Dow Jones Newswires -- June 8, 2000
Seven New Airlines To Enter Struggling Indonesian Market
JAKARTA -- Seven new airlines will be launched in Indonesia this year,
despite the fact that the industry's struggling to recover from the
economic crisis which led to a massive slump in passenger numbers, the
Indonesian National Air Carriers Association said Thursday.
Most of the new airlines will operate on domestic routes, although two
also plan to service Taiwan, Malaysia and Australia, an association
spokesman said.
The new operators are: Indonesian Airlines, Pelita Air Service,
AIRWAGON International, Lion Mentari Air, Bayu Indonesia Air, Rusmindo
Internusa Air and Jatayu Air.
Indonesian Airlines President Director Rudy Setyopurnomo said his
company will begin operating in late August or early September with
two aircraft, but will have 10 Boeing 737-200s within a year.
He said the airline will service 46 destinations across Indonesia
including the islands of Java, Sumatra, Kalimantan, Sulawesi, Bali and
West Papua, formerly called Irian Jaya. They may spread to
international routes later.
Rudy added that he expects domestic and possibly foreign investors to
invest $40 million into the company.
He said he's confident of success despite the sluggish economy and the
fact that state-owned airlines Garuda Indonesia and Merpati Nusantara
together with private airlines Mandala Airlines, Bouraq Airlines and
Dirgantara Air Service are struggling.
"They are struggling because they are not efficient," Rudy told Dow
Jones Newswires.
But not everyone shares such optimism.
Peter Harbison, managing director at the Centre for Asia Pacific
Aviation - an Australian-based independent think tank - agrees the
potential market growth is there but doubts seven new operators can
survive.
"I think the incumbents are reasonably challenged already," Harbison
said.
The financial crisis in Indonesia rocked the country's airlines,
forcing them to cut back on international and domestic routes. With
costs mainly in dollars and revenue in rupiah, the sharp slide in the
value of the local currency pushed them into the red.
Merpati booked a pretax profit in 1999 after posting a loss for seven
consecutive years, while Garuda's earnings also plummeted during the
crisis.
Garuda is currently in the process of trying to restructure its debt,
which stands around $1.8 billion.
Pelita Air Service - which has operated a chartered service for
several years - will service 12 local destinations, while Lion
Airlines will also operate domestic routes including to Kalimantan,
Sumatra and Java.
Bayu Indonesia will service Sumatra, Kuala Lumpur and Penang.
AWAIR has a license to fly 27 domestic and 28 international routes
such as Surabaya, Medan, Batam, and Taiwan and Australia early next
year or late this year.
The airlines association is confident the new carriers can survive.
A spokesman for INACA said that in 1997 there were 13 million domestic
passengers in Indonesia, a number which slumped to 7 million in 1998
during the economic crisis. Passenger numbers are expected to reach
7.5 million in 2000, the association said.
The spokesman said the number of aircraft operating in Indonesia has
also fallen from 182 in 1998 to around 119 this year.
"There is going to be a lot of growth in the market so I don't see why
they cannot all survive," he said.
-By Leigh Murray 62 21 3983 1277; leigh.murray@dowjones.com
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