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Indonesia's domestic carriers could lose out on start international routes

INDONESIA's Minister of Transport, Ignasius Jonan, has warned domestic air carriers that if they are unable to add international routes to their network, the government would offer them to foreign airlines that are knocking at the door.

"The policy is that we will first offer any international routes to our domestic airlines. But airlines like Emirates and Etihad have come to us and asked about more access, and I have said if the domestic airlines are not ready we will offer routes to international carriers," Mr Jonan told delegates at the AAPA's gathering of airline CEOs in Bali recently, the IHS Media reported.

"I love competition, and through competition domestic airlines will grow even better."

The minister's comments come after flag carrier Garuda Indonesia reported a 123 per cent increase in net profit to US$51.4 million in the third quarter compared to the same period last year, despite the country's sluggish economy. Cargo revenue accounted for 10 per cent of the total revenue, coming in at $37 million.

Liberalising air routes provides major benefits to shippers, giving them additional air cargo options and more direct access to important markets, with the increased competition between airlines reducing freight rates.

While Mr Jonan was referring to passenger airlines - Indonesia has a vigorous low cost carrier airline industry - if international carriers such as Emirates or Etihad were granted additional routes to Indonesia they would be served by wide body aircraft bringing 25 tonnes of belly cargo capacity each.

Indonesia is a vast archipelago that is served by a busy domestic air cargo transport business. Garuda is the largest carrier in the country and one of its key focus areas is growing the domestic network.

Garuda Indonesia director of commercial Handayani said the carrier would use its current belly cargo space as it expanded frequencies within the country, although there may be a need for small freighters in the future.

"There is enough demand for a small freighter but for now we will optimise our current fleet," she said. "The cargo is there and as we expand our domestic coverage we expect the cargo demand to grow."

Garuda is also expanding outwards and in January will launch new flights from Denpasar in Bali to Beijing and Guangzhou while adding capacity to the Middle East.