ER
RECENTLY, we were shocked by the news of Indonesian textile giant PT Sri Rejeki Isman (Sritex) going bankrupt due to a debt of IDR25 trillion. The largest textile factory in Southeast Asia also posted a loss of IDR421 billion in the first half of 2024.
President Prabowo Subianto even ordered four ministries, namely the Ministry of Industry, the Ministry of Finance, the Ministry of State-Owned Enterprises and the Ministry of Manpower, to immediately deal with this problem so that it does not get worse, considering that Sritex has about 50,000 employees.
But did you know that there is a business sector that is currently not in good shape. If left alone, the conditions and effects will be worse than Sritex. This sector is the aviation industry.
Serious and chronic
Like a sick person, the national aviation business is already serious and chronic. This happened even before the COVID-19 pandemic. It can be seen from 2017-2018, when the airline, as the main actor in the aviation business, experienced very large losses in that year.
For example, from the financial report of the Garuda Indonesia Group in 2018, which showed a net loss of US$175.02 million or about IDR2.63 trillion. Similarly, the airline Indonesia AirAsia lost up to IDR907 billion. Garuda and AirAsia are two public companies, so their financial reports are available to the public. Other airlines, although their financial reports are not public, have indeed suffered the same fate.
For example, in 2018, Sriwijaya Air Group announced that it had a debt of IDR2.46 trillion. This airline then merged operationally with Garuda Group to avoid bankruptcy. To avoid losses, in 2019 the national carrier tried to increase revenue by raising ticket prices.
However, only a year later, as if the money had not been collected, the airline was hit by the COVID-19 pandemic until 2022, which caused their operations to drop to only 30-40%. Of course, their finances dropped drastically again.
In 2024, we were again shocked by the news that our airlines were experiencing a fantastic number of losses. Indonesia AirAsia announced that it suffered a loss of up to IDR1.29 trillion in the first semester (January-June) of 2024, an increase of 644% compared to the same period last year. Similarly, Garuda Indonesia lost IDR1.54 trillion or up 33% year-on-year.
In fact, the first semester of 2024 is the peak season or busy season for the airline business. There are many holidays, including Eid (Eid al-Fitr and Eid al-Adha), which can last for a month, and school vacations. There is also an election season that increases the movement of people between cities and islands. All of this will use air services.
While in the second semester, the peak season is limited only to Christmas and New Year. Imagine if in the first semester there are many peak seasons for airlines to lose, what about in the second semester? Garuda Indonesia, Indonesia AirAsia and Sriwijaya Air are all airlines. However, the business concept is actually different because it follows the rules of Law No. 1 of 2009 on Aviation.
Garuda is a full-service airline, Sriwijaya is a medium service airline and Indonesia AirAsia is no service (no frills or low cost/ LCC). If they all lose, then it is certain that all national scheduled airlines will experience the same.
High costs
Then how can airlines lose so much when if you look at their business income, it has actually increased? Garuda’s business income in the first half of 2024 was IDR24.59 trillion, an increase of 16% compared to last year.
Indonesia AirAsia’s income also increased by 24.1% to IDR3.78 trillion from IDR3.04 trillion last year. The increase in income can be said that the airline has tried its best. However, what a shame if it turns out that it is still losing money.
In simple terms, the profit and loss statement will show that this loss is because the amount of costs incurred is greater than the amount of revenue. The first major cost is, of course, the price of aviation fuel, which can be as much as 30% of total costs for full-service airlines and as much as 50% for LCC airlines.
The second largest cost is maintenance at 16%, including the procurement of spare parts. It still takes a long time to import spare parts, and most of them are still subject to high import duties.
The third largest is the cost of leasing an aircraft at 14%. When the three costs are added together, it reaches 60% for full-service airlines and 80% for LCC airlines. Of course, the increase in these costs will affect the increase in the total cost of the airline.
Unfortunately, these costs are also affected by the exchange rate of the rupiah against the US dollar. The higher the US dollar, the higher the cost, because the airline’s income is in rupiah. In addition to costs, another factor causing airline losses is the poor business climate.
In the midst of rising airline operating costs, the government’s cap on airfares has not been increased since 2019. As a result, airline revenues are limited and unable to cover costs, so it is certain to be a loss. In addition, there is unhealthy competition because there is one airline group that has a very large market share, allowing it to dictate the market.
The previous Minister of Transportation, who was expected to be the conductor to create a good business climate for the aviation industry, turned out to be incapable of doing so. The government is contradictory because it has built a lot of airport infrastructure in various regions and asked for ticket prices to be lowered. Of course, this cannot be done by airlines that are losing money.
As a result, the airport is quiet, even dead, because no airlines are coming in, and public transportation is disrupted. It’s as if the airline business has also fallen down the stairs.
Widespread impact
If the airline business is not immediately fixed by the government, it is possible that the public will receive worse news than Sritex. This is because the aviation industry has a wider impact on Indonesia, which is an archipelago.
Those who will be most affected later are the tourism and logistics or e-commerce businesses. If there are no flights, the movement of people and goods will certainly be disrupted. Tourists from Java will probably not want to go on vacation to Sulawesi or Kalimantan by boat because it takes a long time. Likewise, e-commerce will be disrupted because of the increased shipping time.
Not only that, it is possible that the movement of government officials (ASN) from the regions to the capital will also be disrupted because they will have to take a boat. It will take longer and the cost of accommodation will be higher.
It is possible that the development of the Indonesian Capital City Nusantara (IKN) will also be disrupted, government programs will also be disrupted. In the end, the life of the nation and the national economy will also be disrupted.
Now we just have to hope that President Prabowo Subianto will move quickly to make the national aviation industry and economy healthy in the 100-day work program, like his plan to make Sritex healthy. [kompas.com/photo special]
