APPRECIATIVE: Najib (centre) takes a closer look at a replica of a Malindo Airways aircraft which he received from Rusid (left) after the agreement signing ceremony. – Bernama photo

KUALA LUMPUR: National Aerospace & Defence Industries Sdn Bhd (Nadi) and PT Lion Air Grup Indonesia (Lion Air) yesterday signed four memoranda of understanding paving the way to a joint-venture to establish a budget airline, Malindo Airways.

The agreements were signed by Nadi president Tan Sri Datuk Ahmad Johan and Lion Air president Rusdi Kirana in the presence of Prime Minister Datuk Seri Najib Tun Razak.

The new airline will focus on short-haul flights within the Asian region and is expected to begin operation from the Kuala Lumpur International Airport 2 (KLIA2) by May 1 next year.

The signing of the agreement was an important milestone in Malaysia’s aviation industry and economic cooperation between Malaysia and Indonesia.

“The venture will see Nadi holding a 51 per cent stake in the JV company, with Lion Air holding the remainder stake,” said Rusdi at a press conference before the signing ceremony.

“Malaysia passenger traffic will be buoyed by growing demand and is projected at 4.9 million passengers per year. Short haul (below four hours) and low cost airline business model will become the dominant carriers,” he said.

Rusdi affirmed that Malindo Airways would be positioned to meet the demand and provide a hybrid product offering to passengers.

“This joint venture will fortify the aviation business eco-system in Malaysia,” he added. “It will provide economies of scale as well as economies of scope.”

The airline will initially fly to Kota Kinabalu, several destinations across Indonesia, Manila, Hanoi and cities in Australia and China. Over the next decade it hopes to expand its fleet to 100 planes, including five flagship 787- Dreamliners to be delivered in 2015.

Rusdi said the airline would set itself apart from competitors by providing in-flight digital connectivity, apart from in-flight entertainment system, state-of-the-art airplanes and ample leg space.

Najib who spoke at the signing ceremony pointed out the necessity for Malindo Airways to be formulated to suit today’s economic outlook.

“As we know, airlines today face huge challenges especially in terms of escalating operational costs and soaring fuel prices.

He added that airlines needed to be innovative and creative to continue to be profitable and sustainable as a business, without compromising on service levels, reliability and affordability.

“A collaboration such as the one witnessed today may very well provide this new airline with various savings and efficiencies in terms of fleet maintenance as well as the opportunity to tap into a robust market that is ripe for the entry of a new LCC.”

He observed that air traffic was expected to grow at a slower annual rate of 5.1 per cent over the next 20 years based on broad projections for global aviation, compared with air travel within the Asia Pacific region which is expected to grow by 6.7 per cent.

“In fact, the Asia-Pacific region accounts for 34 per cent of global passenger traffic and this is expected to almost triple from 779.6 million in 2010 to over 2.2 billion in 2030, with Malaysia expected to account for 200 million passengers.”

The prime minister said the entry of this new airline was timely and necessary to meet the growing market demands, both for low cost flights and maximum connectivity across the region especially between different cities in Malaysia and various parts of Indonesia.

“We must be ready to tap into this lucrative market and readiness means adapting and making changes today for the market conditions we anticipate tomorrow.”

Lion Air is currently Indonesia’s largest privately-run airline, capturing a domestic market share of approximately 45 per cent.

Posted on September 12, 2012, Wednesday