Four local airlines to enter alliance amid competition

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)