The strategic policies implemented by AirAsia Indonesia had a positive impact on the improved operational and financial performance throughout 2023. The number of passengers for the airline was 6.18 million, an increase of 90% from 3.25 million passengers in 2022. The increase in passenger numbers contributed to a 75% growth in revenue, reaching Rp6.62 trillion compared to Rp3.78 trillion in the same period the previous year. As a group, AirAsia was again awarded "World's Best Low-Cost Airline in 2023" by Skytrax. This award is an external recognition of the quality of service provided by the airline to all passengers.

Dear Esteemed Shareholders and Stakeholders,

We extend our praises and gratitude to the God Almighty, for it is with His divine power that AirAsia Indonesia was able to close the year 2023 with improved performance compared to the previous year. This praiseworthy performance is the foundation for sustainable business growth in the future.

The recovery momentum in the aviation industry has supported the execution of AirAsia Indonesia's business strategies, including increasing the number of operational aircraft, launching new flight routes, and strengthening collaborations with stakeholders in the tourism sector, both domestically and internationally.

As a part of the AirAsia Group, which has been named the world’s best low-cost carrier by Skytrax, AirAsia Indonesia continues to maintain high-quality services for all passengers, in line with our vision, mission, and AirAsia Corporate Culture.

On this occasion, please allow us, on behalf of the Board of Directors of AirAsia Indonesia, to present our accountability report on business management throughout 2023. This Annual Report includes, among others, the implementation of business strategies and performance achievements for the year, challenges, governance practices, and business prospects.

ECONOMIC AND INDUSTRY OVERVIEW

Global Economic Conditions

The global economy grew at a slower pace with increased uncertainty risks throughout 2023. Factors contributing to this include the escalation of geopolitical tensions in various regions such as the ongoing Russia-Ukraine war and conflicts in the Middle East. Additionally, the volatility of energy and mining commodity prices, persistently high inflation, and a decline in international trade of goods played a role.

The IMF reported a global economic growth of 3.1% in 2023, a decrease from 3.5% in 2022. The largest economic downturn was recorded by developed countries, which grew only 1.6% compared to 2.6% the previous year. Meanwhile, emerging markets and developing countries maintained stable growth of 4.1% in 2023.

Despite the sluggish global economy, increased mobility has provided a positive sentiment for the aviation industry. The International Air Transport Association (IATA) reported that the global commercial aviation industry has recovered after being impacted by the Covid-19 pandemic. Increased demand for air transportation has led to improved airline performance.

Cumulatively during 2023, the total number of revenue passengers multiplied by the total distance flown for all routes (Revenue Passenger Kilometers/RPK) increased by 36.9%, and the total number of seats multiplied by the total distance flown for all routes (Available Seat Kilometers/ASK) increased by 31.1% annually.

The Asia Pacific region recorded the highest RPK growth at 96.3%, followed by Africa at 36.4% and the Middle East at 32.3%. These two key indicators in the global aviation industry reflect the industry's recovery, which has almost surpassed pre-pandemic performance levels.

Global Aviation Industry Growth in 2023
Description	Share	Year on Year (%)
		RPK Growth	ASK Growth	PLF Growth
Africa	2.1%	36.4%	35.5%	0.5%
Asia Pacific	31.7%	96.3%	75.1%	8.7%
Europe	27.1%	20.2%	15.8%	3.1%
Latin America	5.5%	17.0%	14.5%	1.8%
Middle East	9.4%	32.3%	24.6%	4.7%
North America	24.2%	15.3%	14.0%	0.9%
Total	100.0%	36.9%	31.0%	3.6%

Indonesia's Economic Conditions

Indonesia's economic fundamentals remained robust amidst a global economic slowdown. The Central Statistics Agency (BPS) reported that the national economy grew by 5.05% annually in 2023, with a nominal value based on current prices of Rp20,892.4 trillion. Economic growth was accompanied by strong production activities.

