Board of Directors Report
Amid the pandemic, the Company showed its agility in adapting in order to relentlessly sustain its operations. This could be seen from its innovative cost-cutting measures, while prioritizing employees’ health and safety at all times. In 2021, on the back of industry and economic improvement signs, the Company was ready to restore its operations, meet market demands post-hibernation, and continued digital initiatives.
In line with the trend toward digitization, Collaboration between Collaboration between the Company and Group continues to develop the airasia Super Appairasia Super App, such as by developing the SNAP features (flights and hotels) to address the travel demands of consumers in both domestic and international markets.
Dear Esteemed Shareholders,
The ongoing pandemic has had an effect on AirAsia Indonesia’s commercial performance in 2021, which continued to experience contraction, particularly in terms of passenger revenue. In an unfavourable environment for the commercial civil service business, the Company maintained its adaptation and innovation strategy from the previous year.
AirAsia Indonesia sustained its focus on the domestic market while gradually expanding its flight network. In terms of operations, the Company adhered to strict health procedures and requires personnel to participate in vaccination programs to ensure the safety and comfort of everyone.
We also continued Airasia.com’s platform development through various promotions and remarketing programs aimed at enhancing digital transactions. Additionally, the Company expanded its collaboration with important partners in order to ensure business continuity.
Monetary and fiscal policy responses in numerous countries, which provided incentives to cope with the pandemic, were critical in bolstering the global economy’s recovery. Additionally, the global economy was also driven by relaxed mobility restrictions, as vaccination coverage continued to grow. The World Bank forecasted worldwide economic growth of 5.5% in 2021, up from 3.3% in 2020.
In line with the global economy’s recovery, energy and food commodities surged in price due to strong demand, but restricted supply. This resulted in an increase in inflation, which hamper economic development during the next year. Additionally, the cost of aircraft fuel soared during 2021.
Indonesia’s economy, according to estimates from the Central Statistics Agency (BPS), will reach Rp16,970.8 trillion in gross domestic product (GDP) at current prices and Rp62.2 million or US$4,349.5 per capita in 2021. Indonesia’s GDP increased 3.69% higher in 2021 than it did in 2020, when it contracted by 2.07%.
Indonesia’s economic structure is still dominated by the processing industry; agriculture, forestry, and fisheries; wholesale and retail trade, automobile and motorbike repair, as well as construction and mining and quarrying. Meanwhile, household consumption and investment continued to dominate Indonesia’s economic structure in terms of expenditure.
In 2021, inflation stood at 1.87% on an annual basis, while Indonesia’s balance of payments reached a surplus of US$ 13.5 billion, up from US$ 2.6 billion in 2020.
Industry and Business Analysis
Ease of mobility restrictions and the reopening of international airports in various countries contributed to the commercial aviation industry growing faster in 2021 than the previous year.
According to the International Air Transport Association’s (IATA) recent report, flight demand, as measured by revenue passenger kilometres (RPK), climbed by 79.5% year-on-year, outpacing the 65.9% decline in 2020. Additionally, capacity increased by 45.5% on an annual basis, surpassing the 56.5% decline in 2020. The passenger load factor (PLF) increased 13.7% in 2021, compared to a 17.8% fall in 2020.
While performance by region varies, IATA data indicates that almost all regions, with the exception of Asia Pacific, had positive growth in air transportation traffic in 2021. This circumstance lends optimism to the industry’s future assuming there is no subsequent pandemic wave.
BPS data stated that Indonesia’s air transportation sector contracted by 53.06% year-on-year in 2021. This decline was the result of a flight ban imposed in the middle of the year as part of the implementation of mobility restriction rules. However, the transportation sector has begun to improve as a result of increased mobility and a drop in Covid-19 case rate.
In quarter IV of 2021, domestic and international route passengers climbed by 155.32% (quarter-to-quarter) and 18.23 % (year-on-year), respectively. This growth was consistent with the growing mobility of individuals for business and leisure activities.
Strategic Measures in 2021
In the face of the current pandemic, AirAsia Indonesia has always placed a premium on employee and passenger safety. As a result, the Company requires employees to adhere to the government’s two-dose vaccination program and strict health regulations. Additionally, the Company has established regulations regarding passenger requirements.
Domestic market development continues to be the Company’s primary objective, in addition to serving international routes, particularly those with significant income potential. Additionally, the Company optimizes its distribution channels in order to broaden the scope of its online and offline services.
To facilitate safe and healthy domestic flights, AirAsia integrates the AirAsia app with PeduliLindungi. With this facility, the passenger filter process can be done ‘seamlessly’ in accordance with the applicable travel conditions.
