Australia and Indonesia Reopened a Deal Frozen Since 2011

Australia and Indonesia have signed an updated bilateral air services agreement, the first revision since 2011. It allows airlines from each country to operate an additional 5,000 seats per week between the two markets, and it widens the geography considerably. Traffic rights that were previously concentrated on Jakarta and Denpasar now extend to destinations including Lake Toba, Borobudur, Mandalika, Komodo and Likupang. The agreement also permits carriers from both countries to serve Western Sydney International, Australia’s newest international airport.

Fifteen years is a long time to leave a bilateral untouched, and the gap shows in the numbers. Bali has become one of the most heavily trafficked leisure markets in the Asia-Pacific for Australian travellers, and capacity on the Denpasar routes has been effectively rationed by a treaty written when the traffic was a fraction of today’s. The extra 5,000 weekly seats per side gives Qantas, Jetstar and Virgin Australia room to add frequencies, and gives Indonesian carriers the same scope in the other direction.

A caveat is worth attaching to the destination list. Several of the newly opened names are tourism regions rather than airports with the runway and terminal capability to handle international widebodies today. Borobudur and Lake Toba are development priorities under Indonesia’s programme to spread arrivals beyond Bali, not places that will receive a direct flight from Sydney next season. The more realistic near-term beneficiaries are gateways such as Lombok and Labuan Bajo, the access point for Komodo National Park.

The Western Sydney clause is the quieter structural change. Sydney’s existing airport operates under a curfew and a movement cap, which constrains how much additional international traffic it can absorb regardless of what a treaty permits. Writing Western Sydney International into the agreement gives Indonesian carriers somewhere to put new flights that does not depend on prising a slot out of Kingsford Smith, and gives the new airport an early international market that already has proven demand behind it.

Sources: Australian Aviation, Aviation Week