Provincial administrations attracted to prestigious airline industry<\/p>\n
A'an Suryana, The Jakarta Post, Jakarta<\/p>\n
Emboldened by the autonomy law, which has given provinces
\nlarger incomes and greater power to manage their own economic
\naffairs, several rich administrations are trying their luck in a
\nprestigious and risky business: airlines.<\/p>\n
At least two airlines owned or partly owned by regional
\nadministrations have been issued licenses to operate by the
\nMinistry of Transportation, while another is awaiting a license.<\/p>\n
The two airlines recently awarded with licenses are PT Riau
\nAirlines, owned by the Riau provincial administration and the
\nregency administrations of the province; and PT Seulawah Nangroe
\nAceh Darussalam, which is partly owned by the Aceh provincial
\nadministration.<\/p>\n
Another airline, Papua Indonesia Air System, which is partly
\nowned by the Papua provincial administration, has applied for an
\nairline operator's certificate from the ministry.<\/p>\n
\"We are processing the certificate,\" Edi Wibowo, director of
\nair transportation at the Ministry of Transportation, announced
\non Friday.<\/p>\n
The North Sumatra provincial administration and the regencies
\nin the province have also established their own airline, PT Sumut
\nAirlines. The airline started operations last week despite the
\nfact that it has yet to obtain an airline operator's certificate
\nfrom the Ministry of Transportation.<\/p>\n
Analysts say the airline industry has attracted not only the
\nprivate sector but also provincial administrations because of low
\nairplane leasing prices.<\/p>\n
Leasing prices for aircraft have dropped following the setback
\nexperienced by airlines in Europe and the United States after the
\nSept. 11 terrorist attacks in the U.S. last year.<\/p>\n
Airline industry observer Dudi Sudibyo said that after the
\nterrorist attack, airline capacity rates on both continents fell
\nby 50 percent and 60 percent.<\/p>\n
\"The lack of passengers has forced airlines to ground their
\nfleets,\" Dudi told The Jakarta Post.<\/p>\n
\"In a bid to offset maintenance costs, the airlines were
\nforced to lease their planes to airline companies in developing
\ncountries, at much lower prices,\" said Dudi.<\/p>\n
Indonesia is one of the developing countries being offered
\naircraft for lease.<\/p>\n
Prior to the terrorist attacks, leasing prices for aircraft
\nvaried from US$150,000 to $250,000 per month, depending on the
\ntype of the aircraft.<\/p>\n
\"Now, the price has dropped by approximately 30 percent,\" said
\nMelly R. Untung, corporate secretary of Papua Indonesia Air
\nSystem.<\/p>\n
Besides lower leasing prices, pride is seen by some analysts
\nas another reason for the regional governments to engage in the
\nbusiness.<\/p>\n
\"They are proud of having an airline,\" said a middle-ranking
\nofficial at the ministry who asked for anonymity.<\/p>\n
The official said the regional governments should be prudent
\nand careful in running the business, pointing out that the
\ncountry's airline industry had become very competitive and that
\nprice wars could erupt.<\/p>\n
\"Airline passenger numbers have not yet reached the precrisis
\nlevel,\" he said<\/p>\n
Ministry data shows that domestic airline passengers reached
\nnine million last year, as against 13 million in 1996, the year
\nprior to the start of the economic crisis.<\/p>\n
However, Melly said lower leasing prices and regional pride
\nwere not the major factors for regional administrations to enter
\nthe airline business.<\/p>\n
Before deciding to establish an airline, the Papua
\nadministration thoroughly studied the potential benefits and
\nlosses and realized that there was a huge potential market in the
\nprovince.<\/p>\n
\"We established a business plan before the Sept. 11 attacks,\"
\nMelly told the Post.<\/p>\n
\"People need to use airplanes to travel here, due to the poor
\ncondition of roads and the mountainous terrain of Papua,\" she
\nsaid.<\/p>",
"url": "https:\/\/jawawa.id\/newsitem\/provincial-administrations-attracted-to-prestigious-airline-industry-1447893297",
"image": ""
},
"sponsor": "Okusi Associates",
"sponsor_url": "https:\/\/okusiassociates.com"
}