Board of Commissioners Report


Despite being faced with various challenges, the Board of Commissioners considers that the Board of Directors was able to carry out their duties well, by realising a turning point for the Company to survive. We hope that the Company realise another optimal achievement and continue to rise in the coming year to become the number one airline in Indonesia and the world.

Honourable Shareholders

Praise be to God Almighty for AirAsia Indonesia was go through 2022 which was full of dynamics and uncertainty as a result of the weakening of the world economy after the COVID-19 pandemic. Various strategies and strategic initiatives have been carried out by the Company so that AirAsia Indonesia is able to maintain its position as the best airline in its class and is ready to seize all opportunities ahead.

Macroenonomic and Industry Overview

With more controlled conditions of the COVID-19 pandemic, more countries begun to relax social restrictions and turn the pandemic status to endemic. At the end of 2022, global COVID-19 cases experienced a significant decline which had an impact on improving global economic growth.

However, in aggregate, global economic growth is predicted to experience a slowdown in line with increased risks and uncertainties. The IMF projects global growth to slow down from 6.0% in 2021 to 3.2% in 2022 followed by another slowdown to 2.7% in 2023. During 2022, global growth continued its downward trend caused by Ukraine and Russia’s geopolitical tension which prolonged high inflation pressures and aggressive monetary tightening.

In 2022, there was a number of escalations of tensions between Russia and Ukraine. With the position of the two countries as the world's main producers of energy and food commodities, the war and the sanctions imposed have caused global food, energy, and ultimately financial crises (Indonesian Economic Outlook, Nov 2022). The increase in food commodity prices also prompted export bans in several producing countries. Rising commodity prices and supply chain disruptions amid rising demand have fuelled inflation in a number of developed and developing countries. In general, this has also triggered a tightening of global liquidity, especially at central banks in developed countries.

Central banks in a number of developed countries have withdrawn monetary support and raised interest rates aggressively. United States monetary authority, The Fed, again raised the Fed's benchmark interest rate, Fed Funds Rate (FFR) of 50 basis points (bps) to 4.5% in December 2022. In total, the FFR in 2022 has increased by 425 bps, the most aggressive in the last few decades. The increase in interest rates in Europe and the UK also continued at 2.5 percent and 3.5 percent respectively towards the end of 2022. Meanwhile, China's economy was also under pressure with the enforcement of Zero COVID-19 policy.

While the world was hit by a crisis, the national economy experienced positive growth. According to the 2022 Fourth Edition of the Economic, Financial & Fiscal Review, national GDP grew by 5.7% in the third quarter of 2022 (yoy) or grew by 5.7% (qtq) in the second quarter of 2022. The national inflation rate was not as high as expected. CPI inflation in October 2022 was recorded at 5.71% (yoy), lower than inflation in September 2022 of 5.95% (yoy).

In the transportation sector as well as the accommodation and food and beverage sectors, growth accelerated in the third quarter of 2022. Each experienced growth of 25.8% and 17.8% (yoy), which was indicated by an increase in tourism activity. The increase in tourism activity can be seen from the average hotel room occupancy rate of 49.06 percent and data on the number of domestic flight passengers which jumped to 181 percent (yoy) in the third quarter.

In addition, Statistics Indonesia states that the number of passengers in all modes of transportation has increased both on a yoy and c-to-c basis. The reopening of almost all international airports, holding of international events, and easing of activities encouraged an increase in people's economic activities during 2022. The number of foreign tourist visits increased by 384.12% (yoy . Meanwhile, the average ROR for Star Hotels increased by 6.20% (yoy).

Board of Directors Performance Assessment

To improve the Company's performance on an ongoing basis, we, as the Board of Commissioners, regularly evaluate the performance of the Board of Directors. This assessment serves as a reference for a comprehensive evaluation of various policies and appropriate business management strategies in the future. We appreciate the efforts of the Board of Directors in maintaining the continuity of the Company's business, which is reflected in the achievement of predetermined business targets and goals.

As of 31 December 2022, the Company had served 3.25 million passengers, a significant increase from the previous year's 801.67 passengers. This achievement was supported by an increased seat capacity, reaching 4.12 million seats in 2022. With this achievement, the Company managed to record a revenue increase of 415% compared to 2021, with total assets of 5.36 trillion.

With the global economic crisis and uncertainty, the Company's expenses increased in 2022. The Realisation of the Company's Operating Expenses on 31 December 2022 was Rp5.10 trillion, an increase compared to the Realisation in 2021 of Rp2.30 trillion. The increase in Operating Expenses was mainly due to the increase in fuel prices which caused the Company's fuel expenses to also increase.

Despite being faced with various challenges, the Board of Commissioners considers that the Board of Directors was able to carry out their duties well, by realising a turning point for the Company to survive. We hope that the Company realise another optimal achievement and continue to rise in the coming year to become the number one airline in Indonesia and the world.