In line with the trend toward digitization, Collaboration the Company and Group continues to develop the airasia Super App, such as by developing the SNAP features (flights and hotels) to address the travel demands of consumers in both domestic and international markets. Additionally, there was also feature development of AirAsia’s OTA function, which enables passengers to choose any airline and access additional connections and destinations both locally and globally.
We continued offering promotional programs via digital application. The programs included ASEAN Unlimited (now known as SUPER+), a one-year promotion on flights to ASEAN and Indonesian destinations. Through this offer, we wanted to meet the varied needs of travellers, who fly for tourism or other purposes.
To extend its market share in the sector, AirAsia Indonesia as a modern, technology-driven low-cost airline, has expanded collaborations with a variety of stakeholders, including the Ministry of Tourism and Creative Economy, banks, Indonesia Hotel and Restaurant Association (PHRI), and the media.
The Company also drove its passenger charter services that can be used for a variety of purposes by individuals, businesses, and organizations, including vacation, medical care, visits, business trips, MICE, and company retreats to destinations that are not confined to existing routes.
Not only does AirAsia provide the flight, AirAsia also offers a range of solutions for diverse requirements, rules, and passenger management at the destination.
Along with passenger charters, AirAsia cargo charter services are available to meet the logistics delivery needs of a variety of goods, including export and import commodities, fresh goods such as vegetables, seafood, or fruits, online shopping packages, postal goods, and special cargoes that require the highest handling standards to arrive at their destination.
Performance in 2021
On the back of a disrupted industry landscape, our operating income declined by 61.14% to Rp626.00 billion in 2021 from Rp1,610.97 billion in 2020. This decline was caused by a 68.58% fall in passenger revenue. At the same time, cargo revenue increased 23.23% to Rp75.03 billion, while charter revenue increased 229.86 % to Rp70.58 billion.
The revenue growth in the charter business was the result of AirAsia Indonesia’s success in serving more than 240 charter flights, including flights that accommodate the mobility of workers, logistics, and e-commerce delivery, as well as the growing volume of digital trade transactions.
Continued efficiency contributed to a 48.01% reduction in operating expenses-net amounting to Rp2.29 trillion in 2021, down from Rp4.41 trillion the previous year. The highest fall was in fuel consumption by 73.41%, as aircrafts experienced a period of being grounded due to the government’s travel restrictions.
The decrease in operating expenses was not sufficient to offset the decline in passenger revenue, and AirAsia Indonesia continued to report a net loss of Rp2.34 trillion in 2021. Despite the losses, the amount in fact improved compared to Rp2.75 trillion of losses in 2020.
In terms of operations, ASK dropped by 61% year-on-year to 1,401 compared to 3.615% in 2020. The Company currently operates 19 domestic routes and 5 international routes, compared to 17 domestic routes and 5 international routes in 2020. The annual occupancy rate declined by 4.4 pts to 63.8% from 68.2% in the previous year. The number of passengers declined by 63% in 2021 to 802 thousand, from 2.15 million passengers in 2020.
The Company is confronted with a variety of obstacles in managing its operations, especially the impacts of Covid-19 pandemic. As part of its support to the government’s attempts to stop virus transmission, the Company ceased flying operations from July to September 2021, in compliance with the regulations. This period created a negative effect on passenger revenue. Eventually, starting October 2021, the government permitted airline companies to resume operations.
While operations have resumed, the situation remained far from ideal due to continued restrictions on plane’s passenger capacity and travel bans. Additionally, international borders remain closed, posing a hindrance to commercial flight operations. Additionally, the pandemic altered consumer behaviour, resulting in a reduction in non-essential travels. This condition contributed to the fall in airplane passenger numbers. Moreover, the Company was also faced another challenge of rising aviation fuel prices.
To address these issues, AirAsia Indonesia has developed innovative solutions such as boosting its charter and cargo services; developing ASEAN super application airasia. com through various attractive travel promotions to various destinations; and expanding strategic partnerships with a variety of stakeholders, including regulators and tourism businesses.
Indonesia’s economic recovery is expected to continue, with growth in 2022 exceeding that of the previous year. This is consistent with the more effective management of the pandemic, such as extensive vaccination coverage, which has positively affected individual mobility.
Economic growth and increased mobility are expected to boost scheduled commercial flights. Additionally, large-scale events held in Indonesia will increase in 2022. The Company will continue to optimize these opportunities through innovation and service quality improvements in order to satisfy the evolving needs of consumers.
The Company intends to continue developing the ASEAN super app, airasia.com, by adding exciting promotional features and programs in order to improve its market penetration. Additionally, collaboration with different parties will be enhanced to broaden the area of services. The support from “..Capital A Berhad (formerly AirAsia Group Berhad) adds to the Company’s confidence that the business will continue to thrive.
