Airlines greet new operators with skepticism amid tough rivalry
Airlines greet new operators with skepticism amid tough rivalry
Debbie A. Lubis, The Jakarta Post, Jakarta
Airline operators greeted the planned operation of seven new
airlines with skepticism on Saturday, saying the domestic airline
market is already too crowded and the entry of the new airlines
would make the already cut-throat competition in the industry
even more severe.
Wahyu Hidayat, chairman of the Indonesian National Air
Carriers Association (INACA), said some people had painted too
rosy a picture on the country's domestic airline prospects and
thus parties were vying to enter the business, given the
country's large population.
In fact, the country's domestic airline market was already
saturated with 15 airlines in operation.
"If we see the present capacity with an average load factor of
60 percent, the existing airplanes are enough to serve the
existing customers," Wahyu, who is also a director of state-owned
Merpati Airlines, told The Jakarta Post.
INACA recorded only 8 million domestic air travelers last
year.
He admitted that Indonesia with a population of about 230
million and an archipelagic territory was considered a big and
very promising market.
"But, at the present time when the economy has yet to fully
recover from the more than four-year crisis and people's
purchasing power remains weak, most people are still reluctant to
fly," Wahyu said.
Wahyu was commenting on reports that seven new airlines have
received licenses from the government to operate scheduled
flights. The airlines are Alatief Alair International, Asia Avia
Megatama, Bali International Air Services, Nusantara
International Services, Rusmindo Internusa, Indonesia Airlines
Avi Patria and Satrio Mataram Airlines. All the airlines will be
based in Jakarta, except for Satrio Mataram, which has chosen
Yogyakarta as its base.
There are 15 airlines currently operating with a combined 138-
strong fleet, according to data from the Ministry of
Transportation.
The domestic airline industry has been just hit by the news
that PT Awair International is planning to temporarily suspend
operations from March 8 to the end of May. The airline expects to
resume operations on June 1.
The airline cited tight competition in the domestic market,
which it said had weighed down on ticket prices to the level
where airlines would find it difficult to maintain operations.
Further boosting the competition, the government recently
announced a new pricing policy allowing airlines to raise their
prices up to 20 percent and scrap minimum prices.
In response to the new policy, airlines said they preferred to
lower rather than raise their prices.
Separately, Soeratman, president of Pelita Air Service, warned
the new operators that the airline business was not easy.
"If the new airlines have a limited budget, it would be hard
for them to survive. But if they have an unlimited budget and can
take a long breath while others have run out of breath, they will
survive," he said.
Pelita has reduced its flights on several routes as part of
cost-cutting measures amid the slowdown in the market, Soeratman
said.
He said new airlines would usually launch their operations
during the peak season from April until the end of the year, when
most airlines anticipate good revenue.
But, the new airlines would start struggling to survive when
the low season came after the end of the year.