Renderings of Bintan Airport, Indonesia's first privately owned airport, set to open in the end of 2016 (Photo courtesy of Bintan Aviation Investments)

Indonesia’s First Privately Run Airport to Be Built in Riau Islands Province

BY :DENVERINO DANTE

FEBRUARY 08, 2015

From Jakarta to Jambi and Pontianak to Pangkalpinang, Indonesian cities have experienced tremendous growth in recent years. Unfortunately the airports of these and other cities in the archipelago have been slow to keep up with demand, and are now suffering from overcapacity.

This is not just due to local demand. The introduction of the Association of Southeast Asian Nations (Asean) Open Skies policy is certain to trigger more passenger traffic within the region. This issue must be addressed as airports not only serve to move people, but also contribute to growth.

An example is New Zealand’s Auckland Airport, which served 14 million passengers in 2013 and contributed close to $15 billion, or 19 percent of the country’s gross domestic product.

Virtually all of Indonesia’s airports are government-owned. But a law governing aviation, passed in January 2009, sets out how the private sector can participate in the development of airports in Indonesia. In May last year, airports were taken off the “negative investment list,” allowing foreign companies to own up to 49 percent of airport ventures.

Theoretically, the government has opened the door for the private sector to participate in airport development. Unfortunately these changes are yet to stimulate interest from the private sector.

Each proposed airport project has its own specific challenges, ranging from return on investment issues to land acquisition problems. Lion Air has set out plans to build its own airport in Banten province but no specifics have been announced.

However, one company is set to take on the challenge. Bintan Aviation Investments (BAI), a subsidiary of Singapore-based publicly listed Gallant Venture, which in turn is backed by the Salim Group and Singapore’s Sembcorp, will create Indonesia’s first privately owned airport.

Once completed, the new airport will be able to accommodate wide-body aircraft such as the Airbus A330 and Boeing’s 747 and 777 models.

Located in the Bintan Industrial Estate on Bintan Island, Riau Islands province, the first phase of the airport will include three hangars, a three-kilometer runway and a terminal. The company has set aside $135 million for this first phase.

The airport is set to open at the end of next year, with plans to serve a million passengers in its first year of operation. The company has ambitiously also set aside land for future developments, capable of serving up to 60 million passengers per year, roughly the number handled annually by Jakarta’s Soekarno-Hatta International Airport.

Situated next to the airport is the company’s 177-hectare aerospace industrial park. In December GMF-AeroAsia — a subsidiary of national flag carrier Garuda Indonesia — and BAI signed a joint-venture agreement to establish a company specializing in aircraft maintenance.

This joint venture is a follow-up to a memorandum of understanding signed by both parties in early 2014, which plans to turn Bintan into a new regional hub and maintenance facility center for Garuda Indonesia in order to better tap the Southeast Asian market.

According to Richard Budihadianto, chief executive of GMF AeroAsia, the first phase will see two single-bay hangars, each capable of handling heavy maintenance on wide-body aircraft, plus a third specialized wide-body painting hangar.

He explained that Bintan is the perfect location for the operation as it is near Singapore, where several regional offices of major aviation industry players are located.

The airport is also integrated with a seaport so the movement of aircraft components will be easy and efficient. Aside from already owning several Boeing 747s, Garuda Indonesia will soon receive 10 Boeing 777 jets, while its fleet of Airbus A330s is projected to grow to 30. The total Asia-Pacific market for aircraft maintenance reached $16.4 billion in 2013, and is expected to grow to $26.5 billion by 2022.

The joint venture will handle manufacturing and assembly of aircraft engines and components, aviation training and research and development centers.

There will be a dedicated township, including residential areas for employees, dormitories, a health center, sports center and convenience stores to cater to management and staff at the aerospace industrial park.

“There must be a bundling of several activities in the area to trigger the required base traffic at the airport in order to justify the investment,” BAI managing director Michael Wudy said.

“The Bintan airport comes from the necessity to open access for tourists to Bintan and to provide landing and take-off facilities for aircraft using the heavy maintenance facility.”

The story was first published on GlobeAsia's February edition

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