Thursday, 27 September 2012


Competition in domestic airline business in Indonesia would predictably heighten. Air Asia Berhad through its subsidiary company Air Asia Investment Ltd. together with PT Fersindo Nusa Perkasa was reported to acquire all shares of PT Metro Batavia Group at the cost of USD 80 million. Based on exchange rate of Rp 9,400 per USD the amount was equal to Rp 7.52 trillion.

As planned, in the next one year Air Asia Indonesia and Batavia Air would merge into one new business entity. So far the two airline were still analyzing the form of merger to be realized.

Tony Fernandez, Chief Executive Officer of Asia Air Berhad stated that this Asia’s step was to expand their market share in Indonesia. Although prevalent overseas, Air Asia’s market share in Indonesia was still relatively small.

Last year, Air Asia Indonesia commanded only over 15% of air routes market in Indonesia, having carried 1.3 million domestic passengers; now the aimed at domestic routes. By this acquisition Air Asia Indonesia set target to command over 20% of domestic routes till end of year.

Most likely the target would be met. The point was that Batavia Air themselves had managed to carry 6.7 domestic passengers in 2011. This year Batavia Air set target to carry 8 million passengers, while Air Asia felt sure to be able to carry 6 million passengers. All in all, merger of these two airline was targeted to carry 14 million of passengers this year.

Combination of the two airlines would definitely increase the total number of aircrafts to become 54 aircrafts, 33 aircrafts of Batavia Air. By this combination they would also complement their business line, i.e. medium service normally rendered by Batavia Air and low cost service rendered by Air Asia.

It was not impossible that by this acquisition, Air Asia coule edge aside Garuda Indonesia’s Tbk position as one of the leading air lines in Indonesia. With 94 aircrafts, Garuda flapped their wings to carry 13.7 million passengers in 2011.

The Management of Garuda was not afraid Air Asia’s expansion in Indonesia. Elegantly they stated that corporate act done by the two airline indicated that the potential of airline business in Indonesia was great and the opportunity was open wide, either for low cost service or full service. Last year alone, the number of passengers flown in Indonesia reached 60 million. Each year the total number of passengers were expected to grow by 15%.

What about the prospect ahead? Presumably still bright in line with the betterment of domestic and international economy. The existing data served to confirm the assumptions, at least for the domestic market. Take for example performance of PT Citilink Indonesia, Garuda’s subsidiary company.

By Semester 1-2012 last, PT Citilink Indonesia managed to carry 1.84 million passengers, an increase of 62% compared to same period of the previous year which posted only 1,14 million passengers. The increased number of passengers was thanks to the expanded armada from 8 aircrafts last year to 14 aircrafts this year.

Citilink sets target to carry 4 million passengers till end of year, considering that August was peak season. In terms of earning, the company had managed to pocket Rp 1 trillion of income, an increase of 60% against same period the previous year. By end of year the company sets target of Rp 2 trillion of income.

Citilink sets target of income of Rp 4 trillion in 2013 and would try their best to pursue profit so Citilink could start Initial Public offering in 2015.

Today Citilink was focusing attention on tourists with limited budget (travelers) flying to domestic destinations with flight duration not longer than three hours. Flights of this sort was growing by 20% each year. For that matter this year Citilink sets target to carry 4 million passengers and 16,4 million passengers in 2015.

Today Citilink was concentrating business in Jakarta and Surabaya with eight daily routes from Jakarta and from Surabaya to Batam, Banjarmasin, Denpasar, Balikpapan, Medan and Ujung Pandang. Since the airline business permit (SIUP) was released last November now Citilink had pocketed 70 domestic route permits and 16 regional route permits.

Citilink operated 14 arctafts consisting of 10 Boeing 737 Series and 4 Airbus A 320. By end of year the company sets target to send for six Airbus A 320 so Citilink projected to operate 20m aircrafts.

Citilink planned to increase flight frequency to 120 flights per day by end of year. Considering that productivity in Semester II-2012 was much higher, i.e. today still 72 flights per day, so as per September would be increased to 86 flights per day.

