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Tuesday, August 9, 2022

Airlines resume operation in state of loss amid COVID-19

Physical distancing rules are enforced as passengers queue at Soekarno-Hatta International Airport. (Courtesy of Lion Air Group/-)

National airlines are grappling with losses due to low passenger demand and social distancing restrictions, despite getting the government’s green-light to operate during the COVID-19 pandemic.

While the country still enforces large-scale social distancing (PSBB) in some places and has banned the traditional mudik (exodus), the Transportation Ministry has allowed public transportation operations to resume, including air transportation services, starting May 6.

The move, seen by many as an effort to set the economy in motion amid the pandemic, has had limited impact as airlines continue to struggle with financial woes and low demand from passengers.

“National airlines are flying in a state of loss because [aircraft] can only be filled up to 50 percent of their capacity to follow the social distancing procedure,” Indonesia National Air Carrier Association (INACA) secretary-general Bayu Sutanto said on Monday.

He added that, on top of that, people were still cautious about traveling out of fear of contracting COVID-19.

“The ticket purchasing procedure is also stricter, and passengers must provide the required health certificate [before flying],” he added.

Following the regulations, airlines have gradually resumed domestic flight services with stricter health protocols, such as requiring pre-flight medical check-ups and a letter explaining the reasons for travel from a relevant institution.

Travel between cities is also limited to state officials, employees of private or state-owned firms that provide essential services, repatriated Indonesian nationals, individuals who need emergency medical care and bereaved family members.

Data from INACA show that passenger traffic dropped 8.23 percent year-on-year (yoy) between January and March to 25.5 million people, and the figures for April and May are expected to show an even steeper decline.

Flag carrier Garuda Indonesia said there had been a small increase in passenger numbers after the relaxation policy.

“The passenger increase is small because there are only a few people who are flying,” said president director Irfan Setiaputra on Monday. 

Garuda has slashed its number of flights by 70 percent from its normal operations.

However, Irfan said the airline would still fly on its routes “to maintain connectivity”, while focusing on its cargo services to plug the losses.

The airline has been struggling to pay off its debt amid the pandemic, including the nearly US$500 million in sukuk due on June 3 this year.

However, under the government’s economic recovery stimulus program at a staggering Rp Rp 641.17 trillion ($43 billion), Garuda is set to receive a bailout of Rp 8.5 trillion in working capital.

The largest national carrier, Lion Air Group, meanwhile, refused to comment on its passenger numbers and financial performance.

However, according to its official statement, it flew 978 passengers on Friday last week from Soekarno-Hatta International Airport to cities like Semarang, Central Java, Surabaya, East Java, and Pontianak in West Kalimantan, among others.

The number of passengers on the 20 flights on Friday ranged from four to 93 passengers. In comparison, in September 2019, Lion Air operated an average of 449 flights per day.

The airline operator has taken certain health precautions for its flights, including maintaining a physical distance between passengers and conducting pre-flight medical checks for its crews.

“Lion Air Group is optimistic that, in synergy with other parties, the operation during the COVID-19 pandemic will be on point,” Lion Air Group spokesman Danang Mandala Prihantoro said in the statement.

The International Air Transport Association (IATA) estimates a 49 percent passenger drop and an $8.2 billion drop in revenue for the Indonesian airline industry this year, compared to last year.

Aviation expert Arista Atmajati said that, with the cap to fill merely half of the seats, airlines would struggle to generate profit, except if the passengers had return tickets.

The flights can only cover the cost of the operating fleets, he stated.

“How about the cost to cover the remaining grounded planes that cannot operate?” he said.

Although airlines had shifted to the cargo business, Arista said, this only contributed to around 20 percent of airlines’ total revenue.

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