Batavia Air - In trouble? (Part 1)

A few days ago I tweeted that I heard 2 Batavia Air A320s having been repossessed by its lessor. It all started when I received a message early this week that several cabin crew and pilots have started saying privately that the airline was about to go bankrupt, with about 4 - 5 737s to be returned, and the 330s as well, and that the chief pilot had resigned.

No Cash?

I called up my sources, whilst they were chasing up the information, rumours, leads and leaks, I came across this article at Tempo. The article dated 19 May revealed that 3 days beforehand a Batavia Air flight was delayed (by 5 hours after it was scheduled to depart, the flight, assumed to be from Pontianak to Jakarta). The passengers had decided to bring the airline's station manager to the airport security, and at the security office, a passenger stood up and addressed the other passengers.

"The problem here is that Batavia Air does not have the cash to compensate us in accordance to the regulations. In order for us to go home and rest, I am going to help Batavia Air."

Batavia Air at the airport had only IDR 16 million in cash, and the compensation that was due amounted to IDR 44 million. The passenger, Rasmidi, head of the Ketapang Regency Chamber of Commerce, then said, "I will cover the rest, please register yourselves to obtain the compensation. "I hope this serves as notice to Batavia Air, to reduce its flight schedules to match the small fleet that can operate."

It seemed that Batavia Air had overstretched its schedule.

Planes parked, or missing, and frequencies reduced: Signs?

As I wondered why on earth would Batavia Air not have cash for delay compensation, got to the airport the next day, and found both Batavia A330s parked together at the remote apron. This obviously raised alarm bells in my head, and prompted me to call up my sources again. By the evening, various sources began providing information. 

PK-YVF spotting at Singapore Changi devoid of titles
(Photo by: M. Aswin)

Another (ex-) Batavia A320 devoid of titles in Singapore Changi.
This one is suspected to be PK-YVH. (Photo by M. Aswin)

• 2 Batavia A320s had been seen in Singapore, also parked together at the remote apron. Later I received pictures of the airplanes, both have had their logo and titles removed. The aircraft had been in Singapore since at least 16 May according to sources. One is identified to be PK-YVF and the other is suspected to be PK-YVH as the pair are reportedly leased from CIT.
• 1 737-400, PK-YVQ is reported to have been returned to the lessor.
• Both A330-200s are reportedly being prepared to be returned to lessor.
• Another sources, had said that Batavia have reduced its flight frequencies on several routes by at least 1 flight a day.

Allegations, allegations and allegations - Is Batavia in trouble?
There have been numerous allegations of safety violations/breaches against Batavia. Most of the allegations in the past have been on the subject of crew flight hour limits being exceeded, whether weekly, monthly, or annual limits, are so many that I've lost count and stopped trying to remember them. The last time I heard of the allegation was if I remember correctly, when it was alleged that a DGCA inspector asked a Batavia pilot at Jakarta's airport waiting for his crew transport home, to show his flight log book, to which it was found that the crew had violated one of the periodic flight hour limitations. This reportedly led to immediate removal of the Operations Director.

Past allegations have also included questionable operational decisions, such as the company's route to Luwuk, where former crews claimed that they were not given charts of Luwuk Airport and that the procedures for route and the airport was made up as they go along. One or two allegations regarding operations of aircraft with no-go maintenance issues have also been made (one claim involved an A320 being dispatched on a single IRS, and another claimed that weight limits were exceeded).

Note: The above are allegations and cannot be independently verified.

Poor Maintenance cause delays. A delay (that is not caused by weather or factors beyond the control of the airline which does not include maintenance) exceeding 3 hours now require IDR 300,000 (about US$32) per passenger, cash compensation to be given to the passengers. If an a 737 has 10 flights a day, and each is delayed by over 3 hours, that's US$47,000 to US$55,000 in cash compensations. That amount is about the same as the monthly dry lease rate of an early 1990s built 737 classic. It takes no genius to figure out that delays caused by maintenance, is extremely expensive!

The overrun at Balikpapan in March was the second incident
involving the aircraft in the last few months.

