Two airlines in Indonesia…and arguably the Indonesian government as well…have teamed up to squeeze AirAsia out of Indonesia. It’s a fascinating story of deception and duplicity.
Imagine a circular rope. In the center is AirAsia Indonesia. Around it are three actors: the Indonesian government, Garuda Indonesia, and Lion Air. The Indonesian government is tired of losing money subsidizing Garuda Indonesia, a carrier that has reported steep losses over the last two years. State-run Garuda Indonesia and Lion Air, Indonesia’s largest private operator, are tired of the downward pressure AirAsia has put on ticket pricing, particularly on domestic routes.
So the two have responded by colluding with major online travel agencies in Indonesia to get AirAsia flights removed from search results. By threatening that both Garuda Indonesia and Lion Air will pull space absent cooperation, major sites like Traveloka.com, Tiket.com, and Booking.com no longer show AirAsia flights when searching for domestic and regional international space.
Domestic ticket prices have risen 40-120% since last autumn on Garuda and Lion Air. This has led to protest from consumers…and not at the best time either. Indonesia’s next General Election will be held on April 17, 2019. A key campaign issue has been the rising cost of airfare. Wanting to maintain power, the incumbent Indonesian Democratic Party of Struggle, led by President Joko Widodo, forced Garuda to lower domestic prices by 20% last month. The opposition party often points to Garuda Indonesia as a prime example of why a leadership change is needed in Indonesia.
The Noose Tightens
All of these moves have served to tighten the noose around AirAsia, which Garuda and Lion Air blame for the lack of a stable and profitable airline market in Indonesia.
On the one hand, you can appreciate the difficult position that Garuda is in. Pressure from the government to be profitable and keep prices low is the textbook definition of wanting to have your cake and eat it too. But on the other hand, this move to stifle AirAsia has come at great cost to Indonesian citizens.
Throughout these theatrics, AirAsia has not raised prices like Lion Air and Garuda gladly have. You can still book cheap fares directly on the AirAsia website or via international online travel agencies. But many Indonesians simply don’t know what they are missing out on or are forced to visit brick and mortar travel agencies if they wish to purchase tickets on AirAsia. Now even these traditional travel agencies are being pressured to stop selling AirAisa tickets.
CONCLUSION
I give great credit to Raini Hamdi of Skift for her reporting on this matter. It is a fascinating story that is continuing to unfold. I will be watching the upcoming elections in Indonesia closely.
While Lion Air and Garuda Indonesia may ordinarily make strange bedfellows, it certainly makes sense with government pressure to cut subsidies while simultaneously keeping airfare reasonable. But this sort of deliberate market distortion is unlikely to work on a long-term basis. Indonesians are waking up to the duplicity and responding by rewarding AirAsia with more business.
image: Kentaro Iemoto / Wikimedia Commons
Gyahahahaha….. Indonesian Democratic Party of Struggle… That’s the best english translation i’ve red….
Anyway… Garuda and lion air have different market. Lion air is competing with citylink, garuda’s sister in low cost carrier. Lion air have more diverse destination than air asia. Some which they have monopoly. Lion air founder, rusdi kirana, currently indonesian ambassador for malaysia, previously sat on president’s consideration board and member of a islamic-background political party, though he is not a muslim. Oh and lion air is currently expanding to asean with malindo and thai lion air.
Hahaha exactly, I laughed while reading the translation. It’s true tho. I have no idea of a better translation for PDIP.
Does it surprise? This is one of the most corrupt countries on earth ( certainly top 20).
Scandals in aviation are nothing new.
The repulsive Suharto family still owns the tollway to the airport ( concession corruptly acquired) but none of the weak sisters in power since that time have ever sought to reclaim it.
Tommy Suharto ( convicted of conspiring to murder the judge who found him guilty of corruption) used to own Sempati Airlines ( corruptly acquired, now bankrupt).
Garuda: one of their pilots was convicted of murdering a passenger on a Garuda flight ( poisoned orange juice, ie arsenic in addition to the sugar)..a human rights lawyer. Garuda management bent over backwards to try to stop it getting to court.
Nothing surprises re the lengths these people will go to to eliminate any competition.
Moreover, Munir’s murder was committed on the orders of the then CEO of Garuda ( and he was also convicted of that murder).
Fat chance that Air Asia will be pressured out of the market just because a few OTAs stop listing their flights. Those who fly know where to look. And last I heard Southwest is in good shape and expanding.
Paolo is man from the past. He just came out of his cave today
I don’t know. Paolo certainly has strong opinions about things, but he does actually cite facts to back up his claims.
Ummm what…. Air Asia were the ones who pulled their listings FROM Traveloka. Part of their strategy in increasing their revenue and eventually opening up a bookings portal
No. Traveloka removed airasia’s subcompany which is airasia indonesia from their website twice. So in respond to the incident, airasia HQ decided to pull out all their flight from traveloka which is included thai airasia and malaysia airasia..
Re: Part of their strategy in increasing revenue?
What have you been smoking.
When Traveloka conspired to remove all Indonesia AirAsia’s flights from showing on their website, AirAsia responded by not listing any of AirAsia Group’s flights on Traveloka.
AirAsia Group has more than 160 unique destinations in 25 countries. They certainly didn’t need Traveloka when they were growing nor do they need Traveloka to increase their revenue.
It would be interesting to see how this move will reduce Traveloka’s traffic and their bottom line. Personally I’ve boycotted Traveloka as a solidarity move as a consumer that is not interested in Indonesia’s corrupt practices.
Air Asia,is popular among the people due to AA ‘s abilty to mantain their standard of service/ pricing ,operation / on time performance, and safety/ back up & stdby a/c. We are talking about business ! So…Air Asia –>ever onward no retreat and keep the spirit if ASEAN
Interesting theory but the government isn’t necessarily going to back Garuda in any cartel-style operation to force AirAsia out of the market. It recognizes that Garuda is only a part of the bigger picture of tourism, which it wants to push to 20 million arrivals by the end of this year. It reacted to the high air fares because people in regions that are attracting tourists were complaining that no-one was turning up. While it would like to see Garuda stop making losses (and it has just announced that it scraped a profit in 2018), I doubt if it wants to do so by means of killing the industry as a whole.