Feasibility Analysis for Investment of Cargo Village Development in Soekarno-Hatta International Airport

The sector of world air cargo industry has become broader becoming one of the most integral parts of the global economy, as a significant airport company in Indonesia, PT Angkasa Pura II (Persero), AP2, builds Cargo Village of the Soekarno-Hatta International Airport to provide the best air cargo service providers to meet the competition in the global market. This research aims to investigate the most suitable Construction Staging scenario of the Cargo Village construction project for investment decision by using business issue analysis and financial analysis. This study uses mixed methodology, a combination of qualitative and quantitative research methods. The qualitative method in this study aims to assess the external conditions and AP2 resources, by TOWS Analysis method. Meanwhile, quantitative research methods are used to conducting Financial Feasibility in form of Capital Budgeting Payback Period (PP), Net Present Value (NPV) and Internal Rate of Return (IRR) for several scenarios of development staging. The result shows that AP2 continuously improves its capabilities and core competencies as the internal strength to balance the threat from outside the company and is prepared to start taking advantage of the opportunity available from the external environment to gain more knowledge to take a new step for comprehensive cargo business. the construction of Cargo Village is feasible to be done by the three scenarios of development staging. This research found that Development scenario of finishing the construction on the main cargo terminal building, which has the biggest investment cost prior to the construction of warehouse and additional services such as perishable and transhipment, gives the best result with the largest value of NPV & IRR and less payback period.


INTRODUCTION
The global airport industry has a lot of promising opportunities with abundant new business models. Nowadays, the airport operators manage the major businesses derived from emerging passenger traffic, opening new airports, and domestic or regional route expansions.
Nevertheless, other airport business opportunities can be seized, such as events, cargo handling, and aircraft handling to enter the global market.
For reaching a global business scale, AP2 encourages itself to be more agile in operating cargo terminal by creating global partnerships with worldwide air cargo operators. The transformation of the cargo business is a form of company business and portfolio transformation by building the Cargo Village of Soekarno-Hatta International Airport. On the other side, the investment needed for the Cargo Village area development is quite large.
Therefore, AP2 will build the cargo area gradually, according to several options of construction methods, there needs to be a feasibility study and an investment scenario analysis of the Cargo Village in regards to AP2 financial situation and the most profitable way for the business. Previous studies have used capital budgeting with discounted cash flow to determine NPV, IRR and payback period as a standard method for investment financial feasibility studies in various objects of study. However, the discussion of cargo investment is rare to find. Some of those studies also employed comparative scenario analysis to research the most beneficial investments. The comparative analysis includes price modification, capital investment, and resource funding (Berawi et al., 2015;Chu et al., 2017;Miao & Chan, 2019;Nikoloudis et al., 2017;Oktari et al., 2019;Sdino et al., 2016;Desyanta and Darma, 2020;Shavitri andDarma, 2020, Sudiwedani andPremawati and Darma, 2017;Juzer and Darma, 2019;Wahyuni and Darma, 2019;Rusmahadewi and Darma, 2018;Widiatmika and Darma, 2018;Kanten and Darma, 2017;Wardana and Darma, 2020;Indradinata and Darma, 2019;Mahendrawati and Darma, 2021

Business Issues Analysis
The business issues will be analyzed based on two aspects: internal factors and external factors. Analysis of the external factors is done to understand the strength of business forces, and the analysis of the internal factors is done to describe internal factors such as organizational and technical capabilities to analyse how ready AP2 is to face the new cargo business.

a. External Environment Analysis
-Political, economical, sociocultural, ecological, and legal Issues Based on the analysis political, economical and legal issues give significant impacts on the concept of development and the development purposes decision.
Sociocultural give significant impact to the model of Cargo business to satisfy the market demands. While the ecological issues will not give significant issues as long as the Environmental impact analysis was done before the project.

-The Threat of New Entrants
The entry barriers for shippers, consignees, and forwarders are very low because everyone can start this type of business as long as they meet the requirements mentioned on the minister decree above. The only challenge for the new entrants is that the perfect place of forwarder warehouse, for instance, concerning the ease of access to the terminal, placed in the hinterland of the cargo area, mostly possessed by the incumbent company.
-Product substitutes where logistic transportation is still dominated by land and sea routes, the possibilities of substitute services are still strong.
-Bargaining Suppliers to promote the business of Cargo Village, moving forward, AP2 will only choose to partner with global companies. Referring to this condition, the supplier bargaining will be high because the option for AP2 is less than before.

