Garuda Indonesia is considering plans to launch a separate LCC subsidiary, Citilink, by the end of 2010, due to growing demand in domestic and short-haul international markets (AINonline, 03-Feb-2010/Wall Street Journal, 04-Feb-2010). CEO, Emirsyah Satar, stated the carrier would operate approximately 20 aircraft, including some of Garuda’s older B737s. The carrier currently operates a low fare branded Citilink service on certain domestic routes.
Garuda Indonesia considering launching separate LCC subsidiary
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The new fleet plan supports an ambitious plan to expand Garuda’s international network – both regionally and in the long haul sector. Garuda is also striving to strengthen its domestic position further with narrowbody growth.
According to CEO Arif Wibowo, the group's new overall strategy is: “To dominate the domestic market, expand regional where the opportunities are and subsidise long haul growth.” This is the fourth and final part of a comprehensive series of analysis reports published by CAPA on the Garuda Indonesia Group.
Garuda Indonesia Part 3: new domestic strategy is to slow Garuda growth, accelerate LCC Citilink
Garuda Indonesia is slowing its domestic expansion at its main full service brand while accelerating domestic expansion at the LCC subsidiary – Citilink. Garuda is considering the transfer of secondary leisure-focused domestic routes to Citilink and for the first time may start codesharing with its sister airline, which until now has focused on operating alongside Garuda on trunk routes.
The Garuda group has tweaked its domestic strategy in response to both intensifying competition from the Lion Group subsidiary Batik Air, and an overall slowdown in domestic growth. Batik is a full service airline but has impacted Citilink as its fares are generally priced only slightly above Citilink's fares, and significantly below those of Garuda. Citilink slipped back into the red in 1Q2016 after six consecutive profitable quarters.
Citilink is essentially now sandwiched between Lion, which generally has the lowest fares in Indonesia, and Batik. Garuda believes that it needs to respond by expanding Citilink rapidly, resulting in market share gains and lower unit costs as it starts to achieve better economies of scale.