Lion Air Establishing LCC In Malaysia

By Leithen Francis

Lion Air, Indonesia’s largest airline, plans to transform little-known carrier Berjaya Air into a low-cost carrier for Malaysia.

The Berjaya Group tells the Malaysia stock exchange that Lion Air will own 49% and it will retain 51%, with the deal expected to be concluded in the second half of the year. It says the Berjaya Group and Lion will participate in a rights issue to raise 60 million ringgit ($20 million) to recapitalize the airline.

“The local aviation industry has seen some tremendous changes with the introduction of several regional and long-haul budget airline operators during the last decade,” says the Berjaya Group, adding that “the success of the business models of these low-cost carriers has proven that there is ample demand for the movement of passengers to and from Malaysia, as well as among regional destinations.

“Berjaya Group hopes the proposed joint venture with Lion Air will allow Berjaya Air to successfully expand its business horizon beyond Malaysia by capitalizing on its Indonesian partner’s experience and ‘economies of scale’ in the aviation services industry with a large fleet of aircraft and an expansive reach of destinations,” it says.

Berjaya Air operates three de Havilland Dash 7s and one ATR 72-500, according to the Ascend database. It is based at Kuala Lumpur International Airport but also operates from Singapore to Malaysia’s Tioman and Redang islands, where the Berjaya Group owns resorts.

Lion Air has wanted to expand out of Indonesia for many years to compete against AirAsia in Malaysia. A few years ago, AirAsia expanded internationally by launching Indonesia AirAsia.

AVIATION WEEK Copyright 2011