Celebrating its eighth anniversary on June 30, Lion Air is to expand its business by serving more international routes, in the Asia-Pacific region in particular, and is eying international airlines to acquire.
Lion Air, known as the low-cost carrier trendsetter, is the first airline in the world operating the newest Boeing 737-900ER.
The company, which currently controls almost 35 percent of the Indonesian market, began its domination of the industry when it ordered 178 units of Boeing 737-900ER in 2005.
The first delivery of seven aircraft arrived last year, with eight more expected this year. All aircraft will have been delivered by 2016.
Lion Air's president director Rusdi Kirana, who is also the former chairman of the Indonesia National Air Carriers Association (INACA), shared his company's plans and business strategy with The Jakarta Post's Dian Kuswandini.
Question: What are the reasons behind Lion Air's plan to expand? Answer: Everyone is talking about how globalization will lead to an open-sky market. For some, it's a threat to the local airline industry, but for me, it's an opportunity to expand. I'm not letting Lion Air become only a spectator. That's why we have set plans to go regional and have ordered 178 units of the latest Boeing 737-900ER to support the plans.
Recently, we opened routes to Vietnam and Singapore. By the end of this year or early next year we'll fly to Hong Kong, followed by routes to China, Australia, Saudi Arabia, Jeddah, Riyadh and India. We already obtained the permits for all of the routes from the Transportation Ministry.
We'll also acquire some airline companies in other countries, like Australia, Thailand and Malaysia. But it's still in process.
With Lion Air's strong capital and continually growing human resources of some 5,000 people -- 400 pilots and 700 aircrew members -- I'm positive about our plans.
How will you finance your plans?
We have many options, like banks, sponsors and leasing companies. Some of our aircraft are rented while some are paid in installments. In terms of funding, finance firms will consider the company's reputation and its country of origin.
Lion Air has never been in bad debt and has been one of the most favored airlines here; that's why we get financial support easily. The finance firms see Indonesia as a big and promising market.
Soaring oil prices have hurt the airline industry. How do you deal with price rises, especially when Lion Air is a low-cost carrier?
The soaring oil prices is really a dilemma, but it's not the end of everything. It's like natural selection, and the best will survive. Our strategy is to use new aircraft as they're more efficient in fuel consumption and provide greater capacity. For example, the old Boeing 737-200 only has 110 seats and its fuel consumption is 3,500 liters per hour. The new 737-900ER has 213 seats and its fuel consumption is 3,300 liters per hour.
Before the oil price increases, 30 percent of the company's operational costs went to fuel. Now, it's around 50 percent for new aircraft and 80 percent for the old ones. So, there's a big gap there.
Yes, new aircraft are more expensive, but their maintenance costs are lower compared to the old ones.
The local airline industry has been accused of ignoring safety standards, which has led to many accidents and being blacklisted by the EU. Your comments?
Air transportation is like a celebrity; a little mistake will spark gossip and blame. Even a troubled tire could be a headline. Other modes of transportation, like buses, could have worse accidents, but people pay less attention to them.
There's widespread gossip saying airlines fly with limited fuel in order to save costs. That's very wrong. No airline would want to take the risk of having an accident in fear of being bankrupt.
As for the EU ban, I see it as something unfair. Logically, before you ban something, you should first issue a warning. A ban is imposed when a warning is ignored. So, the EU should give airlines a chance before imposing bans. There should always be room for improvement. We learn form our mistakes.
Has Lion Air also learned from mistakes?
Of course. From past accidents we've learned that good human resources are nothing without good systems and technology. You can have the best pilots, but after all, they're just humans. They can be tired sometimes.
Understanding this, we have supported our employees with the latest systems and technology in our new aircraft. For example, we have FOQA (Flight Operational Quality Assurance) systems that allow us to monitor our pilots while doing their jobs.
Their activities are recorded and if they don't meet the required standards, they have to be trained again.
Another system we use is the Geneva system, which provides data on our employees. For example, if a pilot or an aircrew member tries to work overtime, the system will reject them and they're not allowed to fly. Our rule is, a pilot can't fly more than 80 hours per month.
We also have the Trax system, which allows us to track our maintenance activities and detect locations of our spare parts. The system will warn us when it finds a plane is in poor condition.
We also have the ACARS (Aircraft Communications Addressing and Reporting System), which informs us of our planes' conditions when they're in operation. The system transmits the data to our office, so we always know when our planes are having trouble.
Our other technological device is Radar 4000, a 3-D device. While ordinary radars can detect a mountain, for example, this one can detect what's beyond the mountain.
Mid next year, we'll also use the Stabilizer Approach Monitor (SAM) system. It will give early warnings to pilots with alarms if they are likely to have unstable landings, whether its because they are at too high a speed or to high an altitude.
With these latest systems, we'll start phasing out our old aircraft in September.