Air passengers likely to decline by 15%, says INACA

Air passengers likely to decline by 15%, says INACA

The Jakarta Post, Jakarta

Due to the prevailing high prices of aviation fuel, the
Indonesian National Air Carriers Association (INACA) expects this
year's number of domestic airline passengers to decline by up to
15 percent.

"We project that there will be a 10 percent to 15 percent
decrease in the number of domestic passengers this year from
around 25 million last year," INACA secretary general Tengku
Burhanuddin told The Jakarta Post over the weekend.

In 2003, the number of domestic passengers reached about 18
million.

Tengku said the prevailing high price of aviation fuel avigas
and avtur would eventually force more domestic airlines to
curtail their operations.

"As more airlines cut back flight frequencies and routes, they
will serve fewer passengers," he said.

Earlier, media reports said that the industry predicted the
price of avtur to increase from Rp 5,000 per liter at present, to
around Rp 6,000 per liter by next month.

According to state oil and gas company PT Pertamina, the price
of avtur currently stands at US$73 to $75 per barrel.

Pertamina spokesman Muhammad Harun said that the possible
price increase in avtur was projected by stakeholders.

The high price of avtur, which mirrors global oil prices, has
even forced two airlines to ground some of its fleet.

Budget carrier StarAir currently operates only four of its
seven airplanes serving seven cities -- Jakarta, Surabaya, Medan,
Balikpapan, Menado, Denpasar and Pekanbaru.

StarAir will even suspend its operations altogether starting
in early June due to heavy burden of operational costs, of which
53 percent is spent for fuel.

StarAir's chief J. Temenggung has said that the decision to
stop the airline's operations was based on its inability to
balance income with rising daily expenditure. The airline will
have to return its five rented airplanes, dismiss some of its 500
employees and probably sell its assets, he said.

StarAir's spokeswoman Nurwulan said in a statement on Friday
that 10 investors had shown interest in buying the airline.

Likewise, Pelita Air Service has had four of its six planes
grounded.

In stark contrast, however, to StarAir and Pelita Air, some
other domestic carriers are putting their faith in the industry's
prospects by strengthening their operations.

PT AdamSky Connection Airlines (AdamAir), for example will add
15 more aircraft to its existing eight by June this year.

Chief Executive Officer Gunawan Suherman said in a statement
that the airline aimed to own 25 aircraft by the end of this
year. The airline will serve nine new destinations --
Banjarmasin, Bengkulu, Balikpapan, Menado, Tanjung karang,
Pekanbaru, Mataram, Palu and Ambon.

Even more astonishing was a move by PT Lion Mentari Airline,
Indonesia's largest budget air carrier, to purchase 60 aircraft
from Boeing Co. to boost the number of its airplanes to 94. The
delivery of the aircraft will be completed in five years
beginning July 2007.

The move would allow the company to expand flights to Bangkok
and several cities in India and Australia -- in addition to
servicing current routes of Singapore, Vietnam's Hanoi and
Malaysia's Kuala Lumpur and Penang.

Lion provides flights to more than 50 cities across the
country. (001)