Star Air back in business

Leony Aurora, The Jakarta Post/Jakarta

After 45 days on the ground, low-cost carrier Star Air returned to the skies on Friday, while other airlines were forced to cut back their operations due to the soaring prices of aviation fuel.

Star Air has also slashed its fleet to three aircraft from five, and has undergone restructuring, carrying out cost-cutting measures, including lay-offs, since it stopped operating on June 1, spokesman Wismono Nitihardjo said on Friday.

"We did not have any new investors," said Wismono of the reason behind the airline's comeback.

"The owner, Ali Sugiarto, injected fresh capital into the company," he said, without elaborating.

The carrier's debts from the temporary closure have already been taken care of, he added.

Star Air decided to suspend the use of its Boeing MD 80 aircraft -- which has a capacity of 162 passengers and needs more fuel -- and to continue using three smaller Boeing B-737-200, with a capacity of 118 seats each.

The budget carrier now serves only domestic routes, namely from Jakarta to Surabaya, Jakarta to Manado, and Jakarta to Denpasar and Kupang. It used to fly passengers to four other destinations, including to Kuala Lumpur.

Soaring oil prices, which are hovering at around US$60 per barrel, have prompted state oil and gas firm PT Pertamina to raise aviation fuel avtur and avgas prices.

In the Soekarno Hatta International Airport in Jakarta, for example, avtur domestic prices rose 34 percent from Rp 3,210 (33 U.S. cents), excluding taxes, in January to Rp 4,290 this month.

Such high avtur prices, plus Pertamina's new policy, which requires airlines to pay for the fuel on the spot in cash, have forced many airlines to cut back operations.

Privately owned Bouraq Airlines has continued operating with only two aircraft serving five destinations. For the last two months, it has stopped flying to Manado, Batam in the Riau Islands, Denpasar and Kupang, closed down representative offices in those places and laid off some 100 employees.

"We have still six more aircraft that we are not using at the moment," said the carrier's corporate secretary Boy Mamahit.

"We have decided to maintain only routes that take about one hour to cover," he said.

"Longer routes require more fuel."

Avtur costs now contribute to between 55 percent and 60 percent of total operational costs, said Boy, while before the jump in global oil prices, they contributed only 42 percent.

Some players in the aviation industry were relieved when the Ministry of Transportation issued Ministerial Decree No. 36/2005 on airlines' reference prices.

Wismono said the decree, which determined floor prices for airlines, boosted confidence and had raised fares by 20 percent.

Boy, however, was not convinced.

"After the peak season, the airlines will again lower prices to attract customers," he said. "(Ticket) prices will not be on a par with fuel prices," he added.

Due to the high prices of aviation fuel at present, the Indonesian National Air Carriers Association (INACA) has estimated this year's number of domestic airline passengers will decline by up to 15 percent from the 25 million people who traveled by plane in 2004. (006)