The allegations mentioned above, are very hard to prove. We can believe in them or dismiss them as the claims aren't independently verifiable. However, the findings by the NTSC on the recent A320 runway overrun at Balikpapan ("Update: Batavia A320 Overrun at BPN 12Mar12" (dated 23rd April 2012)), does provide insight into the potential problems. The NTSC found that:

• Batavia had not maintained the aircraft (involved in the incident) in accordance with the Airbus service bulletins, or even, Airbus's recommendation regarding rectification of the cause of the previous incident involving the aircraft. 
• It was also revealed that the airline disregarded the Airbus recommendation for the problem on the brake servos be solved prior to its next revenue flight (after 1st incident at Jayapura) 
• It was found that the airline's Technical Director was different from the Ops Spec submitted and approved by the DGCA.

The NTSC findings above are NOT allegations, they're not in the business of making allegations.

A330 Ops: Batavia's most descriptive bungle

Batavia made a bid in the 2012 Hajj tender. The airline had submitted its bid, which includes utilizing both of its A330-200s, and leasing 4 A330-300/A340-300 from Air Asia X, and 1 777-200 from EuroAtlantic, however Batavia also admitted they had not had any agreements regarding those leases because it was waiting for a decision from the Ministry of Religious Affairs before making commitments on the leases. The Ministry then announced that Batavia had not met the required qualifications specified in the tender documents, which included LOIs to show adequate commitment (ie: "not bluffing") on leases and also possession of IOSA certification. Batavia had none, and can only meet 7 of the 11 qualification criterias .

Batavia then lashed out claiming monopolistic malpractice as a reason for its failure to win a spot in the hajj flights. "This is not the first time we’ve proposed the service and not won," commercial director Sukirno Sukarna said to Jakarta Post, adding the airlines had tried in the past several years to win the haj transportation tender. But the Jakarta Post article showed that Batavia does not understand the tender: 

• Last year Batavia had  its bid rejected because it did not have landing permits for the Hajj flights or had not applied for it, Batavia rejected such notion, claiming that it had the landing permits for Jeddah (except that it is for tourist and business (ie: regular scheduled) flights, and not Hajj flights which is a separate permit).
• Instead of obtaining LOIs for aircraft leases, Batavia instead provided a loan commitment from a bank amounting to $1.3 million to lease aircraft for the hajj flights (something which is grossly inadequate, even for 1 aircraft!)
• Instead of obtaining an IATA Operational Safety Audit (IOSA) certification, they said that "we have secured an ISO certificate that guarantees our service and safety. That is the same," according to Batavia's commercial director Sukirno Sukirna. DGCA spokesman Bambang Ervan had to explain to the media the difference between an ISO and an IOSA.
• The ISO/IOSA games played by Batavia, isn't bought by anyone, because in March, Batavia actually said they were after the IOSA and that they were going to commence the process in 2013, and that Sukirno Sukirna stated that one of the reason is to be able to qualify for the Hajj flight tenders.

Outside of the Hajj bids, the A330-200 operations into Jeddah and Riyadh had seen poor load factors. Batavia initially announced it would fly to Haneda and has recently announced it would delay opening the route citing rising fuel costs as a reason (shouldn't they have factored in this?). If the A330-200s end up being returned to the lessor, I would not be surprised, in fact, such a move could actually save Batavia Air, but this doesn't answer the question as to why the 2 A320s are being returned.

So, who's pulling who's leg?

To conclude all the above briefly, I will add that around a year ago, a source from the financial industry mentioned to me that the airline's balance sheet was in a total mess, with negative cash flow all the time. He estimated that unless something changed, Batavia would run out of cash in about 11 months. The 11th month, was to be May 2012. If Batavia is indeed in trouble, would Rasmidi, who saved Batavia Air's station manager from being arrested or clobbered by Batavia passengers, get his money back?

Whatever is happening in there, hiccups do happen, and sometimes spectacularly when it comes to Indonesian airlines, but my hope remains: That the airline improve, turnaround, and come back as a strong and healthy player in our ever growing market. We don't want another Adam Air here!


Part 2 can be found HERE.