Press articles

Business Times - 18 Jan 2006 Tiger Air to set up second base this year by Ven Sreenivasan Singapore-based budget carrier Tiger Airways will set up a second base, outside Singapore, this year, according to its chief executive Tony Davis. 'We are currently in talks with a number of parties (around the region) and are very interested in setting up a second base in 2006,' he told reporters yesterday. 'We will announce it this year.' He declined to reveal details, but it is likely to be a similar arrangement to that made by its Malaysian rival AirAsia, which has 49 per cent-held associates in Thailand and Indonesia respectively. Industry sources believe that the Singapore Airline associate's second base could be either in Malaysia or Thailand. Last year, the Malaysian media reported that Tiger was in talks with a prominent partner like Penerbangan Malaysia, a subsidiary of national investment vehicle Khazanah Nasional and the operator of Malaysia Airlines (MAS). Mr Davis himself has said that a tie-up with local partners would be one way to bypass protectionist forces that hinder governments from opening their skies to foreign airlines, particularly low-cost carriers that can undercut their national flag carriers. In Malaysia, loss-making MAS faces stiff competition from AirAsia, but does not have the resources to start its own budget carrier to counter the competition. And a majority partnership with Tiger may just be the way to do it. The move could also enable Tiger to operate flights from Singapore to various Malaysian destinations. Meanwhile, Tiger will know this week whether it can continue operating the Clark (Manila)-Macau route. Its temporary permit runs out this Friday. The airline is facing possible action from Philippine authorities following complaints from national flag carrier Philippine Airlines that it started selling tickets for the route months before commencement of its first flight in October 2005. But Mr Davis insisted that it was common practice for airlines to sell tickets once the in-principle approval was given. 'But contrary to some reports, we never started flights until we got proper authorisation,' he added. Tiger, which currently operates flights to 14 destinations, has flown about one million passengers since starting operations in September 2004.

Business Times - 19 Jan 2006 Ban on budget flights to big Indon cities to stay Secondary airports still open to foreign low-cost airlines by Ven Sreenivasan (SINGAPORE) Indonesia has insisted that it will maintain its bar on foreign low-cost carriers - LCCs - from flying into its major cities, although it will continue to welcome them at secondary destinations. The policy stance was reinforced yesterday by Santoso Eddy Wibowo, the director of air transport for Indonesia's Ministry of Transport, speaking to reporters at the sidelines of the Asia-Pacific Low Cost Airline Symposium. He dismissed any suggestion that his government was having second thoughts on the ban it imposed in March last year. 'We are not reviewing our policies on foreign LCCs with regard to the four major cities (Denpasar, Surabaya, Medan or Jakarta),' he said. 'However, there is no problem if they want to fly to our secondary destinations, subject to bilateral agreements.' He pointed out that besides these four cities, there were 23 other international airports dotting the archipelago. 'We encourage operators to help open up the tourist markets at these destinations,' Mr Santoso said. The Indonesian government surprised the aviation market in March last year by imposing a blanket ban on low-cost flights to Jakarta, Medan, Surabaya, Denpasar, Yogyakarta, Semarang and Bandung. This effectively prevented plans by Tiger Airways and Jet star Asia to operate between Singapore and various Indonesian cities. However, the then privately owned Valuair (now controlled by Qantas, together with Jetstar) managed to retain its Singapore-Jakarta route. And late last year, Valuair obtained rights to fly to Surabaya and Denpasar in return for 'fifth freedom' rights granted by Singapore to Garuda. 'Fifth freedom' rights permit taking passengers between two foreign airports as part of a continuous operation also serving an airline's homeland. Mr Santoso said Valuair did not fall into the same no-frills, budget category as Tiger and Jetstar, at which the ban was targeted. 'In any case, Valuair got its Jakarta routes before the ban,' he said. Tiger continues to operate flights between Singapore and Padang in Sumatra, presumably because it is one of the 23 designated secondary destinations in the country. Indonesia's decision was seen as an effort by the government to protect loss-making national flag-carrier Garuda from the strong competition posed by foreign LCCs. Garuda owes some US$850 million to various banks and other creditors, and has been struggling to meet its repayment schedule. But Mr Santoso pointed out that Indonesia was served by many domestic airlines. 'We have many flag carriers in Indonesia,' he said. 'There are 19 scheduled flight operations and 36 non-scheduled operators in the country, who together carried some 29 million passengers in 2005.' In short, the market is too saturated at the moment to cater to foreign LCCs, particularly at its major airports, he suggested. Asked if Garuda had approached either Singapore Airlines or Temasek Holdings to take up a stake in the troubled Indonesian carrier, Mr Santoso said there had been no overtures made at the moment.

