Lion Air’s Founders Planning to Launch New Airline in Indonesia

(Bloomberg) -- The founders of Indonesia's PT Lion Mentari Airlines are planning to start a new airline, according to people familiar with the plan, a development that could aid the carrier's efforts to move beyond one of aviation's biggest disasters.

The new carrier is a project started by Lion's founders including Rusdi Kirana, said the people, who asked not to be named because they're not authorized to speak publicly on the plan.

Lion Air has been trying to move forward from a deadly crash in 2018, which was blamed on design flaws in Boeing Co.'s 737 Max jet, as well as a raft of errors at the airline by pilots and mechanics. Boeing said it has settled 90% of the wrongful death claims as of July.

Budi Prayitno, a spokesman for the transport ministry confirmed it's processing one application for an air operator certificate, while declining to reveal more details. Lion Air's spokesman Danang Prihantoro declined to comment on the matter, while Kirana couldn't immediately be reached for comment.

Fresh Start

The new carrier could give the founders a fresh start, said Shukor Yusof, founder of aviation consulting firm Endau Analytics in Malaysia.

“Don't underestimate Rusdi,” he said. Closely held Lion has better leverage ratios than its Southeast Asian rivals and many 737 Max orders that can prove valuable once the pandemic subsides, he added. “There may be a method to the madness.”

Airlines in Indonesia, like their peers around the world, are suffering from falling passenger numbers due to travel restrictions. While air travel in the country's vast archipelago rebounded to 1.46 million people in July, from just 87,000 in May, that's still far below 7.14 million seen in the same month last year, according to the statistics bureau.

Globally, airlines are floundering. American Airlines Group Inc. and United Airlines Holdings Inc. will cut a combined 32,000 jobs as a debate over new government assistance drags on. The International Air Transport Association expects December air travel to fall 68% from the previous year, compared with an earlier forecast of a 55% decline, due to the impact of a resurgent coronavirus in European countries.

Suffering Rivals

Flag carrier PT Garuda Indonesia is relying on bridging loans from the government to avoid falling into bankruptcy, while regional airline AirAsia Group Bhd. seeks cash injections by the end of the year as it seeks to survive.

If the new airline plan goes ahead, it may allow Lion's founders to grab a bigger share of one of the world's fastest growing air travel markets when the pandemic subsides, said independent aviation analyst Gerry Soejatman.

“This could be a good strategy for the company as its rivals are suffering,” Soejatman said by phone. It's unclear whether the new entity will be part of the same Lion group.

©2020 Bloomberg L.P.