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AirAsia’s First Airline Partnership Expands its Presence in Indonesia

Edward Russell

October 2nd, 2023

A Citilink plane taxis past an AirAsia plane

AirAsia is joining the growing ranks of airlines partnering to expand their reach in Southeast Asia with a deal in the large Indonesian market.

The discounter signed a memorandum of understanding at the end of September with Garuda Indonesia-subsidiary Citilink to establish its first-ever interline partnership. The tie-up could launch in the first quarter. The pact aims to expand connectivity between third- and fourth-tier destinations in Indonesia served by Citilink and international points in AirAsia’s network. And it comes just three months after Citilink agreed to sell flights via AirAsia’s Superapp.

In addition to the passenger airlines’ tie-up, AirAsia-parent Capital A’s Teleport Everywhere logistics firm also plans to partner with Garuda Cargo on air freight.

The pacts come amid a wave of new airline partnerships in Southeast Asia. Singapore Airlines has led the charge with, since April 2022, new or expanded tie-ups with Garuda, Thai Airways International, United Airlines, Vietnam Airlines, and Virgin Australia. Almost all of them focus on feeding travelers into Singapore’s global network. And Thai, in addition to its Singapore Airlines pact, has unveiled plans for a commercial partnership with Turkish Airlines.

Partnerships are viewed by most airlines as a low-cost way to expand one’s network. The range in depth from a basic interline agreement that simply facilitates traveler connections to a codeshare where airlines place their own flight number on a flight operated by their partner and sell it as theirs, and a joint venture where two or more carriers operate as essentially one in a given market. The pacts also vary in cost and complexity — and potential financial benefit — in the same order: interline, codeshare, and joint venture.

The new AirAsia-Citilink pact is the most basic when it comes to partnerships. The airlines only plan an interline agreement where “travelers would be able to check through baggage from origin to destination, on a single boarding pass, for seamless transfer through integrated services.” They did not say whether it could be a precursor to a deeper partnership in the future.

The tie-up links Indonesia’s second largest domestic airline by seats, Citilink, with the country’s largest international airline, Indonesia AirAsia, by seats, according to Cirium Diio schedules.

AirAsia (blue) international routes to Indonesia, and Citilink (magenta) domestic routes in Indonesia routes in October 2023. (Cirium Diio)

AirAsia, in its statement on the planned partnership, said the interline would include the full “breadth” of its international routes and not only ones to and from Indonesia. That means destinations like Ho Chi Minh City, Hong Kong, Seoul, and Tokyo are to be included.

The focus on Indonesia makes a lot of sense. The country is the largest in Southeast Asia both in terms of population with more than 275 million people, and gross domestic product. And, owing to the country’s archipelago geography, most people have to fly — or take notoriously dangerous ferries — to get where they are going.

That’s why many airlines want a bigger piece of the Indonesian pie, including AirAsia and Singapore Airlines.

Of course, the opportunity in Indonesia is not new. AirAsia, in fact, tried to tap it with its own local subsidiary, Indonesia AirAsia. That airline continues to fly but, in terms of seats, is a small player in a crowded market that also includes Batik Air, Garuda, Malindo, and Lion Air.

In addition to its home carrier in Malaysia, AirAsia has operating subsidiaries in Indonesia, the Philippines, and Thailand, as well as ties to the longhaul low-cost brand AirAsia X. It sold its Indian subsidiary, AirAsia India, to the Tata Group which owns Air India, last year. And AirAsia’s newest local airline, AirAsia Cambodia, plans to begin revenue flights in November.

AirAsia aims to fully recover to pre-pandemic capacity levels by the end of the year.

Edward Russell

October 2nd, 2023

Tags: Asia-Pacific

Photo credit: A Citilink plane taxis past an AirAsia plane Flickr / thisisinbalitimur

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