The fate of Indonesia’s airlines amid the pandemic

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Chappy Hakim Air Force Chief of Staff (2002-2005), author of Tanah Air Udaraku Indonesia (“My Aerial Homeland, Indonesia”)

IO – To quote various news sources published throughout 2020, the COVID-19 pandemic has caused the bankruptcy of scores of airlines worldwide. The list of bankruptcies includes names such as Air Italy; Atlas Global (Turkey); Cathay Dragon (a Cathay Pacific subsidiary in Hong Kong); AirAsia Japan; NokScoot (Thailand); Compass Airlines (the US), Trans States Airlines (the US); Virgin Australia, TAME Airlines (Ecuadorian Government airlines), LATAM Airlines (the US), biggest airline in Latin America; One Airlines (Chile); Flybe Airlines (the UK); Air Mauritius; and Ravn Alaska. 

Last and most dramatic in this list of bankruptcies is Colombia’s legendary airline, Avianca. The airline, born a mere 16 years after the Wright Brothers’ first flight in 1903, shut down in May 2020, a victim of the COVID-19 pandemic, after having operated for over 100 years. The situation is so bad that even seemingly-resilient companies like Thai Airways and Philippine Airlines are said to be “on the way” to bankruptcy. 

How Things Are in Indonesia 

Airlines in Indonesia have been facing various serious issues since 2018-2019 – even before the COVID-19 pandemic appeared as a scourge. We recall how at the time airlines in Indonesia just left the long battles of the low ticket prices era, with few survivors. As there is no more competition, the relatively few airlines left sense consolidating as a survival solution, getting ticket prices back onto a normal curve. 

The bounce back of ticket prices came as a “sticker shock” to consumers who were already lulled by unrealistically cheap prices. The backlash emerged from various groups – not just end-consumers who use air travel services, but other relevant side businesses: travel bureaus, hotels, restaurants. As expected, after airlines stopped bearing their losses in the price war, the return to “proper” prices gave rise to accusations of oligopoly and price inflation, of fleecing passengers and cargo deliverers, of obstructing the economy. Now, even before this brouhaha gets resolved, the COVID-19 pandemic appeared to smack down the situation. Be sure that the handful of surviving airlines in Indonesia are feeling extraordinary pressures. 

Opportunities 

Amid the complex problems hitting the global flight service and industry as a whole, Indonesia itself still has promising potential in developing its air transport sector. The domestic passenger flight market continues to provide hope for the airline business. Air cargo and charter flight businesses continue to shed a bright light for air transportation as a whole. However, it would only be true if the airlines running the services are wholly healthy and reliable. 

It’s very cheap to lease airplanes nowadays. Furthermore, finding crewmembers and land staff is relatively easy, as the market is quite open. Again, it is a golden opportunity for airlines with no financial or management problems. This is why whispers of new airlines that will operate domestically appear. 

The point is, all potentials of existing opportunities favor new, healthy airlines. It’s not possible for large airlines, especially if they’re in trouble. But why? No matter what huge airlines do, with such shrunken market nowadays, they will not be able to cover the costs of their business just from possible profit margins. It’s just too little to do any of them any good. On the contrary, new airlines are a fresh start. They have just the right scale, structure, and posture to match up with the current market conditions. The problem is, resetting or rebooting an airline, especially those large ones with hundreds of airplanes and thousands of crew and staff members, is not as easy as resetting or rebooting a smartphone. 

Let that sink in. Let the smart minds among us find the way out to rejuvenate the national air scene. And let’s hope that the current vaccination effort and our joint work to mitigate the COVID-19 pandemic can succeed sooner instead of later, so we can turn around the fate of Indonesian airlines.