Lion Air – World’s Fourth Largest Airline?

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Lion Air wants lots of planes! It has already placed two the biggest aeroplane orders in aviation history:

  • 234 Airbus A320 and A320neo aircraft valued at US$ 24 billion in 2013
  • 230 Boeing planes in 2012 worth $US22.4-billion
  • 44 ATRs on order– the largest order with that manufacturer

Now, the airline is talking to Canada’s Bombardier Inc.’ about their CS300 planes with a possible 100 plane order.
 

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With its other orders, the airline will grow their fleet from 120 planes currently to over 820 planes in a decade. This would propel Lion Air to the fourth largest airline by fleet size in the world, smaller than the current American Airlines but bigger than Southwest. Their fleet orders are already 300 more than Air Asia, their key Asian low cost rival.

The airline is obviously capitalising on the massive growth in Indonesian air travel, the world’s fourth most populated country. Last year the number of passengers flying reached 70 million. In 2000 it was five million. CAPA estimates that to keep its current market share, then Lion air will need to have 300 planes in five years. The airline is also banking on international growth. It owns 49 percent of Malaysia’s Malindo Air and is in the process of setting up a Thai joint venture.

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It is creating a second hub on the Indonesian island of Batam which is near Singapore. It is also building a large maintenance, repair and overhaul facility at this airport.

To keep growing, the airline needs to do something about its customer safety rep. Skytrax lists it as a two star airline: Representing a poor Quality performance – falling below the industry average in the different competitive rankings of Product and Service standards. Other two star airlines include Biman Bangladesh, Cubana Airlines and Iran Air. passenger discussion forums are full of customers complaining about the airline’s poor punctuality and service: This airline has no customer care or communications capability

The bigger fly in the ointment which I have mentioned a few times is their terrifying safety record. The airline has had nine “incidents” in eleven years including two in 2013. It is banned (along with several other Indonesian carriers) from flying into European airspace because of safety concerns. The airline is trying to fix its safety reputation. If it doesn’t, all of the planes it owns will be in vain.737 crash

So how does an airline with a poor safety and service reputation keep growing? And how does it manage to convince financiers to support it?

 

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Comments

  1. Very helpful article – thanks for posting. It helped me to get an idea about the airline as a friend recommended me to make use of the “affordable tickets”. There is no such thing as free lunch.

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