Aviation Claims in Indonesia Part I: Setting the Scene - DAC Beachcroft

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Aviation Claims in Indonesia Part I: Setting the Scene

Published 10 mayo 2021

In this, Part I of a series focusing on aviation claims in Indonesia, Senior Associate Hermanto Moeljo (i) speaks to the central role that aviation plays in this archipelagic nation and the bright future that is forecast for it, (ii) looks at Indonesia’s recent air accident occurrence rates and trends, and (iii) flags issues that make local knowledge a pre-requisite for the effective handling of aviation claims within the jurisdiction. 

Aviation in Indonesia: a bright future 

Indonesia is the largest archipelagic nation in the world, with a population of more than 270 million people and abundant natural resources (to include oil, coal and liquefied natural gas).   This is a country with great economic potential and aviation has a key part to play in the same.  In the course of 2020 and 2021 Indonesia has not been immune to the impact of the Covid-19 pandemic, both in terms of the tragedy of  loss of life and significant impact on its economy.  The country’s burgeoning aviation industry has but hit hard, in particular as concerns its international flight operations. 

On the domestic front, whilst flight numbers are down by some 62% on the same period in 2020, services have continued to operate and so maintain vital inter-island connectivity.  In a boost to keep domestic flights operating, in April 2021 the Indonesian Ministry of Transportation introduced rapid Covid-19 pre-boarding breath tests for domestic air travel at major provincial airports in Palembang, Bandung, Surabaya, Yogyakarta and in Bali[1].  The breath analyser device, developed by Indonesian scientists at Gadjah Mada University in Yogyakarta and currently patent pending, works by electronically ‘smelling’ the coronavirus infection.  The associated test offers a cost effective option, is quick to administer and delivers results within minutes.  Whilst other states globally continue to ponder the options for pre-flight Covid-19 testing, in this respect, Indonesia is strides ahead. 

Coupled with the roll-out, now well underway, of Covid-19 vaccination programmes, comes hopes for the re-start of the Indonesian economy, to include its aviation industry.  The potential for growth remains strong:  an IATA 2018 forecast (albeit pre-Covid) forecast 219% growth for Indonesia over the next 20 years. If realised, this could result in a staggering 268 million additional air passenger journeys by 2037, supporting approximately USD77 billion of GDP and around 6.9 million jobs[2]


Air accident occurrence trends

Whilst there is a high expectation of a rebound and future growth of the Indonesian aviation sector, the focus must also be on further improving Indonesia’s air safety record.  Undeniably, Indonesia has a chequered record in this regard and achieving a reduction of air accident rates remains a key objective for the Indonesian government supported by the wider aviation community.

The following table provides a snap-shot of Indonesian air accident occurrences in the past five years as investigated by the Indonesian National Transportation Safety Committee (KNKT). [3]  

 

2016

2017

2018

2019

2020

2021

Air accident occurrences

 

45

37

44

30

26

8

Fatalities

 

5

6

199

5

2

62

Seriously injured

13

21

5

6

5

0

What this table does not show however is a vastly improved state of affairs from the position 15 to 20 years ago. It was back in 2007 that both the United States (US) and the European Union (EU) imposed bans on Indonesian carrier operations due to safety concerns, with flight bans extending to 2016 as regards the US and into 2018 in the EU.  Meanwhile, significant investment and industry support has fostered a positive shift to an emerging safety culture.  

When one analyses Indonesia’s major air losses, they are not limited to a sole operation or aircraft type.  Losses span general aviation (both fixed and rotor wing) to commercial wide-bodied fleets, to include older turboprop aircraft and those of the most modern design: in October 2018 the aircraft that crashed into the Java sea resulting in the loss of 189 lives was operated by a B737 MAX.  One notable trend is that losses on domestic routes feature prominently. Already in early 2021, the nation has been struck by another tragic domestic aviation accident. In January 2021, a B737-500 plunged into the Java Sea with the loss of life of all 62 persons on board.  The earlier 2018 B737 MAX loss was also a domestic flight operation.   

The occurrence of any air accident necessitates consideration of a range of possible causative factors, from some deficiency in design and/or manufacture and/or maintenance, to human factor aspects.  As concerns Indonesian air losses, two factors tend to feature prominently: the country’s challenging topography and its weather hazards.  As to the former, the larger islands of Indonesia are mountainous with some peaks reaching 3,800 metres and up to 5,000 metres on Papua.  The region is tectonically unstable with some 400 volcanoes of which 127 are active.  As to weather conditions, Indonesia sits in the tropical monsoon zone that straddles the Pacific and Indian oceans.  These factors, when combined with others, can create a perfect storm in terms of propensity for accident occurrence.


Knowing the jurisdiction

The handling of claims in any jurisdiction is best served by those having local knowledge and experience.  Indonesia is no exception.  (i) Whilst one state, Indonesia comprises more than 300 ethnic groups.  (ii) Bahasa Indonesia is the official language and spoken by over 90% of the population, but this disguises the fact that it is the first language of a much smaller percentage of the population (around 20%).  Indonesia has a rich linguistic diversity: it is estimated that several hundred native languages or dialects are actively spoken. (iii) Whilst Indonesian law is based on a written civil code (in turn drawing upon Roman-Dutch law), in civil law claims, Islamic law and customary law play an important part.  So for example, in the handling of claims flowing from a fatal air accident, if at the time of death the deceased was a Muslim, then the identification of their heirs and the basis of entitlement of each to the estate or some part thereof (to include monetary compensation from the air carrier in a liability claim) falls subject to and will be determined by Islamic inheritance law.                                                                                                                               

Aspects of aviation claims handling that are dialled up e.g. by international aviation convention and which are a common feature in many jurisdictions can impede rather than assist in Indonesia, if not handled with due sensitivity. For example, the Montreal Convention 1999 (the MC99) at Article 28 provides for advance payments by the carrier to support the immediate economic needs of injured passengers and/or families of deceased passengers.  The intention is entirely altruistic and yet, unfamiliar with the concept of advance payments, we are aware of Indonesian claimant families railing against the move, misinterpreting the offer of an advance payment as an attempt to deny them full compensation.  It is just in such delicate of circumstances that local cultural knowledge and language skills best serve insurers and their aviation insureds.  

 

In Part II of our focus on aviation claims handling in Indonesia, Hermanto will reflect on Indonesia’s adherence to international civil aviation liability conventions to include the Montreal Convention 1999.

Hermanto is a Senior Associate based in in our Singapore office and has more than a decade of experience in advising clients in Indonesia and Singapore. He is an Indonesian qualified lawyer, admitted to the Indonesian Bar in 2010 and also a Registered Foreign Lawyer in Singapore.  Hermanto is a native Indonesian language (Bahasa Indonesia) speaker and fluent in English.

[1] ICAO, Uniting Aviation: “A game changer for air travel: Indonesia’s COVID-19 breath analyzer”:
https://unitingaviation.com/news/safety/a-game-change-for-air-travel-indonesias-covid-19-breath-analyzer/

[2] IATA: The Importance of Air Transport to Indonesia 2018.
https://www.iata.org/en/iata-repository/publications/economic-reports/indonesia--value-of-aviation/

[3] Taken from, “Status of Transportation Accident Investigation Report and Monitoring of Transportation Safety Recommendation”, 5 April 2021 meeting material, prepared by the National Transportation Safety Committee (KNKT): http://knkt.dephub.go.id/knkt/Recommendation/Status_Rekomendasi/20210406_Rekomendasi/Bahan%20Rapat%20KNKT%20Tanggal%20%205%20April%202021.pdf)  

Authors

Hermanto Moeljo

Hermanto Moeljo

Singapore

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