Lion Air Plans Asia, Australia Ventures Using 1,000-Plane Fleet

02 April, 2013 | Source: The Jakarta Globe

Lion Mentari Airlines plans to set up ventures across Asia and Australia to expand after placing orders of more the $45 billion with Airbus and Boeing in the past two years.




Indonesia’s biggest private carrier is considering partnerships in Thailand, Myanmar, and Vietnam, Commercial Director Edward Sirait said in an interview on Monday. Lion Air, which has the world’s biggest order backlog for 559 narrow-body aircraft, aims to have 1,000 planes in 10 years, he said.

The carrier’s plan mirrors the strategy of AirAsia Bhd. that has set up ventures across the region to become Southeast Asia’s biggest discount operator. Singapore Airlines Ltd. and Qantas Airways Ltd. are among companies that have also started budget airlines as Asia’s economic growth enables more people to fly for the first time.

“The economic growth in this region has been strong and this will translate to Air travel demand,” Sirait said. “Lion Air is anticipating this by ordering these aircraft early. We want to set up partnerships in a number of countries.”

The airline is also setting up a Malaysian venture to challenge AirAsia’s grip on the region’s budget travel market. Malindo Airways, which will draw its fleet from planes ordered by Lion Air Group, aims to start flights this year.

Virgin, Tiger

Lion Air, based in Jakarta, is considering the venture in Australia as Qantas seeks to defend its 65 percent market share in that country amid rising competition. Virgin Australia Holdings, which sold a stake to Singapore Air last year, is also seeking to build on alliances by acquiring Tiger Airways Holdings, Australian unit and regional carrier Skywest Airlines.

State-owned Garuda Indonesia last week said it would start a Sydney-to-London flight via Jakarta in the fourth quarter, competing with Qantas and Singapore Air. Qantas has formed an alliance with Emirates to cut travel times to Europe by using the Gulf carrier’s Dubai hub.

More than a dozen discount carriers began operations in Asia-Pacific in the past 15 years. Budget carriers’ market share in Asia-Pacific rose to 24 percent last year from 1.1 percent in 2001, according to CAPA Centre for Aviation, an industry consultancy. Total traffic for the region will expand 6.4 percent a year during the next 20 years, Boeing has forecast.

Narrowbody planes

That has spurred airlines to order more aircraft. AirAsia has built a backlog of 359 narrowbody planes, according to Bloomberg Industries. The Malaysian carrier has set up ventures in the Philippines, Japan, Thailand, India and Indonesia.

Asia will be able to take in more aircraft as economic growth and a population of more than 3 billion people will sustain travel demand, Tony Fernandes, head of AirAsia, said last month. The region, which has 10 times the population of the U.S., has about a third of the number of aircraft, according to Fernandes.

Lion Air started operations from Indonesia in 2000 with one aircraft, according to the airline’s website. The carrier was the launch customer for Boeing’s 737-900ER, and currently serves more than 36 destinations.

Lion Air agreed to buy 234 Airbus planes last month, its second commitment in two years to purchase more than 200 planes. Most aircraft on its fleet will be used to service Indonesian operations, Sirait said. The airline has a total of 700 planes on order, including turboprop aircraft.

“The plan A that we have is to put all these planes that we have ordered into operation,” Sirait said. “We also have plan B: if some one is keen to lease our planes of course we will do it.”

 

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