Doomsday gloom as heavy as last summer's smoke hangs over southeast Asia's second tier airlines. Rising currency costs and plunging traffic are hammering carriers in Indonesia, Papua New Guinea, and the Philippines.
'We will not be able to make it until April,' warns Benny Rungkat, secretary general of the Indonesian Association of Airlines. Hadi Soemarto, president of the Indonesian National Air Carriers Association, predicts that government-owned Garuda and Merpati Nusantara may survive, but says that Sempati, Bouraq, Mandala, and DAS are in 'serious danger' of shutting down.
A 70 per cent devaluation of Indonesia's rupiah has wreaked havoc at those airlines most dependent on domestic traffic. Even though Jakarta allowed them to raise fares in January by as much as 35 per cent, the airlines seem no better off. Bouraq has withdrawn eight of its 10 Boeing 737s from service. Sempati has suspended seven more routes on top of the 14 it dropped last year. Merpati was cutting capacity 40 per cent in March while all of Indonesia's airlines have suspended large numbers of staff.
The malaise extends to neighbouring Papua New Guinea. Devaluation of the kina and a nationwide drought have added to government-owned flag carrier Air Niugini's woes. PNG Prime Minister Bill Skate has invited Qantas to buy a 25 per cent stake and take over management of the badly-undercapitalised airline. Failing Qantas' investment, the government threatens to suspend Air Niugini's board, replace it with a management committee, and put the airline into receivership.
The Philippines' three startups also have their share of troubles. Lessors have seized three Grand Air jets for payment defaults in the past seven months. Taiwanese ERA Air Service claims Grand Air owes it more than $1 million on a 737. Last summer Dutch-based lessor ING seized two Grand Air A300s in Hong Kong for lease defaults.
The setbacks have caused Grand Air to change course. Instead of forsaking domestic flights in favour of regional services, as planned last year, Grand Air has now suspended all flights to Hong Kong and Taiwan so it can concentrate on domestic routes. A Grand Air official predicts the airline will resume overseas flights in May, but with smaller jets.
Cebu Pacific Air, which won a quarter of the domestic market last year with a 'low fare great value' theme, has seen its image tarnished by a crash in February that claimed 104 lives. Philippines President Fidel Ramos grounded Cebu Pacific, criticising it for a flight plan change that may have caused the crash.
The only second tier carrier unfazed by domestic turmoil is Air Philippines. With a cautious growth policy, it broke even in 1997 after a $US9.5 million loss in 1996.
Source: Airline Business
