Garuda losing Rp 3 billion per day<\/p>\n
JAKARTA (JP): Garuda Indonesia is suffering an operating loss
\nof at least Rp 3 billion (US$240,000) per day as a result of
\nartificially low fares and sluggish domestic sales, the company's
\npresident said here yesterday.<\/p>\n
Robby Djohan said that to offset the huge deficit the national
\nflag carrier would need to increase domestic flight fares by
\nbetween 35 percent and 40 percent.<\/p>\n
He explained that without such an increase the deficit would
\ncontinue to widen because more than 80 percent of the airline's
\nexpenditure is quoted in U.S. dollars.<\/p>\n
Given the sharp depreciation in the value of the rupiah
\nagainst the U.S. dollar over the last few months, a 35 percent to
\n40 percent increase in domestic fares would be quite reasonable,
\nhe said.<\/p>\n
\"Domestic fares are too low. We must increase them again,\"
\nRobby, who became president of the ailing airline in June, told
\nreporters on the sidelines of a seminar on the tourist industry.<\/p>\n
The former banker said Garuda's international routes had been
\nsubsidizing domestic routes, but added this situation could not
\nbe sustained.<\/p>\n
He said that because the state budget could no longer cover
\nthe airline's operating loss, the company would have to resort to
\npricing policy to ensure that it broke even and therefore had no
\nchoice but to raise domestic fares.<\/p>\n
A review team made up of officials from Garuda, the Indonesian
\nNational Airlines Association (INACA), the Ministry of
\nCommunications and the House of Representatives are currently
\ndiscussing further airfare increases, Robby said.<\/p>\n
The country's airlines are currently facing severe
\ndifficulties because ticket revenues quoted in rupiah have fallen
\nshort of offsetting operating expenses, which are mostly quoted
\nin U.S. dollars.<\/p>\n
The year-long economic crisis has had a severe impact on
\npassenger numbers, while the sharp plunge in the rupiah against
\nthe dollar has caused operating costs to soar in local currency
\nterms.<\/p>\n
Robby said that a fare increase would enable the airline to
\nweather the crisis because it has the lowest operating costs in
\nthe world. He pointed out that labor costs were only 13 percent
\nof the company's total costs compared to 30 percent for other
\noverseas airlines.<\/p>\n
He also said that he hoped ongoing negotiations with foreign
\ncreditors to restructure the $200 million of Garuda's overseas
\ndebt which is due to be repaid this year would eventually be
\nbrought to a successful conclusion.<\/p>\n
\"We are only going to pay back interest,\" he added, declining
\nto give further details.<\/p>\n
He said he expected Airbus would agree to further lower the
\nmonthly charge for leasing its airplanes to $550,000 per aircraft
\nfrom $750,000 which the foreign company proposed in the first
\nround of negotiations last month. Monthly lease payments were
\npreviously $1.05 million per aircraft.<\/p>\n
Garuda has already agreed with foreign lessors to return 11
\naircraft under cost cutting measures.<\/p>\n
\"But all this restructuring will be meaningless if we can't
\ngenerate more revenue,\" Robby said, emphasizing the urgent need
\nto raise domestic fares.<\/p>\n
Garuda raised fares by an average of 35 percent in January to
\noffset depreciation in the value of the rupiah, then introduced a
\nfurther increase of 37 percent in May in response to a 42 percent
\nincrease in the price of jet fuel.<\/p>\n
The last round of price increases were based on an assumed
\nexchange rate of Rp 5,500 against the U.S. dollar, while
\nyesterday the currency was hovering at more then Rp 12,000
\nagainst the dollar. (rei)<\/p>",
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