25-Year Sales Forecast of 6.4 Trillion KRW
Effective Local Partnerships in Indonesia
Expectations for Expanded Joint Entry of Domestic Companies
Incheon International Airport Corporation has secured the operation and development project of Indonesia's Batam Hang Nadim International Airport, valued at 600 billion KRW. This is the corporation's largest overseas project to date and the first case where it is responsible for both operation and development of a foreign airport.
On the 21st (local time), Incheon Airport Corporation announced that it signed a contract for the operation and development project of Batam Hang Nadim International Airport with the Batam Free Trade Zone Authority (BIFZA) at the Batam Radisson Convention Center in Indonesia.
The project period for Batam Airport in Indonesia is 25 years, from next year until 2047, with a total project cost of approximately 600 billion KRW. During this period, the expected cumulative revenue is estimated to reach about 6.4 trillion KRW. Additionally, it is expected to secure approximately 485.1 billion KRW in dividend income over the next 25 years.
Earlier, after competing with world-renowned airport operators such as Zurich Airport in Switzerland, France's EGIS, and India's GMR, the corporation was selected as the final successful bidder for this project by the Batam Free Trade Zone Authority (BIFZA) on March 19.
Global Airport Construction and Operation Expertise
Effective Partnership with Local Indonesian Companies
Hang Nadim Airport, located on Batam Island in Indonesia, consists of one passenger terminal (T1), one cargo terminal, and one runway. As of 2019, the airport handled 4.54 million passengers and 44,000 tons of cargo. Incheon Airport Corporation plans to carry out development projects including the renovation of the existing passenger terminal and construction of a new passenger terminal (T2), aiming to expand Batam Airport's passenger capacity to 25 million by 2040.
This month, the corporation jointly established a local joint venture with its project partners, Indonesia's First Airport Company and an Indonesian state-owned construction enterprise. Following procedures such as obtaining certification for Batam Airport operation and establishing an operational plan, the corporation plans to commence full-scale operation of Batam Airport in June next year.
The corporation cited its global airport construction and operation expertise, deep understanding of the Indonesian airport industry, and partnerships with local Indonesian companies as key success factors in securing this project.
The corporation entered the global stage as a latecomer compared to competitors such as France's ADP and Germany's Fraport by winning the operation support project for the new airport in Arbil, Iraq, in 2009. Leveraging airport construction know-how accumulated through four phases of airport expansion and airport operation capabilities proven by ranking first in the World Airport Service Quality Awards for 12 consecutive years, the corporation has secured 30 projects in 15 countries to date.
From the early stages of its overseas business, the corporation selected Indonesia as a key target region, steadily conducting local corporation establishment and bidding activities to enhance its understanding of the Indonesian airport industry. The corporation has successfully executed five projects in Indonesia, including commercial consulting for Surabaya Airport (2015) and Jakarta Airport Terminal 3 (2017), accumulating know-how in local airport business.
By proactively establishing cooperative relationships with Indonesian state-owned enterprises, reflecting local foreign investment regulations that limit foreign investors' airport shareholding to a maximum of 49%, the corporation played a crucial role in significantly increasing the likelihood of winning this project.
Cumulative Revenue Effect of 6.4 Trillion KRW Jackpot
Expansion of Joint Entry with Domestic Construction Companies Expected
Amid the unprecedented crisis faced by Incheon Airport due to the prolonged COVID-19 pandemic, the full-scale launch of the Batam Airport project in Indonesia is expected to provide a breakthrough for Incheon Airport by diversifying its revenue structure.
First, the expected cumulative revenue of the local corporation through Batam Airport operation over the next 25 years is approximately 6.4 trillion KRW, and during the same period, the corporation is predicted to record about 485.1 billion KRW in profits through dividend income. The corporation plans to improve its profit structure by diversifying Batam Airport's revenue streams in both aviation and non-aviation sectors, including expanding flight routes and developing commercial revenue.
With this project win, the joint entry of domestic companies into Batam Airport's operation, maintenance, and construction sectors is expected to expand significantly. The corporation plans to promote the introduction of its proprietary operation system, AirCUS (Common Use Passenger Processing System), at Batam Airport and pursue joint overseas business ventures with its subsidiaries.
During the operation and maintenance phase of Batam Airport, the corporation plans to actively support domestic companies' overseas market development by promoting joint entry with domestic IT companies, duty-free shops, travel agencies, and in the future expansion and development phase of Batam Airport, with domestic construction companies (design, construction, supervision, etc.).
The corporation plans to pursue additional airport operation and development projects mainly in emerging markets such as Southeast Asia and Eastern Europe, aiming to expand the number of overseas airports it operates to more than 10 by 2030, thereby becoming a truly global airport operator. Major projects currently under review include the Indonesia Lombok Airport investment and development (PPP) project and the Poland new airport investment and development (PPP) project.
Kim Kyung-wook, President of Incheon International Airport Corporation, said, "Based on this contract signing, the corporation will do its best to successfully promote Indonesia Batam Airport project, the first overseas airport operation and development project by a Korean company." He added, "We will expand our overseas business worldwide including Southeast Asia, Eastern Europe, the Middle East, and Central Asia, and promote joint entry with domestic companies to contribute to revitalizing the national economy through the export of Korean-style airport platforms."
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