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2 Falling skies for Indonesian
aviation By Bill Guerin
JAKARTA - The rise and fall of Adam Air,
until recently Indonesia's most popular budget
airline, has cast a harsh light on the country's
weak regulatory regime and reaffirmed already
entrenched foreign-investor perceptions about the
private sector's often corrupt and careless
business practices.
The January 1
disappearance of an Adam Air flight carrying 102
people and the government's erratic response have
left Indonesia's entire airline industry - dozens
of new private airlines have taken
to
the skies since deregulation of the sector began
in the 1990s - in disarray.
Adam Air was
Indonesia's fastest-growing low-cost carrier
before this month's tragic crash. Founded in 2002
and flying by 2003, the politically connected
airline, which referred to itself in its
promotional materials as a "boutique" carrier, had
made its mark in one of the fastest-growing
aviation markets in the world, expanding from 5
million to 25 million passengers over the past
seven years.
According to the Sydney-based
Center for Asia Pacific Aviation, that figure was
expected to double to 50 million passengers yearly
by the end of this decade. Those projections are
now arguably primed for a major downgrade in the
wake of the Adam Air accident and the various
revelations that have since emerged about the
industry's safety standards.
It seemed the
sky was the limit for the profit-making budget
carrier, co-founded by Agung Laksono, Speaker of
the House of Representatives, and Sandra Ang, a
wealthy ethnic-Chinese businesswoman who earned
her family fortunes through trading in West Java.
Prior to the January 1 crash, the airline's
19-aircraft fleet carried an average of 15,000
passengers and flew 73 flights per day,
representing a high 90% average load factor.
The airline was acknowledged by the Asia
Pacific and Middle East Aviation Outlook Summit as
the Low Cost Airline of the Year in Singapore in
November - two months before the fatal crash. Adam
Air's management was in the process of spreading
the airline's wings regionally, expanding its
current international destinations to Singapore
and Malaysia's Penang with new flights to Kuala
Lumpur, Bangkok and Perth and new one-stop
services to India and Vietnam via Singapore.
From the start, Adam Air was very much a
family affair. Laksono's son, David Laksono,
served as the airline's vice president in its
early days and is still reportedly on the
company's board of directors. Meanwhile, Ang's son
Adam Adhitya Suherman, 26, is now president
director and his elder brother, Gunawan Suherman,
is chief executive officer. Another brother,
Yundhi Suherman, is chief commercial officer.
Some well-placed local sources requesting
anonymity claim that Agung Laksono never actually
invested his own capital in Adam Air, but rather
contributed to the enterprise's value through his
official government position, helping to smooth
the way for receiving hard-to-get licenses and
airport landing rights. The same sources also
point out that the Ang family had no business
experience in aviation before starting up Adam
Air.
Still, Adam Air rose quickly. The
airline first took to the skies in December 2003
with just two Boeing 737s it leased from GE
Capital Aviation Services. Yet early on, the
airline showed a penchant for exaggeration and
even obfuscation. For instance, Adam Air's early
promotional campaign invited passengers to take to
the skies with its "new Boeing 737-400s" when in
fact its aircraft were used and more than 15 years
old.
Still, the strong growth potential of
Indonesia's aviation industry piqued the interest
of some major foreign investors, including more
established international airlines. Last February,
the Ang family was reportedly in talks with
several different parties, including Australia's
Qantas Airways Ltd, about the possibility of
selling a 20% strategic stake to an outside
investor.
In October, US-based Texas
Pacific Group, a private-equity fund, was spurned
in its approach to acquire Adam Air outright,
reportedly because of the Ang family's desire to
maintain managerial control. More recently, Adam
Air managers planned in either 2007 or 2008 to
issue an initial public offering in Singapore, a
move designed simultaneously to raise capital for
new aircraft purchases and lift the airline's
international prestige.
Crashing halt
Those heady days, however, have come to a
crashing halt. After the still-unresolved January
1 accident that killed more than 100 people,
revelations and allegations about Adam Air's
safety record, suspect maintenance standards and
questionable management practices now threaten to
ground the once-respected budget carrier
permanently.
Former Adam Air pilots have
in recent days given a series of press interviews
accusing senior management of putting profits
before safety. Sutan Salahuddin, a former Adam Air
pilot who flew 18 months for the airline, last
week told the local and international press that
on at least two occasions senior management had
ignored his objections to flying aircraft that he
deemed unsafe.
Specifically he said that
one of Adam Air's owners telephoned him with a
direct order to fly an aircraft to Padang in West
Sumatra despite the pilot's voiced concerns about
a malfunctioning navigational backup system.
Salahuddin also claimed that on another occasion
he was coerced into signing an
aircraft-maintenance log without a mandatory check
by engineers before a scheduled two-hour flight
from Jakarta to Medan.
Feisal Banser,
another former Adam Air pilot, said in press
interviews that he was grounded for a week by
senior management over his refusal to fly after he
had exceeded the regulation limiting pilots to
five daily takeoffs. "Every time you flew, you had
to fight with the ground staff and the management
about all the regulations you had to violate,"
Banser was quoted as saying by the Associated
Press.
Both Salahuddin and Banser have
also claimed in recent interviews that spare parts
were recycled from other aircraft to save costs,
that pilots were put under pressure to break
international safety regulations, and that the
company bribed aviation officials to look the
other way. Notably, the former pilots' allegations
do not come out of the blue.
Last
February, an Adam Air flight destined for Makassar
after three hours aloft made an emergency landing
with 145 passengers on board in remote West Sumba,
East Nusa Tenggara, after disappearing from
traffic control's radar on an international flight
path. Upon landing 525 kilometers from their
planned destination, the pilots blamed a
malfunctioning navigation system. Adam Air
insisted the system was working properly and
called the police in to arrest the pilots on
charges of endangering passenger safety, according
to news reports at the time. (One of
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