Citilink will operate as budget airline

Friday, January 27, 2006

The Jakarta Post, Jakarta

National flag carrier Garuda Indonesia plans to spin off its low-cost unit, Citilink, as an independent company within the first semester of this year in order to keep pace with the fast-growing competition from local budget carriers.

Joseph Saul, the Garuda vice president with responsibility for Citilink, told The Jakarta Post Wednesday that by operating as an independent airline, Citilink would be better able to compete with its low-cost rivals.

"We are now discussing the possibility of leasing another 10 Airbus 319s to support the operations of the new budget airline," he said.

An extra 10 Airbus 319s, each with a capacity of between 120 and 140 passengers, would greatly augment Citilink's capacity. It currently operates a fleet of five leased Boeing 737s.

Garuda's executive vice president of finance, Alex Maneklaran, told the Post earlier that Citilink would hold a tender for the extra planes so as to secure the best deal. Citilink leases its current fleet from GECAS, the Singapore branch of an American leasing firm.

Maneklaran added that Citilink was seeking out another low-cost carrier to serve as a strategic partner so as to improve its systems and management.

With the new aircraft, Citilink will be in a position to expand its domestic services. It currently flies from Jakarta to Surabaya (East Java), Pontianak (West Kalimantan), Batam (Riau Islands), Banjarmasin (South Kalimantan), Balikpapan (East Kalimantan), Mataram (West Nusa Tenggara), Pekanbaru (Riau) and Medan (North Sumatra).

"Last year, Citilink carried around 700,000 passengers. This year, we hope to carry about one million," Saul said.

According to the Transportation Ministry, Citilink currently has a 2.4 percent market share.

Maneklaran said Citilink was hoping to increase its load factor to 80 percent this year compared to 70 percent last year. "We will be profitable if we can increase the load factor to more than 75 percent," he said.

The establishment of Citilink as a low-cost division of Garuda some years ago was intended to help the national flag carrier come to grips with the growing competition from the country's budget airlines.

However, as the competition gets even fiercer, Garuda now feels the establishment of an independent low-cost carrier will be a more effective way of competing with the country's existing low-cost carriers, such as AdamAir, Lion Air, Batavia Air, Sriwijaya, Mandala, Efata Air, Lorena Airlines and Indonesia AirAsia, which is 49 percent owned by Malaysia's Air Asia, one of the most successful budget airlines in the region. (03)