ANALYSIS: Batam to emerge as key regional hub

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Lion Air’s plans to build up a domestic hub in Indonesia come on top of years of capacity growth at Hang Nadim airport, which features Southeast Asia’s longest runway.

Viewing Google Earth gives some sense of the opportunities available for Batam’s Hang Nadim airport. Its 4,000m (13,100ft) runway lies in a fairly undeveloped part of the island, which itself is a short ferry ride from bustling Singapore.

Batam itself is bustling, with one of Indonesia’s fastest growing urban areas in the last decade. It also shares all of Singapore’s geographic strengths, namely a strategic position at the nexus of the Straits of Malacca and South China Sea, and a central position between the eastern and western parts of the Indonesian archipelago.

Flightglobal’s CapStats database shows that seat capacity from Hang Nadim has doubled between 2008 and 2013. In 2008, total outbound capacity came to 1.3 million seats. In 2013, this number will climb to 2.7 million.

Batam outbound capacity, 2013

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Flightglobal Capstats

The vast majority of this increased capacity comes from a single source: Lion Air. In 2013, it will provide nearly half of the available outbound capacity with 1.2 million seats, compared with just 243,000 seats in 2008.

Batam’s capacity growth is especially impressive given that Indonesia AirAsia, which provided 209,000 seats in 2008 has abandoned the Batam market. Batavia Air, which was the third carrier in 2008 with 189,000 outbound seats, has also almost disappeared from the market.

Batam outbound capacity, 2008

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Flightglobal Capstats

Lion has become increasingly open about its plans to grow its Batam hub, and has even disclosed that it plans to obtain a ferry service between Singapore and the island. Although the ostensible role of the ferry will be to convey components Lion’s new MRO facility at Hang Nadim, Lion will also use the ferry to transport airline passengers.

The move is reminiscent of Hong Kong company Shun Tak’s involvement in Jetstar Hong Kong. Shun Tak operates ferries from the Pearl River Delta directly to Hong Kong International Airport (HKIA). If Jetstar Hong Kong gets off the ground, the new carrier will be able to provide seamless connectivity for ferry passengers on to flights from HKIA.

Batam airport does not have a dedicated ferry terminal along the lines of HKIA’s Skypier, but such a facility would be of immense value siphoning Indonesian domestic traffic from Singapore’s Changi airport. When Lion launches international flights from Batam, such a system could appeal to budget conscious travellers going to Indonesian destinations.

It is questionable, however, how willing the Singapore government would be to allowing the development of such an alternative to its prized air hub.

Nonetheless, Batam is still at an early stage of its development. FlightMaps Analytics shows that the most distant destination served from Hang Nadim is Surabaya, with Lion and Citilink providing 90 services monthly.

The thickest outbound destination from Batam is Jakarta, where market leader Lion provided 32,000 outbound seats in September, followed by Garuda Indonesia with 23,000 seats. The other key market served is Medan, with Lion providing 19,000 seats in September, followed by Citilink with 9,360.

Outbound routes from Batam, 2013

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FlightMaps Analytics

Despite Lion’s plans, the only international destination served is Kuala Lumpur, with Firefly providing 18 services monthly with ATR 72 aircraft.

Although Batam is a long way from approaching Changi as the regional hub of choice, its long runway, improving infrastructure and the support of Southeast Asia’s top low-cost carrier are bound to see it go from strength to strength.