Mandala, Indonesia AirAsia and Citilink to benefit most from Batavia bankruptcy

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.