Airlines focus on efficiency to survive
Airlines focus on efficiency to survive
A'an Suryana, The Jakarta Post, Jakarta
The liberalization of the country's airline industry two years
ago has led to cut-throat competition among airline operators,
forcing them to slash fares to gain customers.
While the entry of new airlines provides travelers with more
options and cheaper fares, there is been concern this will
someday lead to compromised safety when financially strained
airlines lower standards to reduce costs.
Industry executives have dismissed such fears.
"The airlines have no choice but to operate in line with
international aviation procedures," said Wahyu Hidayat, chairman
of the Indonesian National Air Carriers Association (INACA).
He added that the government would revoke the license of an
airline operator if it neglected safety standards.
Wahyu said that in order to survive the tight competition,
airlines were focussing on boosting efficiency and reducing
ground-handling costs, which were not related to passenger
safety.
Ground-handling includes reservations, ticketing and luggage
care.
"The efficiency measures include trimming expenditure for
electricity, papers and phones," said Nur Wulan, spokeswoman for
new airline Star Airline.
The liberalization of the industry has increased the number of
airline operators from five to 15, with a total of 516 planes in
operation. Reports have said that 10 new airlines were planning
to enter the industry.
The passenger volume increased from 6.36 million passengers in
1999 to around 9.07 million last year.
But the problem is an oversupply of airplane seats
particularly on competitive routes between Jakarta and Surabaya,
Jakarta and Medan, and Jakarta and Pontianak.
For the Jakarta to Surabaya route, for example, the daily
average passenger volume is only 1,500 people but there are 3,000
seats available.
"No wonder, the imbalance in demand and supply has forced the
airlines to cut down the price of air tickets in order to
survive," said Yoyok Priyowiwoho of INACA's economic commission.
Flight fares from Jakarta to Surabaya now cost between Rp
350,000 (US$39.32) to Rp 550,000, compared to more than Rp
700,000 previously. By comparison, the fare for an executive-
class train from Jakarta to Surabaya is around Rp 280,000.
Industry observer Dudi Sudibyo is concerned that the price war
could one day force airlines to start reducing maintenance costs.
He said maintenance costs were one of the three major cost
items in the industry that could be reduced easily.
The two other items, fuel and plane leasing, could not be
reduced, he said.
The majority of airlines in Indonesia were operating leased
airplanes. "Fuel and leasing expenditure can not be reduced as
those are fixed costs. The only option left is to reduce the
maintenance expenditure," he said.
According to data from the Ministry of Transportation, there
were 14 flight accidents and six minor incidents between July
2001 and September 2002, which claimed four lives.
The government acknowledged that it had frequently issued
warnings to airline operators for neglecting maintenance
standards.
However, Iing Iskandar, head of the certification section at
the Ministry of Transportation, said no single airline had been
grounded yet because the airlines had committed only minor
violations.
He said his section had 150 aviation inspectors who audited
airline operations randomly.
Some experts have said the number of aviation inspectors was
relatively small compared to the increasing number of airline
operators.