Mechanism of Supervision on the Implementation of the Company's Strategy

The Board of Commissioners has a supervisory function over all business management carried out by the Board of Directors which refers to Law No. 40 of 2007 concerning Limited Liability Companies. Therefore, we as the Board of Commissioners carry out regular supervision by periodically reviewing all strategies that will be or have been prepared and implemented by the Board of Directors. The monitoring and supervision mechanism is carried out through meetings, including meetings of the Board of Commissioners and joint meetings with the Board of Directors.

During 2022, we regard that the plans and strategies set by the Board of Directors for efficiency are ideal to be implemented. We consider the Board of Directors to be quite aggressive in taking innovative and adaptive measures to overcome the crisis during and after the pandemic. In addition, with the relaxation of travel restrictions, both domestic and international travel demand has increased significantly. This is utilized by the Company to expand the range of airlines to accommodate all requests. Thus, in 2022, the Company has successfully launched 5 (five) new domestic routes, namely:

  • Bandung – Medan,
  • Balikpapan – Denpasar,
  • Banda Aceh – Medan,
  • Jakarta – Silangit, and
  • Denpasar – Medan.

We consider the Board of Directors to be quite aggressive in taking innovative and adaptive measures to overcome the crisis during and after the pandemic.

We highly appreciate the hard work of the Board of Directors for the year in enabling the Company to rise again in an innovative and effective manner to strive for success in the coming years.

Assessment of Good Corporate Governance Implementation

We regard the Good Corporate Governance (GCG) implementation as a fundamental aspect to generate added value for the Company and all stakeholders. The GCG is a system that must be implemented in all of the Company's business lines to increase the effectiveness and quality of the Company.

We appreciate the efforts of the Board of Directors in increasing understanding of the well-implementation of GCG at the Company through the GCG roadmap. We consider that the Company has made appropriate adjustments and fulfilled GCG with reference to GCG principles, and communicated the Code of Conduct and Corporate Culture Guidelines of AirAsia for both new employees and old employees.

Opinion on Whistblowing System Effectiveness

The Whistleblowing System (WBS) functions to identify allegations of fraud or violations, gratuity, and corrupt practices, as well as violations of the code of conduct committed by employees and the management of the Company. The WBS is always disseminated to all Company personnel for more optimal implementation in the future.

During 2022, the Board of Commissioners did not receive receive any reports of violations committed by employees and the management of the Company. This is an indicator that the Company's WBS is running well based on the applicable laws and regulations.

Opinion on Business Outlook

In connection with the lifting of the social restriction policy, the tourism industry showed another increase and recorded positive growth. Based on data from the Central Statistics Agency (BPS), the number of foreign tourist arrivals to Indonesia has reached 3.92 million people or exceeded the optimistic target or upper limit set at around 3.6 million people as of October 2022. These results generated a tourism foreign exchange value of $4.26 billion. The positive growth also occurred in the number of domestic tourists which increased by 15 percent with 633 to 733 million domestic trips throughout the year.

Therefore, we regard that the Company has bright business outlook in the future. We hope that the Company can seize the existing business opportunities in order to maintain the momentum of sustainable business growth. We also urge the Board of Directors to always apply the principle of prudence in formulating strategies and innovations by paying attention to external conditions.

Changes in the Board of Commissioners Composition

During 2022, the Company underwent a change in the composition of the Board of Commissioners with the following composition.

Period of 1 January-6 July 2022

Name Position Basis of Appointment Tenure
Kamarudin bin Meranun President Commissioner AGMS on 24 May 2018 29 December 2017 – 6 July 2022
Agus Toni Sutirto Independent Commissioner EGMS on 21 December 2017 29 December 2017 – 6 July 2022

Period of 6 July -31 December 2022

Name Position Basis of Appointment Tenure
Tharumalingam Kanagalingam President Commissioner AGMS on 6 July 2022 6 July 2022 – 6 July 2027
Reza Viryawan Commissioner EGMS on 25 October 2022 25 October 2022 – 25 October 2027
Sabam Hutajulu Independent Commissioner EGMS on 25 October 2022 25 October 2022 – 25 October 2027

Closing

To close this report, allow us to express our gratitude to the shareholders who have trusted us with the supervisory duties on the management of the Company's business by the Board of Directors. Our highest appreciation also goes to the Board of Directors, the management, and all employees who have devoted their ideas and efforts to optimize the Company's operational and financial performance. We would also like to give our highest appreciation to the government and AirAsia Indonesia loyal passengers who have given their unlimited support and support to the Company's performance. We hope that this good cooperation so far can be maintained in the future.

Jakarta, 12 May 2023

Tharumalingam Kanagalingam

President Commissioner