Deregulation in the airline industry has led to dramatic changing in the domestic airline competition situation. Sempati have the advantage to be the first private-owned airline that get permit to operate jet planes and in addition, Sempati is also the first airline in the country that operate F-100 aircraft



This opportunity also attracts other airline company to follow the same path. in airline industry, to be competitive, one should at least follow the leader moves. Actually Bouraq have asked permission to operate jet planes long time ago, but unfortunately Sempati got first Bouraq had already signaled the market that it would buy 30 jet planes (the existing fleet consists of 20 planes now) in the next five year starting in 1991 (that means 6 planes per year). it is still question mark though whether other private-owned airline will buy jet planes in the near future, because it need big chunk of money.



If they do buy jet planes, the chances are they will use this jet planes on new route (like Sempati did) or they use them on the existing routes, which is no longer competitive and efficient if served with propeller planes. if they want to operate in the new routes, they will compete with Garuda group and if operating in the existing routes means that they will shift their old planes to the new routes which might be new direct competitor for Sempati Air or being the first in certain route with all the advantages. This scenario implies a tougher competition both in the long-range route and in the short-range routes where F -27 operates.



On the other hand, Sempati Air it self might expand their fleet and invest in bigger jet planes. The management disclosed that in the next five year, they are going to invest US$ 500 million in aircraft and the new F-100 is 'only' cost them half of that amount Therefore, we expect that in the near future, Sempati might have more F-27 planes, more jet planes, or both. ]n short, we can say that both the competitive situation and the company itself might change the position ofF-27.



There are some alternatives of what Sempati Air can do regarding their F-27 fleet in facing the future condition, i.e.:

-Harvesting, with the assumption that in the future, the contribution of F-27 fleets will be trivial.

-Improve the existing operation.

-Expanding the operation and the number of F-27 fleets.



Having compared the strategic alternatives mentioned above, Sempati's capability and resources and all pertinent influenced factors, we come to the conclusion to propose Improvement Strategy for Existing Product as the strategy for the future of F-27.

In the medium/long term where the competition would become severe with the increasing number of jet planes operated by private-owned airline, as well as expansion in the airline operation we propose Sempati to establish Sempati Klasik as well as Sempati Arrow and further focus the target market to lower-end business traveler for Sempati Klasik and higher-end business traveler for Sempati Arrow.



Expansion should be done in term of increasing the flight frequency, with adding a number of same type of a aircrafts to the fleet



Expansion to new routes will require quite a bit investment Since Sempati's management seems like concentrating on expansion its jet fleet, therefore expansion of F-27 routes should not hamper this strategy and does not need to be taken in hurry. While Batam's growth triangle promises new routes for border crossing, Eastern Indonesia still need a lot of time to be developed.



The terms of 'short term' and 'medium/long term' in the strategy are relative and subject to management discretion to anticipate the changing in environment



This report will be limited to marketing point of view; hence the implementation plan shall be suited to fulfill those requirement.



Research location: PT Sempati Air

Supervisor: Siswanto Sudomo, PhD

Accepted: January 1990