Source: Reuter. Date: 3 Apr 91. Story Type: News. Original
Language: English. Dateline: Jakarta. Byline: Elizabeth Pisani.
Text: Abridged. Brief Remark: Forwarded.
PRESIDENT'S SON BRINGS EFFICIENCY TO INDONESIAN SKIES
A newly revamped airline part-owned by President Suharto's
youngest son looks set to blow competitors out of the Indonesian
skies.
Jakarta's businessmen, accustomed to moaning about special
deals given to the president's family, are full of praise for the
professionalism and efficiency of PT Sempati Air.
"Sempati has broken the logjam. They have brought in capital,
banged on the door of the fare structure and increased
efficiency," one airline industry analyst said.
Efficiency, a concept all but unknown to regular air
travellers in Indonesia, is the watchword that Sempati director
Hassan Soedjono is drumming into his staff.
"At the end of the day our people realise that reliablility
brings bucks," Soedjono said in an interview.
The political burden of "nation-building," of providing
flights between small towns in underpopulated corners of some of
Indonesia's 13,000 islands, has crippled the state-owned domestic
airline Merpati, analysts say.
Flights are often delayed for days or cancelled. Sometimes
whole planeloads of passengers with confirmed tickets are bumped
off because a minister or local official takes over the plane.
Merpati, a subsidiary of national flag-carrier Garuda, has
been compensated to a certain extent by having a monopoly on some
of the popular "fat routes," passed over to it by Garuda in a
recent restructuring.
Now several of those are being carved up and shared with
Sempati.
"If you can have an efficient, non-bumpable, safe flight on
a new Sempati plane who in their right mind would fly Merpati?"
the industry analyst said.
Sempati says the new planes that set it apart from its rivals
earn it the right to fly fat routes.
So far it is the only one of Indonesia's four private
passenger airlines to take advantage of a new ruling allowing
private domestic carriers to buy jets. Some analysts say the rule
was introduced especially for Sempati's benefit.
"We waited so long for the change, and as soon as Tommy
(Suharto) bought into Sempati the change came. That's why they are
called the First Family. They always come first," an industry
source said.
The armed forces firm that owned Sempati in 1989 sold a
quarter of the shares to Humpuss, a company owned by Suharto's
youngest son Hutomo Mandala Putra, nicknamed Tommy, and another 35
per cent to logging tycoon Bob Hasan.
Together, the shareholders have stumped up around 210 million
dollars to buy seven brand new Fokker-100 jets, four of which are
already plying the skies.
"Everybody would get good routes if only they would fly new
jets," Soedjono said. "We're opening doors and new horizons.
"If they have the long-term vision to revitalise their capital
structure I would help them enjoy the same facilities the
government has bestowed on Sempati."
Other industry sources are sceptical, saying ailing domestic
airlines, strapped by some of the lowest government-set airfares
in the world, have no way of putting up cash for jets.
On the strength of what they can earn, no one even wants to
lend them the huge amounts they would need to buy jets.
"Here we earn about seven cents per seat per kilometre. We
need 13 cents just to break even. There is no way you could grow
from your income," said Soelarto Hadisoemarto, chairman of the
Indonesia National Air Carriers Association.
Since Sempati stormed onto the scene, fares have risen twice
but analysts say another 80 to 100 per cent rise is needed.
Sempati has two ways of getting around the problem. One is to
fly overseas where they can charge whatever the
market will bear. Sempati this year became the first private
Indonesian airline to go international when it began to fly the
popular Jakarta-Singapore route, one of the region's fattest.
The second, says Soedjono, is to make the airline popular.
"If the price is fixed, don't go after costs which affect
service. Get the volume up, aggressively. Anything you do to
improve service at small cost makes a fantastic difference to a
passanger's impression," Soedjono said.
He cites as an example a raffle held on board just before
touchdown. "We buy a smile with a door prize."
Sempati's planes are now just over half full and the airline
will break even when it fills 58.59 per cent of its seats, a
target it believes it will reach around June. "Then I can stop
sending 'Dear Dad, send money' letters to the shareholders,"
Soedjono said.
The airline, which has added 18 new destinations to its
pre-revamp seven, saw sales jump to 20 billion rupiah (10 million
dollars) last year from just six billion (three million) in 1989.
This year Soedjono predicts 60 billion (30 million), and the
airline is shooting for 100 billion (50 million dollars) by 1992.
"But none of the shareholders are going to get any money for
at least five years. We're going to eat up all the cash we get to
grow," Soedjono said.
He is adamant the airline can compete on a level playing field
despite its powerful backing. "We want to show that no simple
presidential decree can win the hearts and minds of the
passengers."