Bali's Air Paradise to start flying to Seoul in July

Marian Carroll, Contributor, Denpasar, Bali

At a time when most international carriers are cutting flights, Asia's newest airline is expanding into new markets, but its owner has warned that growth will be limited without government financial support.

Bali-based Air Paradise, which launched services to Australia in February, is struggling to break even and is seeking tens of millions of dollars in loan from state-owned banks to fund future expansion.

The airline's expansion is critical to the recovery of Bali's tourism-driven economy, argues owner Kadek Wiranatha.

"In another six months, if the situation in Bali has not improved, a second bomb will explode: Uemployment," he said in an interview.

"The Balinese cannot wait; we need transport to bring the tourists here and for that we need help from the Indonesian government."

The airline currently flies twice a week direct to Melbourne and four times a week to Perth.

It is filling 70 percent of seats on average, but Kadek expects this figure to rise to 85 percent during the seasonally busier months of July and August.

To tap into the expected rise in tourists, Air Paradise has leased a second aircraft and plans to start direct flights to Seoul, South Korea, on July 16. It plans to lease a third aircraft to start services to New Zealand and Japan in October.

However, beyond that, the airline's growth depends on the government, Kadek said.

"It is impossible to expand to more destinations, apart from those already in the pipeline, without help from a bank or financial institution."

Air Paradise's entry into the global travel market was always a risky bet, given the sharp drop in tourist numbers to Bali following last October's bombing, but its potential success has been further jeopardized by the global downturn in travel resulting from fears over the spread of Severe Acute Respiratory Syndrome (SARS).

"The bombing, the Iraq war and SARS were a big wake-up call for the Balinese," said Kadek.

"Like it or not, we are 100 percent dependent on tourism for our livelihood and we have to secure Bali as a tourist destination. "That is why I set up Air Paradise. If we, as Balinese, will not do it, who will do it for us?"

He said the Balinese could not depend on other carriers because they only flew when demand was strong enough to safeguard their profit margins.

"But not Air Paradise. We are suffering, but we must still expand because we need to make sure there is enough capacity as tourists start to return to Bali."

He estimates the airline will contribute around US$9 million to Bali's coffers every month, if it brings in 200 passengers a day to help fill the 50,000 hotel rooms across the island.

Kadek has already approached state-owned banks about the possibility of a loan, but so far none has agreed to provide any funding.

"I think they need to realize that we are not in competition with any domestic airlines: We only fly overseas," he said.

If a bank loan is not forthcoming, Kadek is uncertain of how he will raise the cash.

But he is adamant about one thing: He has no plans to sell his 100 percent ownership of Air Paradise to raise the cash. He will only consider a partial or full sale once the airline is well established.

"Perhaps, when we have five aircraft flying and we are covering all of Bali's major tourist routes, then I may sell," he said.