Surabaya Juanda Airport

Jetstar aims to catch up in Indonesia after squandering first mover advantage inherited from Valuair

The Jetstar Group is preparing to increase its presence in the booming Indonesia market with additional services from its Singapore hub. The expansion follows several years of relatively flat capacity to Indonesia for Jetstar while its LCC competitors have pursued rapid growth.

Jetstar faces challenges as it tries to catch up on several years of missed opportunities in the Indonesian market. The group may struggle to compete with larger players, most of which are also pursuing rapid capacity expansion. Jetstar lacks an Indonesian affiliate, making it difficult to sell in the local Indonesian market, which remains heavily dependent on travel agents.

But the opportunities in Indonesia are too humongous for the usually conservative Jetstar to pass up. It needs to make a push or risk being shut out entirely in one of the largest and fastest growing markets in Asia.

Tiger and SIA/SilkAir lead race to expand in Indonesia-Singapore market with AirAsia lagging behind

Competition in the Indonesia-Singapore market will intensify in 3Q2013 with Singapore Airlines (SIA) adding capacity while its regional subsidiary SilkAir and low-cost affiliate Tiger Airways each launch services to two new Indonesian destinations. Garuda Indonesia, Tiger affiliate Mandala Airlines and Jetstar are all planning to follow SIA, SilkAir and Tiger in adding capacity in the dynamic Indonesia-Singapore market.

The surge in capacity is in part made possible by a newly expanded bilateral agreement between the two countries. Slot constraints, however, threaten to impede growth for some carriers operating in the market and make it difficult to use newly awarded traffic rights. For example, Indonesia AirAsia has already been set back by slot constraints at Changi Airport in attempts to launch three new routes to Singapore.

Singapore Changi to benefit from continued rapid growth of Indonesia market

This is the second part of a report looking at the Indonesia-Singapore market and the impact of the recently expanded bilateral between the two countries. The first part looked at the Jakarta-Singapore route, which accounts for 55% of Indonesia-Singapore capacity and has not seen growth in recent years due to bilateral restrictions.

The other 13 routes currently connecting Singapore and Indonesia have not generally been constrained by the bilateral. But there are huge opportunities to expand capacity on these smaller routes, driven by Indonesia’s rapidly growing economy and Changi’s position as the leading international hub for secondary cities in nearby Indonesia.

Leading LCC groups – including AirAsia, Lion and Tiger – as well as full-service carriers, led by Singapore Airlines regional subsidiary SilkAir, are likely to launch new routes connecting Indonesia with Singapore as well as add capacity in existing markets.

Jakarta-Singapore route poised for big capacity increase, led by Tiger and Mandala

Jakarta-Singapore, one of the world’s largest routes, will see a major surge of additional capacity in 2013 as a newly expanded bilateral between Indonesia and Singapore is implemented. Singapore-based low-cost carrier Tiger Airways and its new Indonesian affiliate Mandala Airlines will be the biggest beneficiary as the Tiger Group currently only has a paltry 5% share of capacity in the Jakarta-Singapore market. Tiger and Mandala are each preparing to add several daily flights on the route, supplementing Tiger’s current schedule of only two daily flights.

Other LCCs – including Indonesia AirAsia, Lion Air and Jetstar Asia – will also benefit from the new bilateral while full-service carriers are likely to see their market share drop, including market leader Singapore Airlines (SIA). AirAsia and Lion will be keen to add Jakarta-Singapore flights to maintain their leading shares of LCC capacity in the market as Tiger/Mandala attempt to quickly match or surpass their existing thicker schedules. AirAsia and Lion each currently operate six daily flights on the route.

Tiger's Indonesian affiliate Mandala starts to pursue faster expansion but faces tall order

Tiger Airways Indonesian affiliate Mandala Airlines has unveiled further network expansion plans as it aims to establish a meaningful presence in Indonesia’s fast-growing domestic and international markets. The carrier has grown slowly – extremely slowly for Indonesian standards – since resuming services in Apr-2012, following a 15-month suspension.

Slightly faster growth is now being pursued, with three routes being added in Jan-2013 following the launch of four routes in Dec-2012. But Tiger and Mandala will need to invest in accelerated growth if it is to become a significant player in the dynamic Indonesian market.

With the latest expansion Mandala will operate 11 routes – seven international routes and four domestic routes – with a fleet of five Airbus A320s. Further expansion is expected over the next six months as Mandala doubles its fleet to 10 A320s, meeting an Indonesian DGAC requirement for all airlines to have at least 10 aircraft, including five owned.

Citilink regional expansion will further intensify competition between Garuda Indonesia and Lion Air

Competition is to further intensify between leading Indonesian airline groups Garuda and Lion as Garuda accelerates expansion of its budget airline subsidiary Citilink to include regional domestic routes. Citilink now plans to operate a fleet of 80 aircraft by the end of 2015, including 30 70-seat turboprops, which should make it the second largest carrier in the Indonesian domestic market after Lion.

Citilink only carried 1.6 million domestic passengers in 2011, compared to 25 million for Lion and just over 12 million for Garuda mainline. But Garuda is committed to closing the gap with Lion, which became Indonesia’s largest carrier in 2009, by focusing on rapid domestic growth at both ends of the market.

Closing the gap at the budget end of the market will not be easy as the Lion Air Group, which includes regional subsidiary Wings Air, has its own ambitious expansion plans. But Citilink’s expansion comes off a much smaller base as the carrier is slated to end 2012 with a fleet of only 18 aircraft.