, Finance & Economics

Flying the unfriendly skies


JAKARTA — The reputation of Indonesia’s aviation industry, which has been growing exponentially since 1998, has quite literally crashed, time and again, over the last several years.

It began with the arrest of an off-duty pilot for the state-carrier Garuda who is now in jail for the poisoning of celebrated human rights activist, Munir Said Thalib, aboard a Garuda flight in 2004. Several years later the chief executive for Garuda was fired and then imprisoned for his role in the conspiracy.

Then, in January 2007, the popular budget airline Adam Air crashed into the sea, killing all 102 people on board. Several months later a 737 operated by Garuda and carrying 140 people overshot a runway in Central Java, killing 21. The pilot of that flight is now serving time for criminal negligence — the third Garuda employee now in jail.

In response to the string of disasters, the United Nations Civil Aviation Organization performed an audit that found a lack of oversight in the industry and severely lax safety standards. The European Union followed with a ban on all 51 Indonesian airlines preventing them from entering its airspace.

Indonesia’s transportation minister, Jusman Syafii Djamal, deemed it a wake-up call. The government moved quickly to overhaul the industry, addressing more than 120 safety and regulatory problems cited by the U.N. and EU.

The country grounded several airlines and permanently revoked the license of Adam Air, which at the time was one of the most popular domestic airlines.

Among the issues raised were a lack of regularly scheduled maintenance for aircraft, insufficient training for pilots and other crew, missing but required technology such as Traffic Collision Avoidance Systems, and an oversight body with little power to punish airlines that were breaking safety rules.

Indonesia has since outlined clearer safety codes, revamped its aviation regulator to give it more power, and established a safety oversight organization under the perview of the president.

And so, two years after the ban went into effect, the EU lifted it for Garuda and several other small airlines on Wednesday.

“It was long, difficult process,” Djamal said.

The work seems to have paid off. There has not been a major passenger air disaster in Indonesia in over a year; though there were several military plane crashes in May, one of which killed 90 people.

EU representatives praised the Indonesia government on Wednesday for resolving all but a handful of the problems found in 2007 and officially announced that Garuda, along with Mandala Air, a small passenger airline, cargo operator PremiAir and charter company Airfast, are now welcome in European skies.

The ban remains, however, for dozens of other airlines, including Lion Air, a popular domestic company that boasts the largest volume of passengers in the country and has service to several other Asian countries.

For Garuda, the end of the ban means it can now finally realize its long planned goal to reach Europe. The company’s chief executive, Emirsyah Satar, said it expected to start flying between Jakarta to Amsterdam, a high traffic route given the two countries' interconnected history, in early 2010. It would begin routes to several other European cities shortly after that, including London and Frankfurt, depending on the state of the world economy.

Currently, Garuda flies throughout ASEAN, Australia, South Korea, Japan, Saudi Arabia and China.

Somewhat miraculously, Garuda has grown into one of the world's few profitable airlines in recent years despite the EU ban and the global economic meltdown. Satar said the company’s net profit had increased ten-fold from 2007 to 2008 because of high domestic demand, routing out corruption, and massive debt restructuring.

The Indonesian airline industry has ballooned in the last decade as the government improves infrastructure across the country’s 17,000 islands. Airlines here now fly more than 30 million people a year, up from about 5 million in 1998.

“The ban was not good for our image, but really it was a ban on the country as a whole,” Satar said in an interview. “Garuda has a long history of adhering to the highest safety standards and has been welcomed by many other countries who have their own regular safety audits.”

Garuda plans to go public in the first half of 2010, perhaps selling as much as 20 percent, and to double its fleet of aircraft to about 116 over the next five years, he said.

European Union representatives in Jakarta said Wednesday that the ban could be lifted for more airlines before the end of the year, but did not specify which ones.

Read more on the Indonesian economy:

Will Indonesia make it BRICI?

The most influential person in Indonesia?

Beware Indonesia's "road pirates"