Consortium involving Changi renegotiating terms for revamp of Indonesia's Flores airport

Goods and passenger ships at the port of the habour town Labuan Bajo in Flores, eastern Indonesia.
Goods and passenger ships at the port of the habour town Labuan Bajo in Flores, eastern Indonesia.PHOTO: ST FILE

JAKARTA - Singapore's Changi airport might just be one of the first foreign businesses to benefit from Indonesia's new "omnibus law."

Changi Airports International Pte Ltd and its Jakarta-based partner Cardig Aero Service are currently renegotiating with the government on the terms for the refurbishment of the main airport in Labuan Bajo, Flores, head of Labuan Bajo and Flores Tourism Authority Ms Shana Fatina told The Straits Times last month.

The fishing town of Labuan Bajo on the island of Flores is the gateway to the Komodo National Park, home to Indonesia's famed komodo dragons.

Under a consortium called Cinta Airport Flores (CAF), the new law would see the two investors receive several incentives, including fiscal, because the Labuan Bajo project is considered a national strategic project.

In late 2019, CAF won a competitive bid to refurbish the airport, pledging to spend 1.2 trillion rupiah (S$112.6 million) in return for a 25-year concession to run the facility, a government document obtained by The Straits Times showed.

The plan fell through because the Covid-19 pandemic caused passenger traffic at the airport to plunge to around 6,400 weekly in 2020, from around 13,700 in the previous year.

The consortium and the government are now negotiating on lower capital spending by investors as well as their expected rate of return which was set at around 16 per cent previously.

"Negotiations are being conducted so that either the government or the private investors would not be disadvantaged," said Labuan Bajo and Flores tourism authority's Ms Shana said on Feb 19.

"Investors are still very keen (to continue with the project). That's why we are still negotiating over the date of the hand-over of the airport from the transport ministry," she said.

Indonesia is targeting to have the project handed over to the consortium in the second half of this year, Ms Shana added.

Changi holds a 20 per cent stake in the consortium.

Changi Airports International's spokesman Lim Wee Ping, in an email reply to The Straits Times on Feb 24, said: "Cinta Airport Flores remains in discussion with the Indonesian ministry of transportation regarding Komodo Airport." He did not elaborate.

Government documents say the consortium requested the change of business plan with a lowering of the required capital spending to around 750 billion rupiah. The government in turn has signalled that any adjustment to this figure must be paired with a comparable adjustment for expected returns on investment.

This means some parts of the renovation work would have to be handled by the Indonesian government.

The proposed revision takes into consideration that the airport would probably see passenger traffic recover to 2019 levels only in 2026.

With additional reporting by Toh Ting Wei