Indonesian aviation authorities ask Sparrow Air to slow down growth, to increase financial and infrastructural stability
Fast-growing Sparrow Air is being investigated by Indonesian authorities due to some disruptions in the flight-schedule as well as concerns about their financial viability. These news came, after Sparrow Air expanded their fleet throughout late October and November with a total number of 145 aircraft now in active service.
Sparrow Air confirmed, that there were some „financial issues“ during last weeks´ payment. A financial loan was issued to Sparrow Air to pay their obligations.
Journalists investigated, that the management of Sparrow Air „loves to play with the available amount of money and the actual cashflow“. The airline „leased a large number of (Boeing 717)-aircraft, installed seats, trained pilots and cabin crew and forgot to take care of very high costs of aircraft maintenance prior to the first wave of departures and even stored these leased aircraft without using them“.
„This not only resulted in huge amounts of money to be paid, but also drained money-accounts.“
Sparrow Air´s spokeswoman said, that using money is „legitimate“. At the moment, we can´t arrange interest rates for our money, not for a paid ticket paid 3 weeks ago and not for a ticket paid 30 minutes ago. Normally, we would love to take a large amount of money - already paid tickets – to a bank and to invest large amounts of money in exchange for attractive interest rates. This is currently not possible“.
A spokesman of the authority refused to accept these „we are so poor, because you are bad to us“-attitude. He claims „that there are so many other companies who are financially doing well“ and recommended to employees of the financial accounting department of Sparrow Air to „go back to school to learn the fundamentals of accounting.“
It is believed, that the CEO got angry with this comment. „Sparrow Air is financially very healthy and paid back the loan needed to survive the week.“
The dramatic expansion of the schedule was initiated three to four days ago, after Sparrow Air leased a large number of available Boeing 717s and stored them after agreements were signed. Some sources say, that the CEO signed leasing-agreements via his smartphone and had to look for a large computer-screen to start looking on what he has leased.
Nevertheless, Sparrow Air´s flightops made the impossible possible. Each Boeing 717 was carefully rostered after maintenance was conducted to allow a dramatic increase of frequencies on existing routes as well as new city-pairs and the resulting increase of presence at specific hubs within Indonesia.
Industry-analysts decribe the policy of Sparrow Air as a rather easy and low-risk way to expand. While other airlines clearly earmark most modern aircraft like the Airbus A220 or Boeing 737MAX, Sparrow Air seems to retain the policy of expanding with adequate 129-seat Boeing 717s – even for the sake of using these aircraft on routes not suitable for this kind of aircraft.
Sparrow Air confirmed, that the Boeing 717 suffers some payload - as well as operational restrictions due to demanding stage-lengths. This results in blocked seats (10 to 15 seats) and lack of cargo capabilities. The company argues, that there are (at the moment) no - much better suited -A319/320s or A321s available at attractive leasing conditions and Sparrow Air accepts these penalties while operating the Boeing 717s.
However, the vast majority of Boeing 717-flights are operated without any restrictions and the attractive operatings costs allow Sparrow Air to operate the Boeing 717 in a very efficient way. The Boeing 717 „can compete very effective when it comes to costs“.
The Boeing 717 became the most prominent type of aircraft within Sparrow Air, followed by 37 MD-80s, eleven A319/320/321s as well as five MD-11s.
The 282-seat MD-11s allow Sparrow Air to provide long haul services. Some of these routes are loss-making. However, Sparrow Air believes that these routes will break-even over the time. The most important long haul destination is Amsterdam with a daily flight between Indonesia and Amsterdam. Sparrow Air has no plans to increase their long haul business – short haul is the market, where money can be made much more easily.
The dramatic increase of capacity will result in a drop of system-wide load-factors until the public recognizes the ever-increasing amount of possible connections made available through these new flights.
The lack of slots at key airports within Indonesia remains a problem, „but we have to accept that“.
Medan became an attractive hub in the northwestern part of Indonesia with attractive connections to Indoensia, India as well as China. China remains to be a traditionally very difficult market. Even the Boeing 717 seems to be „far too big for some connections“, one employee of Sparrow Air told to one passenger. Ujung Pandang remains to be the gateway to the Eastern part of Indonesia, but the vast distances and lack of connectivity at key smaller airports make further developments really difficult.
Sparrow Air thanks all IL-partners for the vital partnerships. One international partnership remains to be the most important over all the years: Air Malaysia. Operating a fleet of modern Boeing 737/787 as well as Airbus A330s, Air Malaysia provides a very attractive network and connecting flights while providing the finest in service. Sparrow Air gradually increased the number of flights between Kuala Lumpur and Medan as well as Ujung Pandang to reflect the demand and to increase connectivity. The Boeing 717 is the perfect tool – right sized, right economics, nice comfort.
Within Indonesia, Snooker Airways is also profiting from Sparrow Air and vice versa. Snooker Airways – bigger than Sparrow Air – operates a comprehensive network and employees of Sparrow Air are always told to look at Snooker Airways as an example of success. It shoudl be noted, that there is a nother big Indonesian company: Fly Indonesia. We highly respect this company and even leased aircraft from them.
Over the weeks, other subsidiaries of Sparrow Air made adjustments in their specific market-areas. For example, Wings Indonesia started to connect tiny airfields in Malaysia as well the Philippines with small Pilatus-aircaft to Ujung Pandang as well as Medan. The return of investments is small, but the very profitable operations of five MD-80s cover any costs associated with such expansion.
The biggest IL-partner is Spirit of Asia with a network, which makes Sparrow Air´s a tiny one. This partnership allows Sparrow Air to offer a seamless connections to a vast number of destinations and Sparrow Air is able to provide their attractive Indoensian network.
All IL-partners are important. However, some of these IL-partners cover very important markets. For example, Air Victoria opens totally new markets in Australia, while IndiFly covers India – a traditionally difficult market for Sparrow Air. Singaporean Kris Air allows optimized connections via Singapore and ROYAL OMAN AIRLINES is believed tob e a masterpice of business.
This airline not only operates a vast network but also provides the utmost quality of services. Even the heavy cutlery and silky napkins are more worth than the catering aboard an A321 of Sparrow Air!
Sparrow Air argues, that the heavy cutlery would result in payload restrictions when operating the A321-100. „Please keep in mind that the A321-100 is not the most powerful aircraft in its class. 220 passengers + baggage + luggage + crew and the aircraft is really operating close to the maximum allowed weights and the wings are bending after take-off!“
Last but not least, the CEO of Sparrow Air presented a new theme-song presented in Hamburg/Germany in 1969 and later found out, that this German folk song (originally from 1935) is about swallows, not sparrows!
The CEO was not avalable for any comments.