Batavia Air is an Indonesian airline based at Jakarta Soekarno-Hatta International Airport. Batavia operates primarily domestic services but also operates short-haul international services to major cities in South East Asia. It also operates to destinations in Saudi Arabia.
Batavia Air suspended operations on 30-Jan-2013 being declared bankrupt by the Central Jakarta Commercial Court.
Location of Batavia Air main hub (Jakarta Soekarno-Hatta International Airport)
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The Indonesian domestic market is poised for more rapid growth in 2013 despite the bankruptcy and suspension of operations at Batavia, which had been Indonesia’s fourth largest carrier. The void left by Batavia has been quickly filled by other carriers, primarily Tiger Airways affiliate Mandala and Garuda Indonesia subsidiary Citilink. Nearly all of the country’s other remaining carriers are also pursuing rapid expansion in 2013.
Indonesia’s domestic market grew by 20% in 2012 from 60.2 million to 72.5 million passengers, according to preliminary data from Indonesia’s DGAC. This makes Indonesia the fifth largest domestic market in the world (after the US, China, Japan and Brazil) and one of the fastest growing.
The 20% increase in domestic passenger traffic for 2012 follows 16% growth in 2011, 18% growth in 2010 and 17% growth in 2009. As a result Indonesia’s domestic market has nearly doubled in only four years – from 37.4 million passengers in 2008.
Indonesia's Batavia Air suspension of operations on 31-Jan-2013 provides a dose of healthy consolidation for the fast-growing Indonesian market. The nation's three largest domestic players – Lion Air, Garuda Indonesia, and Sriwijaya Air – will benefit and see their market shares increase even further.
But Indonesia AirAsia and new Tiger Airways affiliate Mandala could be the biggest beneficiaries as Batavia's exit make it easier for the two LCCs to succeed in their attempt to establish a meaningful presence in the domestic market. Indonesia’s fastest growing carrier from 2012, Citilink, will also benefit as Batavia’s suspension comes just as the Garuda Indonesia budget subsidiary pursues more rapid expansion.
The bankruptcy and suspension of operations of Batavia does not provide a big and sudden shock to the Indonesian market as the carrier had already reduced significantly in size during 2012. Batavia had captured 11% of the domestic market in 2011, back when it operated a fleet of over 30 aircraft. But the airline had already seen its market share slip significantly in 2012 as it cut back its network and as a large portion of its fleet was repossessed. Indonesia’s other major carriers, meanwhile, expanded rapidly in 2012 and were already planning more rapid capacity expansion in 2013, allowing them easily to fill the void now left by Batavia.
AirAsia’s decision to drop plans to acquire Indonesian carrier Batavia Air leaves the group with the daunting task of having to rely on organic growth to increase its share of Indonesia’s booming but crowded domestic market. Southeast Asia’s leading LCC group is now the sixth largest player in the region’s biggest domestic market, a glaring weakness in an otherwise strong portfolio that it was aiming to overcome by acquiring Batavia.
The Batavia acquisition, while against the grain of normal AirAsia strategy, would have given the group a respectable third place position in Indonesia’s domestic market. Batavia would have also given AirAsia slots at Jakarta’s congested airport and access to a valuable local distribution network. Perhaps most significantly the Batavia deal would have allowed AirAsia to compete more effectively against fast-expanding Indonesian LCC group Lion Air, which has emerged as a bigger rival to AirAsia than the more well known Jetstar or Tiger groups.
Indonesia’s potential for more rapid aviation growth is expected to fuel a surge in new aircraft orders beyond those announced at this week’s Paris Air Show.
Sriwijaya Air is responding to intensifying competition in the Indonesian market by committing to become the first Indonesian customer for E190s. The new type will allow Sriwijaya to differentiate itself from some of its low-cost competitors and expand into some of Indonesia’s many fast-growing secondary routes.
Indonesia is a nation with very impressive statistics that still remains somewhat off the beaten path and away from much global notice. Yet it is the world’s most populous Muslim nation and ranks fourth globally in total population. It is the largest nation in Southeast Asia and stretches from west of Malaysia to the north of Australia.
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