Lion Group eyes further Australia expansion with Malindo services from Bali to Adelaide and Sydney

The Lion Group is considering further expansion in the Australia market with new services from Bali to Adelaide and Sydney, using its Malaysian affiliate Malindo Air.


Summary

  • Lion Group’s Malaysian affiliate Malindo Air has secured traffic rights to operate Kuala Lumpur-Bali-Adelaide service and is applying for traffic rights to operate Kuala Lumpur-Bali-Sydney.
  • Malindo already operates Kuala Lumpur-Bali-Brisbane and Kuala Lumpur-Bali-Melbourne; its sister airline Batik operates Bali-Perth.
  • The two new routes would give Lion Group five Bali-Australia routes and nearly a 20% share of Bali-Australia seat capacity.

Malindo recently secured traffic rights from Malaysian authorities for up to seven weekly services to Adelaide from Kuala Lumpur via Bali, starting Dec-2018. Malindo tells Blue Swan it is also applying for traffic rights to Sydney from Kuala Lumpur via Bali.

Malindo already operates from Bali to Brisbane and Melbourne, with both flights originating in Kuala Lumpur. Its sister Indonesia-based airline Batik Air operates from Bali to Perth, while Malindo serves Perth nonstop from Kuala Lumpur.

The addition of Adelaide and Sydney would give the Lion Group five destinations in Australia. Assuming a daily service to both Adelaide and Sydney, Lion Group would operate up to eight daily services to Australia, including six daily services from Bali.

Malindo already sells Brisbane and Melbourne as a one-stop same-plane product from Kuala Lumpur and most of its traffic on the Brisbane and Melbourne to Bali sectors consists of Australians heading to Indonesia for a holiday. The planned flights from Adelaide and Sydney would also consist mostly of fifth freedom passengers heading to Bali, rather than continuing to Kuala Lumpur.

The Lion Group has pursued rapid expansion in Australia since late 2015, when Malindo entered the Australian market with 11 weekly services on the Kuala Lumpur-Perth route. Malindo increased Kuala Lumpur-Perth to twice daily (14 weekly frequencies) in Aug-2018.

Brisbane became Malindo’s second Australia destination in Mar-2017 and has since been served with a daily flight from Bali. Malindo is reducing its Kuala Lumpur-Bali-Brisbane service to four weekly services at the beginning of Feb-2019 but tells Blue Swan the reduction will only be seasonal. Malindo is selling four weekly services to Brisbane for February, March, May and June but has a full seven weekly services in its schedule for April and July.

Malindo added Melbourne in Jun-2018, also with a daily service from Bali. Malindo is continuing to sell a year-round daily Bali-Melbourne service, which has been performing better than Bali-Brisbane.

Meanwhile, Batik began serving Australia in Jun-2017 with twice daily Bali-Perth services. Batik continues to operate two services daily on this route and although it has talked about potential expansion in Australia, it has not yet added any routes.

Batik and Malindo are both full service airlines, offering a business class cabin and seatback IFE in economy, along with meals and drinks. Malindo mainly operates 162-seat 737-800s on its Australia flights but currently deploys the larger 180-seat 737-900ER on some of its Kuala Lumpur-Perth flights. Batik currently uses 180-seat 737-900ERs on all its Bali-Perth flights.

The launch of Adelaide and Sydney would give the Lion Group a capacity share of nearly 20%. The Qantas Group is currently the market leader, with 52% (45% for LCC Jetstar and 7% for the parent full service brand). Garuda Indonesia and Lion Group are virtually tied in the second position, with 14% shares. The AirAsia Group and Virgin Australia are the only other competitors in the Bali-Australia market, each accounting for approximately 10% shares.

If it launches Bali-Sydney, Malindo will compete against Garuda, Jetstar, Qantas and Virgin Australia. On Bali-Adelaide, Malindo would only compete against Jetstar. Malindo currently competes against Garuda, Jetstar and Qantas on Bali-Melbourne and against Jetstar and Virgin Australia on Bali-Brisbane. Batik competes against AirAsia, Garuda and Jetstar between Bali and Perth.

The Lion Group currently has slightly more than 7,000 one-way weekly seats to Australia. The group’s Australia capacity could reach 9,000 one-way weekly seats in 2019 if the plans for Adelaide and Sydney are implemented.