Another airline for Australia?

Indonesia’s biggest domestic airline, Lion Air, plans to take advantage of Australia’s ultra-liberal aviation rules that allow any foreign company the right to set up a domestic airline Down Under, as Singapore’s Tiger Airways did in 2007.

That ambition was mentioned again last week when Lion announced the biggest aircraft order in the history of European plane-maker Airbus, following the biggest order in US manufacturer Boeing’s history in 2012. The Indonesian behemoth wants to grow so quickly over the next decade that all its needs can’t be met by only one of the Big Two in airliner production.

Lion Air’s growth plans are anything but fanciful. In a nation of 240 million people, the domestic airline business is already the same size as Australia’s after a decade of explosive growth. Yet, according to the statistics, only about six per cent of the Indonesian population have ever flown, whereas in Australia, every man, woman and child on average travels by air more than once a year.

One of the ways Lion Air plans to grow is by copying the strategy of Asia’s biggest low-cost carrier, Malaysia’s AirAsia, which has already set up subsidiaries in Indonesia, Thailand and Japan. Owner and co-founder Rusdi Kirana not only has plans for a new Indonesian airline – a full-service carrier called Batik Air on top of the existing no-frills Lion Air, which has 45-50 per cent of the domestic market, while national carrier Garuda has only about 25 per cent – he has announced a new Malaysia-based venture called Malindo Airways.

Kirana was also the first Indonesian entrepreneur to express an interest in setting up an Australian domestic operation. In 2008, he entered a 49-per-cent-owned Australian venture with Brisbane-based charter airline SkyAirWorld. The intention was to fly Australian domestic routes and link Australian cities with Indonesia. But the venture was abandoned when SkyAirWorld collapsed in March 2009.

Lately, Kirana hasn’t been talking about his dreams of an international expansion beyond a smattering of regional destinations and regular services from Jakarta to Jeddah, Saudi Arabia, using a couple of Boeing 747-400s.

But even if he plans to exhume his long-held Australian ambitions, there is a major obstacle: Lion Air remains on a blacklist of airlines that are banned from using both European and US airspace because they haven’t passed the required internationally recognised safety audit.

The past two decades have not only seen an explosion in the number of Indonesians using airlines to get around the archipelago, but an explosion in the number of air crashes as the Indonesian government regulator struggled to maintain an adequate oversight of the local airline business.

Since it arrived on the scene in 2000 – the same year as Virgin Australia was born – Lion Air has destroyed or badly damaged no fewer than five airliners in a series of crashes and incidents. One of the crashes killed 25 people.