By: Karon Ng

ARMED with a low-cost business model, budget carrier Lion Air wants to give the regional airlines a run for their money.

Its success will mean that air travellers can continue to get cheap fares if not better services despite high oil prices as competition among the budget carriers becomes more intense.

As a hybrid airline, the upstart Indonesian carrier offers business as well as economy class seats at low prices.

An economy class Singapore-Bali return ticket, departing from Singapore's Changi Airport Terminal 1, costs around 200 now inclusive of taxes and other charges.

A check on the Internet shows that a similar flight can cost around $650 on JetStar Asia, $560 on Garuda and $533 on Singapore Airlines.

AirAsia, the region's largest budget carrier, charges RM800 (S$336) to fly from Kuala Lumpur to Bali.

Lion Air's other attractions: It gives 20kg baggage allowance for economy class, offers safety by flying new aircraft on regional routes and on some flights, such as Singapore to Bali, it serves free snacks and drinks. It also plans to have inflight entertainment on some routes.

AirAsia charges RM3 for one-way baggage handling fee and has a  baggage allowance of 15kg while the rest offer 20kg.

Passengers pay for food and drinks and get no inflight entertainment on no-frills AirAsia and JetStar Asia.

With a more than 5,000-strong workforce, Lion Air operates with new aircraft and it is also banking on an extensive network to boost its business.

As Indonesia's largest domestic carrier, it has a 40 per cent market share and it won an award for being a top brand last year.

It now flies to 36 destinations with 226 flights daily in Indonesia, besides flights every day from Singapore to Denpasar and Ho Chi Minh City and between Jakarta and Kuala Lumpur.

Lion Air plans to fly to Australia later this year and Hong Kong, China, Korea and Japan next year.

Mr Rusdi Kirana, its founder and president director, says: "As Indonesia's largest domestic airline based in Jakarta, Lion Air is able to leverage on low operational, staff, training and maintenance costs in order to offer affordable and competitive fares."

LionAir aims to have the world's largest boeing 737-900ER fleet when 144 of the 178 aircraft that is had ordered are delivered by 2012. The airline has taken delivery of 15 new places so far.

The fuel-efficient Boeing 737-900ER is a single-aisle commercial airplane that carries up to 213 passengers in a single-class configuration, which translates to cheaper fares.

In Lion Air's circulation, operating its new fleet of aircraft will result in 6 per cent lower operating cost per trip and 4 per cent lower operating cost per seat compared to the Airbus A321.

But the Indonesian carrier won't have the skies all for itself. Its fast-growing Malaysian rival, AirAsia, intends to grow its regional network in a big way too, despite the rising fuel costs.

AirAsia's chief executive officer Tony Fernandez said last week that the airline would "market" itself out of the problem.

It intends to launch four new routes in the next two months. It will also expand its food menu and sell more in-flight products and services.

This article was first published in The Straits Times on June 23, 2008.