Provincial administrations attracted to prestigious airline industry
Provincial administrations attracted to prestigious airline industry
A'an Suryana, The Jakarta Post, Jakarta
Emboldened by the autonomy law, which has given provinces
larger incomes and greater power to manage their own economic
affairs, several rich administrations are trying their luck in a
prestigious and risky business: airlines.
At least two airlines owned or partly owned by regional
administrations have been issued licenses to operate by the
Ministry of Transportation, while another is awaiting a license.
The two airlines recently awarded with licenses are PT Riau
Airlines, owned by the Riau provincial administration and the
regency administrations of the province; and PT Seulawah Nangroe
Aceh Darussalam, which is partly owned by the Aceh provincial
administration.
Another airline, Papua Indonesia Air System, which is partly
owned by the Papua provincial administration, has applied for an
airline operator's certificate from the ministry.
"We are processing the certificate," Edi Wibowo, director of
air transportation at the Ministry of Transportation, announced
on Friday.
The North Sumatra provincial administration and the regencies
in the province have also established their own airline, PT Sumut
Airlines. The airline started operations last week despite the
fact that it has yet to obtain an airline operator's certificate
from the Ministry of Transportation.
Analysts say the airline industry has attracted not only the
private sector but also provincial administrations because of low
airplane leasing prices.
Leasing prices for aircraft have dropped following the setback
experienced by airlines in Europe and the United States after the
Sept. 11 terrorist attacks in the U.S. last year.
Airline industry observer Dudi Sudibyo said that after the
terrorist attack, airline capacity rates on both continents fell
by 50 percent and 60 percent.
"The lack of passengers has forced airlines to ground their
fleets," Dudi told The Jakarta Post.
"In a bid to offset maintenance costs, the airlines were
forced to lease their planes to airline companies in developing
countries, at much lower prices," said Dudi.
Indonesia is one of the developing countries being offered
aircraft for lease.
Prior to the terrorist attacks, leasing prices for aircraft
varied from US$150,000 to $250,000 per month, depending on the
type of the aircraft.
"Now, the price has dropped by approximately 30 percent," said
Melly R. Untung, corporate secretary of Papua Indonesia Air
System.
Besides lower leasing prices, pride is seen by some analysts
as another reason for the regional governments to engage in the
business.
"They are proud of having an airline," said a middle-ranking
official at the ministry who asked for anonymity.
The official said the regional governments should be prudent
and careful in running the business, pointing out that the
country's airline industry had become very competitive and that
price wars could erupt.
"Airline passenger numbers have not yet reached the precrisis
level," he said
Ministry data shows that domestic airline passengers reached
nine million last year, as against 13 million in 1996, the year
prior to the start of the economic crisis.
However, Melly said lower leasing prices and regional pride
were not the major factors for regional administrations to enter
the airline business.
Before deciding to establish an airline, the Papua
administration thoroughly studied the potential benefits and
losses and realized that there was a huge potential market in the
province.
"We established a business plan before the Sept. 11 attacks,"
Melly told the Post.
"People need to use airplanes to travel here, due to the poor
condition of roads and the mountainous terrain of Papua," she
said.