Gudang Garam's Dhoho International Airport Takes Flight Despite Setbacks

Key Takeaways

• Dhoho International Airport, built by Gudang Garam, has commenced commercial operations after months-long delays and cost overruns.
• The airport was initially projected to cost less than 10 trillion rupiah but ended up with an investment of about 14 trillion rupiah ($880 million).
• The airport, aimed to serve domestic and international flights, has a 3,300-meter-long runway and a terminal initially capable of handling up to 1.5 million passengers per year.
• Analyst Brendan Sobie casts doubts on the airport's ability to attract significant traffic due to its location and lack of rail access, drawing parallels to the situation at Kertajati Airport.
• Gudang Garam, a major player in the cigarette industry, has been diversifying into new businesses to offset declining sales, with the company's revenue falling 4.6% to 118.9 trillion rupiah in 2023.

News Content

The Dhoho International Airport in Kediri, East Java, built by billionaire Susilo Wonowidjojo's Gudang Garam, has commenced commercial operations after facing setbacks and cost overruns. The project, initially estimated to cost less than 10 trillion rupiah, eventually required an investment of about 14 trillion rupiah. Although initial doubts have been raised about the airport's ability to attract significant traffic, plans are in place to accommodate up to 10 million passengers annually.

The airport, designed to cater to domestic and international flights, has a 3,300-meter-long and 45-meter-wide runway and can handle wide-body aircraft. The first airline to operate from the airport is state-owned Citilink Indonesia, offering flights from Jakarta to Kediri. Gudang Garam, primarily a cigarette manufacturer, has been diversifying into new businesses due to declining sales. The company's revenue fell by 4.6% in 2023, and Susilo Wonowidjojo and his family are ranked No. 16 on Indonesia's 50 Richest list with a net worth of $3.6 billion.

Despite doubts about its potential to attract significant traffic, Dhoho International Airport in Kediri, East Java, has begun commercial operations after facing delays and cost overruns. Built by Gudang Garam, the airport was initially estimated to cost less than 10 trillion rupiah but ultimately required an investment of about 14 trillion rupiah. The facility is equipped with a runway and terminal with plans to accommodate up to 10 million passengers annually, albeit with initial doubts about its potential for success.

The airport's ability to attract airlines and passengers has been questioned, with comparisons drawn to Kertajati Airport in West Java, which has faced challenges. Gudang Garam, a cigarette manufacturer, has been diversifying into new businesses due to declining sales, with the company's revenue falling by 4.6% in 2023. Notably, Susilo Wonowidjojo and his family are ranked No. 16 on Indonesia's 50 Richest list with a net worth of $3.6 billion, further indication of the company's significant presence in the country.

Analysis

The commencement of commercial operations at Dhoho International Airport, Kediri, East Java, after setbacks and cost overruns can be attributed to ambitious expansion plans by Gudang Garam in the face of declining revenue from its core cigarette business. The 40% cost overrun, from the initial estimate of less than 10 trillion rupiah to 14 trillion rupiah, reflects challenges in project management and market forecasting. Short-term consequences include financial strain on Gudang Garam, while long-term effects may involve the airport's struggle to attract significant traffic. This move aligns with Susilo Wonowidjojo's diversification strategy, signifying a shift towards non-core businesses in a bid to maintain the company's stronghold in the evolving Indonesian market.

Do You Know?

• Gudang Garam's diversification into new businesses: Gudang Garam, a cigarette manufacturer, is expanding into new industries due to declining sales, highlighting the company's efforts to adapt to changing market conditions and explore new revenue streams.
• Comparison to Kertajati Airport in West Java: The doubts about Dhoho International Airport's potential success are underscored by comparisons to the challenges faced by Kertajati Airport in West Java, shedding light on the complexities of establishing and managing airport operations in Indonesia.
• Net worth of Susilo Wonowidjojo and family: Susilo Wonowidjojo and his family are ranked No. 16 on Indonesia's 50 Richest list with a net worth of $3.6 billion, indicating the significant influence and wealth associated with Gudang Garam and its founder.