Cut-throat competition in aviation business<\/p>\n
B. Gunawan, Contributor, Jakarta<\/p>\n
Many people were surprised when Star Air ceased operations on
\nJune 1, 2005. Actually, there is nothing strange about this news
\ngiven the fact that following the deregulation in the aviation
\nbusiness in Indonesia, the competition among airlines has become
\never stiffer.<\/p>\n
The deregulation in the aviation sector since 1999 has brought
\nconcrete results. An interesting fact is that the volume of air
\npassengers in Indonesia has continued to rise. While in 2002
\nthere were 12.5 million passengers, in 2003 the number rose to 16
\nmillion. In 2004, the number of passengers jumped to 20 million
\nand this year it is estimated to reach 25 million.<\/p>\n
In the Asia and Pacific regions, according to the data
\ncompiled by the Association of Asia Pacific Airlines (AAPA), the
\nfirst half of 2005 saw the number of air passengers stand at 61.9
\nmillion people, up by 7.2 percent over the figure recorded the
\nyear before. Meanwhile, the earnings of all 17 AAPA members
\ntotaled US$ 691.8 billion, up by 30 percent over the figure
\nrecorded the year before.<\/p>\n
It is this lucrative market that has made foreign airlines
\nturn their attention to Indonesia. Several airlines in Asia-
\nPacific countries are now indeed augmenting their fleets. Boeing,
\nfor example, is now competing with other aircraft manufacturers
\nthat have also gained access to Asia-Pacific countries, such as
\nAirbus. Airbus has even sold its aircraft to Singapore Airlines
\nand Tiger Airways, while Boeing has sold 60 of their latest
\ngeneration aircraft to Lion Air<\/p>\n
After Malaysia's AirAsia gained access to Indonesia and
\nsecured its own market share in this country, the next to enter
\nIndonesia must be Singapore's Tiger Airways and Australia' Virgin
\nBlue. Offering low-cost air tickets because they can cut their
\noverhead costs, these airlines pose a threat to national
\nairlines. Only airlines with deep pockets and a similarly low-
\ncost strategy can compete with them. Other airlines must find it
\nvery hard to sustain their business.<\/p>\n
In advanced countries, governments never devise special
\nstrategies in connection with their open-sky policies. In
\nIndonesia, particularly, however, several analysts have suggested
\nthat the government should give special treatment to national
\nairlines in order to save them.<\/p>\n
\"This is the result of the fact that it is very easy to obtain
\na license for an airline business. To be honest, most of the
\nnational airlines are undercapitalized. They have maybe only two
\naircraft to operate and even these two aircraft are obtained
\nthrough leasing, meaning that they do not own them,\" said
\naviation observer Kamis Martono some time ago.<\/p>\n
According to the data compiled by the Communications Ministry,
\nthere are now 28 national airlines in operation with 414
\naircraft. Unless the government immediately puts things in order
\nin this sector by issuing fair regulations, then the future of
\nnational aviation will be bleak.<\/p>\n
A seminar held some time ago even predicted that unless the
\ngovernment gave support by devising a national strategy in this
\nsector, a third of national airlines would go bankrupt in the
\nnext five years. Aside from being unable to bear the increasing
\noperational burden owing to the rising prices of fuel, national
\nairlines will never be able to compete with foreign airlines that
\nenter the Indonesian market.<\/p>\n
Star Air is a case in point. Last October, the Communications
\nMinistry revoked the aviation business licenses of four airlines,
\nPT Trans Nusantara Airways, PT Rabin Global Air Servindo, PT
\nLatief Alair International and PT Camar. Unlike the case
\ninvolving Star Air, these four airlines were yet to operate their
\naircraft.<\/p>\n
In fact, the government has a list of more than ten other
\nairlines that it intends to close down. This measure is being
\ntaken because these airlines have yet to operate their aircraft
\neven though they have been in possession of their licenses for
\nover a year, a condition in violation of the stipulation
\ncontained in Government Regulation No. 40\/1995 on Air
\nTransportation and the Decree of the Communications Minister No.
\n11\/2001 on the Organization of Air Transportation.<\/p>\n
There are several reasons why airlines that have been issued a
\nlicense do not immediately operate their aircraft. First, they
\nonly want to benefit from the fact that it is easy to obtain such
\na license from the government but in fact they are not
\nmanagerially or financially ready to run such a business.<\/p>\n
Second, sometimes they are allocated a \"pioneering\" route,
\nfor example, to fly in the eastern part of Indonesia, regions
\nthat are usually lacking in good airport facilities and
\neconomically disadvantageous.<\/p>\n
Whatever the reason, the closure of several airlines in
\nIndonesia reflects a \"natural selection\" process following the
\nspringing up of dozens of airlines in this country within just a
\nshort span of time.<\/p>\n
This process of natural selection will go on until an
\nequilibrium is attained. While the process is still going on, new
\nairlines will emerge while some old ones will be closed down.
\nTake the United States, for example. For every new airline that
\nemerges, there is an old airline that goes bankrupt.<\/p>",
"url": "https:\/\/jawawa.id\/newsitem\/cut-throat-competition-in-aviation-business-1447893297",
"image": ""
},
"sponsor": "Okusi Associates",
"sponsor_url": "https:\/\/okusiassociates.com"
}