Lion Air aims dominate Indonesia's domestic market

Indonesian dancers perform near a new Boeing 737-900 ER series plane during its official launch by Indonesia's Lion Air at the Sukarno Hatta Airport in Jakarta April 30, 2007.

SINGAPORE (Reuters) - Indonesia's Lion Air aims to dominate the domestic market of the world's fourth most populous nation, piling pressure on flag carrier Garuda Indonesia (GIAA.JK) and regional carrier Air Asia (AIRA.KL) which also operates locally.

Lion Air's Chief Executive Officer Rusdi Kirana told a media briefing on Friday that the recent orders of 230 Boeing (BA.N) 737 passenger jets, valued at nearly $22 billion at list price, is "binding" and "cannot be cancelled".

"We expect to have 60 percent domestic market share in the next two years because by the next two years we would have doubled our fleet from today's level," Kirana said on the sideline of the inaugural flight of its carrier from Singapore to Indonesia's second largest city Surabaya.

The new aircraft will allow Lion to reach farther to other metropolitan cities in Asia and Kirana is aiming to capitalise the Southeast Asian open sky policy, which will come into effect in 2015, to expand its footprint in the region.

"With open sky happening in 2015, I can fly to any point in Asia," Kirana said adding that he is looking to use Singapore as a base to reach other destinations in Asia, such as Beijing.

Lion is generating more than $1 billion in revenue and carries nearly 30 million passenger each year and the number is still growing, driven by strong growth of Indonesia's air travel industry.

"Today we have a total outstanding order with Boeing for 408 aircraft and it is not enough. We are flying to 62 points in Indonesia and we still can have 90 percent load factor."

The strong growth should be able to help the company in its plan to do an initial public offering of the company in 2012. Kirana had said earlier this year that he was aiming to raise more than $1 billion from the sale of 20-30 percent stake.

Kirana said the bulk of the new order will be used to serve the domestic market, which have been growing by an average of 15-20 percent annually since 2000.

(Reporting by Harry Suhartono)