A pilot of Indonesia’s airline, Garuda Indonesia, takes a selfie from his cockpit. Mast Irham/EPA

Indonesia’s aircraft industry: will it fly higher?

Indonesia’s aircraft industry is ready to take off again after collapsing as a result of the 1997 Asian financial crisis.

Before the devastating crisis, Indonesia’s aircraft industry supplied major jetliner makers like Boeing and Airbus in the 1980s.

Now, it’s ready to take off again as two Indonesian aircraft manufacturers – Dirgantara Indonesia (DI) and Regio Aviasi Industri (RAI) – continue to expand their business and develop new plane types.

Nevertheless, the resurgence of this aircraft industry face challenges of poor maintenance, safety issues and lack of support.

Good business

Indonesia’s promising aviation industry is reflected in the thriving business of its two plane makers, DI and RAI.

DI is a state-owned company, while RAI is a private one. Both of them have not gone public yet, so we could not assess their performances in numbers.

But the business has gone well for both firms so far as they continue to develop new plane models and expand to other countries.

Since 2012, DI has produced almost 60 aircraft and helicopters. The company has exported its products to South Korea, Senegal and Thailand.

The company also continues developing new plane types, including the N-219, a 19-seat transport aircraft for multipurpose missions in remote areas. DI is collaborating with Korea Aerospace Industries to develop IF-X/KF-X fighter aircraft for both countries’ air forces.

Established in 1976, DI was known as Nusantara Aircraft Industry. It employed up to 16,000 staff and became a subcontractor to the world’s major aircraft industries, such as Boeing, Airbus, General Dynamics and Fokker.

Then the economy crashed in 1997.

The financial crisis forced the firm to downsize its operation, delay the development of new aircraft and cut 12,000 jobs.

It became DI in 2000.

Besides DI, Indonesia also has RAI. It is developing the R-80 aircraft, an 80-seat regional transport aircraft. Up to 155 R-80 planes have been ordered by local airlines. Its prototype is targeted for flight tests by 2022.

Challenges

Indonesia has signed agreements to export N-219 aircraft to China and Mexico. Meanwhile, Turkey is interested in selling them to Africa.

But DI’s N-219 aircraft is yet to be certified due to the lack of financial budgets for flight tests. Should the aircraft pass the flight tests, it will get a certification from the Transportation Ministry. Without certification, the plane cannot be marketed and sold to other countries.

Meanwhile, the IF-X/KF-X project was put on hold in mid-2018 due to contract disagreements between Indonesia and Korea on intellectual property rights, technology transfer, and marketing. Various issues with finance, administration and political conditions also delayed the project. After renegotiation by the end of 2018, both countries agreed to continue the project.

Other challenges include poor maintenance and inadequate human resources, such as technicians and aircraft maintenance experts. The poor maintenance is due to the lack of supporting industries.

Poor maintenance has caused devastating plane incidents in a country notorious for its poor aviation safety. In the past 100 years, Indonesia booked 147 fatal accidents, compared to Malaysia’s 37 and Singapore’s 7. These data don’t mention how many DI and RAI planes were involved in these accidents as the report focuses only on commercial aircraft. The last time a DI airplane was involved in a fatal incident was in 2011, while RAI’s planes are not in the market yet.

Such conditions help explain why Indonesia’s aircraft industry is worse than other countries in the region despite its potential.

Business consulting firm Frost & Sullivan reports that, among Southeast Asian countries, the overall trade value of Indonesia’s aerospace products is still below Singapore, Malaysia, the Philippines and Thailand.

In 2017, Indonesia’s aerospace exports only reached US$103.9 million, while Singapore and Malaysia’s exports reached $7.4 billion and $2.1 billion, respectively.

Huge potential

Indonesia needs to answer the above challenges to ensure it can tap into the enormous potential of the regional aviation industry.

Indonesia is the only country in Southeast Asia with complex aircraft manufacturing capability. Other Southeast Asian countries, such as Singapore, Malaysia and Thailand, focus more on maintenance, repair and overhaul services, as well as manufacturing parts.

Thai Aviation Industries (TAI) manufactures RTAF-6 trainer aircraft in very small numbers. The Philippines’ Aviation Composite Technology (ACT) produces only one Apache 1 trainer aircraft.

Meanwhile, DI has produced different types of aircraft and helicopters, including transport aircraft for civil airlines as well as military planes. DI even produces several helicopter products under agreements with Airbus Helicopters and Bell Helicopter Textron.

Showing the country’s ambition to expand its aviation industry, Coordinating Minister for Maritime Affairs Luhut Binsar Panjaitan encourages Boeing to set up business operations in Indonesia to help spur the national economy.

Possible solutions

Developing new aircraft projects is a key move to increase the growth of the country’s aircraft industry.

For these to succeed, it is important for the government to provide support.

For instance, the government, as one of DI’s shareholders, can provide financial support to help the firm get certification for its N-219 plane.

The government can also help DI hold talks with the US and European countries to promote the company’s aircraft and help get certification from international aviation regulatory authorities.

Meanwhile, for the IF-X/KF-X project, the government should make sure the renegotiation with South Korea succeeds. The government must persuade the Koreans to agree on Indonesia’s intellectual property rights over the aircraft and guarantee the transfer of technologies to Indonesia. It will give Indonesia the freedom to market the fighter jet.

To promote its aviation industry, the government also needs to establish the aircraft industry ecosystem to improve maintenance and ensure safety on its planes.