Market Outlook 2012 Passenger Trend (Indonesia) Trend On Regional Airline Business

1. Passenger Trend (Indonesia)
Trend On Regional Airline Business
CSE Aviation
www.cse-aviation.biz

2. Passenger Trend (Indonesia)
In 2003 there were 26 airlines operated
in the sky of Indonesia – compared with
only 7 (seven) airlines before the crisis.

3. Passenger Trend (Indonesia)
Flight route
Airport

4. Passenger Trend (Indonesia)

5. Passenger Trend (Indonesia)

6. Trend On Regional Airline Business
By Edwin Soedarmo - President Director CSE Aviation
Some turboprop
manufactures already
discussing potential
New Generation
Regional airline business development in recent years has quite frequently become Turboprop (NGTP), 90
topics of discussion, particularly in Indonesia where many of the air operator to 100 seats
found that it is a promising business but mostly ended up with difficulties. Re- capacity, with regional
collecting from several references and data base owned by CSE Aviation, the air operators
materials obtained are reviewed and presented in this brief market study.
Regional airline operators provide flight services between small cities within a
country and also to small cities in the neighboring countries where it should also
have a strong relationship with one of the region’s major airlines as a complement
for the base network. However, there are also regional point to point services
provided by the mainline carriers themselves that blur the distinction between
regional and mainline aircraft.

7. The regional operations in Indonesia are diverse, they fly mix between
turboprops and regional jets, and generally most of them serve niche markets
where profitability can only be achieved through strong financial discipline. The
keys success in the typical niche markets operation for regional airline business
are the efficient connectivity, the right capacity and the right cost.
Business Trend
• Average aircraft capacity, average stage length and block time have risen in
the last decade (global trend)
• With fuel price rising and turboprop aircraft’s growth to 60 seats, regional jet
sales have decreasing while turboprop sales increases (see chart of Global
Regional Aircraft Seats)
• Based on the above data, it would be rather logical to predict that the trend
of aircraft demand would be for turboprop with 90 to 100 seat capacity
• Some turboprop manufactures already discussing potential New Generation
Turboprop (NGTP), 90 to 100 seats capacity, with regional air operators
• The regional airline business in Indonesia (niche markets, with the biggest
regional operators in the region), typically generates low margin. Therefore
it is logical to expect that there will be a certain consolidation as to seek for
the economic of scale

8. Business Model (Global)
• Typically private held
• Tend to be smaller niche player that interline with major carriers
• Tied into long-term, fixed fee contract with major carriers. The major airline typically pay for the fuel
• Regional carriers can set their own schedule and pricing but take the risk by paying for their own fuel
• Some countries may granting Public Service Obligation (PSO) tenders for routes that would not otherwise
be commercially viable. The PSO is divided into many smaller tenders and renewed every four (4) to five
(5) years. The smaller the tender, the more difficult it is to operate commercially
• Other regional operators may operate under “Capacity Purchase Agreement”