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An Aviation Blacklist that Cuts Two Ways

Indonesian Airlines Urged to Avoid Purchasing or Chartering European Aircraft.

(12/24/2007) The Indonesian Department of Transportation is urging national airlines to purchase and charter aircraft from non-European sources as a response to the continuing "blacklisting" of Indonesia airlines by the EU.

Quoted in Bisnis Indonesia, the Director General of Civil Aviation, Budhi Muliawan Suyitno, said this suggestion has been forwarded to local airlines, reminding Indonesian air operators that the cost of securing European aircraft will increase following the withdrawal of Indonesian airworthiness inspectors from the EU.

That withdrawal, a retaliatory step by the Indonesian government to the EU ban, means that flight approval for European aircraft (e.g. Airbus and ATR) chartered or purchased by Indonesian airlines must now be carried out in Indonesia at an estimated additional cost of US$200,000 per aircraft.

While the withdrawal of Indonesian aviation inspectors from Europe will not cause a loss to the Indonesian government, it will be potentially expensive for Indonesian airlines flying European aircraft. Budhi suggested that such losses can be minimized by Indonesian airlines seeking aircraft in other markets. While this may prove complicated for Indonesian carriers who have purchased EU aircraft, Budhi contends that lease contracts are more easily terminated.

While Indonesia continues its massive efforts to improve aviation safety, the next aviation audit team from the EU is expected in Indonesia on January 20, 2008. On the agenda for that meeting is a review of Indonesian aircraft operations and talks to achieve a shared perception on safety standards.

As part of its tougher stance towards EU aviation policy, Indonesia is now placing greater safety scrutiny on EU carriers, such an KLM and Lufthansa, who fly to Indonesia.

Mandala Facing Higher Costs

Mandala Airline told Bisnis Indonesia that the change in inspection rules necessitate expensive "double" registration and inspections of their new Airbus aircraft. The aircraft must now be delivered with European registration upon hand-over at the Airbus factory in Toulouse, France and then flown to Indonesia for re-registration and an additional inspection process.

Despite current difficulties surrounding securing European aircraft, Mandala's CEO Warwick Brady told the Jakarta Post that down payments have been made and his airline was compelled to proceed with its purchase of 30 Airbus A320 aircraft.

Brady said: "We support the government in that they need to find a resolution... However, we cannot cancel the purchase agreement, or we will suffer losses on our down payment."

There is a practical aspect to the current imbroglio tied to the EU "blacklisting" of Indonesian registered aircraft, not entirely attributable to any degree of umbrage felt by the Indonesian towards any officials EU rulings. The current ban does not allow Indonesian registered aircraft to fly within European airspace. Thus, if an Indonesian company purchases an Airbus and, as they have in the past, provided the aircraft with an Indonesian registry at "point of purchase" then that aircraft would not be legally able to fly out of European airspace for eventual delivery to Indonesia.

In a similar vein, President Susilo Bambang Yudhoyono has vowed not to undertake a visit to Europe until the current blacklisting of Indonesian aircraft is lifted. While special exemptions would likely be granted to the Garuda Indonesia aircraft that would fly the Indonesian President to Europe, the President is taking a principled stand and refusing to fly to Europe in the current situation in which Indonesian registered aircraft are "blacklisted" in European air space.