Commitment to Good Corporate Governance
The Company is committed to applying sound corporate governance (GCG) principles within a framework that encompasses governance structures, governance procedures, and governance outcomes. The GCG is implemented to assure the establishment of a customer experience that is consistent with AirAsia Group best practices, including ensuring the safety of the Company’s passengers.
The Company’s commitment to GCG implementation is demonstrated by the completion of operational safety audits conducted by the International Air Transport Association (IATA), also known as the IATA Operational Safety Audit (IOSA), which examine the airline’s operational and functional areas, including but not limited to organizational and management systems, flight operations, operational control, and flight dispatch., technical and aircraft maintenance, cabin, ground handling, and cargo operations, and security and safety management.
On governance, the Company has its primary bodies such as the GMS, Board of Commissioners, and Board of Directors, all of which have their respective duties and responsibilities. Moreover, the Company has GCG supporting organs such as Corporate Secretary, Internal Audit Unit, Audit Committee, and Nomination and Remuneration Committee.
The Company is committed to enhancing the quality of GCG by strengthening internal control systems and risk management, as well as adhering to all applicable laws and regulations.
Perubahan Komposisi Direksi
In 2021, the composition of the Company’s Board of Directors changed. The 2021 Annual General Meeting of Shareholders approved Mr. Dinesh Kumar’s retirement from the Company’s Board of Directors and the appointment of Mrs. Indah Permatasari Saugi as a Director. We would like to express our gratitude to Mr. Kumar and wish him continued success.
Human Resource Management
The Company believes that human resource (HR) is critical in the attainment of business objectives. The Company has a human resource management policy that places a premium on creating settings and circumstances that foster a pleasant, conducive work environment and on with plenty of equal opportunities for employees to fulfill their potential. This commitment is supported by other related policies in human resource, such as recruitment, performance assessment, compensation and benefits, and talent management.
The Company’s personnel recruitment is performed only for a few, strategic important roles and as necessary. The recruitment process is transparent and with internal candidates given the first opportunity to apply. Additionally, the Company recruits through external channels, including many career sites.
Throughout 2021, human resource management was conducted digitally to accommodate pandemic-related restrictions on faceto-face meetings and physical interaction. The Company utilizes different digital procedures to manage its human resource across multiple areas, including employee relations via the “AskPAC” system, online onboarding program for new employees, and optimization of the “Learning Management System.”
Information Technology Development
The pandemic, which has been ongoing for the past two years, have accelerated the adoption of digital-based information technologies. The Company also continues to improve its IT infrastructure and systems in order to maintain its excellence.
The Company ensures that all information technology systems are implemented in accordance with the best available standards, including ISO/IEC 27001 and PCI DSS compliance (Payment Cut Industry Data Security and System). Additionally, the Company maintains a data governance structure and a working group dedicated to data security and privacy management. The entire process is conducted in compliance with existing regulations.
The Company’s development in the information technology area in 2021 includes the deployment of electronic flight baggage (EFB), which will eventually replace pilots’ manual flight paperwork. Additionally, in accordance with the pandemic situation, the Company introduced self-service luggage tags and boarding ticket printing to avoid physical contact.
Additionally, the Company deployed Citrix Cloud as part of its transfer to cloud-based systems and updated its antivirus software from Deep Instinct to McAfee to enhance data security against virus attacks.
Commitment to Sustainability Aspects
The Company, which is a subsidiary of the AirAsia Group, has adopted the AirAsia Sustainability Manifesto, which encompasses environmental, social, and economic issues while taking internal and external conditions and available resources into account. The AirAsia Group’s Sustainability Manifesto outlines the strategic objectives for operational measures to be implemented over the next few years.
Additionally, the Company has met its commitments regarding human rights, employment, occupational health and safety, fair business practices, and consumer rights. In terms of consumer rights, we facilitated temperature checks via roving technology and enforced rigorous health measures during the pandemic to ensure passengers’ safety and security throughout their flights.
Finally, on behalf of the Board of Directors, we would like to express our gratitude to the Board of Commissioners for supervising the management of the business conducted by the Board of Directors. Additionally, we thank the shareholders who have entrusted us with the responsibility of managing the Company’s business.
We would like to express our gratitude to management and all staff who have worked diligently and collaboratively to overcome the challenges of navigating challenging times throughout 2021.
Last but not least, we extend our gratitude and appreciation to all passengers who have made AirAsia Indonesia as their preferred airline. Additionally, we wish to express our gratitude to all partners and other stakeholders who have contributed to the Company’s seamless operations. and we look forward for more collaborations in the future.
Jakarta, May 2022
On Behalf of the Board of Directors