Merpati, Mandala not interested in no-frills

Fitri Wulandari, The Jakarta Post, Jakarta

Merpati Nusantara Airlines and Mandala Airlines say they have no plans to enter the no-frills business due to the fact that in- flight services are still a priority for local passengers.

"The consumers here are still 'spoiled'. When they fly, they always ask for in-flight services, like meals," Yoyok Priyowiwoho Merpati's manager for marketing analysis told The Jakarta Post on Friday.

Ndan Kamandanu, commercial director of Mandala Airline concurred, saying that "Indonesian passengers like to be pampered".

He added that local passengers' behavior was different from Europeans and Americans where no-frills flights and airlines have thrived for a long time.

Europeans and Americans have developed a culture as travelers where an affordable ticket price is a higher priority than in- flight services.

"There hasn't been any market research to indicate whether local passengers would show a similar trend. It is very important to look at those countries and deeply understand consumer behavior," Ndan said.

No-frills airlines are thriving in Asia and Australia. A no- frills airline is an airline that offers low-cost tickets that can cost as little as half the normal price. Due to their low prices, they come without passenger in-flight services such as meals, beverages or entertainment. They mainly serves shuttle routes and point-to-point routes.

In order to offer cheap prices they use Internet sales to cut commissions for travel agents, skipping big meals, charging for snacks and operating only one type of aircraft.

Although still in their infancy, several airlines plan to hit the regional market after booking success at home.

Such examples are Malaysian Air Asia and Australian Virgin Blue. Experts say that no-frills airlines have the potential to eat up traditional airlines.

In Indonesia, no-frills flights made their mark here a year ago with Citilink, operated by Garuda. This year, another incumbent carrier, Bouraq, also entered the business through its subsidiary.

Further, Ndan said, considering the local market, Mandala will continue to focus on fully-serviced flights.

"Our priority is to provide value-added services, convenience, safety and accessibility for our customers," he said, adding that an emphasis on value-added services and convenience has been Mandala's key strategy in developing Mandala into a major player in the domestic market.

Elsewhere, Yoyok added that the situation in the domestic market was not favorable for the development of no-frills airlines given the current political and economic situation.

"The main requirements to run a no-frills airline are very low-priced tickets and controllable operating costs. It is very hard to do that (control cost) here," Yoyok told The Jakarta Post.

Yoyok pointed to the volatility of the rupiah against the U.S. dollar as one area of uncertainty.

"Operating costs are pegged to the dollar, and it fluctuates greatly. In Europe or the U.S. they don't have problems with their exchange rate, so, it's controllable," he said.

Cutting reservations and passenger services would not have much impact as they make up a small proportion of the operating costs, Yoyok explained.

"Seventy-five percent of operating costs involves maintenance, fuel and aircraft leasing. The rest is for reservations, passenger services and ground handling," he said.

It is too risky to run a business when one cannot control the operating costs.