-Power of Consumers
The service provided in cargo is in minimum differentiation, according to the supply chain process focused on delivering and receiving goods. Therefore, the customer may have the power to be the price maker; the provider will switch costs less within the cargo area to maintain the price range and competitiveness. -Competitors Looking at the competition in the air cargo industry, there are two kinds faced by the air cargo provider: competitions within the cargo business and competitions with other airports in the global market. Businesses will compete with each other to meet the requirements of airport demand and capacity by managing the price level and quality of services, both internationally and domestically. While on the other side, airports must compete with other airports to dominate the market and place their stamps on the market area.

b. Internal Environment Analysis -Organizational
The latest organizational structure consists of three levels of strategy and the employee demographic of AP2 Company as the strong factor to grow the business -Technology Mastered AP2 adopts and implements new technologies within the automatic control of passenger and aircraft flow to provide the best experience for customers and reduce operational costs, with collaboration between stakeholders in managing complex operations through real-time data exchange.

c. TOWS Analysis
From the TOWS analysis above, we can derive that although AP2 has already had sufficient resources to handle cargo business, it has yet to manage it properly to overcome the challenges ahead for larger cargo business and compete for the market share to neighbouring airports. The innovation of technology is also required to get business differentiation. Meanwhile, the personnel also need to be trained and educated to understand that the business model has changed; for this purpose, the transfer of knowledge from external experts is recommended.
To enter the global market, AP2 has to decide the market to serve due to the strong competition in the Asia market and sturdy cargo business by neighbouring airports. The domestic movement benefits AP2. Therefore, instead of reaching the international market with significant challenges right away, it is wiser to focus on the

Financial Feasibility
Financial analysis was conducted by integrating underlying assumptions and scenarios happening in the Cargo Village construction proposal.

a. Staging Development
The construction method and staging development can be formulated into several development scenarios adjusted to the primary needs: supporting facilities and safety and security needs. it can be concluded that it is possible to create staging development scenarios to find the most beneficial option for AP2 and adjust it to the company's financial condition. The distribution of development scenarios are as follows:

Sensitivity Analysis
The sensitivity analysis may show how sensitive the business decision is if the value of some variables affecting the business is changed.

a. Percentage of revenue sharing of handling and warehousing
The graph shows that the reduction of revenue sharing will reduce the value of NPV; for every 5% reduction of revenue sharing, the value of NPV is reduced by Rp.
2,013.42 billion. The NPV value is still slightly positive if the revenue sharing is applied at 15%, but when the percentage of revenue sharing is less than 10%, the NPV shows negative results.

Graph 1. Revenue Sharing vs NPV Graph b. Average movement growth
It can be seen that although the movement growth is decreasing, as long as the volume still increases, the NPV value will still be positive. The NPV will drop to zero when the cargo volume decreases by 14%.

CONCLUSION
After deliberating the external and internal environment to analyze the business issue of Cargo Village, it can be concluded that the external factors have a significant role in forming the concept of Cargo Business in AP2. Meanwhile, AP2 continuously improves its capabilities and core competencies as the internal strength to balance the threat from outside the company.
From the financial capital budgeting analysis of NPV, IRR, and payback period for 13 years of operation and three times staging development, the NPV of each scenario shows a positive result, the IRR is larger than 0, and the value of IRR > discount rate. The payback period for scenarios B and C are a year longer than scenario A; this means that the construction of Cargo Village is feasible to be done by the three scenarios of development staging.
It is found that scenario A gives the best result with the largest value of NPV & IRR and less payback period. Hence, although all three scenarios are feasible to be established, the first scenario staging development gives more benefits for AP2. While from the sensitivity analysis done to scenario A, it can be summarized that the business will be at risk if one of these conditions were to happen in the future: decreasing revenue sharing percentage, increasing the interest rate, increasing cost growth, decreasing movement growth, and increasing cost of capital. AP2 has to manage this by monitoring the external and internal conditions that may affect those variables.