1

Indonesian Aviation Industry: the challenges & opportunities

Presentation in the Willis ConferenceHong Kong, 07 March 2012

Overview of the Airline Industry

3

Forecast by IATA in 2011 believes Asia will be the center of thegrowth: Pax

11

33

22

Source: IATA Airline Industry Forecast, Oct 2011

4

IATA forecast in 2011 believes Asia will be the center of the growth:Freight

11

44

22

33

Source: IATA Airline Industry Forecast, Oct 2011

No of aircraft on order in Asia Pacific gives a clear sign of bullish air traffic growth in the region including Indonesia

6,3557,968

9,4383,017

1,499 1,290

Source: Citi investment research & analysis

• Overall, AAPA member airlines carried 189.9 million international passengers in 2011, 3.5%more than the previous year, with the region’s sustained economic growth supporting both business and leisure travel demand. International passenger traffic, measured in revenue passenger kilometer (RPK) terms, grew by 3.7%. Capacity growth for the year was a relatively optimistic 6.3%, resulting in a 2.0 percentage point fall in the average international passenger load factor, to 76.4%.

AAPA traffic growth 2010-2011

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44,786 46,164

44,004 45,386

48,064 50,380

46,686 47,715

2010 2011

Passenger TrafficJan-Dec

1Q 2Q 3Q 4Q

Sources: AAPA monthly Press ReleaseAAPA Member Airlines: All Nippon Airlines-Asiana Airlines-Bangkok Airways-Cathay Pacific-China Airlines-Dragon Air- EVA Airways-Garuda Indonesia-Japan Airlines-Korean Air-Malaysia Airlines-Phillippines Airlines-Royal Brunai Airlines-Singapore Airlines-Thai Airways International

2.2 3.0 4.1 6.2 11.4 14.2 17.2 20.5 23.6 23.8 28.634.4

40.346.4

52.559.1

66.3

4.1 4.6 5.0 6.27.8

9.511.6

13.515.6 13.6

15.217.1

18.619.8

21.2

22.9

24.3

0

10

20

30

40

50

60

70

80

90

100

1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015

Prem ium Budget Traveler

Sources : DoT, Garuda Market Survey, Garuda Market Forecast

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23.8m28.8m

34.0m39.2m 37.4m

43.8m

51.6m

66.2m

73.7m

82.0m90.6m

24%21%

18%15% -4%

17%

18%

14%

12%

11%

11%

11%

58.9mCAGR 1999 – 2010Total Market = 21%Premium = 14%Budget Traveler = 28%

CAGR 2011 – 2015Total Market = 11%Premium = 7%Budget Traveler = 13%

12.4m

19.2m

9.1m7.6m6.3m

55%

36%20%21%

The Indonesia domestic market size is predicted to double in the next 5 years

• Real GDP will be growing at 5.7% pa for 2010 – 2015• Air travel typically grows faster than GDP – up to 2x

In 2011 : 11 out of 20 countries has been served by GAIn 2015 : 16 out of 20 countries to be served by GA

*Source: IATA PaxIS Plus; Pax market Nov 10 – Oct 11

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Top 20 Market to/from Indonesia (Local Traffic)(in thousands passenger)*

The Opportunity and Challenges

5,162.2 4,893.5

2,115.5 1,431.1

1,238.7 887.4

821.7 776.7

624.1 572.8

286.3 198.3 193.7 178.6 175.6 161.4 153.8 143.9 142.0

81.9

MalaysiaSingapore

AustraliaSaudi Arabia

Hong KongJapan

ThailandChina

TaiwanSouth KoreaNetherlands

United StatesUnited Arab Emirates

FranceGermany

United KingdomIndia

VietnamPhilippines

Russian Federation

The Indonesia’s Economic Growth is predicted to remain robust despite EUR crises

§ For the last five years, the economy grows 5.9% on average annually. It reaches the highest in 2011 (6.5%).

§ Despite EUR crises, the economy is predicted to still grow quite significantlySource: Institute for Development of Economics and Finance, March 2012

The Indonesia’s Economy is forecast to be among the world’s top five by 2030

10

0

5

10

15

20

25

30

China USA EU India Indonesia

GDP of the world's top 5 countries by 2030 (trillion USD)

Source: Institute for Development of Economics and Finance, March 2012

The economic growth is held by infrastructures. Survey of Travel & Tourism Competitiveness Index by the World Economic Forum in 2011 reveals deficiencies in infrastructures

Indonesia ranks in the Asia Pacific region (out of 26 countries) or 1313 7474 overall (out of 139 countries)

Specifically, the survey reveals deep concerns of the country in terms of under-developed infrastructures which include

5252Air transport: rank overall

8282Ground transport: rank overall

9696ICT: rank overall

Infrastructures can yet be funded entirely by tax collection so Indonesia needs to be open for private investors (both domestic and foreign) to improve the infrastructures (Institute For Development of Economics and Finance – Indonesia, March 2012)

A current case in Jakarta sets up a good example of the problems faced by airline industry in Indonesia

• By 2015, of 35.2 million passengers that Garuda carries, as many as 30 million passengers are predicted to go through Jakarta’s Soekarno-Hatta (CGK) Airport

• By the same year, Garuda’s number of departure will go up four times as many as the current number. Most of it will depart from Jakarta

• Currently, CGK airport serves as many as 44 million passengers while its maximum capacity is 22 million

• Apart from a number aircraft planned to be added by other airlines based in Jakarta, Garuda’s number of aircraft will also be double by 2015.

