Garuda books Rp 200b in profit, says Tanri

JAKARTA (JP): The country's flag carrier PT Garuda Indonesia has booked Rp 200 billion rupiah (US$18.2 million) in profits as of August as a result of the airline's massive restructuring program, Minister of State Enterprises Tanri Abeng said on Monday.

"Garuda made the achievement after restructuring its management, business and foreign borrowings," the minister said, adding that the figure took him by surprise since he had earlier predicted the company would experience financial difficulties up to early next year.

Previously, Tanri had said Garuda's ongoing restructuring program would result in a net profit of Rp 500 billion in 1999, from a projected loss of Rp 3.25 trillion this year.

Tanri said on Monday he hoped the airline's performance would continue to improve in the coming months and predicted Garuda would be able to record a net profit of Rp 1 trillion this year.

The fact that the company was able to renegotiate its aircraft leasing payments contributed to the turnaround, he said.

Garuda was able to negotiate new leasing fees of $600,000 for each of its Airbus jets per month from a previous rate of $1 million per month. In the first round of negotiations, however, Airbus was only willing to reduce its leasing fees to $750,000 per aircraft, he said.

Garuda currently operates 50 aircraft, 24 of which are leased from foreign firms.

"Furthermore, Garuda's load factor has increased to 80 percent from only 30 percent previously," he was quoted by Antara as saying.

Like other airlines based in the country, the fact that the majority of Garuda's revenues are made in rupiah had created major financial difficulties for the company due to the economic crisis since its expenses are largely in dollars.

The sharp depreciation of the rupiah against the U.S. dollar had multiplied Garuda's dollar-denominated obligations, which represent 70 percent of total costs, while the country's year- long economic crisis had sharply cut passenger volumes.

Garuda has cut back on some of its international flights and has also reorganized some of its domestic routes.

The airline was reportedly on the brink of financial collapse early this year following a threat from the U.S. and several European countries to seize its aircraft if it flew to their countries without first settling unpaid leasing installments.

Company president Robby Djohan, who took ever the airline's helm in June, said recently that Garuda would lay off at least 3,000 of its nearly 13,000 workers as part of its restructuring efforts.

Robby also said the airline was proposing to roll over up to $300 million of its $400 million overseas debt, saying he was optimistic creditors would agree to the proposal.

The company returned six leased aircraft in June and plans to return another five leased aircraft in the near future.

It was also recently reported that it was considering leasing or selling its headquarters to ease its financial problems.

The government and the House of Representatives have allowed Garuda and other airlines to raise their fares several times this year to offset losses due to the rupiah's tumble.

Fares were first raised by an average of 35 percent in January and further raised 37 percent in May.

They were again increased 40 percent to Rp 753 per kilometer per seat in late August.

The country's airlines have also received government approval to further raise their fares another 14.5 percent to Rp 862 per kilometer per seat in December. (jsk)