Four local airlines to enter alliance amid competition

JAKARTA (JP): Four airlines -- Mandala Airlines, Pelita Air Service, Bouraq Airlines, and Dirgantara Air Service -- will form an alliance next month to cope with mounting domestic competition, a senior airline executive said.

Head of Mandala's development division Kus Winarko said on Wednesday that the alliance was the only way the airlines could provide new destinations without adding more planes.

"We (the airlines) can increase our services and we won't be killing each other off in competition," he told The Jakarta Post.

Kus said that Mandala had initiated the alliance with an agreement with Pelita last month and that Bouraq and Dirgantara were expected to join the alliance by Sept. 12.

The alliance will take the form of the Star Alliance which groups international airlines, he added.

Competition for domestic passengers has increasingly become more competitive over the past few years with the addition of nine new scheduled airlines to the original five airlines -- Bouraq, Dirgantara Air Service, Garuda Indonesia, Mandala Airlines, and Merpati Nusantara Airlines.

The new airlines are Airmark Indonesia, Awair Internasional, Bayu Indonesia Air, Deraya, Indonesian Airlines Avi Patria, Lion Mentari Airlines, Pelita Air Service, Rusmindo Internusa Air and Star Air.

After the economic crisis in 1997, which had caused a dramatic fall in demand for air transportation, established and fledgling airlines targeted the same routes which promise higher load factors.

This is causing a price war among the airlines on the profitable routes, especially in linking Jakarta with Batam, Makassar, Medan, Pontianak and Surabaya.

Furthermore there is also the danger of an oversupply of airline seats which would make competition even more fierce.

Data from the Ministry of Transportation shows that the 106 aircraft operated by five scheduled airlines in 1999 recorded an average decline of about 15.51 percent from 208 aircraft in 1995.

In 1999, counting total frequencies and destinations, the domestic seat capacity totaled some 10 million.

When some of the new airlines start full operations, seat capacity will exceed 15 million, with Bouraq, Dirgantara, Garuda, Mandala and Merpati accounting for 13.6 million of the total and the new airlines the remainder.

In the meantime, the Indonesian National Air Carriers Association (INACA) earlier predicted that the overall domestic passenger traffic would experience a stagnant period with between seven million and 10 million seat capacity yearly until 2004.

Kus said that instead of damaging each other's business in competition, the four airlines would instead complement each other's routes so that passengers could have more destination choices.

"The alliance will give passengers more connecting flights to their destinations, without the hassles of reserving with different airlines" he said.

The airlines themselves could increase their load factors by waiting for passengers coming off other partner airlines, Kus added.(tnt)