Indonesian carrier Lion Air delays IPO, slams ban from flying in EU

By Tim Hepher, Reuters

SINGAPORE–Low-cost carrier Lion Air has postponed plans for a 2012 share flotation worth more than US$1 billion, its chief executive and co-founder said, bowing to a stock market reversal that soured last week’s debut of Indonesian flag carrier Garuda.

Lion Air, Indonesia’s biggest carrier by passenger volume, has ambitious plans for expansion as the archipelago nation expands its poorly served air corridors, and has placed a record provisional order for more than 200 Boeing jets. “We can’t do it this year because the situation with the financial crisis is not so good,” CEO Rusdi Kirana said in an interview on the eve of the Singapore Airshow.

He said Lion Air had a domestic airline market share of 51 percent and aimed to go public when this figure reached 60 percent, something he estimated would happen “in the next two years.”

Shares in PT Garuda Indonesia fell 17 percent on their trading debut on Friday as buyers took fright at what they deemed a high valuation — a sign that investors have turned cautious on Indonesia’s previously buoyant markets.

Investors have sold Indonesian stocks this year on worries over inflation and to cash in on a 46 percent rally in 2011. Kirana, who branched out from the travel business to start the airline with his brother Kusnan in June 2000, insisted Lion Air did not need the funds it would have raised from the IPO to pay for deliveries of aircraft on order from Boeing.

The airline grabbed world attention in November by placing what could become Boeing’s biggest ever commercial order, worth US$21.7 billion at list prices. Europe’s Airbus has accused the United States of applying political pressure to secure the deal. The provisional order for 230 short-haul jets, signed in the presence of U.S. President Barack Obama, takes Lion Air’s order book to more than 400 planes, which it aims to use to fly across an Asia-Pacific region still seeing robust passenger growth. Safety Concerns Dismissed Its fleet of 92 aircraft also includes European ATR-72 turbo-props built jointly by Airbus parent EADS and Italy’s Finmeccanica. Demand to feed traffic from Indonesia’s 17,000 sometimes remote islands which spans three time zones is expected to grow. With a poor rail and road infrastructure, air travel is the only way for the world’s 12th busiest domestic market to tap its potential and there is plentiful margin for growth, Kirana said. Indonesia is the world’s fourth most populous nation with 230 million people, but has barely half the domestic traffic generated by Malaysia’s 28 million people. Indonesia’s average annual passenger growth is 21 percent, according to the airline.

Lion Air, whose competitors include Malaysia’s AirAsia, says low costs allow it to offer tickets for US$40-US$60.