AdamAir bridges gap between full-service airlines and LCC
AdamAir, a boutique airline, is slowly emerging as one of the rising stars in the industry in the country. Having flown with only two planes in December 2003, it is now flying with 19 aircraft. This year, it expects to fly more than 4 million passengers. The Jakarta Post's Anissa S. Febrina spoke with AdamAir president director Adam Suherman last week to discuss the company's business plans, including its ambitious plan to go public in Singapore. The following is an excerpt of the interview:
Question: Can you explain how AdamAir has grown since first operating?
Answer: We have been in the business for two years now. We have exceeded everything we intended to do in our business plan. In 2003, we started with two planes, in 2004 it grew to five, and surprisingly because of the significant increase in the number of passengers, it has jumped to 19 this year. All (the planes) are being leased, because in our view, for the time being, it is the best thing to do in order to maintain the mileage of our planes.
We heard about your company's planned-initial public offering, does it have anything to do with your expansion plans? And how ready is the company, and more importantly, why Singapore? We aim to become more than just an airline company; we want to make it a professional one. We'd like to open the door to share with anyone interested in having a stake in it. Since we want to grow big, we will need to draw in more financial support.
Yes, we plan to do it some time in 2007 or 2008. Business- wise, we are ready. However, first there are requirements to be met, like the minimum operating period of three years. We would also like to set up the infrastructure first.
There is always the possibility of doing it here (in Jakarta). But, from my point of view, the Singaporean market is more promising in the transportation sector. In the local market, there has never been any (airlines going public).
One thing is for sure though, we will maintain the majority stake. (AdamAir is currently a family business with Adam Suherman's family and that of Agung Laksono -- current House speaker -- controlling the company)
Will Singapore then be a kind of a regional hub for AdamAir? There is always that possibility. We are planning to expand our regional routes, to Kuala Lumpur for example. Currently we only fly to Penang and Singapore, and we might develop the routes from Singapore to other cities in the region. Still, I think our core business will remain in the domestic market.
We also plan to fly to China and India in the next five years.
So, how will you expand domestically next year? We are holding talks with both Boeing and Airbus as we plan to purchase new planes through a financing system scheme. We will likely make the decision for that early next year. I do think that Airbus is a very good product and it could provide maximum convenience for our passengers. For a start, we will take 20 planes. In the next five years, we plan to operate with 50 to 60 planes.
We will still focus on the domestic market because the growth is amazing. Every year it grows by about 40 percent. We will increase flight frequency of high-traffic routes in response to increasing passengers.
Some of our new planes will be used for planned regional routes from Jakarta to KL and Denpasar to Perth next year. The rest will serve the domestic market, especially eastern parts of Indonesia. We tried opening a route to Manado. Other possible cities are Timika, Biak, Palu, Gorontalo. We are flying five times a week now to Makassar with a high load factor. Probably, we will develop routes from Makassar to other eastern Indonesian cities. It will be our eastern hub.
We flew only tens of thousands of passengers in 2003, as we started only in December. In 2006, we aim to fly seven million to eight million passengers. This year, we recorded around four million passengers, almost triple the 1.5 million in 2004. Our average load factor is 85 percent.
You call yourself a boutique airline, what does that mean? What makes you different from other airlines? We are not merely depending on low prices. Our pricing is competitive but we have a commitment to giving the best service. We are not merely aiming to give the lowest prices. Our prices are in between, 25 percent higher than LCC (low-cost carrier) but still up to 30 percent lower than a full service airlines.
Flying with AdamAir has its own value and benefit through our staff's attitude and our corporate culture. Each of our employees has a strong sense of belonging to the airline; even the pilots are willing to help carry luggage when needed.
Being a boutique airline, we bridge the gap from full-service airlines to LCC. We feel that customers need some adaptation. We are in the middle, trying to keep costs down but still giving services to our customers and not dictating to them.
What is your market segment then and what are the challenges of dealing with such a segment? Most of our passengers are first-time travelers, those from the middle market. The population is huge and by targeting that segment we will be more stable. It is less price-sensitive than the lower class, thus we will not have problems if conditions force us to increase prices. Fortunately, there are no other players in that segment.
What are your suggestions to the government in order to boost the potential of this industry? They should build more airports, of course. And expand current ones; Cengkareng for example is already too crowded. It must be done gradually, and equipped with proper infrastructure, such as night flight equipment. And secondly, they need to work on the transportation network from the airports to the cities. Most of our passengers are having problems going to the cities when they arrive at night, there are no buses, no taxis.