Is Indonesia too hard to crack for Australia’s airlines?
The overwhelmingly large proportion of Australians going to Singapore or beyond to do business in Asia fly over Indonesia in the dark, and asleep.
As a current article in the Financial Times reminds its subscribers, this could prove a costly pointer to the curious lack of participation in the surging airline sector of a nation that on present trends, will be the sixth largest economy in the world by 2030, and is ranked 16th today.
Neither Qantas nor Virgin Australia have a declared strategy for participating in the manifest potential of air travel in the vast archipelago to our north, which despite some serious Australian trade ventures, registers mainly in the public mind as being a holiday destination, Bali, distantly followed by Lombok, maybe.
The two low cost franchises that have gained traction in Indonesia are Air Asia, and Tiger Airways Holdings, through its investment in a restructured Mandala Airlines.
Qantas did once look at Adam Air, a lethally flawed and now defunct Indonesian operator and was considering a 20% equity in the carrier prior to a 1 January 2007 that crash that killed all 102 people on board an aged and inadequately maintained 737-400 flown by poorly trained pilots which crashed into the sea on a Surabaya-Manado service.
Since then there have been vague indications of interest by Indonesia’s large low cost carrier Lion in participating in Australia’s domestic routes, rather than attracting Australian equity for its own operations, and Lion with orders or options for around 300 Boeing 737s, is proposing to launch a full service subsidiary Batik Air, using a small fleet of 787 Dreamliners.
It is important to recognise that the trajectory of population and economic growth in Indonesia will, as it has in China, rapidly turn that country from being predominantly a destination for Australians into a source of visitors to Australia.
The geographical reality of Indonesia also means that route developments will be widely dispersed, rather than aggregated through Denpasar and Jakarta, and that in turn means the emphasis will for a long time be on single aisle jets like 737s and A320s seeking access to dozens of ports in Australia, a very different situation to the emphasis on large wide bodied airliners by carriers like Emirates, Singapore Airlines or Cathay Pacific.
The Indonesian situation that is emerging in air travel demand is not one that will challenge the Australian carriers with monolithic sovereign funded enterprises with dozens of A380s, but a broad range of private operators flying hundreds of A320/737 sized jets.
The question has to be asked, what sort of whinging will this inspire in Australian carriers, and might they instead, this time, see the opportunities coming at them, and actually do something about it for their shareholders and employees?
The current roster of airline stories on the FT site also includes an interesting report quoting Cathay Pacific CEO John Slosar on low cost carriers, pointing out that their impact, so far, on its fortunes has been unmeasurable, and that it has, as it has often said in the past, no plans to launch a Jetstar type second brand.