Then, as per October till end of year flight frequency would be 120 flights per day. The plan to increase flight frequency was in tandem with the arrival of a number of new airplanes.

In terms of fleet, last year there were only 8 aircrafts. By end of 2012, Citilink who had chalked up income of more than Rp 1 trillion through Semester 1 this year would soon have 21 units of aircrafts.

Citilink performance was in accordance with data of the Board of Statistics (BPS) who recorded the number of domestic air passengers which in June 2012 had posted 4.6 million passengers, an increase of 2.17% compared to May 2012.

The same was with the number of international passengers which increased by 9.58% to become 1.1 million people. Through the period from January to June or Semester 1-2012 domestic passengers pared to same period of 25.1 million people.

As with international passengers in Semester 1-2012 it increased by 10.84% to become 5.8 million passengers against same period of 2011. The highest increase of passengers in June was in Hasanuddin airport Makassar (7.82%) followed by Ngurah Rai airport Bali (5.33%), Polonia airport Medan (3.27%) and Soekarno Hatta airport Jakarta (0.98%). On the contrary at Juanda airport Surabaya the number of passengers dropped by 2.54%.

Meanwhile the most numerous domestic passengers in June were from Soekarno Hatta airport which posted 1.7 million passengers or 36.44% of domestic passengers; followed by Juanda airport Surabaya with 582,600 passengers or 11.43%. The total number of domestic passengers for Semester I-2012 reached 26.3 million passengers, an increase by 4.68% against same period last year at 25.1 million people.

One thing was sure airline business for an archipelago country like Indonesia, in spite of being capital intensive was appealingly prospective. In spite of being hampered by high price of oil and weakening global economy, airline business was rated as having stable outlook.

Moody’s Investors Service, a rating agency in the Annual Outlook released early July 2012 mentioned that airlines in North America and the Middle East would predictably be able to reap high profit while operators in Asia would be facing heightened competition.

In parallel with the above picture, the International Airport Association (IATA) projected profit of global airline through 2012 would came to USD 3 billion, slightly down previous estimate of USD 3.5 billion.

For the most part, the profit figure was contributed by airlines of the Asia Pacific region amounting to USD 2.3 billion, up against the previous prediction of USD 2.1 billion. Hence this region was the greatest contributor to profit amount of global airlines. Meaning airline business in Asia in general and Indonesia in particular would be a highly prospective market for the future.

The evident was clear that Air Asia Berhard from Malaysia, in spite of having acquired Indonesia’s Air Asia, stretched their wings to Indonesian skies by acquiring Batavia Air. The reason was simple, i.e. to harness Indonesia’s airline market which was the biggest market in Southeast Asia.

Naturally this was a great challenge for national airline including Garuda Indonesia as national flag carrier to remain to be the ruler of their own territory. A potential of that magnitude must be grabbed by Garuda Indonesia through attainment of maximum performance.

Not ignorable was of course was the role of tourism in this airline business. The Government claimed that tourism industry would keep growing amidst long and dragging crisis of the world. This proved that the tourism industry was crisis resistant. Growth of this sector was supported by inflow of international tourists; which posted growth of around 6 percent per year. Through quarter 1/2012 it managed to grow by 6.3%.

The total inflow of foreign tourism was on the average still stable. The surprising fact was that tourist inflow from the USA and Germany were still high. Tourists from America were prevalent, constituting 12% of total number. Many possible factors were the background of increasing number of tourists to Indonesia from countries troubled by economic crisis.

The increased number of foreign tourists were among Malaysian and Chinese nationalities. Meanwhile tourists of Australian origin were in the process of growing. With high mobility of tour operators and ground attendants to save domestic as well as foreign tourists, growth of airline business was becoming more important and deserves more support.

Tourism was a golden opportunity for domestic, regional or international airline to explore Indonesian skies. This was thanks to Indonesian economy which grew positively with a background of excellent geographical condition, a vast number of rising middle class, increasing purchasing power and high mobility of the people.

Business News - August 10, 2012   

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