As Indonesia’s Economy Booms, Private Jet Demand Soars
Business is booming for Indonesia’s luxury jet charter firm Enggang Air Services and the company’s CEO Donnie Armand tells CNBC he is planning to expand his fleet size to meet the growing demand.
“Private jets in the United States average 30-50 hours of flying time per month, we average around 75 hours per month, well above the industry,” said Armand, adding that Enggang is going to place orders for two 20-plus seater business jets this week, bringing its fleet size to 6.
According to Armand, Indonesia will take delivery of an estimated $500 million worth of private jets this year. The country already has an estimated 18 jet charter companies operating in the domestic market, and this number is climbing.
Jakarta-based budget carrier, Lion Air is the latest Indonesian company to announce an order for private jets. The airline, which plans to launch its own private jet charters, confirmed on Wednesday at the Singapore Airshow that it had purchased two Hawker 900XP mid-sized business jets for a list price of $64 million, with options for two additional aircraft from the U.S-based manufacturer.
With this growing interest, international jet manufacturers are identifying Southeast Asia’s largest economy as a key target market in the region, in addition to China and India.
“I would single out Indonesia as the strongest market in Southeast Asia. It’s been that way for the past 24 months, and going into 2012, I think it’s going to continue to lead the region,” said Pasha Saleh, Regional Sales Director, Southeast Asia at Hawker Beechcraft.
Jose Costas, Vice President for Marketing & Sales, Asia Pacific, for Brazil-based aircraft manufacturer Embraer, says that alongside the country’s growing wealth, the topography of Indonesia is a large driver behind private jet travel.
“With over 17,000 islands spanning over 3,000 miles, companies need an efficient mode of transportation to shuttle employees between their headquarters and the locations of the mines, for example,” Costas said.
Corporate executives in the mining, oil and gas and agriculture sectors are currently leading the demand for private jets.
“The demand for travel is enormous and the (domestic) airline network is not there yet,” Costas added. Embraer, the fourth largest aircraft maker, has sold 8 executive jets, ranging from a list price of $9.5 million to $54 million, in the country since late-2004.
Asia, as a whole, currently remains a relatively small private jet market compared to the rest of the world, but the region will account for 16 percent or $40 billion of total orders over the next 10 years, according to industry estimates.
Pleasure Jets
While business travel makes up 90 percent of private jet usage in Indonesia, charter companies and manufactures are seeing growing interest around non-business, private jet travel by high net worth individuals looking for a weekend getaway. The country’s millionaire population is set to treble to 100,000 by 2015 according to a report by CLSA and Julius Baer.
“High GDP growth has resulted in an increasing number of high net worth individuals who can afford this kind of luxury,” Armand said, adding that some of the most popular destinations include the Maldives, Alice Springs and Phuket.
A 5-hour journey from Indonesia to Maldives on a chartered 14-seater private jet could cost up to $100,000 orapproximately $7,100 per passenger, he said. This is around double the price of a Singapore Airlines business class ticket ($3,757) to the same destination.
Limitations to Growth
While prospects for the private jet sector in Indonesia are bright, industry experts say it is crucial for infrastructure surrounding private jets to improve in order for the segment to realize its full growth potential.
“A lot of the (smaller) airports that are developed don’t necessarily have runways long enough to support some of the bigger (20-seater) airplanes,” said Saleh.
However, Saleh says there are positive signs that indicate the government is moving in the right direction. The government’s flight inspection division recently purchased a private jet to fly to different airports to check on safety conditions. “It’s an indication of the government’s willingness to meet demand,” he said.