From the expenditure side, the consumption and investment sectors continued to be the largest contributors to the economic structure, accounting for 82.51%. Household consumption remained strong due to sustained purchasing power. Additionally, the consumer confidence index remained high, indicating public confidence in the national economic outlook.

Investment growth was supported by the continued completion of the National Strategic Program, including the construction of toll roads, housing, and dams. Increased investment was also driven by growing capital investment activities due to positive perceptions from global investors about the Indonesian economy.

By business sector, the highest growth in 2023 was recorded in the Transportation & Warehousing sector, which grew by 13.96%, Other Services by 10.52%, and Accommodation & Food Services by 10.01%. The largest contributors to growth still came from the industrial, trade, and agricultural sectors.

The three business sectors that recorded the highest growth in 2023 were influenced by increased community mobility; the hosting of international events such as the U-17 World Cup, ASEAN Summit meetings, MotoGP Mandalika, and preparations for the 2024 general elections.

Economic growth was accompanied by controlled inflation at an annual rate of 2.61%. The main contributors to inflation in 2023 came from the food, beverages, and tobacco group, contributing 1.60%. Price increases in food commodities such as rice and clove cigarettes also played a role in the annual inflation rate.

Along with positive economic growth, the tourism sector continued its recovery. BPS recorded that during 2023, visits by international tourists (Wisman) to the country reached 11.68 million visits, an increase of 98.30% compared to 5.89 million visits in 2022.

Meanwhile, domestic tourist (Wisnas) travel reached 7.52 million trips in 2023, an increase of 112.26% compared to 3.54 million trips in 2022. The rising trend of Wisnas travel since 2020 was not only due to sustained purchasing power but also supported by the readiness of airlines to meet tourist needs.

The continued recovery in the tourism sector has had a positive impact on the commercial aviation industry. This is evident from the number of passenger departures using domestic air transportation totalling 62.65 million in 2023, an increase of 19.20% compared to 2022, and international departures reaching 15.63 million, up by 120.07% compared to 2022.

Ngurah Rai Airport in Bali and Soekarno-Hatta Airport continue to be the major gateways for international visitors coming to Indonesia. It is recorded that visits by international tourists landing at Ngurah Rai Airport increased by 143.64% and at Soekarno-Hatta Airport by 108.95% throughout 2023.

AirAsia Indonesia 2023 Performance Analysis

Strategic Policies

AirAsia Indonesia, in its business plan document, anticipated the recovery of the aviation industry in 2023. To optimize business opportunities, Indonesia AirAsia has implemented strategic policies aimed at achieving set targets and realizing sustainable business growth.

The strategic policies implemented by AirAsia Indonesia include increasing the fleet of operational aircraft, opening potential new routes, strengthening cooperation with stakeholders particularly in the local and international tourism sector, and maintaining cost efficiency while still providing quality service to airline passengers.

To meet growing market demand, AirAsia Indonesia increased the number of operational aircraft from 16 to 24. Additionally, the airline successfully operated 34 flight routes, consisting of 14 domestic and 20 international routes, with a total frequency of 400 flights per week.

AirAsia Indonesia commitment to supporting national economic growth, particularly in the tourism sector, continued. In 2023, AirAsia Indonesia successfully launched the Toba Lake livery on one of its aircraft in collaboration with Tobatenun, BPODT, and InJourney.

AirAsia Indonesia also collaborated with Western Australia Tourism for international routes. Moreover, the Company continued to strengthen ASEAN connectivity by opening new flight routes from Jakarta to Kuching in collaboration with the Ministry of Transportation of Sarawak and direct flights from Jakarta to Phnom Penh, Cambodia, and Jakarta to Ho Chi Minh, Vietnam.

In the domestic market, AirAsia Indonesia continued to enhance inter-regional connectivity through air travel by opening new flight routes including Jakarta-Lampung, Banjarmasin-Bali, and Denpasar-Kupang. Additionally, the Company supported government efforts to revitalize premium tourist destinations by opening a flight route from Surabaya to Labuan Bajo in East Nusa Tenggara.

