Indonesia AirAsia faces challenging conditions

Image: Air Asia airline taking off
One of Indonesia AirAsia’s 20-year-old B737s takes off from Jakarta.
(Source: Airliners.net – Raldi)

AirAsia is the largest low-cost carrier (LCC) in Asia with three subsidiaries. The original Malaysian AirAsia, which started in January 2002, has since been followed by Thai AirAsia (February 2004) and Indonesia AirAsia (December 2004 and originally known as AWAir until 1 December 2005). The Indonesian operation is currently the smallest and least profitable. Since flights began, the airline has carried just over 3.5 million passengers.

Chart: Indonesia Air Asia Monthly Traffic
Source: AirAsia

Nine routes with eight aircraft

The current network from Jakarta’s Soekarno-Hatta International Airport (CGK) consists of nine routes, all of which are served at least twice per day. CGK has grown rapidly in recent years to become the world’s 30th busiest airport with 30.86 million passengers in 2006 (+10.4%). Just six years ago, in 2001, the airport handled fewer than 12 million passengers, which highlights the phenomenal growth of aviation in Indonesia in recent years.

Map: Routes from Jakarta
Indonesia AirAsia’s network is focussed on domestic routes with Kuala Lumpur the only international route at present.

Kuala Lumpur (KUL) is the busiest route for Indonesia AirAsia with five daily flights, two of which are operated by CGK-based aircraft and the other three by KUL-based aircraft. The most recently added routes were to Pekanbaru (PKU) and Palembang (PLM), which both started with double-daily services in July this year. The route network being flown in August can be operated with just seven aircraft, though the airline actually has eight in total.

Table: Indonesia Air Asia at Jarkarta

The fleet of B737-300s is each configured with 148 seats. The aircraft are typically between 17 and 22 years old, which has resulted in some reliability issues for the airline.

Difficult first quarter in 2007

Indonesian air travel started the year badly with the fatal crash on 1 January of an Adam Air B737, with the loss of all 102 lives on board. In February, Jakarta suffered major flooding and in March a Garuda B737 overshot a runway with the loss of 22 lives. Not surprisingly, these events impacted on Indonesia AirAsia, which described this period as a “turbulent quarter”.

Image: Formula One car with Air Asia livery
Following in the wheeltracks of Emirates, Etihad and Kingfisher, AirAsia is developing a global marketing partnership with the Williams Formula 1 team.

Despite passenger numbers growing 40% to 440,000 in the first quarter and load factors improving four percentage points to 78%, average fares fell to under $30 per passenger and with a rise in fuel costs the airline reported an EBITDAR margin of minus 20% and net margin close to minus 40%. In the last two quarters of 2006, the airline had reported EBITDAR margins of around 12% to 15%, resulting in small net profits. Load factors in the second half of 2006 averaged over 80%.


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