Indonesian limit on budget carriers stays
Indonesian limit on budget carriers stays
Bloomberg, Jakarta
Indonesia's government may let Singapore Airlines Ltd. add
flights to Jakarta and to the resort island of Bali, while
keeping its limit on overseas low-fare carriers that want to
compete with PT Garuda Indonesia, a minister said.
"The issue of low-cost airlines is one of the agenda" to be
discussed on May 25 with Singapore's Transport Minister Yeo Chew
Tong, the Minister of Transportation Hatta Radjasa said on
Thursday. The ministers are scheduled to discuss a request to let
Singapore-based low-fare carriers Tiger Airways Pte. and Valuair
Ltd. add flights to Indonesia and Jetstar Asia to begin flying to
Jakarta.
The Indonesian government, which owns and appoints managers to
run Garuda, wants to protect the Jakarta-based airline from
mounting competition by Malaysian Airline Systems Bhd, Singapore
Airlines and Southeast Asia's 10 low-fare carriers. Closely held
Garuda, whose board members were replaced by the government in
March to boost earnings, posted a first-quarter operating loss of
Rp 139 billion (US$14.5 million), almost double the loss from
last year.
"Garuda now has burdens from the past bad stories that it
still needs to sort out. It needs restructuring," said
Enggartiasto Lukita, a member of the House of Representatives in
charge of transportation affairs. "In other countries like France
and Singapore, they do protect their flagship. And that's what
Indonesia should do, too."
On May 12, Garuda said it wanted to delay paying up to $523
million of debt owed to European lenders. A successful push to
delay the payment would help Garuda save as much as $110 million
this year in interest costs and principal payment. Garuda owes
$826.5 million in debt.
Transportation ministry said in March that new landing right
applications by overseas budget carriers for Jakarta, Medan,
Surabaya and Denpasar will be rejected to protect its airlines.
Applications for cities of Yogyakarta, Semarang and Bandung would
also be rejected, while those for other cities were welcome.
Singapore has written to Indonesian officials on the issue,
Yeo said last month. Singapore Airlines' partly owned Tiger
Airways flies to Padang, the provincial capital of West Sumatra.
Landing rights that have been given to Valuair, that flies to
Jakarta and Malaysia's AirAsia Bhd., Southeast Asia's largest
discount carrier, which has flights to Jakarta, Medan, Surabaya,
Denpasar and Bandung, won't be affected by the restrictions.
Indonesia's government is also likely to block a request from
Singapore for a so-called open sky policy, which offers unlimited
access to the nation's aviation market, Hatta said.
Singapore, where government-owned Singapore Airlines competes
with state-owned Garuda for flights to Indonesia, "should not get
a no-limit policy," he said.
"The only country that gets the no-limit policy from Indonesia
is the U.S.," because flights to the U.S. are long distance
services that don't compete with Garuda, he said.