AirAsia Indonesia consistently fulfilled its commitment to providing quality service to all airline passengers through timely strategy implementation, hence achieving optimal schedule and On Time Performance (OTP). AirAsia Indonesia also has a modern refund system and customer service (AVA), supported by the AirAsia MOVE app, a user-friendly lifestyle and travel platform accessible from various smartphone operating systems.

To maximize added value for shareholders, AirAsia Indonesia continued to optimize operational cost efficiency. Measures included using leasing systems to add operational aircraft and improving fuel efficiency with digital technology support.

Performance Achievements

The strategic policies implemented by AirAsia Indonesia had a positive impact on both operational and financial performance throughout 2023. AirAsia Indonesia operated 23 aircraft with 180 seats per aircraft. Additionally, the Company operated 34 flight routes, consisting of 14 domestic and 20 international routes, with a total frequency of 400 flights per week.

Available Seat Kilometers (ASK) increased by 101% annually to 10.338 mils, compared to 3.257 mils in 2022. The number of airline passengers was 5.9 million, up 91% from 3.25 million passengers in 2022.

The increase in passenger numbers contributed to a 75% growth in revenue in 2023, reaching Rp6.62 trillion compared to Rp3.78 trillion in 2022. AirAsia Indonesia also successfully reduced its loss from operations from Rp1.31 trillion in 2022 to Rp702.62 billion in 2023, and its net loss to Rp1.08 trillion from the previous year's Rp1.65 trillion.

As a group, AirAsia was again named the World's Best Low-Cost Airline in 2023 by Skytrax. This award is an external recognition of the quality of service provided by the airline to all passengers.

Challenges and Resolution Efforts

Throughout 2023, AirAsia Indonesia encountered external challenges such as the depreciation of the rupiah exchange rate and the rise in aviation fuel prices. To address these obstacles and challenges, AirAsia Indonesia implemented operational efficiencies supported by information technology.

In addition to efficiency efforts, AirAsia Indonesia sought to increase revenue from airline passengers by optimizing marketing aspects. The marketing strategy of AirAsia Indonesia in 2023 focused on digital marketing through social media, publishers, meta, Google, and others.

The presence of AirAsia MOVE, a lifestyle and travel platform, has made it easier for passengers to access airline services and meet other needs such as booking hotel rooms and favourite tourist destinations. AirAsia Indonesia prioritized new flight routes to attractive tourist destinations.

Implementation of Good Corporate Governance

In carrying out business management functions, the Board of Directors adheres to the AirAsia Indonesia Board of Directors' Charter and complies with relevant laws and regulations. Compliance with regulations is one form of implementing good corporate governance. To achieve optimal results, the Board of Directors is supported by corporate govervance supporting organs, namely the Corporate Secretary and Internal Audit.

During 2023, the Corporate Secretary and the Internal Audit Unit each performed their duties. The Board of Directors also continuously monitored the implementation of corporate govervance through Board meetings and joint meetings with the Board of Commissioners. The frequency of Board meetings was in accordance with regulations and the company's needs.

AirAsia Indonesia also conducted an operational safety audit performed by the International Air Transport Association (IATA). The IATA Operational Safety Audit (IOSA) includes operational and functional areas of the airline including but not limited to organization and management systems, flight operations, operational control and flight dispatch, technical and maintenance, cabin operations, ground handling operations, cargo operations, and safety and security management.

AirAsia Indonesia believes that the implementation of corporate govervance and operational safety audits by competent authorities are crucial in achieving sustainable business growth. The results from the IOSA audits provide input for AirAsia Indonesia to further enhance the safety, comfort, and security for all airline passengers.

