Local airlines offer lower fares with more added value

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DESPITE soaring fuel costs, safety woes and the enduring flight ban into European skies, Indonesia’s local airline industry is taking a fresh maneuver with lower pricing policies and plenty more added value for the domestic passenger.
These past few years have seen regional airline passengers paying lower fares and traveling to more exotic destinations. Along with the advent of budget airlines such as AirAsia, Tiger Airways and ValuAir, Indonesia’s own local carriers have also been carrying out similar low-price strategies to fare better in the competition.
According to Arista Atmadjati, industry analyst and marketing specialist for PT Garuda Indonesia, the Indonesian air travel market has indeed grown over the past five years, particularly in the low-cost carrier (LCC) segment. As predicted by Atmadjati, the domestic air travel industry is forecast to earn Rp 60 trillion (nearly US$5.5 billion) this year, catering to about 40 million passengers nationwide. “As regional autonomy and provincial developments increase in number, we are seeing local airlines flying more frequently to new destinations such as Kalimantan, Papua and Sulawesi,” he said.
Even if a number of local airlines have folded lately — owing to various reasons from mismanagement to major deficits — there are others that have become better at making the grade and generating profit, such as Mandala, Batavia Air, Sriwijaya Air and flagship carrier Garuda Indonesia.
The issue of safety in air travel has also been subsequently raised with the commencement of Transportation Ministry’s Road Map to Safety, Security and Services (3S1C) program, not to mention routine audits, inspections, surveillance and compliance evaluations on national airlines and airports. “All in all, we can see airlines putting an obvious effort into increasing their safety standards these days,” said Atmadjati.
Meanwhile, the idea of more value for your money is ever optimized by airlines wanting to best capture the market’s demands. “The story of the Indonesian air travel industry is pretty simple: it’s of a mass consumer market with hardly any other efficient way to travel; and to top it off, it has had a terrible reputation too,” said Warwick Brady, CEO of PT Mandala Airlines.
Mandala’s strategy as of July 2007 has been to focus on innovations in all areas of “quality, service, and affordability”. Apart from partnering up with the Singapore Airlines engineering company for plane repair and maintenance, Mandala is also planning on replacing its current fleet with one single fleet of Airbus A320s starting the end of this year, thanks to a planned economic boost from investors Indigo Partner and PT Cardig International Aviation.
In terms of fares, Mandala offers three options for the passenger: the Ultra Saver and Ultra Flexible tickets for mass customers, and the Mandala Priority for corporate users. All this is supported with a comprehensive call center and e-ticketing system as well as various payment alternatives including through credit cards, ATMs and, most lately, a micro-payment system using mobile phones.
As Brady further explained, in 2007 when investment was first pitched up, the airline’s first priority was to provide safe, reliable, on-time, well-maintained service while getting costs down. “Now, we are the third largest airline in western Indonesia by number of passengers, and our business has tripled in size,” he said.
Asked how the airline could manage the balance between its higher cost of operation and lower pricing policy, Brady recounted: “Mandala is definitely not trying to cut corners by compromising safety, service or quality. We employ management experts who know how to keep costs to be fully self-sufficient.”
A similar attitude toward keeping fares low is also shared by Batavia Air, another local airline that has been subject to constant growth in recent quarters. Today, Batavia flies to a number of domestic destinations as well as international ports such as Guangzhou in China and Kuching in Malaysia. It is currently planning flights to the Middle East and Australia as well as other Southeast Asian destinations. “The Indonesian market is still pretty large due to a large number of its population living scattered across islands, so that they are still dependent upon air transportation for running business and social activities,” said Eddy Haryanto, PR manager for Batavia Air.
Batavia positions itself as a low-fare carrier. Unlike other LCCs, however, it provides complimentary snacks, light meals and heavy meals on all flying routes, on top of implementing an e-ticketing and e-cargo system to ease customers when making a reservation either via online or through travel offices and agents.
Safety also features as Batavia’s primary concern. “To comply with regulations set by the Transportation Ministry, we have extensive training for all crew that comprise, among others, simulations for Boeing 737 series including the 737-200,” explained Haryanto.
“There is also cabin simulation for flight attendants to act in emergency situations, classroom training, and a full hangar facility at Soekarno-Hatta Airport to perform repairs,” he added.
Yet all the facilities would have been in vain if it were not for the airline’s efforts to keep fares down. As said by Haryanto, “While we believe that service, comfort and in-flight entertainment can help in the competition, low fares continue to be one of the main considerations for our customers.”
It is the dilemma between managing the high cost of operations and the low pricing policy that has seen the collapse of some of Indonesia’s most respected airlines to date. And it could simply be from mistaking oneself to be a full-service carrier — when one actually isn’t. “The most basic concept of a low-cost carrier is to transfer passengers from one point to the other, which requires no food or beverages,” Atmadjati pointed out. “Elsewhere around the world, LCCs also operate at second-tier airports and run an exclusively Internet booking service.”
In Indonesia, however, LCCs depart from international airports, offer in-flight magazines and run a 24-hour call-center service whose infrastructure is undoubtedly costly to build. “So long as the airline can work out a system to balance out cost with its pricing policy, it is of course entitled to its own style and character,” said Atmadjati.
Brady, who was once positioned as former deputy office director for the global low-cost flier Ryan Air, agreed with the notion. “Coming from an LCC background myself, I can say that the Indonesian market is not as black and white as distinguishing yourself between a low-cost and a full-service carrier. “The structure of society is very different here. Indonesia is an agent-driven market with a strong ‘helper’ culture whereby customers will demand to be cared for — and they will demand no less than quality, service and affordability,” he said. (Andrea Tejokusumo
The Jakarta Post, November 04, 2008