Lion Air joins the premium carrier competition

FOLLOWING on the heel of Qantas’ announcement that it would set up an Asia-wide premium carrier – RedQ – to be based in either Kuala Lumpur or Singapore as part of a restructure to stem the loss of its international operations arm, AirAsia said it would also introduce a premium carrier – Caterham Jet – that will operate from Kuala Lumpur to destinations that include Singapore, Jakarta and Bangkok. At the same time, compatriot Malaysia Airlines also announced its plans for a new premium carrier. It is likely that this will be a collaborative effort with AirAsia although it is not known if Malaysia Airlines is also talking about Caterham Jet.

The focus seems to have shifted from budget carriers to regional premium carriers as Indonesia’s Lion Air becomes the latest airline to join the regional premium carrier competition. However, while Qantas, AirAsia and Malaysia Airlines plan to fly their offshoots in 2012, Lion Air’s Space Jet will not take to the skies until 2013. It will begin with operations within Indonesia, looking to increasing its share of the domestic market from 47 to 60 per cent, before going international.

According to Lion Air’s president-director Rusdi Kirana, the move was necessary to ensure that the airline company remains competitive. The rationale may sound all too obvious, but its relevance cannot be ignored. Lion Air as a hybrid carrier that offers both economy and business classes faces stiff competition from budget carriers as well as full-service airlines, most of whom are driving a two-prong strategy to capture the full spectrum of the market. The situation will become critical with complete liberalization of Asean skies in 2015, if Lion Air chooses not to go where its rivals are heading.

Lion Air is Indonesia’s largest private carrier, operating to more than 60 destinations (the majority of them domestic), but it suffers from a poor reputation of safety concerns. It is banned from operating to the European Union and denied membership of the International Air Transport Association (IATA). According to the Indonesian transportation authorities, Lion Air recorded the worst on-time performance (OTP) out of six airlines nationwide in a survey conducted from January to April this year.

That has not deterred Lion Air from continuing to expand its network. The airline made headline news in November when Boeing announced its biggest order ever – 230 airplanes with a list price of almost US$22 million. Including options for another 150 aircraft, the total deal would add up to more than US$35 million.

It looks like Lion Air is serious about its intent and is ready to impress the world – if it could in the meantime work at improving its OTP and allay concerns about its poor safety record.

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About David Leo
David Leo has more than 30 years of aviation experience, having served in senior management in one of the world's best airlines and airports. He continues to maintain a keen interest in the business, writes freelance and provides consultancy services in the field.

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