Expansion continues despite stormy weather
Rudijanto, Contributor, Jakarta
The new general manager of Gulf Air in Indonesia, Hameed I Hussain, would certainly not expect that his adjustment process in Indonesia would be marked by the second Bali bombings in early October that threatened to ruin the tourism and airline industry in Indonesia's most popular destination.
Admitting to having received his new assignment in Indonesia with great excitement, Hameed tried to maintain his optimism in the country in spite of the unfortunate event that served as a reminder of the greater challenge for him in leading Gulf Air's operation in Indonesia.
"Gulf Air remains committed to Indonesia. We have just opened an office in Surabaya and plan to open another one in Medan. We also help transporting people from Bali to Singapore," says Indian-born Hameed, who barely four months ago took control of Gulf Air operations in Indonesia.
For Hameed, Indonesia is a country with a huge potential. Even after the bombing in Bali, he believes that tourism will recover as people will quickly forget the incident and come again to the island.
In spite of Hameed's optimistic view about the potential of Indonesia as a whole, the recent Bali bombings underline the risk and uncertainty about the security situation in the worlds biggest archipelago.
Aside from terrorist threats that continue to persist even after the killing of one of two top fugitives in Indonesia, Dr. Azahari bin Husin, Indonesia is also part of an area hot by avian influenza. That is why not all international airlines are upbeat about the country's prospects.
Japanese Airlines (JAL) has already reduced its flight frequency and changed routings on the airline's Japan-Indonesia flights since Oct. 30. The reason for this flight frequency reduction is the significant decrease in passenger demand from Japan resulting from the Bali terrorist bombings.
Bali-based airline Air Paradise announced the closure of its operation last Wednesday. Air Paradise's chairman I Made Wiranata admitted that his airline had been severely hurt by the recent suicide bombings in Bali.
"I apologize to the people of Bali and players in tourism industry here. Due to our condition, we have to stop the operation of Air Paradise," said Wiranata in his Denpasar office.
Air Paradise's flights to Australia last Wednesday constituted the last flight operated by the airline. Starting its operation only in February 16, 2003, Air Paradise flew to Korea, Japan and Australia from Bali. The airlines load factor declined by 80% after the day of the bombings.
Australian Airlines chief executive Andrea Staines also announced the suspension of the airline's flights to Bali from Perth and Melbourne until January 29 due to the decrease in demand for Bali. However, he expressed confidence that Australians would soon return to Bali in increased numbers.
However, not all international airlines are ready to reduce flights or depart from Indonesia. Aside from Gulf Air, another optimistic airline that operates in Indonesia is Emirates.
"Indonesia is a very interesting market for Emirates. Of the country' over 250 million people, only 10 percent to 15 percent of them have ever traveled by air. If the number doubles, the size of the market is already big," says John Rotikan, Emirates area manager in Indonesia.
John's optimism is based on a solid growth in Emirates's flight frequency. Operating with only three flights per week in 1992, Emirates steadily increased to ten times per week this year with a load factor between 70 percent and 75 percent. The airline is planning to increase its flight frequency to 14 times by the second half of next year.
Another airline that is planning to increase its flight frequency in Indonesia is Hong Kong-based Cathay Pacific (Cathay). Currently, Cathay flies to three Indonesian destinations, namely Jakarta, Surabaya and Denpasar. The airline plans to increase flights to Bali.
Though Indonesia is not a huge market for Cathay, the airline's CEO Philip NL Chen said the country has made a significant contribution to Cathay's total revenue. That is why the airline will continue to develop its market in Indonesia, particularly its cargo market.
Qantas also stressed the importance of Indonesia as a market. The airline flies to Jakarta and Bali, two important markets for the Qantas Group. In addition, Qantas this year celebrated 55 years of flying to Indonesia.
Opportunities always stand side by side with high risk, not only in Indonesia, but throughout the world. Since the attacks on New York's twin towers, the airline industry has received repeated blows.
John confirmed that the situation has not been easy for international airlines operating not only in Indonesia but also in other parts of the world. Under the current situation, he believes that only airlines that have a strong determination to exist will survive.
"The key is to lower operational costs without sacrificing security and convenience. We are successful in controlling costs and managing our fares at a competitive level. For instance, for strong routes, such as Dubai-Bombay and Dubai-London, we do not offer special rates," says John.
Terrorist attacks followed by the U.S.-led wars in Afghanistan and Iraq have made people feel safer staying at home rather than traveling to distant places. Terrorist bombs in Indonesia, Pakistan, Egypt and even London have confirmed the view that the world has become a dangerous place to travel.
In addition, the recent sharp rise in fuel prices, including the price of aviation fuel, has undermined the profitability of airlines. However, business has to go on for airlines. And long- sighted major airlines understand this.
Major airlines, including Singapore Airlines, Qantas, Emirates and Cathay, are continuing with their well-planned investment programs to boost their operations.
The widely publicized arrival of the new Airbus 380 (A380) with popular Hollywood actor John Travolta on board to mark Qantas' 85th anniversary in Brisbane, Australia, highlighted Qantas' order of A380s.
The A380 is the world's biggest aircraft and is capable of carrying 555 passengers in a typical seating configuration, including economy, business and first class. The aircraft is designed for long-haul travel and can fly up to 15,000 kilometers non-stop.
Qantas has 12 A380s on order, as well as options for a further 12. The first aircraft will be delivered in April 2007, with all 12 scheduled for delivery by June 2009. The A380 will be utilized on Qantas's trans-Pacific and kangaroo routes to Los Angeles and London.
The first 12 aircraft will enable the airline to fly at least 17 weekly services between Australia and Los Angeles and 14 weekly services between Australia and London via Singapore and Hong Kong.
Just like Singapore Airlines and Qantas, Emirates has also ordered the A380 with its total commitment to the "super jumbo" reaching 45 aircraft. The airline's US$19 billion order for A380s represented one of the largest in civil aviation history.
Still, the airline signed another US$9.7 billion contract with Boeing for the purchase of 42 B777s on the opening day of Dubai 2005 -- the 9th International Aerospace Exhibition. Emirates' decision to close the deal during these turbulent times is considered a brave move in the airline industry.
The first aircraft is scheduled for delivery in 2007. In addition, Emirates will also have purchase rights for 20 more B777s. This new deal boosts Emirates current aircraft order book to 132, with a total value of US$37.4 billion, and adds to the airline's 23 B777-300ERs; 45 A380s, 20 A340-600s, and two A310Fs pending delivery.
Though not as spectacular as Emirates, Cathay also revealed its plan to increase its fleet to 100 aircraft by the end of 2006. Currently, the airline operates 96 aircraft, consisting of A330, A340, B747 and B777.
The current situation both in Indonesia and around the world poses a great challenge to airlines. A well-planned strategy and long-range investment policy are the keys to airline survival and growth during this turbulent time in the airline industry.