Garuda benefits as Indonesia authorities force Singapore Airlines to delay Jakarta-Sydney service

11 April, 2017

Indonesia has taken a step backwards from liberalisation by forcing Singapore Airlines (SIA) to delay the launch of services between Jakarta and Sydney. Garuda has benefited from the delay and is adding capacity on the route.

SIA was initially planning to launch Singapore-Jakarta-Sydney service with fifth freedom pickup rights in late 2016. However, it was forced to postpone the launch at the last second when it was temporarily stripped of slots at Jakarta by Indonesian authorities due to a runway upgrade project.

SIA in theory should be able to launch Jakarta-Sydney in 2018, once the runway upgrade project at Jakarta is completed, assuming Indonesia does not throw up another obstacle for SIA. Preventing SIA from launching Jakarta-Sydney leaves in place – at least for now – the Garuda and Qantas duopoly in a growing market.

In late Sep-2016 SIA announced and began ticket sales for three new Jakarta-Sydney flights and eight additional Singapore-Jakarta flights effective 23-Nov-2016. The new Jakarta flights would have expanded SIA’s Jakarta operation by approximately 4,000 weekly seats as the Singapore-Jakarta route expanded from 63 to 71 weekly return frequencies and three Jakarta-Sydney flights were added.

However, just two weeks before all the additional Jakarta flights were to be launched SIA announced it had to cancel the flights at the direction of Indonesian authorities. SIA had secured the 14 additional weekly slot pairs at Jakarta to support the planned expansion, had the fifth freedom rights necessary for the Jakarta-Sydney flights and received the required approvals from Indonesian authorities. Authorities subsequently informed SIA could not add the flights due runway maintenance works in Jakarta.

Later in Nov-2016, SIA also announced the cancellation of five of its pre-existing 63 weekly Singapore-Jakarta flights. SIA has been operating the reduced schedule of 58 weekly Singapore-Jakarta flights since 1-Dec-2016. The reduction has reduced SIA’s share of international capacity at Jakarta to 8%, compared to 9% previously and 10% had SIA been able to implement the expansion it had announced.

Jakarta began in late 2016 a runway surface upgrade project. The project is long overdue as the previous poor grade of the pavement could not handle a fully loaded 777-300ER, forcing Garuda to operate most of its European flights via Singapore on the outbound leg. However, no other airline including Garuda has announced cancellation of any Jakarta flights due to the runway project, which is expected to take 15 months and be completed in early 2018.

Seven of the SIA’s 14 newly secured slot pairs at Jakarta are in the post-peak evening hours, with landing slots at 21:00 and takeoff slots at 22:25. The other seven new slot pairs were in the middle of the afternoon with landing slots at 14:35 and takeoff slots at 15:35. The Jakarta-Sydney flight used the 22:25 takeoff slot on three days and the 14:35 landing slot on three days while the additional Jakarta-Singapore flights used the other slots.

The five longstanding slot pairs that SIA is not currently able to use are peak hour slots with landings at 17:10 and takeoffs at 18:05. SIA is currently only able to operate this flight on Fridays and Sundays.

The construction project requires one of Jakarta’s two runways to be shut from 10pm to 5am. Therefore, of the 38 takeoff and landing slots SIA is not currently able to use only seven takeoff slots are during the actual construction period.

SIA’s forced reduction at Jakarta could be a move to protect Garuda, which obviously would be impacted by SIA’s entry on the Jakarta-Sydney route as well as by additional capacity on Jakarta-Singapore.

Between 10pm and 11pm the number of hourly movements at Jakarta drops to only approximately 30 compared to more than 80 movements during peak periods. The number of movements seems low enough at this hour, even with the additional SIA takeoff, to be accommodated on the single runway.

SIA was not offered alternative slots that could have potentially enabled the airline to launch Jakarta-Sydney. For example, if the 1025pm departure was a concern because of the construction it could have been offered a temporary slot an hour or two later when there are even fewer movements.

The last second nature of the directive was unfortunate given the runway upgrade project had been planned for several years. Indonesian authorities in theory should have been able to reject the additional flights when the initial applications were submitted, therefore minimising the inconvenience to passengers.

SIA’s forced reduction at Jakarta could be a move to protect Garuda, which obviously would be impacted by SIA’s entry on the Jakarta-Sydney route as well as by additional capacity on Jakarta-Singapore. Jakarta-Sydney is a growing underserved market with only eight weekly nonstop flights currently, including four from Garuda and four from Qantas. SIA’s entry would be economically beneficial and positive for consumers but detrimental to Garuda (and Qantas).

Garuda is introducing a fifth weekly frequency on Jakarta-Sydney from the end of May-2017. Garuda is keen to expand in Australia including more additional frequencies on Jakarta-Sydney. Garuda now has the opportunity to further bolster its position on the route before SIA enters.

Sydney to Jakarta one-way capacity by airline: Sep-2011 to Sep-2017

Source: CAPA – Centre for Aviation & OAG