Business Times - 20 Jan 2006 Indon airline eyes 2008 S'pore listing In meantime, it welcomes any investor that can help it grow now ADAM Air, one of the most profitable privately held airlines in Indonesia, is eyeing a mainboard listing on the Singapore Exchange within a couple of years. Adam Air president-director Adam Adhitya Suherman said that his company was targeting a 2008 listing here and had already started preliminary discussions with SGX. 'At the moment, we are building up our business, fleet and network,' he said at the sidelines of the 3rd Annual Asia Pacific Low Cost Airline Symposium yesterday. The 24-year-old Mr Suherman added that his airline, which posted a profit in its first year of operation, would also welcome investors who could help it grow during its current phase of rapid expansion. Established in December 2003 with just two planes, the Suherman family-owned airline is one of the most successful carriers in the country of over 250 million people. Its fleet of 19 Boeing 737 planes operate on 22 routes, including its two international sectors: Medan-Penang and Jakarta-Singapore. Adam Air enjoys a domestic load factor of well over 80 per cent. But it fills only about 65 per cent of its seats on its twice-daily Jakarta-Singapore flights. Mr Suherman said that Adam Air would be ordering eight more planes this year to service new domestic and international routes, including a third daily Jakarta-Singapore flight, and new services from Singapore and Kuala Lumpur to Surabaya, Bali and Medan. It plans to have about 50 planes in five years. The new planes are likely to be of the new-generation Boeing 737, though Mr Suherman did not rule out the Airbus 320. Mr Suherman expects his airline to carry some eight to nine million passenger this year, double last year's four million. 'This is a country where almost 30 million people flew in planes last year,' he said. 'About 80 million people have mobile phones, and these are the kind of people who fly in Indonesia. Just imagine if each of them flies just one round trip a year.' He added that the Indonesian government's decision to remove fuel subsidies for land-based transport had made air travel more competitive and enabled airlines to compete effectively against intercity buses and trains. But even without this unexpected boost, Adam Air has proven to be one of the most profitable airlines in the country which has 19 scheduled airlines and 36 non-scheduled operators. However, Mr Suherman declined to reveal the actual profit numbers. 'Our Ebitda (earnings before interest, tax, depreciation and amortisation) margin last year was about 35 per cent,' he said. 'So you can work out the numbers.' While seeking to raise capital for organic growth, Mr Suherman said, Adam Air could also seek acquisitive growth by buying into its smaller domestic rivals. Mr Suherman said he had been in talks with the Civil Aviation Authority on the possible use of the new Changi Budget Terminal. But he added that Adam Air, which he described as a 'boutique airline' positioned between the low-cost carriers and the legacy carriers, would continue using Terminal 1 for now. 'We have to consider several service factors,' he said. 'For example, our passengers seem to prefer the convenience and comfort of the aerobridge. And we already enjoy three or four years of free landing fee, as an incentive from the CAAS. So we don't mind paying for the convenience of the aerobridge.' Aerobridge charge is around $125 per docking at Changi. Meanwhile, Mr Suherman added, the bigger priority for Adam Air was to continue on its steady growth path as it heads for a Singapore listing.

Air Transport Intelligence news New low-cost airlines planned in South Korea Leithen Francis, Singapore New low-cost airlines are being planned in South Korea even though the country’s first such operator, Han Sung Airlines, has faltered. Korea Transport Institute director of aviation research, Kim Yeon Myung, says a new low-cost carrier is preparing to launch in the south-western city of Kwangju. He also says the two dominant carriers in South Korea, Asiana Airlines and Korean Air, are looking at possibly establishing low-cost subsidiaries but Kim fails to elaborate. Kim does not say who is behind the new carrier planned for Kwangju or whether it is owned by local government or private interests. Kim made his remarks during a speech to the Asia Pacific Low Cost Airline Symposium in Singapore. The South Korean domestic market is controlled by Asiana and KAL but mid-year a new regional carrier, Jeju Air, is aiming to launch with services from its base on Jeju island. South Korea also has a low-cost carrier called Han Sung Airlines but it only has one aircraft, an ATR 72, and late last year suspended all operations for what it said would be a temporary period. Kim says Han Sung, which has a licence for non-scheduled passenger services, suspended operations “due to financial difficulties”. “They had a minor incident...and after that passenger load factor decreased from 87% to 10% so they stopped operating,” says Kim, referring to an incident last year that led the local media to question the airline’s safety.

Air Transport Intelligence news Indonesia to maintain restrictions on foreign LCCs Leithen Francis, Singapore Indonesia has no immediate plans to abolish its controversial policy that bars foreign low-cost airlines from operating to the country’s four most popular destinations. Santoso Eddy Wibowo, director air transportation at Indonesia’s Ministry of Air Transportation, says overseas low-cost carriers from countries including Singapore are prevented from operating to Jakarta, Denpasar (Bali), Medan and Surabaya but are welcome to serve other cities in Indonesia. “The four main cities are already developed [in terms of air services] and we want to scatter and spread out the development” to other parts of Indonesia such as the city of Padang, where a new airport has been built, Santoso told ATI on the sidelines of the Asia Pacific Low Cost Airline Symposium in Singapore. He says the ministry is concerned that if it grants traffic rights to low-cost carriers to serve the “four big cities” the new entrants will simply take market share away from full-service airlines such as national carrier Garuda Indonesia. When asked if the ministry plans to abolish the policy over the longer term, he says: “We can’t say.” Singapore-based low-cost carrier Tiger Airways is one airline that is pushing for the ban to be lifted. It only serves one destination in Indonesia, Padang, but CEO Tony Davis says that “we are working hard to increase on that”. Davis told delegates at the symposium that Tiger wants to operate to other places in the country such as Denpasar, on the resort island of Bali, but is unable to because of the Indonesian policy. Indonesia’s tourism industry is suffering at the moment and “allowing airlines from overseas like Tiger to fly into Bali would create more tourism”, says Davis. He says Indonesia’s decision to bar low-cost carriers from operating to places such as Bali has meant Tiger “is putting its efforts into developing other markets”. “So it is the Vietnamese who are benefiting,” Davis adds, referring to the fact that Tiger now serves Vietnam’s three major cities, Danang, Hanoi and Ho Chi Minh City. “Liberalisation of air services is good for the citizens of countries we serve.”