Indonesia's Lion Air rises from obscurity

November 18, 2011 - 9:40 PM
Indonesia Boeings Buyer

Lion Air CEO Rusdi Kirana talks to the Associated Press at Nusa Dua, Bali, Indonesia on Friday, Nov. 18, 2011. Kirana announced Thursday that his company Lion Air, a private carrier in Indonesia, is planning to order 230 airplanes from Boeing. (AP Photo/Aaron Favila)

BALI, Indonesia (AP) — A decade ago, Rusdi Kirana sat on the grass at an air show in Britain, eating burgers with his wife. "I didn't know anybody," he says, "and nobody knew me." That will change now that his company, Lion Air, has announced the biggest order ever from Boeing.

The once little-known Indonesian airline says it is planning to buy 230 planes from Boeing Co. The bill — with a list price of $21.7 billion — is to be paid over 12 years though bank financing.

Dozens of airlines have emerged in Indonesia since it deregulated its aviation industry in the 1990s, making air travel affordable for the first time for many across the sprawling island nation of 240 million, and luring passengers away from ferries and trains.

Kirana — a travel agent before he and his brother, Kusnan, pooled $850,000 to start Lion Air in 1999 — saw the opportunity and jumped.

"Last year we had 21 million passengers, this year I think I can carry 27 million," said the 48-year-old CEO, adding that with plans for an open-sky arrangement in Asia by 2015, a massive Boeing purchase "is not much of a gamble."

Kirana said his company's first plane was a leased Boeing 737-200, which flew from Jakarta to the tiny airport of Pontianak on jungle-clad Borneo island.

"I didn't have any money after that, because it all went to pay for the deposit on the aircraft," he said.

Though the name Lion Air doesn't resonate internationally, it's hardly an unknown, said Peter Harbison, executive chairman of the Sydney-based Center for Asia Pacific Aviation.

"It's operating 67 aircraft at the moment and had 125 on order before this deal," he said, adding with new routes to Japan, South Korea, China and Taiwan, it's clear it wants to be a real player in the region as well.

"It's a bet on Asia," Harbison said of the proposal to buy the 230 planes — most of which are 737 Max, a new version of Boeing's most popular plane with more fuel-efficient engines.

The biggest market for now is home.

The number of air passengers in Indonesia jumped 22 percent from 43 million in 2009 to 53 million in 2010, according to Indonesia's statistics agency.

That trend has continued in 2011.

But the country also has had its share of accidents, raising concerns that the supply of trained aviation professionals, regulatory oversight and ground infrastructure can't keep up with growth.

In 2007, the European Union banned all of Indonesia's 50 airlines from landing on its runways for two years, and Lion Air has not gone unscathed.

In 2004, a Lion Air MD-82 crash-landed at the airport in Surakarta, killing 25 people in its only fatal accident. There also have been scores of other incidents, including hard landings and overshooting runways, some causing injuries or damage to planes.

"Yes, we've had some problems," said Kirana, adding that planes now have equipment that warns pilots when they are flying too high or too fast. "But we're improving."

With 50,000 passengers a day, his bet, he says, is on the future.

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Associated Press writer Alex Kennedy in Singapore and Niniek Karmini in Bali contributed to this report.