Mandala the tip of an iceberg

The air transport business in Indonesia, the world’s largest archipelago, is undoubtedly very promising. The country’s big population and widespread distribution of settlements makes air transportation the most reliable means of social mobility and goods movement.

But unfortunately it’s with this very sector that Indonesia has experienced management shortcomings in making its airlines more contributive to national development.

One of the fairly prominent reasons for this lack of progress is the government’s slow regulatory movement in anticipating the rapid increase of airline companies and passengers. The significant rises were due to the deregulation of the airline industry in the 1990s. In 2000, for example, Indonesia only owned five airlines serving 10 million passengers, but in 2006 there were over 25 airlines and 20 million passengers.

It was a phenomenal growth, although not without embarrassment, as it was accompanied by a fast-rising number of air accidents. From 1995 through 2005, Indonesia recorded 3.1 aircraft accidents per million departures. The figure may seem small, but they are drastic in contrast to the world average of 0.89 accidents per million departures, a ratio of one to 3.5.

For this reason, in April 2007, the Federal Aviation Administration (FAA), which has long been a reference organization for the world airline industry, lowered the flight safety rating of the Republic of Indonesia to category two, the “failure” group. The FAA only recognizes two categories: “pass” for countries meeting safety requirements, or “failure” otherwise. It refers to findings of the application of flight safety regulation standards set by the UN International Civil Aviation Organization (ICAO).

What has really happened then? The fast increase in the total number of airlines was far from meeting the demand for air transportation facilities and infrastructure, especially in proportion or personnel. Likewise, the new players in the airline business still lacked basic aviation knowledge as well as aviation business experience; their focus was on easy profits from commercial air transport. This led to the high rate of air accidents and the emergence of unfair competition.

The circumstances were coupled with the government regulators’ weak control due to various reasons including the very small number of inspectors at the Transportation Ministry. Negative developments thus followed; from the issue of aircraft maintenance standards, the struggle for and piracy of technicians and aviators who were in short supply, to the fixing of ticket prices and rivalries in securing lucrative route permits. All this was marked with the closure of the airline company Adam Air, which had encountered fatal air accidents.

As the situation developed, several other airlines flopped, particularly the old ones that were incapable of keeping up with the new, aggressive players. Until a few years ago, the surviving old companies were Garuda Indonesia, Merpati (thanks to the government’s support) and Mandala, after being taken over by Cardig Air and obtaining fresh funds from foreign investors. However, even Mandala failed to hold on and took a tumble. Newcomers have proven capable of dominating the national airline industry with their new strategies unfamiliar to the long-established companies.

The fact is these newcomers have managed to procure over 100 new planes with ease. The question now is how they got the licenses to buy such a large number and to park them all when they arrived in Indonesia.

There’s also a new trend to make available airbus planes on relatively lenient conditions and recruit a fresh pilots from abroad — particularly European countries. Over 250 foreign pilots have reportedly been operating in Indonesia. This also raises the question as to what was behind the lifting of the European Union ban, while the FAA, to which the European Union ban referred, has not restored Indonesia to category one.

It was amid such unfair competition that Mandala, as an old player, got caught in an unfavorable position. Garuda and Merpati obviously were not much disturbed with the government behind them.

Meanwhile Mandala relied on investors, which always required profit parameters within reach of the thriving newcomers. It was impossible for Mandala to follow the rhythm of Garuda and Merpati, because foreign investors are very different from the government, and it was equally difficult to play with the newcomers. It was as if a classical orchestra had been forced to play pop music.

This tough position thus caused Mandala to be overwhelmed by the national airline business competition. It is also certain that the 45-day period fixed for Mandala to stage a come-back will be hard to meet. Therefore, the time has come for the government as regulator to immediately and seriously put the Indonesian commercial air transportation business in order.

The demise of the old airline companies in Indonesia, excepting Garuda and Merpati, must have been due to some unsound developments in our aviation community. It should not happen that all the airline companies in Indonesia are perishing one after another in their domestic battle, allowing room for foreign domination, only because of our own weaknesses in air transport management.

Jakarta Post , Thursday, January 20, 2011

Chappy Hakim.

The writer is an aviation safety observer, retired Air Chief Marshall, an Air Force chief of staff and former chairman of the National Team for the Evaluation of Transportation Safety and Security.