Malindo grows further in Australia with new Adelaide service

Lion Group’s Malindo Air is pursuing further expansion in the Australian market next month as Adelaide becomes its fourth destination. Malindo has expanded rapidly in Australia since launching Perth in 2015; Brisbane was added in 2017 and Melbourne in 2018.


Highlights:

  • Malindo plans to launch services to Adelaide on 31-Mar-2019 with four weekly flights from Bali that originate in Kuala Lumpur;
  • Adelaide will be Malindo’s fourth destination in Australia in less than four years;
  • Malindo’s parent the Lion Group is eager to expand in the Australia-Bali market although it has recently cut capacity on the Perth-Bali and Brisbane-Bali routes.

The launch of Melbourne in Jun-2018, the upcoming launch of Adelaide on 31-Mar-2019 and the anticipated launch of Sydney later this year is part of a strategy of reducing Malindo’s reliance on the Malaysian market. Malindo is based in Kuala Lumpur but all its Australia routes except Perth are served from Bali, using fifth freedom rights.

Malindo has stopped expanding in Malaysia over the last 18 months – as its fleet has shrunk after an initial four years of rapid expansion. However, Bali-Australia is an attractive market which is growing and is relatively undersupplied compared to most of the international markets from Malaysia that Malindo now serves.

Australian visitor numbers to Indonesia have more than tripled over the last decade, from 419,000 in 2008 to 1.3 million in 2018. Bali is by far the most popular Indonesian destination for Australians and is one of the most popular destinations for Australians globally.

The recent decision to launch Adelaide-Bali does not come as a surprise as Malindo applied for and secured traffic rights for Adelaide-Bali-Kuala Lumpur last year. Malindo will initially operate four weekly flights, boosting its Australia-Bali operation to 15 weekly flight and its total Australia operation to 29 weekly flights (when including its double daily Perth-Kuala Lumpur service).

Malindo currently operates four weekly Brisbane-Bali flights seven weekly Melbourne-Bali flights. Both routes were launched as daily but Brisbane frequencies were reduced at the end of last month. Malindo’s Indonesia-based sister airline Batik Air serves the Bali-Perth route but cut back from 14 to seven weekly frequencies in late 2018.

Adelaide, which is currently served by only eight foreign airlines, will be Malindo’s smallest Australian market. However, Adelaide-Bali is underserved with Jetstar the only current nonstop competitor (operating once daily with A320s).

Tigerair Australia dropped Adelaide-Bali in 2017, leaving a void in the market that Malindo is keen to fill. Tigerair Australia took over the Adelaide, Melbourne and Perth to Bali routes in 2016 from full service parent Virgin Australia and would likely still be competing in these markets if it was not for Indonesian regulatory issues.

In Nov-2018 (the last month of available BITRE data) the Lion Group flew 12,700 passengers in the Australia-Bali market, including 8,200 for Malindo and 4,500 for Batik. Lion captured only a 6% share of the market in Nov-2018 as Australia-Bali total nonstop passenger traffic grew by 24% to 225,000.

There is clearly an opportunity for Malindo and the Lion Group to increase its presence in the Australia-Bali market, offering attractive fares and a full-service product to price sensitive consumers. However, the group will have to overcome potential reluctance from Australian consumers following an instruction by the Australian government to employees and contractors to not fly Lion Air or subsidiary airlines outside Australia.

The instruction, which has been in place since the 29-Oct-2018 Lion Air 737 MAX 8 crash, does not apply to flights to/from Australia but has likely impacted demand, contributing to the decision by Batik to reduce Perth-Bali capacity by 50% and the decision by Malindo to reduce Brisbane-Bali capacity by 43%