The Lion Group is expected to allocate Lion Air, which previously took an average of about 10 737NGs per year, more aircraft deliveries in 2016. But the rate of capacity and passenger growth is unlikely to reach the levels achieved between 2008 and 2013.
While Lion Air will likely again receive several aircraft per annum in the coming years it has been looking at returning and leasing out its oldest 737-900ERs. Lion’s first batch of 737NGs will reach their tenth birthday in late 2016 and 2017.
Even without the ill-conceived price floor, lower domestic growth for Lion Air was inevitable given the overall slowdown in the Indonesian market over the last two years. Lion Air also has limited opportunity to further grow its market share as it already exceeds 40%, a relatively high figure given Indonesia has such a large and fragmented domestic market.
But there will be opportunities for international growth given that Lion Air now allocates over 95% of its capacity to the domestic market. The group initially envisioned Batik becoming the main brand for the international market. But there should be opportunities to extend the Lion Air network well beyond the current three countries. The Group will have to focus on establishing a brand presence, as neither brand is yet well known outside Indonesia.
Lion is already preparing to launch scheduled services by the end of 2015 to four secondary cities in mainland China, a market it has so far only served with charters.
The new A330 fleet has the potential to become an important growth vehicle for Lion expansion in medium-haul markets
China could eventually be served with a mix of 737s and A330s with the latter being used to larger cities and on longer routes. The new A330 fleet has the potential to become an important growth vehicle for Lion expansion in medium-haul markets across North Asia as well as to the Middle East and Australia.