May 06, 2013
Indonesian low-cost carrier Lion Air is among the rising stars of the global airline industry, but the crash of a Lion 737-800 in Bali last month is prompting some to wonder if the carrier will be able to handle all that it aims to accomplish.
The airline has made headlines with multibillion-dollar orders for Airbus, ATR and Boeing aircraft that would make it one of the biggest carriers in the world in the coming years. But it must still secure financing for some of those aircraft, and it will have to try to multiply in size in a very short period of time without diminishing the quality of its equipment and service. The emphasis on and perception of safety and quality are particularly important for low-cost carriers (LCC), which may be suspected of cutting corners.
The April 13 incident in Bali has raised questions about Lion's ability to manage its rapid expansion. The 737-800 on final approach to Ngurah Rai International Airport landed in shallow seas short of Runway 09, then broke in two and became stranded on rocks 50 meters (156 ft.) from the runway, which juts out to sea. All 101 passengers and seven crew onboard survived, although 46 were taken to hospital.
An aircraft financing executive says the crash alone is not cause for concern, but he stresses that quality control “is extremely important for such a rapidly growing airline, [and] we have some more questions about the viability of their extreme fleet-growth plans in a very competitive market.”
CEO and co-founder Rusdi Kirana will have to answer those questions, amid high stakes and in the international spotlight due to Lion's huge aircraft orders. He signed a contract in November 2011 for 230 Boeing 737s as U.S. President Barack Obama looked on, and two months ago, Rusdi signed an order for 234 Airbus narrowbodies at the Elysee Palace in Paris with French President Francois Hollande in attendance. Lion has also bought 60 ATR 72s, some of which have been delivered.
While these are big commitments for the airline, they also represent strong vested interests on the part of Airbus, ATR and Boeing to ensure Lion's success.
Airbus was able to provide Lion a sizable number of 2014 delivery slots, making a strong argument for the narrowbody order that followed the commitment with Boeing. Recognizing the big potential in the Southeast Asian air travel market, Lion needed to secure early delivery slots to enable it to expand more quickly than its competitors. No single manufacturer would have been able to deliver as many aircraft as Lion wants.