Incheon International Airport invests in Indonesian project

Incheon International Airport Corporation President Kim Kyung-wook, right, receives a souvenir from Muhammad Rudi, Chairman of Batam Indonesia Free Zone Authority at a convention center in Batam, Indonesia on Tuesday. [IIAC]

Incheon International Airport Corporation (IIAC) is making a major investment in an Indonesian airport as it seeks to diversify revenue.

The airport corporation signed a deal with Batam Indonesia Free Zone Authority (BP Batam) in Batam on Tuesday for the development and operation of the Hang Nadim International Airport for 25 years starting next year.

Hang Nadim International Airport is located in Batam, the largest city in the province of Riau Islands, located 1,150 kilometers (715 miles) north of Jakarta. It is the ninth largest airport in Indonesia by the number of passengers.

BP Batam is the central government agency that manages, develops and constructs free zones.

IIAC will work with local state-run partners — PT Wijaya Karya engineering and construction firm and Indonesia's largest airport corporation PT Angkasa Pura I (AP1) — in the Hang Nadim International Airport project.

The three established a special purpose company on Tuesday for the development and operation of Hang Nadim International Airport. IIAC owns 30 percent of the entity.

The new company will manage the Indonesian airport for 25 years from June 2022 through mid-2047.

The airport's first terminal will be renovated, a second terminal will be built and the airport's annual passenger capacity will be increased to 25 million from 4.5 million in 2019.

IIAC expects Hang Nadim International Airport to generate 6.4 trillion won ($5.7 billion) in revenue between 2022 and 2047 based on an estimated 600 billion-won investment. It anticipates 485.1 billion won in profit from the 25-year project.

The company is seeking a breakthrough from the current crisis through the diversification of revenue once the Hang Nadim International Airport project kicks off, the airport corporation said in a statement, referring to the collapse in business during the pandemic.

Domestic companies, including IT firms, duty-free operators and travel agencies may also work with the IIAC in the Indonesia project, the airport corporation said.

"We plan to contribute to boosting the domestic economy by exporting Korean airport platform worldwide, including to Southeast Asia, Eastern Europe, Middle East, Central Asia, and seek a joint overseas market entrance with domestic firms," IIAC president Kim Kyung-wook said in a statement.

The consortium of IIAC and the two local partners won the bid to operate Hang Nadim International Airport in March. Zurich Airport and Egis Group, a French infrastructure and transport systems provider, also bid.

IIAC hopes to operate at least 10 overseas airports by the end of 2023.

The airport corporation said it expects 490.5 billion won of revenue this year, down 55 percent on year, and a net loss of 761.4 billion won.

BY JIN MIN-JI [jin.minji@joongang.co.kr]