Garuda eyes mainland market
Garuda Indonesia, the only full-service airline in Indonesia, believes mainland tourists to Indonesia will double in a few years' time due to closer economic ties between China and Southeast Asian countries.
Nearly one in every 100 tourists from China who travelled overseas last year visited Indonesia, equivalent to about 500,000 passengers. But the share in the tourism market was low and had severely lagged growth in economic ties between the two nations, said Emirsyah Satar, president and chief executive of Garuda.
The carrier has joined hands with Ctrip, the popular online ticketing agent, to sell a Garuda package tour on the mainland through a joint venture, Garuda Orient Holidays. This has freed it to devote more resources to marketing its services to individuals and corporate clients.
'Air traffic within the region, including flights to China, will continue to grow this year,' Satar said.
In December, Garuda increased its service from Jakarta to Shanghai from four flights a week to a daily flight; and it now flies to Beijing from Jakarta five times a week, up from its previous three times a week. Both services deploy Airbus A330-200s, while its daily Guangzhou-Jakarta service is on a Boeing 737-800.
Satar steered the carrier out of hefty-loss-making operations in 2004 and 2005 into profit in 2007 by an aggressive restructuring programme. Now the airline faces a new challenge to its profitability posed by an aggressive new entrant into the market.
Lion Air, an Indonesian budget carrier, made the headlines during the Singapore Air Show in February when it ordered over 200 new aircraft from Boeing, including 201 737 Max jetliners which Boeing is still developing, and 29 B737-900ERs in a pact valued at US$22.4 billion at catalogue price.
Its full-service subsidiary, Space Air, will take on Garuda's monopoly later this year. Garuda welcomed the competition, Satar said. 'It gives passengers a chance to evaluate and differentiate our service from the services of others.'
Garuda is also expanding and plans to increase its fleet of aircraft to 194 by 2015 from 92 aircraft at present, including 17 wide-bodied planes. In a response to Space Air's challenge, its low-cost subsidiary, Citilink, will increase its fleet size to 50 from 12 at present.
Dependence on airborne transport is high in Indonesia, which is composed of over 17,000 islands, of which some 6,000 are inhabited, and this explains why 11 of the 12 airlines serving the domestic market are low-cost carriers.
The number of new aircraft ordered from Boeing by Garuda rival Lion Air, which plans to start full-service operations this year