Board of Directors' Explanation on the Sustainability Report _{[OJK D.1]}

As a form of accountability in supporting the government's program to achieve sustainable development goals that encompass economic, environmental, and social aspects, the Company has annually produced a Sustainability Report, which in 2023 is the third report for stakeholders. The Sustainability Report outlines the sustainability strategy and performance achievements in sustainable development, as well as initiatives undertaken by the Company to realize sustainable development goals in order to positively impact the economy, environment, and society.

As a form of compliance with applicable regulations, the process of preparing this Sustainability Report is based on the Financial Services Authority Regulation Number 51/ POJK.03/2017 regarding the Implementation of Sustainable Finance for Financial Service Institutions, Issuers, and Public Companies, and the Financial Services Authority Circular No. 16/SEOJK.04/2021 about the Form and Content of the Annual Report of Issuers or Public Companies.

Policies and Commitments to Implementing Sustainability Strategies

Amid various challenges, the Company recognizes the importance of evolving with the changes to fulfill all responsibilities, particularly in optimizing the achievement of sustainable development goals. The Company continues to adapt to drive and determine the direction of these changes.

Throughout 2023, the Company has made real progress in Environmental, Social, and Governance (ESG) practices. The Company integrates Environmental, Social, and Governance aspects into all its business activities, including operational activities. By embedding these aspects, the Company proactively engages in managing prevalent global issues, aiming to actively contribute and provide positive impacts on the environment while ensuring optimal implementation of sustainable development.

Response to Challenges in Sustainability Strategy

In the era of globalization and increasingly evident climate change, sustainability issues have become a major focus in various aspects of human life, including the importance of implementing sustainable development.

Sustainable development not only generates positive impacts on the environment and society but also provides significant benefits to stakeholders through an approach that integrates economic, environmental, and social aspects.

Throughout 2023, the Company encountered various risks in achieving sustainable development, including post-pandemic impacts of COVID-19, a global economic slowdown, and the incomplete recovery of the aviation industry. Additionally, the Company also considered the risks of climate change and environmental and social risks increasingly important to manage. The risks encountered during 2023 were intensively managed and transformed into opportunities. Strategic steps taken to mitigate climate change impacts include reducing the carbon footprint, minimizing waste, creating a comfortable, safe, and inclusive work environment, investing in communities, and innovating to improve service and operational standards.

Furthermore, the Company conducts environmentally friendly operational efficiencies aimed at reducing fuel consumption on every flight. Airlines are required to offset emissions above the CORSIA (Carbon Offsetting and Reduction Scheme for International Aviation) baseline using Sustainable Aviation Fuel and purchasing carbon credits.

The efforts made by the Company have generated various opportunities, including a positive value proposition for eco-friendly investors and customers, carbon offsetting as an additional product, B2B solutions for companies wanting to become carbon neutral, fuel savings and emissions through more efficient airspace management, ESG financing for new SAF equipment and facilities, and joint investments in carbon projects and SAF production/ procurement facilities.

Despite the challenges, the Company remains optimistic about leveraging every opportunity to grow positively amidst the turmoil of uncertainty and rapid changes in the era.

Achievements in Sustainability Strategy Performance

The Company strives to continuously improve its sustainability performance through strategic initiatives that were implemented until the end of 2023, including:

1. Environmental Performance
   The Company has initiated various environmental conservation innovations such as energy management, carbon emission management, water management, recycling program intensification, and waste management.
   
   A concrete step taken regarding environmental concern is the efficient utilization of resources adhering to the 3R principles (Reduce, Reuse, and Recycle), implemented in the Company's operational activities. In practice, 3R efforts are realized by managing the use of raw materials, energy, emissions, waste, and wastewater to reduce negative impacts on the environment.
   
   In 2023, the Company's energy consumption intensity was recorded at 657.529 TonCO₂eq, a decrease compared to 2022, which reached 343.550 TonCO₂eq. The use of energy automatically impacts the greenhouse gas emissions produced by the Company.
2. Social Performance
   In the social aspect, the Company remains focused on two factors: employee welfare and creating harmonious relations with the community.
   
