Garuda Indonesia and Sriwijaya respond to Lion by forging partnership

Premium Analysis

Indonesian airline groups Garuda and Sriwijaya have forged a partnership which will lead to a codeshare between all four of their airline subsidiaries. The two former rivals have joined together to fight off their larger competitor, the Lion Group, in a challenging domestic environment. 

The Indonesian domestic market is the fifth largest in the world and one of the fastest growing, with passenger numbers tripling since 2005. However, competition has intensified despite consolidation, resulting in overcapacity. All the main Indonesian domestic airlines were unprofitable in 2017. 

The Garuda-Sriwijaya partnership, which will also involve the Garuda LCC Citilink and Sriwijaya's regional subsidiary Nam Air, should improve the two groups' long term position and could potentially lead to a merger. However, there will be significant short term costs as Citilink Sriwijaya and Nam add codeshare functionality that could make it more difficult for the two groups to return to profitability in 2018. 

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