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Charter flight business suffers from falling oil, coal prices

Growth in the charter flight business is projected to slow this year due to declining demand from mining companies as well as oil and gas firms resulting from the falling prices of coal and oil.

Denon Prawiraatmadja, head of the non-scheduled services division at Indonesia National Air Carrier Association (INACA), estimated the charter flight business would see less than 10 percent growth this year as more than half of demand came from the mining sector, as well as oil and gas companies.

Denon said the country’s air-charter operators booked a total of US$500 million in business contracts in 2014, a 12 percent increase from a year earlier.

He said charter flight businesses had enjoyed steady double-digit growth in 2012 and 2013, but began to slow in 2014 following a slump in coal prices.

“We can no longer rely on the mining and oil and gas sectors, so we are starting to shift our focus to other sectors, including tourism and medical,” Denon told the Jakarta Post on Friday.

The global coal market has suffered in the past year as demand from China, which buys almost half the world’s coal and ore cargoes, declined by 22 million tons.

Indonesia’s coal-price reference (HBA) dropped by 27 percent last year and continued to decline to hover at around $63 per ton in February.

Meanwhile, global oil prices have also dropped significantly since June last year to around $50 per barrel this year from a high of more than $100 per barrel in 2010.

Business flourished last year, according to Denon, due to the legislative and presidential elections and a surge in demand stemming from political campaigning.

Demand for non-scheduled service, currently supplied by 40 domestic players, was high until the election period ended, as it is considered a lifestyle for many businessman and politicians.

Denon, who is also president director of air charter operator PT Whitesky Aviation, said his firm was already in discussion with a tourism agency in Australia to transport tourists to Bali.

“I believe the tourism market is still untapped, and although the demand is not that large yet, it has the potential to grow,” he said.

He added that the combined share of tourism, medical and other sectors in the chartered flight business reached around 10 percent.

As of the end of last year, Whitesky operated three Bell 429 helicopters, three Bell 407 helicopters and four fixed-wing Cessna 402. The company has maintenance facilities and hangars at Halim Perdanakusuma Airport in East Jakarta and Sepinggan Airport in East Kalimantan.

Meanwhile, air charter operator Travira Air director Rudiana Syamsuddin said that over the first quarter of this year, the airline had not signed any business contracts with mining firms or oil and gas companies.

“We have 15 aircraft, but none of them were operated during the first quarter of the year since our market is still reliant on the oil and gas companies,” Rudiana told the Post. “This year will be the toughest year for our business. We can only hope the situation will recover soon,” he added.

source: http://www.thejakartapost.com