Indonesian Airline Mandala Hopes Time is Right for Return

By webadmin on 10:15 pm Mar 29, 2012
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Francezka Nangoy

Singapore’s Tiger Airways expects Mandala Airlines to match its own robust growth rate as the Indonesian airline resumes flying after a 15-month suspension.

Mandala, which stopped operation in January last year due to bankruptcy, is restarting operations next Thursday with its first flight from Jakarta to Medan, capital of North Sumatra, the company said on Thursday.

“Mandala was once a glorious airline. We hope to re-establish the airline to once again be a valuable asset to the country,” said Sandiaga Uno, co-founder and chief executive of private equity firm Saratoga Group.

Authorities allowed Mandala to resume operations after the airline’s suppliers agreed to its debt restructuring and Saratoga, which now controls 51 percent of Mandala, pledged to invest in the airline along with Tiger.

Sandiaga said with Mandala’s return as a low-cost carrier, he expects to tap the middle-income demographic, which he said had grown by 7 million people annually in recent years, creating a big pool of consumers increasingly seeking air travel.

Chin Yau Seng, Tiger’s chief executive, said he was optimistic about the Indonesian market and ready to compete with established budget airlines, including Lion Air, Citilink and Indonesia AirAsia, that are also expanding.

“The good thing is the market is also growing, so while low-cost carriers will grow their frequencies and networks, I think there will be quite a bit of new demand,” Chin said.

He said the rise in middle-income households combined with the many islands that make up the country meant air travel was the most efficient means of travel.

Chin said half-jokingly that he would not mind if Mandala grows even faster than Tiger’s operation in Singapore, which he said grew more than 50 percent in capacity over the past few years.

“We continue to grow at a high-growth rate [in Singapore]. There’s no reason why Mandala can’t be like that,” he said. Tiger owns a 33 percent stake in Mandala.

Both Saratoga and Tiger refrained from disclosing the amount of money they have invested in Mandala. Mandala owed Rp 2.4 trillion ($262 million) to 114 of its suppliers, and Rp 27 billion to more than 70,000 ticket holders.

“Primarily, Tiger’s investment brings expertise and aircraft [to Mandala],” Chin said.

“We are committed to provide at least five aircraft, but certainly would like to deliver beyond that,” he added, refusing to reveal his investment in the new Airbus A320s for Mandala, other than saying that it was “not cheap.”

Initially Mandala will operate three planes and Chin says he hopes it will operate 10 aircraft by the end of the year. It is also re-employing about 80 people from its former cabin crews, including 22 pilots. The company is aiming to hire as many as 100 pilots by the end of the year, he said.

After the initial Jakarta-Medan route with 12 flights a week, Mandala will fly Medan to Singapore beginning on April 20 and Jakarta to Kuala Lumpur starting on May 4, said newly appointed president director Michael Coltman.

When asked about upcoming routes, Coltman said the company will continue “analyzing and adjusting” its routes for the most effective and efficient operation.

Herry Bakti Singayuda Gumay, director general for civil aviation at the Transportation Ministry, told the Jakarta Globe that Mandala has yet to submit its full route plan.

Coltman said he was not setting any targets in terms of market share or capacity. “I don’t have any figures off the top of my head right now,” he said.

“This market is not static, it is fast growing. We will grow as we offer more flights and more frequency,” Coltman said, adding that he believes the company is operating in the right market at the right time.

Mandala is also offering a form of refund to its former passengers. Passengers who bought tickets but did not travel after Mandala ceased operations last year can register via its Web site to claim an electronic voucher.

Registration opened on Thursday and will close on April 16. Once a claim is verified, customers will receive a voucher that can be used for travel with Mandala within six months of the voucher’s issuance.

The Indonesian Ticket Agents Association (Astindo) this week threatened legal action against the airline over Rp 11 billion worth of ticket refunds it claims it is owned. A court ruling on the airline’s debts was issued last year.

Though journalists tried to get the new management’s contact details, Coltman admitted that they didn’t even have their business cards ready yet.