Jakarta Soekarno-Hatta Airport is one of the most congested airports in the world. As explained in part one, the largest Indonesian airport has failed to cope with passenger growth and will continue to do so in the future. This means that Jakarta is in desperate need of a second large airport to cope with future growth.
Presently, downtown Halim Perdanakusuma Airport is used to relief Soekarno-Hatta, but with very limited capacity and limited space for expansion. Therefore a complete new greenfield airport is seen as the best solution. Located further away from the city centre, such a new airport will not only serve the Indonesian capital, but also the densely populated areas of the adjacent Banten and West Java provinces.
Multiple large greenfield airport projects are in various stages of development. There are Karawang Airport and Kertajati Airport east of Jakarta, and Lebak south of Jakarta. Karawang and Lebak are seen as the best options to complement Soekarno-Hatta, but contrary to Kertajati Airport, actual construction work is yet to start. Karawang Airport is even blocked by the West Java Province as it will be competing with Kertajati Airport.
Halim Airport: the Old Jakarta Gateway
In January 2014 Halim Airport was reopened for domestic operations to reduce pressure on Soekarno-Hatta. Garuda Indonesia’s low-cost subsidiary Citilink is currently the only user that actually moved operations away from Soekarno-Hatta to the previous international gateway of Jakarta. Due to the limited amount of available slots and the requirement to split operations between two airports, Garuda Indonesia, AirAsia Indonesia and Lion Air all cancelled their plans to operate from Halim.
Yet in October 2014, Lion Group announced that they will invest $436 million in the airport to develop a new terminal, capable of handling up to 12 million passengers per year, and other facilities such as taxiways and aprons. There are also plans to build a monorail to downtown Jakarta. Halim will serve as a base for Lion Air’ full service subsidiary Batik Air with construction work on the terminal expansion to be finished by July 2015.
In 2006 Lion Group already saw potential in Halim Airport, with subsidiary PT Angkasa Transportindo Selares securing a 25-year lasting concession for its commercial operations. Though state-owned airport operator AP II was assigned to manage the Indonesian Air Force owned airport when it re-opened in January 2014. When Lion Group wanted to start making use of its concession, the Supreme Court had to order AP II to hand over the management of Halim to Lion Group.
Despite Lion Group’s expansion of the airport, Halim is doomed to remain a secondary airport only. The airport is located just 10km from the centre of Jakarta, and is surrounded by an expanding city (see above image). Further, there is no room for extensive expansion beyond its current single runway, and only limited space for terminal expansion. Moreover, environmental and social considerations are a major issue in the operation and expansion of Halim Airport.
Lion Group Secures Own Airport Infrastructure
Just a few weeks after the announcement of Lion’s plans for Halim Airport, the airline group confirmed plans for a new large airport just south of Jakarta in Lebak, part of the Banten Province. Construction is to begin in 2015 with first operations to start in 2018 – an ambitious goal for a large greenfield airport project. The airport is planned to reach a capacity of up to 50 million passengers per year and will serve as the main hub for no-frills airline Lion Air, replacing Soekarno-Hatta Airport.
Lion Group CEO Rusdi Kirana commented in November 2014 that they received initial approval from the Transportation Ministry to develop a new four-runway airport in the Lebak Regency. One of its runways will be able to handle the Airbus 380 in the light of a potential partnership with a Gulf carrier (Emirates, Qatar Airways and Etihad Airways), though no concrete plans have been made about such a partnership. Lion Group plans to break ground in 2015 on a site of 600 hectares it already owns.
The airport is also intended to become the largest cargo airport in Indonesia, serving as a multimodal hub for the domestic market. The airport site which will eventually be as large as 5,500 hectares – two times the size of Soekarno-Hatta Airport – will include warehouse facilities, wholesale distribution centers, a commercial zone for shopping and a fast train connection to Jakarta.
For the new Lebak airport, Lion Group will source private funding as it is not subject to state-funding. The airline group is planning to sell 30% of its share in one of Indonesia’s largest IPO’s (Initial Public Offering) in 2016. This IPO is intended to raise about $820 million to partly fund the new airport project. Other unknown companies will also be involved in a new consortium to help fund the airport.
Conflict Over Competing West Java Airports
East of Jakarta there are plans for two other major airports, Karawang International Airport and Kertajati International Airport. Karawang is the preferred option for both the national government and the city of Jakarta. The estimated catchment area of Karawang has a large overlap of about forty percent with that of Soekarno-Hatta. In other words, Karawang could take over a large share of the demand in Eastern Jakarta to relieve Soekarno-Hatta Airport.
Kertajati Airport which is located further to the east has an estimated overlap with Soekarno-Hatta of just 2%, with Greater Jakarta completely outside the catchment area of this airport. Therefore Kertajati will not be able to take over an adequate share of Soekarno-Hatta’s traffic.
Though Kertajati Airport is the preferred project of the West Java Province government. West Java’s government is pushing to increase airport capacity in the important metropolitan area of Bandung, where Kertajati Airport will be built. However Karawang and Kertajati share a significant part of their catchment area and according to West Java there is room for only one large airport in that region and therefore sees Karawang as a major threat.
Karawang Airport, which will be funded by the independent Japanese government agency Japan International Cooperation Agency, still needs permission from the local government of West Java to start construction. The latter applies the brakes to ensure his favorite Kertajati airport gets ahead: it could easily take until 2017 before Karawang airport receives governmental approval.
Meanwhile plans for West Java’s Kertajati have been accelerated and expanded when the first phase’ target doubled in size, aiming at a capacity of 24 million passengers per year and up to 500,000 tons of cargo. With operations planned to start in 2018, West Java wants to make sure Kertajati airport starts operations before Karawang so that it has a first-mover advantage. Kertajati Airport is planned to expand to a capacity of 40 million by 2035.
Plans for Karawang International Airport are to reach a capacity of up to 70 million passengers, with 4 runways. Although expanding airport capacity in the Eastern Jakarta region is a key project, the protective attitude of West Java towards Kertajati brings the Karawang project in jeopardy. And while the construction of Karawang Airport was planned to start in 2015, it is very unlikely that this deadline will be met. Meanwhile, construction on Kertajati Airport’s first runway is underway (with South Korean construction group Samsung C&T being involved since summer 2014 to ensure the smooth development of the project).
Why Airport Development Remains Uncertain
Karawang Airport and Lion Group’s new Lebak airport are 2 greenfield projects that could solve the capacity shortages in the region, though both are still in the planning phase.
Lebak airport is planned to be operational by 2018, ambitious for a greenfield project of this size as construction will only start in late in 2015. And Karawang Airport is blocked by West Java because of conflicting interests with Kertajati Airport.
Regional interests conflicting with national projects are daily business in Indonesia and a major reason for the current problematic state of its infrastructure.
Lion Group could actually prove to offer the best solution by moving away from Soekarno-Hatta as one of its main customers, and securing its own airport capacity in Halim and Lebak.
It is striking that a private airline group has to develop its own airport capacity to overcome problems caused by a failed airport strategy by AP II and the Indonesian governments. Lion Group seems to succeed in turning this problem into a commercial opportunity and at the same time gaining a competitive advantage over airlines that remain dependent on Soekarno-Hatta.
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