Indonesia's largest privately-owned carrier Lion Air is moving into airport management and expanding its airline business by adding ATR turboprops, Boeing 747-400s and more 737-900ERs.
The carrier has established an airport management company, in which it has an 80% stake. The Indonesian air forceholds the remaining 20%.
Lion Air president director Rusdi Kirana says the airport venture has defence and finance ministry approval to manage and use Jakarta Halim Perdanakusuma International Airport, which is currently used by the Indonesian air force. It is located closer to the city-centre and was Jakarta's main airport until the opening of Soekarno-Hatta International Airport in 1985.
Rusdi says the partners are waiting on approval from the transport ministry and that the venture is now possible because in January the government passed a law allowing private companies to manage Indonesian airports.
The plan is to shift all of Lion's passenger operations from Soekarno-Hatta airport to Halim airport, he confirms.
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© Kevin Phillips |
He also says Lion has signed an agreement with the Indonesian navy to develop and manage a section of Surabaya's Juanda Airport, which is Indonesia's second largest.The navy controls this section of the airport and Lion plans to develop a passenger terminal and aircraft maintenance hangar there, says Rusdi.
Lion a few weeks ago signed a three-year contract to have Indonesian maintenance, repair and overhaul firm GMF AeroAsia do all the heavy maintenance checks on its aircraft.Lion is GMF AeroAsia's largest client after Garuda Indonesia, but Lion has always madeclear it plans to eventually bring MRO in-house. It is well-placed to do so because it is already the world's largest operator of the 737-900ER, with 23.
While Lion appears set to become the largest privately-owned operator of airports in Indonesia and has ambitions to be an MRO player, it is expanding its airline business too.
Long-haul Venture
It is branching into long-haul operations, using two recently secured Boeing 747-400s,by launching services from Jakarta to Jeddah in Saudi Arabia.
Rusdi points to a large under-served market, saying there were too few non-stop flights to Saudi Arabia, prompting travellers to fly to Europe and points in the Middle East before venturing to Saudi Arabia. The carrier estimates that in some years there are as many of 700,000 Indonesians travelling to Saudi Arabia, especially for Muslim festivals such as the Haj.
Lion also has well over 100 737-900ERs on order of which it will be receiving six this year, taking the number of this aircraft type in its fleet to 29.
In May the US Export-Import Bank granted financing support for 30 of the 737-900ERs it has on order. Lion is also "waiting on news from the export agencies" of Italy and France to support its plans to get ATR turboprops.
Last November Lion signed a memorandum of understanding for 10 ATR 72-500s with options for 10 more.Rusdi says it is working to get financing for the purchase and plans to start taking delivery of the aircraft in July.
These aircraft will be assigned to Lion's wholly-owned subsidiary Wings Air and be used to provide passenger feed.Rusdi says at year-end it will have five ATR 72-500 turboprops and next year it will receive five more.
Rusdisays the better fuel efficiency of the 737-900ER gives Lion an important competitive advantage over its smaller competitors. Indonesia has over 25 commercial airlines, but the smaller ones still largely rely on older aircraft such as Boeing MD-82s and 737-200s.
The government earlier this year introduced a law requiring that all scheduled airlines must have a minimum of ten aircraft by January 2012 and that carriers must own some aircraft, rather than relying entirely on leases.Rusdi believes this new law, coupled with the intense competition in the Indonesian market, will lead smaller players to either merge or close down.
Local Competition
Elsewhere in the country, Indonesia AirAsia is increasing its focus on international routes to boost profitability. The carrier is adding three more A320s this yearand increasing services from Bali, Bandung and Jakarta to Singapore in support of this aim.
"It was more domestic before, but now it is 50:50 and we will move to 70:30 [in favour of international routes]," explains Indonesia AirAsia marketing and distribution director Widijastoro Nugroho. He says the carrier will continue to operate on some major domestic routes, but generally prefers to leave the domestic market to players such as Lion and Mandala Airlines which have been competing aggressively on price.
Widijastoro adds that Indonesia AirAsia is also looking at using Indonesia's fifth freedom rights through Singapore to serve other Asian cities.
National carrier Garuda Indonesia, meanwhile, is adding Airbus A330-200s to launch international flights from Jakarta to Tokyo Narita, Sydney, Shanghai and Seoul Incheon.
Garuda's services from Australia, Japan and Korea have thus far tended to operate out of Bali, but Garuda chief executive Emirsyah Satar says there is demand for services from these countries to Jakarta.
Source: Airline Business
