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Citilink builds up presence in market with fleet expansion

Low-cost carrier Citilink expects that its ongoing fleet expansion this year will help it secure opportunities from the continuously increasing numbers of air travellers in Indonesia

Rizal Harahap (The Jakarta Post)
Pekanbaru
Fri, July 29, 2016

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Citilink builds up presence in market with fleet expansion

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ow-cost carrier Citilink expects that its ongoing fleet expansion this year will help it secure opportunities from the continuously increasing numbers of air travellers in Indonesia.

Citilink finance director Mega Satria said that the company, a subsidiary of national flag carrier Garuda Indonesia, would add nine Airbus 320 planes to its fleet this year. Of the nine aircraft, three have arrived and have already been serving three routes, namely Pekanbaru (Riau) to Medan (North Sumatra), Medan to Banda Aceh and Pekanbaru to Bandung (West Java).

Mega said the company had leased the nine new planes for 12 years, a scheme it considered to be a “more flexible option” rather than taking out loans to buy them.

“The company has to repay debts if we buy them with loans,” Mega told The Jakarta Post in Pekanbaru, without detailing the amount of the company’s new investment.

Last year, 9.5 million passengers flew with Citilink, a 25.8 percent increase from the 7.55 million passengers recorded in 2014. As of June, Citilink had served more than 5.2 million passengers and expects to serve at least 12 million by the end of the year.

Citilink’s fleet expansion, Mega said, would make the airline able to maintain its growth of passenger numbers at double-digit levels in the upcoming years.

“The growth shows that we have gained the trust of our consumers regarding our services,” he added.

With the three additional aircraft, Citilink is currently operating 36 Airbus 320 planes and five Boeing 737 planes. Mega said the company was laying out a plan to add more aircraft next year, so that the company could run 50 Airbus 320s in its operations.

Apart from booking higher passenger-number growth in 2015, Citilink also saw its highest profits since the establishment of the company. Last year, the carrier managed to book US$470 million in operating revenues and $4.9 million in profits.

Mega said Citilink had planned to open new routes next year, including those connecting the Riau provincial capital of Pekanbaru to other cities, in an effort to book more high profits.

“We believe that Pekanbaru would serve as a hub for our operations, seeing that the city’s economic growth is high, apart from the growing number of passengers flying from the city.”

Riau, the country’s largest oil-producing region, is home to more than 6 million people, with about 20 percent of them living in the provincial capital.

Indonesia, which has Southeast Asia’s largest economy, is witnessing a domestic travel boom as more people enter the middle-income segment and with aggressive marketing efforts by the Tourism Ministry, industry players say.

Places gaining in popularity include the world’s largest volcanic lake, Lake Toba in North Sumatra, and Labuan Bajo, a fishing town at the western end of Flores Island in East Nusa Tenggara, which affords access to the popular destinations of Komodo Island and Rica Island.

The number of middle-income and affluent consumers is projected to reach 141 million by 2020 from 88 million in 2014, according to a study by the Boston Consulting Group. With at least Rp 50 million ($3,808) in personal assets, this demographic is jacking up spending in the country.

Those who earn Rp 5 million to Rp 10 million per month have begun traveling by plane, Sriwijaya Air Group senior corporate communications manager Agus Soedjono said recently.

“We regard that social economic class our [customer] segment, even though they are mostly ‘swingers’ as they have no loyalty to any one airline,” he said, adding that people from that segment opted for domestic rather than international destinations because of lower costs and easier travel.

During the first half of the year, Citilink served about 170,000 passengers flying from Pekanbaru.

“In the Sumatra region, such a figure is only outnumbered by Batam,” Mega said, referring to the biggest city in the neighboring Riau Islands province.

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