Best

Worst

ASEAN Average

A study by the World Economic Forum on the Quality of Air Transport Infrastructure reveals Indonesia was also still below ASEAN Average(source: World Economic Forum’s Global Enabling Trade Report 2010)

Ranked # 63 out of 125 countries

# 25 of 125

# 95 of 125

# 1 of 125

# 24 of 125

# 79 of 125 Jakarta, Manila and Saigon are all rated no starby Skytrax

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MP3EI (Masterplan of Acceleration and Expansion of INDONESIA Economic Development 2011 – 2025)

MP3EI : Masterplan Percepatan dan Perluasan Pembangunan Ekonomi Indonesia

Updates on Government Actions over Safety Issues

1. In July 2011, President of the ICAO Mr. Roberto Kobeh Gonzales visited Indonesia to see the progress of the improvement efforts on air transport safety and security measures. Mr. Gonzalez expressed his satisfaction over the completion of 80% of the ICAO findings.

2. Soon afterward, the Minister of Transport stated that Indonesia has finished 95% of the ICAO findings. There was only two issues left, i.e. the separation of the Directorate of Air Worthiness and Aircraft Operation (as the authority of national civil aviation) and also the National Transportation Safety Committee from the Ministry of Transport (up to now both organizations are still under the Ministry of Transport)

3. The other issue was the separation of the Air Traffic Service Provider from the airport management so that it can function as an independent body.

4. In October 2011, the Ministry of Transport launched what was called the National Safety Program which formed the national committee who is in charge of the safety and security of the national air transport. The committee is led by the Director General of Air Transport.

No of occurrences related to safety per year in Indonesia

Source: Aviation Safety Network, updated 11 Apr 2010

Garuda’s Incident Rate

Year 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011*

Incident rate achievement 1.23 1.04 1.09 1.11 0.94 0.77 0.76 0.41 0.53 0.37 0.31

Incident rate maximum target 0.99 0.97 0.97 0.88 0.80 0.80 0.76

Garuda Indonesia’s latest updates

Garuda Indonesia Group

IT Services

Aero Systems

Hospitality and Tourism

Aerowisata

Global Distribution

Systems

Abacus

Ground Handling

Gapura Angkasa

MRO Services

GMF AeroAsia

Key Subsidiaries & Associated Companies

Garuda Indonesia (Main brand)

Cargo Citilink (LCC)

Domestic

International

Sub-100

Hajj / Charter

Shanghai

Kuala Lumpur

BeijingTokyo

OsakaGuangzhou

Hong KongBangkok

Nagoya

singaporeJakarta

Seoul

DubaiJeddah

Melbourne

Denpasar

Amsterdam

Makassar

PerthSydney

87 Aircraft

6.5 yrs Fleet Age

17.1 millionPassengers

$3 billionRevenue

22%Revenue CAGR

18%EBITDAR Margin

229k tonnesCargo

Garuda Indonesia at a Glance

Banda Aceh

Medan

PekanbaruBatam Pontianak

Balikpapan

Banjarmasin

Padang

Palembang

Jakarta

Denpasar

Semarang

Biak

Manado

SurabayaSolo

Yogyakarta

Palangkaraya

Ujung PandangTimika

Jayapura

Ambon

Mataram

Jambi

Tjg.Karang

Pgk.Pinang

Kendari

Palu

Ternate

KupangMalang

Gorontalo

17International Destinations

31Domestic

Destinations

Note: §Map not drawn to scale§Figures are as per Dec 2011-unaudit

Garuda has already put in place a quantum leap plan to take the company to move forward into the future

2nd Journey2nd JourneyMilestone – Quantum Leap2011 2015

• ASK/Employe6.80 mio

• Best CabinCrew

• Cengkarengdedicated

terminal• Garuda Sub-100Seater

• Initial PublicOffering (IPO)

• CitilinkRevitalization

• SkyTrax 5 Star• DenpasarDedicatedTerminal

• Fly to AllProvince Capital

• First Flight toUSA

• Fleet 194Aircraft

• DedicatedAircraft for Hajj

2005 2010 2015

57 (aver. age: 11.2 yrs)

89 (aver. age: 8.1 yrs)

154(aver. age: < 6 yrs)

Quantum Leap Program will bring up the number of our aircraft almost double than 2010, while the average age will be down below 6 years

in 2015:•Our passenger will grow three fold to 35.2 millions•We target to become Skytrax’s 5-star airline•Employee productivity will increase by 40%

Results in 2011

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Passenger carrried in 2011

12,5

17,1

Number of passenger carried up 36% YoY

36%

41%

19%

45%

Seat load factor increase by 3 point

Financial & Operational Indicators - Group

Jan-Des 2010 Jan-Des 2011 • % YoY

Operational:

Aircraft Utilization (Hours) 9:23 10:40 1:17

Frequencies 102.724 130.043 26,59

On Time Performance (%) 80,16 85,68 6,89

ASK (’000) 25.772.196 32.473.738 26,00

Passenger & Cargo:

Passenger Carried 12.534.975 17.073.963 36,21

Seat Load Factor (%) 71,7 74.7 4,26

Cargo/Mail Uplifted (Tonnage) 207.008 229.378 10,81

Notes: All figures include GA & Citilink, except aircraft Utilization and OTP are for GA Main Brand only,

Financial Summary

IDR (trillion) JanJan--Des 2010Des 2010AuditedAudited

JanJan--DesDes20112011

(Un Audited)(Un Audited)

•• % % YoYYoY

Operating Revenue 19,5 27,1 39

Operating Income (0,07) 0,9 NA

Thank you