12 September 2012
Lion Air, Indonesia’s largest privately-run airline, is intensifying competition in Malaysia’s skies by partnering with National Aerospace and Defence Industries Sdn Bhd (Nadi) to form a new low-cost regional carrier called Malindo Airways, with flights originating from the soon-to-be-completed klia2 in Sepang.
Under the joint venture, Nadi will hold a controlling 51% stake in the new airline and Lion Air the remaining 49%. Chandran Ramamuthy, currently personal assistant to Lion Air president director Rusdi Kirana, has been named as its chief.
Rusdi said the new LCC is expected to begin operations on May 1, 2013, with a fleet of 12 new 737-900ERs. It will add five 787-8 Dreamliners to its fleet, with the first four planes due for delivery in 2015 and the fifth in 2016.
"All these new aircraft will come from Lion Air’s current order book. The plan is to add 12 new planes to the fleet per year, bringing the total to about 100 in 10 years," he told reporters after the signing of the joint venture agreement between Nadi and PT Lion Grup, parent company of Lion Air, yesterday.
Malindo Airways will initially focus on short-haul flights that are less than four hours, but will begin operating to destinations that are 11 hours in 2015 with the delivery of the 787-8s.
"The idea is to operate flights from all cities in Indonesia to our Kuala Lumpur base and from here, fly to major countries in Asia such as China, Hong Kong, India and Japan and other Asean countries. We also plan to make Jakarta and Bali the hub for Malaysians to go to Australia," said Rusdi, adding the new LCC will also enter into code share arrangements with Lion Air or its sister carriers namely Wings Air and soon-to-be-launched Batik Air, if needed.
Registered in Malaysia, Malindo Airways expects to apply for an air service licence from the Department of Civil Aviation Malaysia this week, after which it will decide on the routes to fly.
Industry observers see Malindo Airways competing head-on with Malaysia’s own AirAsia Bhd, which recently shifted its regional headquarters from Kuala Lumpur to Jakarta – Lion Air’s home ground. AirAsia is also in the midst of acquiring Indonesia’s privately held budget airline Batavia Air.
An observer said Malindo Airways will fill the gap where Firefly left off, when the unit of Malaysia Airlines discontinued its jet operations last year following the national carrier’s share swap with AirAsia.
This is not Lion Air’s first attempt to enter Malaysia’s aviation industry. Last October, Berjaya Land Bhd had terminated its JV agreement with Lion Air as both parties could not finalised the terms of the shareholders’ agreement and other related arrangements. Berjaya and Lion Air were supposed to jointly operate, manage and develop the business operations of Berjaya Air on a 51:49 equity basis.
However, Rusdi was quick to say Malindo Airways will not compete with AirAsia as the new airline will be positioned between a full service carrier and a LCC.
Meanwhile, the partnership between Nadi and Lion Air will also see them working together in the areas of maintenance, repair and overhaul (MRO) services, supply chain management, and human capital development.
Lion Air currently commands a 45% share of Indonesia’s air travel market. It carries about 100,000 passengers on 600 flights daily, operating a fleet of 100 aircraft and has 382 new planes on order.
Its load factor is 90% to 92% per year and it services 72 destinations across Indonesia and regional Asia.
Rusdi expects Lion Air to carry over 30 million passengers this year, with 15.6 million recorded in the first quarter. Last year, it carried 27.6 million passengers.