   Employees are an important asset of the Company, and one form of this is ensuring employees have a safe and comfortable work environment. The Company also conducts various employee development activities through training, internship programs, and optimized gender equality such as career development opportunities between male and female employees.
   
   The Company's presence in the community aims to create harmonious relations through various Corporate Social Responsibility (CSR) activities, which include pioneering sustainable tourism concepts, enhancing aviation safety standards, realizing disaster relief programs, and improving working conditions.
   
   The Company is committed to supporting the wellbeing of the Indonesian community by growing together with the community. Supporting the community is an essential part to achieve societal well-being.
3. Economic Performance
   As one of the players in the aviation industry, 2023 posed a unique challenge amidst the yet-to-recover national aviation sector due to the post-pandemic impact of Covid-19.
   
   To address this condition, the Company adjusted and changed several policies. Additionally, the Company realized improvements in service quality, conducted customer satisfaction surveys, provided various facilities, and offered compensation for flight schedule delays.
   
   With policy adjustments and strategies, throughout 2023, the Company demonstrated its existence by recording positive performance. Customer survey results also showed good outcomes, with the Company scoring 50 with 166,789 respondents in 2023.

Business Outlook

The global aviation industry is expected to continue its recovery momentum for the next one or two years. The International Air Transport Association (IATA) estimates that global airlines will fly 4.7 billion passengers throughout 2024, which is more than the pre-pandemic level of 4.5 billion passengers.

This increase in the number of airline passengers will support the growth in revenue and profitability levels of airlines. According to an IATA survey, one-third of travellers’ plan to travel more than before the pandemic. About 49% state that their travel habits are now similar to pre-pandemic periods.

In the national aviation industry, political stability following the 2024 general elections is crucial for continuing the growth achieved in the previous year. The development of super-premium tourist areas such as Labuan Bajo will increase tourist travel traffic. Additionally, the addition of several new airports will strengthen inter-regional connectivity and present business opportunities for airline companies.

In the predicted continued recovery of the national aviation industry, AirAsia Indonesia, as part of the world's most cost-effective airline according to Skytrax, will implement aggressive strategies by increasing its fleet to 32 aircraft. This fleet expansion will be supported by the AirAsia MOVE app and collaborations with other stakeholders in the commercial aviation industry ecosystem.

Changes in the Board of Directors Composition

There were changes in the composition of the Board of Directors in 2023. According to the decisions of the Annual GMS on June 28, 2023, and the Extraordinary GMS on November 16, 2023, the composition of the Board of Directors as of December 31, 2023, is as follows:

Name	Position	Basis of Appointment	Term of Office
Veranita Yosephine Sinaga	President Director	AGMS 6 July 2022	6 July 2022 – 6 July 2027
Jurry Soeryo Wiharko*	Director	EGMS 16 November 2023	16 November 2023 – 6 July 2027
Achmad Sadikin Abdurachman**	Director	AGMS 28 June 2023	28 June 2023 – 16 November 2023
Leon Ruben***	Director	EGMS 23 March 2022	23 March 2023 – 28 June 2023

*) Appointed as per the EGMS decision on 16 November 2023
**) No longer served as per EGMS decision on 16 November 2023
***) No longer served as per AGMS decision on 28 June 2023

Appreciation

The remarkable performance achievements of AirAsia Indonesia in 2023 are the result of support from all parties, including Shareholders, the Board of Commissioners, management, employees, strategic partners, and, of course, all of AirAsia's loyal passengers. On behalf of the Board of Directors, we express our gratitude to everyone who has contributed to the development of AirAsia Indonesia. We are confident that as the aviation industry continues to grow, the performance of AirAsia Indonesia will also continue to develop in the future.

Jakarta, May 2024

On Behalf of the Board of Directors

Veranita Yosephine Sinaga

President Director