Indonesia

Tiger Airways narrows losses in FY2013 - but challenges for FY2014 remain

Tiger Airways has narrowed its losses in the year to 31-Mar-2013 and extended its operating profit to a second consecutive quarter while forecasting a positive operating result by mid-Jul-2013 after the sale of 60% of Tiger Australia to Virgin Australia is completed.

The carrier also plans to add frequencies to high demand routes between Singapore and Malaysia and expects to take delivery of 10 A320 during the financial year, half of which will be allocated to the Singapore operation and the remainder between Tiger Australia and two associated airlines, Mandala and SEAir.

Tiger Singapore will use the aircraft to increase capacity by about 25% by the end of FY2014 and taking advantage of expanded bilateral rights between Singapore and Indonesia which will also boost Mandala. However, the group still faces significant challenges as it strives to nurture three affiliated carriers in Australia, Malaysia and the Philippines to profitability.

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.

Competition between Indonesian market leaders Lion and Garuda to intensify as Batik Air launches

Competition in Indonesia’s dynamic domestic market will further intensify in May-2013 as market leader Lion Air launches its new full-service subsidiary, Batik Air. Batik will initially serve three domestic routes alongside budget brand Lion and operate 737-900ERs in two-class configuration. Several more domestic routes are expected to be launched by the end of 2013 with international service to follow in 2014 or 2015.

Garuda will be most impacted by Batik’s launch as the flag carrier’s biggest competitor becomes stronger and more diversified. All of Batik’s initial routes are already served by Garuda and most are also served by Indonesia’s second largest full-service carrier, Sriwijaya. Batik will also face indirect competition from Garuda budget subsidiary Citilink, AirAsia Indonesia and Tiger Airways' affiliate Mandala but the Lion Group will mainly use its powerful budget brand to compete with these rapidly expanding LCCs.

South Korea's Asiana targets growth in 2013 within Asia, in advance of big long-haul growth in 2014

One of the highest growth rates in North Asia in 2013 will be from South Korea's Asiana, which is projecting a 9% increase in RPKs. This compares to 4% RPK growth at Korean Air and modest growth from All Nippon Airways and Japan Airlines. Many Chinese carriers will have similar or higher growth, but notably Air China will be lower as it runs out of slots.

The focus in 2013 for Asiana, globally the 54th largest airline based on capacity and sixth largest for intra-Asia international capacity, is regional flights, increasing capacity to cities including Chongqing and Yangon and launching new services to Denpasar and Jakarta. This traffic will help feed its long-haul network, due to commence notable expansion beginning in 2014 as A380s replace 777-200ERs, facilitating their re-deployment to new routes.

Singapore Changi traffic growth to slow as Qantas drops hub and AirAsia closes base

Passenger growth at Singapore is slowing significantly, making it very unlikely Changi will expand in 2013 its current streak of three consecutive years of double-digit expansion. Growth in the low to mid single digits will provide some breathing space for authorities to tackle increasing congestion problems. But Singapore authorities should still accelerate airport expansion, particularly the opening of a third runway, because the current congestion has already become an impediment to growth.

In the latest blow to Changi, AirAsia has decided to close its Singapore base. Shifting back to Malaysia the group’s small contingent of Singapore-based crews will have a very slight impact on total passenger figures at Changi. But it signals the challenges Changi faces as its LCC growth figures start to slow down while other airports in the region continue to record rapid increases.

The AirAsia decision follows Qantas moving its transit hub for European services from Singapore to Dubai, leading to a reduction in total Changi capacity of more than 2%.