Lion Air joins race for LCC supremacy

INDONESIA is one of the fastest-growing travel markets in the world today. “Couple this with the incredible amount of nationals embracing mobile and social media, along with a growing economic base, and it’s safe to say Indonesians will be travelling in even greater numbers in the future,” says Wego chief flights officer Dean Wicks.

Malaysian and Indonesian airlines are racing through the skies at breakneck speed leading the charge to rule Southeast Asia’s low cost carrier (LCC) market, translating into huge savings on airfares and a flurry of promotional offers for travellers.

“Air Asia currently owns 520 aircraft (including orders) and is currently the largest, however it’s about to be overtaken in fleet number by Indonesian operated Lion Air who has 721 aircraft (including orders),” Wicks tells TTN. “While Lion Air is well- known in Indonesia’s domestic market, the carrier will require a huge investment commitment to grow its brand awareness and gain comparative market share in Air Asia’s well-established regions.”

GROWING SCOPE
While it’s true that air travel increases can be attributed to work-related travel, with Indonesia’s improved economy, religious and leisure travel is also on the rise, says Wicks. “In fact, charter flights are engaged to cope with the extra demand for Hajj traffic. We have also seen a lot of expansion lately from Middle Eastern airlines into Indonesia and three major carriers have all increased their services between the two regions.”

Qatar Airways has increased its service to Jakarta, with the Asian region overall representing 30 per cent of the carrier’s global route network. Etihad too has increased the frequency of its Jakarta - Abu Dhabi service, from seven per week to twice daily (adding over 5,500 seats per week), while Emirates tripled their daily service earlier this year from Jakarta to Dubai.

Doha is now connected to both Jakarta and Bali through Qatar Airways, which is also reviewing new possible codeshare partners in the Asia Pacific region as a result of LCC dominance and expansion.

As some airlines struggle financially, cashed up Middle Eastern carriers have a distinct advantage that enables them to invest strategically, as they are doing in the Asia Pacific; and secure their positions in a market undergoing tremendous change.

Just recently SriLankan Airlines mentioned they were also investing marketing into Indonesia. A multitude of carriers now connect to Jakarta from Europe too. KLM, Lufthansa and Air France who have just resumed daily services last month.

FIVE YEARS FROM NOW
With ten additional LCCs launching in 2014 and with the planned expansion and additional aircraft by existing players, competition for South East Asian skies is about to become intense.

“Over the next five years Asia’s LCC network boom may slow down, somewhat but the speed itself won’t diminish the impact it has on the region,” says Wicks. “As new aircraft are received, we’ll see additional routes being established, with improved and affordable connectivity. However, domestic growth rates in the major cities of Indonesia may be hampered by an infrastructure not quite prepared for this influx of visitors. Airports today in the country are already struggling, so growth will lean more towards international routes.” 

Domestic travel in Indonesia has been on a steady rise over the past couple of years, however, airlines will look to expand further into Southeast Asia in the immediate future, predicts Wicks. “With the introduction of LCCs we’ve seen Thailand, Philippines, Malaysia and Singapore become established LCC markets. Other emerging countries in Indochina, such as Myanmar, where economies are at the early stages of growth, are the logical next step for new LCCs and whole new travelling markets.

“As regulations change in China, Taiwan and even Japan (whose LCC markets are still small), the potential opportunities for Indonesia, especially in Bali, are enormous. In fact, Hainan Airlines has begun offering three direct flights per week from Beijing to Bali, as the Chinese interest in the tourist island continues to grow.

“I believe we’ll also see a huge push by Indonesian airlines for new and additional services to Australian destinations, followed by North Asia and the Middle East,” concludes Wicks.