Citilink Plans IPO and Expansion in Indonesia's Low Cost Aviation Sector
Citilink Indonesia, the low-budget unit of Garuda Indonesia, announced its intention to conduct an initial public offering (IPO) in 2015 by offering 30 percent of its stocks to the public. The Indonesian budget airline also plans to expand its fleet-size to 50 airplanes. However, before an IPO can be conducted, the company said it should improve its (financial) performance first. In 2012, Citilink Indonesia recorded an USD $28.4 million loss on operating revenues of USD $73.4 million.
Indonesia's aviation industry has been a highly lucrative business in terms of passenger growth in the last 15 years. However, fierce competition has reduced profit margins as airlines have to sell tickets at low prices to remain competitive; sometimes even selling below break-even point. This situation has resulted in a number of casualties. One year ago, Mandala Airlines almost collapsed due to high debt woes. A takeover by private equity firm Saratoga Capital and Tiger Airways was just in time to save the airline. In early February 2013, Batavia Air went bankrupt after it was unable to repay its debts.
Currently, Citilink serves 76 domestic routes throughout the country, but is seeking to expand its network and number of daily flights. For this reason, it is adding numbers to its fleet size. In January 2013, the company ordered 25 Airbus A320neo airplanes (valued at USD $2.4 billion), and 25 regional ATR 72-600 airplanes. Its total number of airplanes is expected to rise to 50 by 2015, and number of passengers to 16 million. In 2012, the company carried four million passengers. This number is equivalent to a market share of about 17 percent in Indonesia's low cost carrier segment.
Citilink's main competitors in Indonesia's low-cost air service are Lion Air and Indonesia AirAsia.
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