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AirAsia seeks govt support to explore more RI destinations

by June 13, 2016 General

Once an ailing airline struggling with debt, Malaysia-based budget carrier AirAsia has successfully transformed itself to become one of the most successful airlines in the region while working to achieve its noble vision: democratizing air travel by offering low fares and high quality service. Despite a market slowdown, AirAsia has so far become the world’s best-performing airline stock this year. In Indonesia, the company manages two units — Indonesia AirAsia (IAA), which operates a fleet of 29 Airbus A320s, and Indonesia AirAsia X, the country’s first long-haul, low-cost carrier — and has become a serious competitor for major local low-cost airlines, including Lion Air and Citilink. Last week, AirAsia Group CEO Tony Fernandes invited The Jakarta Post’s Farida Susanty to his office in Kuala Lumpur to discuss the company’s business strategy, his vision for the company’s Indonesian units and his response to the recent launch of the world’s biggest alliance of low-cost airlines to challenge the company’s stronghold in the business. The following are excerpts of the interview.

Question: You keep saying that Indonesia is more than just Bali. How do you envision the country’s aviation industry in the next few years?

Answer: We want to invest more [in Indonesia]. That’s why we’re after a change in Indonesian regulations. We think that domestic flights are already well-covered as Citilink, Lion Air and Sriwijaya Air are doing a good job. We also contribute a little.
However, our strength is in international [flights] and this is the reason why our [international] flight to Bandung [West Java, Indonesia’s fourth most-populous city] is always full. No one flew to Bandung before us. So we want to do more Bandung [flights]. We have 55 million international passengers that we can bring to Indonesia. So, what do we need? Well, we need the regulations on ownership to change. We would like taxes for leasing and fuel to be more market-driven. We would like the Indonesian government to look at smaller airports. I said to the Indonesian government, for small airports that have no international flights, why don’t they bring down the charges [for airlines], so at least we can try some direct flights from Thailand, Malaysia, Singapore or even China?

The government is developing small airports, like for example Silangit Airport near North Sumatra’s Lake Toba. Would you fly there?

We would. You open the newspaper and see the ticket price is RM 50 [US$12]. You are willing to try. However, if your airport tax is already RM 50, then that will kill such enthusiasm. But if you’re in Jakarta and see a ticket price to Kota Bharu [Malaysia] selling for Rp 50,000 ($3.7), you’ll say “I’ll try it, why not?” even though you’ve never heard of the city. That’s what we’re trying to encourage. So we hope that the government sees it our way. I talked to Ibu Rini [State-Owned Enterprises Minister Rini Soemarno] about that and she was interested in the idea.

So, you will focus on international flights?

We’ll do better for domestic [flights], but I think it is already well covered by Citilink and Lion Air. But we’ll still do some. We have to. The Jakarta-Denpasar route is very good and Jakarta-Surabaya is very strong. But look, we are never going to be as big as Citilink and Lion. So, you just focus on what you’re doing.

How do you describe AirAsia’s strategy in Indonesia for the next five years?

To continue being the No.1 international airline, we will surely develop more Bandung flights. More direct connectivity will bring more people from China, India, ASEAN, to your amazing country and to allow Indonesians to see more of the world. That would be my dream for the next five years.

Your Indonesian partners might not be willing to spend more to invest at that time. What is your next move?

Wait and see. Maybe we’ll get some new shareholders then. We like exploring ideas.

Is it true that you are preparing a consolidation between Indonesia AirAsia (IAA) and Indonesia AirAsia X (IAX)?

No, no, no. The existing regulation [which stipulates that an airline must have 10 aircraft] has created this vague situation. What we’re going to do is we’re going to bring down IAX to a charter airline, and IAA will remain as it is. We have to try to change the regulation. It’s a shame. IAX is flying to Australia and China, but we cannot fulfill 10 aircraft in one year. It’s impossible. The rule, the law, has a fault. Because buying 10 aircraft, 10 wide-body aircraft, will require a lot more money than buying turboprops. But the rule is the same, 10 aircraft. So we’ll downgrade, we’ll work with the government and hopefully we can change the rule.

The government issued over 100 regulations last year, including in the aviation sector. What are the ones that hamper the sector’s growth?

I always talk to Transportation Minister [Ignasius] Jonan. We don’t always agree. But I think that fuel pricing is a regulation that should go. We’re talking. It came down from 40 percent to 30 percent. So I think it should go completely. I’m not the regulator. He’s listening. We need to bring more tourists to Indonesia. So my suggestions are driven toward reducing airport charges, reducing tax, on the ownership regulation, it’s all about creating more tourists.

What do you think about the recent launch of the Value Alliance (an alliance formed by low-cost carriers in the Asia-Pacific region)?

It’s a Mickey Mouse alliance. It’s confusing. Go buy a ticket for the Value airlines. Tell me the experience. I don’t even know how to buy one. I should never laugh at innovation. It’s always worth trying. But our philosophy is not in alliances. Can you imagine us and Lion Air and [Indonesia’s flag carrier] Garuda Indonesia working together? Nightmare! It’s hard enough getting Indonesian, Thai and Malaysian [airlines] to work together. Can you imagine the picture with Japanese, Taiwanese and Australian [airlines] on board? Forget it. It won’t work.