EDITOR’S EYE: Lion Air banks future on fair weather forecast

EDITOR’S EYE: Lion Air banks future on fair weather forecast

Last week we saw the continuation of a trend that, in the past three years, has defied economic conditions, common sense, and made even most senior figures in the aviation industry raise a curious eyebrow. Adding to huge single-aisle aircraft orders from IndiGo and AirAsia, Indonesia’s Lion Air announced plans to purchase up to 380 new 737 aircraft from Boeing. Lion currently has a fleet of 71 planes. Accounting for replacements of its older jets, the purchase will see Lion’s fleet expand to 437 aircraft, if all options are exercised – a more-than-500% increase compared to today.

But this is in line with Boeing’s predictions, is it not? In its most recent long-term forecast, the US planemaker said that the number of aircraft in the Asia Pacific fleet will nearly triple to more than 13,000 by 2030. It’s a pretty impressive statistic to have on your sales kit. And of course, the more aircraft that are added to the market (especially new, fuel efficient models, which are cheaper to operate), the lower airfares will become, which in turn will allow more people to travel, thus creating even more demand for new planes. It’s a brilliant self-fulfilling prophesy!

But of course I’m not accusing Boeing of fudging figures to create self-made demand for new planes. Aviation forecasts are based largely on economic data, and Indonesia, which is expected to see GDP growth of more than 6% a year from 2011 to 2015 is right up there with the world’s red hot emerging economies. And as the Economist Intelligence Unit predicts that this economic boom will be driven “mainly by private consumption”, the prospects for Indonesia’s domestic aviation sector are very bright indeed.

Whether these predictions come true however, is largely a question of luck. As the last few years have shown, where the economy is concerned, anything can happen. While Lion Air will certainly have a long-term plan for transporting huge numbers of newly-affluent Indonesian citizens across the archipelago, that doesn’t mean to say it will happen. The timing of the delivery of these new planes is key; if Lion is scheduled to take a batch of, say 50 new planes in a year when Indonesia is rocked by an economic slowdown in that year, it will have a huge number of empty planes on its hands.

But long-term, these new orders will probably serve Lion Air well. Indonesia’s unique geography means that domestic air travel is more important than in other countries, and give or take a downturn or two, traffic levels will surge. So while it seems crazy, 380 new planes for Lion Air is probably about right. All they have to do now is find 700-odd new pilots to fly the damn things.

Mark Elliott
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Mark Elliott
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