Super Air Jet Sets Up Wider Post-Pandemic Moat for Rusdi Kirana's Empire
Jakarta. New budget airline Super Air Jet's surprise attempt to break into the country's limping air-travel industry would only ensure Lion Air's founder Rusdi Kirana's dominance in the country's post-pandemic travel, providing the billionaire with a wider moat to dissuade aspiring entrants to the market.
The airline would be the Southeast Asia country's first new airline in the past ten years, which saw the domestic airline industry consolidating into a duopoly: Lion Air Group in the budget segment and flagship-carrier Garuda Indonesia and full-service segment.
The government has tried to reintroduce competition to the industry by lowering the bar for new airlines, requiring them to have only three airplanes under their control instead of ten previously to start the service.
And for many in the industry, Super Air Jet's establishment represents a strategic defense move from Rusdi, who reportedly backed the airline.
"This is more a strategic move from the owners of Lion," Brendan Sobie, a Singapore-based aviation analyst, said on Tuesday.
"The strategy behind establishing the new airline is about making it harder for potential startups to enter and providing a platform for even lower costs by securing very cheap second-hand aircraft that are now available at bargain-basement prices," Sobie said.
"The ownership structure of Super Air Jet may be different than Lion Air, Batik Air, and Wings Air, but the new airline is still about ensuring the Lion family maintains or even grows their leading share in the Indonesian domestic market over the next decade," Sobie said.
Rusdi's handprints were all over Super Air Jets. Bloomberg reported last year that the 57-year-old billionaire was working on creating the new airline. Ari Azhari, the president director of Super Air Jet, was a director at Lion Air.
Ari did not reveal Super Air Jet's financial backers, only saying that it was all-Indonesian investors. Danang Mandala Prihantoro, the corporate communications strategic Lion Air, told local media that Super Air Jet was in different management than Lion Air. Danang has yet to respond to the Globe question on Rusdi's ownership in the new airline.
Super Low Cost
Super Air Jet will operate the new 320-200 with a maxed-out configuration of 180 economy class seats. The airline sports a white and beige livery for its fleet and a beige uniform for its aircrew, setting it apart from competitors.
Super Air Jet announced on Monday that it would reintroduce a 'super' low-cost segment to Indonesia's air travel market, aiming specifically to cater to the young air travel customers.
"The youth segment will continue to grow rapidly, and Super Air Jet is ready to cater to that market with our "Super Cost" offering, which offers the cheapest airline services possible to make them more affordable," Ari said.
Almost half of the Indonesian population today is younger than 30 years old, census data from the Central Statistics Agency (BPS) showed, providing ample room for growth in the segment.
"I'm pretty sure the domestic market will continue to grow in the future," aviation observer Gerry Soejatman told the Globe's sister company BeritaSatu on Tuesday.
"Once the pandemic is over, the airline industry will definitely grow again, especially if we look at the growth of the middle class and the social mobilization from low-income to medium-income groups. The middle-class will be even bigger, and they have great interest in flying,” Gerry said.
Super Air Jet's emergence amid crisis was reminiscent of how Rusdi launched Lion Air at the height of the Asian Financial in 1999 with a strong conviction that there would be a boom in demand for air travel in line with the growth of the middle-income group.
Aviation observer Alvin Lie shared similar views, said a post-pandemic airline industry might mirror what happened in the aftermath of the last crisis.
"The need to travel will always be there, and during a pandemic, the purchasing power decreases, so of course, consumers will be more sensitive to prices. They are willing to sacrifice comfort, and at this time, it is the LCC that is more attractive to flight service users," Alvin said.
"Of course, price is not the only factor here. We will see the route, the schedule, as well as the frequency of flights, that will also determine,” Alvin said.
A Battered Industry
The number of airline passengers in Indonesia dropped 58 percent to just 32.3 million people last year from 76.7 million in 2019 due to travel restrictions put in place by the government to curb the Covid-19 spread.
Lion Air Group and flagship-carrier Garuda Indonesia today share between them more than 89 percent of Indonesia's domestic air travel, Transportation Ministry's data showed.
The Lion Air Group, which consists of three airlines, namely Lion Air, Batik Air, and Wings Air, managed to transport up to 21.5 million passengers, or 60.6 percent of the total passengers last year.
Garuda and its budget airline subsidiary Citilink Indonesia carried 10 million passengers or 28.3 percent of the market share. The rest of the traffic was shared among smaller airlines like AirAsia Indonesia and Sriwijaya Air, among others.
All the airliners are in bad shape following restrictions put in place by the government last year cut the air travels by more than a half. Garuda Indonesia had to resort to the government's Rp 8.5 trillion ($600 million) bridging loan to keep afloat after losing Rp 16.5 trillion in the first nine-month period last year.
The flagship carrier was bogged down with debts, which reached Rp 154.6 trillion at the end of September last year, or Rp 6.8 trillion more than its total assets.
AirAsia Indonesia also reported losses for eight straight quarters since 2017, with the loss in the first quarter of 2019 — in the latest available statement.
Sriwijaya was not spared from the hardship. Hardly recovering from the Flight 154 tragedy early this year, the airline also had $37 million in debt for aircraft maintenance still outstanding to Garuda.
Lower Regulatory Bar
Adita Irawati, the Transportation Ministry's spokeswoman, said that currently, the Super Air Jet airline is still obtaining an air operator certificate (AOC) as a condition for operating commercial flights.
"Super Air Jet is in the process of obtaining AOC," Adita Irawati told Beritasatu on Monday.
In February, the government loosened the aircraft ownership requirements for scheduled commercial air transport operators. Now, an airline needs to own only one airplane and control two other aircraft — either by taking a lease or borrowing — to start their service. Previously, the government required the airline to have ten airplanes, half of which must be under its ownership.
The new requirements were laid out in a 2021 Government Regulation (PP) about Aviation Sector Administration, a derivative regulation from the 2020 Law about Job Creation.Tags: