RI airlines boom as others cut back

RI airlines boom as others cut back

Slobodan Lekic, Associated Press, Denpasar, Bali

The launch of Air Paradise International in February couldn't
have come at a worse time.

The Bali-based airline's maiden flight was delayed for three
months after the Oct. 12 terrorist attacks on the island in which
202 people died. When it finally took to the air Feb. 16, it had
to contend not only with a slump in travel to Bali, but also with
the looming war in Iraq.

"On top of that, we now have to deal with SARS," owner Kadek
Wiranatha said, referring to severe acute respiratory syndrome,
the contagious flu-like illness that has ravaged air travel
throughout Southeast Asia.

Still, Wiranatha is optimistic that Air Paradise will prosper
in the burgeoning aviation market in Indonesia, where air travel
is the primary means of getting around the country's 13,000
islands scattered over an area the size of the United States.

While many airlines worldwide are cutting back, coping with
empty seats and mounting losses, Indonesia is seeing an
unprecedented boom with packed planes and new domestic carriers
vying for a place in the sky.

By the end of 2002, there were 22 airlines in the country, up
from five in 1998 when the Asian financial crisis devastated
Indonesia's economy. At least four more are seeking approval to
start flying this year, officials said.

The 1998 crisis slashed passenger numbers by more than half,
from 13.4 million in 1998 to 6.2 million the following year, said
Santoso Eddie Wibowo, director of civil aviation at the Ministry
of Transport. But since then, he said, ticket sales have steadily
grown and are expected to surpass pre-crisis levels this year.

A factor in the expansion is that entrepreneurs can get planes
more cheaply now, said Srboljub Savic, a consultant and expert in
Indonesian civil aviation.

"It owes much to the post-Sept. 11 airline problems in the
United States, which have idled a large number of passenger jets
and made them available for leasing at rock-bottom rates," Savic
said.

Medium-range jets such as a Boeing 737-300 can be picked up
for US$45,000 a month, compared to US$120,000 two years ago,
Savic said.

There are now about 200 medium and long-range jets in airline
fleets in Indonesia, almost double the number four years ago. The
typical startup airline has about half-a-dozen 737 or MD-82 jets
in its fleet, Savic said.

Other factors fueling the boom include airline deregulation
and an overvalued currency - making it easier to pay fixed costs
pegged in U.S. dollars.

A price war is now raging in Indonesian skies among domestic
carriers with names such as Batavia Air, Lion Airlines, Nurman
Avia and Star Air.

With dozens of flights a day from Jakarta to other large
cities, ticket prices have plunged so much that intercity bus
drivers see airliners as competitors and have taken to blockading
access to airports.

A ticket for the two-hour flight between Jakarta and Medan, a
city 1,400 kilometers (900 miles) away, goes for as little as Rp
450,000 (US$50).

Elsewhere in Asia, wave upon wave of bad news has battered the
already depressed aviation industry.

Flights to Europe, the United States and Australia were cut
back due to the war in Iraq. The outbreak of SARS, which has
killed more than 130 people worldwide, has caused a further
downturn.

The region's largest operator, Singapore Airlines, has
announced possible staff layoffs and flight reductions. Hong
Kong-based Cathay Pacific Airways said that SARS fears caused its
traffic to plunge from 30,000 passengers a day to below 10,000.

Indonesia's flag carrier Garuda, with an extensive overseas
network, has been similarly affected by these crises.

Although Air Paradise flies only between Bali and the
Australian cities of Melbourne and Perth, its managers feel
confident they can weather the storm by targeting a lucrative
market segment. It operates two Airbus A310-300 wide-body jets
leased from Singapore Airlines, and says its load factors have
averaged between 70 percent and 80 percent.

"We have been doing very well, much better than expected,"
said Wiranatha, whose family also owns a string of hotels and
nightspots on Bali. "Let's just hope SARS doesn't slam us too
hard."