Malaysia Airlines pursues expansion in Indonesia with four new secondary destinations

Malaysia Airlines plans to double the size of its Indonesian network with the launch of services to Kertajati, Padang, Pekanbaru and Solo. While the new routes are mainly aimed at the religious pilgrimage market by feeding Kuala Lumpur-Saudi Arabia flights, Malaysia Airlines will also benefit from offering corporate customers connectivity to growing undeserved markets in Indonesia.


Highlights:

  • Malaysia Airlines plans to add four secondary destinations in Indonesia by mid 2019 – Kertajati, Padang, Pekanbaru and Solo;
  • The routes will mainly carry religious pilgrimage traffic heading to Saudi Arabia but will enable the airline to attract business traffic to/from four underserved airports;
  • Indonesia is already Malaysia Airlines’ largest international market with 96 weekly flights to four destinations.

Indonesia is Malaysia Airlines’ largest international market, accounting for 14% of its total international seat capacity and 17% of its international departures (based on CAPA – Centre for Aviation and OAG data for the week commencing 4-Mar-2019). The oneworld member serves four destinations in Indonesia – Bali, Medan, Jakarta and Surabaya. These are the four largest international airports in Indonesia (by a wide margin).

It has 96 weekly flights to Indonesia, including 49 frequencies to Jakarta, 21 to Bali, 14 to Medan and 12 to Surabaya. It is the third largest foreign airline in the Indonesian market (based on current seat capacity) after Malaysia AirAsia and Singapore Airlines.

The four new destinations will further strengthen Malaysia Airlines’ position in Indonesia, a fast growing and strategically important market. Indonesia-Malaysia is a large local market with strong demand from the business, leisure and labour segments. Kuala Lumpur is also a popular connecting hub for business and leisure passengers heading to/from Indonesia.

The four new destinations are expected to mainly generate sixth freedom transit traffic to Jeddah and Madinah in Saudi Arabia. However, Malaysia Airlines should also be able to attract transit traffic heading to or from other markets such as Australia, China, Japan, South Korea and the UK. It should also be able to attract some local traffic (both business and leisure) heading between Indonesia and Kuala Lumpur.

Kertajati, Padang, Pekanbaru and Solo currently have limited international services. International passengers heading to or from these markets now generally have to transit in Jakarta, which is very congested and does not generally offer a good transit experience. The new Malaysia Airlines flights should be appealing to international passengers given the superior transit experience (both in terms of product and number of destinations) offered via Kuala Lumpur.

Malaysia Airlines will become the only foreign full service airline in each of the new destinations. Kertajati and Solo do not have any scheduled foreign airline service at the moment although Solo was previously served by SilkAir. Kertajati is new airport in West Java that was opened in May-2018. Malaysia AirAsia is the only foreign airline serving Padang while Pekanbaru is only served by Malaysia AirAsia and Scoot. Padang, Pekanbaru and Solo are all well served domestically. Kertajati is much smaller as it is new but is growing.

Indonesian carriers also have a small number of flights to Saudi Arabia from all four airports, catering to Indonesia’s Umrah religious pilgrimage market that Malaysia Airlines is also targeting with its new flights. International passengers flying on Indonesian carriers from these four airports to international destinations other than Saudi Arabia have to transit in Jakarta – or to a lesser extent Bali, Medan and Surabaya.

Malaysia Airlines is planning to enter each new market by mid 2019 with two frequencies per week. While this is a small number of flights, it is significant for the four airports given their limited international networks. If Malaysia Airlines is successful at generating traffic outside the Umrah market it will likely add frequencies, which should help attract more corporate traffic.

CHART – Malaysia Airlines cut one-way seat capacity to Indonesia in 2015 as part of its restructuring but over the last two years capacity has again been on the upswingSource: CAPA – Centre for Aviation & OAG (Note: this shows capacity levels up to Apr-2019 and a further increase is expected later this year as the new Indonesia routes are launched)