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."