Lion Air to join with Australia’s SkyAirWorld to operate international services – and maybe domestic

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) Centre for Asia Pacific Aviation, PREMIUM: Lion Air, Indonesia’s most successful new entrant airline, flying as Lion Air Australia, plans to start Australian operations later this year using a six aircraft fleet of new extended range B737-900ER, 215-seat aircraft. Lion will hold 49% of the new company, which is to be 51% owned by small Australian charter operator, SkyAirWorld.

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) Centre for Asia Pacific Aviation, PREMIUM: Lion Air, Indonesia’s most successful new entrant airline, flying as Lion Air Australia, plans to start Australian operations later this year using a six aircraft fleet of new extended range B737-900ER, 215-seat aircraft. Lion will hold 49% of the new company, which is to be 51% owned by small Australian charter operator, SkyAirWorld.

Initially Lion Air Australia is only looking at international routes, to Indonesia and southeast Asia, but the door is open to domestic Australian services also. It is hard to believe that such an attractive market (Qantas and Virgin Blue collectively project profits of around USD1.5billion for FY2008) would be ignored in order to fly notoriously low yielding services to Indonesia and Thailand. The B737-900ER has a range of up to 6,000km, so route options are extensive.

Service will range from extra cheap fares, through premium service. PT Lion Mentari Airlines is a hybrid low cost operator, operating domestic and international services to Singapore and Kuala Lumpur.

The initiative for Lion Air Australia came from the SkyAirWorld, whose head of flight operations, Rick Howell, has recently joined after spending seven years with Emirates Airline in Dubai; several of the other members of the management team have also spent long periods in the Middle East, mostly with military backgrounds.

SkyAirWorld was the first operator in Australia to introduce the Embraer-170 jet last year, the same type that Virgin Blue is to launch later in 2008. Lion Air is a substantial airline in its own right, with 122 B737s on order and will look to surf off SkyAirWorld’s Air Operator’s Certificate to ease its entry to the market – although specific changes will be necessary, to allow for the B737 type.

At a time when Australia’s domestic market is a global standout in terms of profitability, and where Virgin Blue’s majority owners, Toll Holdings, are looking for a buyer, almost any possible permutation of new industry leaders is possible. Last month, the Centre raised the possibility of AirAsia joining with Virgin Group to buy Virgin Blue back from Toll.

The Lion Air Australia/SkyAirWorld move is likely to stimulate knock-on responses from other interested parties. If nothing else, Lion Air Australia would provide a useful vehicle for another investor seeking to establish in Australia.

Meanwhile, Thai aviation authorities – much more protective of flag carrier, Thai Airways, and nervous following upsets over ownership of Thai AirAsia – have shown a cautious response to Lion Air’s announcement that it will also establish in that country. According to Lion Air President Director, Rusdi Kirana, Australia and Thailand were selected because it is “easier there for foreign investors to obtain permits”.

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