Malindo Airways: Lion Air makes its roar heard in Malaysia

Indonesia's Lion Air and Malaysia's National
Aerospace & Defence Industries join hands
to set up Malindo Airways in Malaysia

Lion Air has confirmed plans to set up Malindo Airways in a partnership with Malaysia's National Aerospace & Defence Industries.

Several interesting key points were made in the event:

• Malindo will provide a hybrid service (between LCC and full service carrier).
• Base will initially by at KLIA2, the future home of Air Asia Malaysia
• Malindo will start in May 2013 with 12 737-900ERs with 12 business class seats and 168 economy, with IFE and WiFi.
• Malindo aims to add 12 aircraft a year and hit 100 aircraft in 10 years.
• 787s will be introduced in 2015.
• Prices for tickets and services is aimed to be on par if not lower than Air Asia.

What this means for Lion Air and possible factors:

• Lion Air sees that its growth in Indonesia needs to slow down due to infrastructure limitations such as airport aircraft parking space are running out nationwide.
• Lion still have A LOT of aircraft to be delivered, and they have to be used somewhere, these aircraft will now go to Malindo and to a certain extent, Batik Air.
• The 787s slated for Batik Air is likely to go to Malindo first, Lion is negotiating for more 787s for Batik Air.
• Lion Air sees that if it wants rapid growth, it must be done outside Indonesia. This is nothing new to Lion Air, but previous attempts to set up subsidiaries outside Indonesia have so far failed (in my opinion, due to picking the wrong partners). Malindo seems to be the most realistic one yet (and I believe it will happen).
• Growth on the premium sector through Batik Air will not be as rapid as desired, again, due to limitations on infrastructure in Indonesia.
• This announcement effectively put an end to the previous rumored Malaysian joint venture, Lion Berjaya Air (And unless there's another announcement, Lion Air Australia is effectively scrapped).

On the Malaysian competitors...

• Air Asia will now have serious competition. Insiders have said that Air Asia's Tony Fernandes isn't afraid of Lion Air in Indonesia, but sees non-LCC developments of Lion Air (such as Malindo and Batik Air) as a threat.
• Firefly needs to set its direction and stick to it, lounging around between jets and props isn't going to get them anywhere against Air Asia, and with Malindo, the might end up being the loser.
• Malaysia Airlines will only face more challenges. Its entry into OneWorld is already being questioned by some after it's alliance sponsor Qantas decided to dump British Airways and went for Emirates. Malindo will only erode further on its short haul yields.

Looking back over the years, Lion Air have announced many plans to set up joint ventures and/or subsidiaries outside Indonesia, none of which have come to fruition. Malindo appears to be Lion's boldest move yet, with a reputable local partner in the form of NADI, and the ceremony was attended by Malaysian Prime Minister Najib.

This time around, it seems that Lion Air is planning serious business outside it's den.