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.