Garuda continues IPO plan despite revenue snag

JAKARTA (JP): State-owned flag carrier Garuda Indonesia is continuing to restructure in a bid to qualify for public listing even though it did not meet its revenue targets in the first quarter this year, it said yesterday.

Garuda's president, Soepandi, said in a hearing with House of Representatives members here that passenger- and cargo-services revenue increased 0.5 percent and 14.9 percent respectively over the same period in 1996.

But he refused to elaborate.

"Garuda gained Rp 124.65 billion in profit last year after a total loss of Rp 204.01 billion in 1995," he said, adding that it still expected a Rp 308.28 billion profit this year.

The airline is restructuring its marketing, operations and organization to revitalize its business. The government has injected Rp 1.7 trillion in new funds in the company to improve its financial performance.

Garuda originally posted a Rp 88 billion loss in 1996, but it sold assets -- including spare parts for DC-9 and F-28 aircraft which it no longer used -- valued at about Rp 212 billion. As the proceeds were included as revenue, Garuda claimed a profit of Rp 124.65 billion last year.

Soepandi said Garuda was preparing to become a world class carrier. "This year is the test."

He said Garuda planned more alliances with foreign carriers to win global aviation business.

"We also plan to accept private capital placement as part of the public offering," he said.

Aviation industry sources believe Garuda has offered up to 25 percent of its shares to foreign airlines including the Netherlands' KLM, Britain's British Airways and Germany's Lufthansa.

Soepandi said yesterday Garuda would sell its hotel subsidiary Aerowisata as part of its financial restructuring.

"We are currently in the process of due diligence (checking quality of assets and liabilities)," he said.

Aerowisata owns and manages three hotels, one each in Bandung (West Java), Lombok (West Nusa Tenggara) and Sanur (Bali).

The company has just terminated management contracts with star-rated hotels including the Nusa Dua Beach (Nusa Dua, Bali), Biak Marauw (Biak, Irian Jaya), Pusako (Bukittinggi, West Sumatra) and Biliton (Belitung, South Sumatra).

Merpati

Merpati Nusantara Airlines reported in the same hearing yesterday that it had posted a total loss of Rp 137.1 billion last year.

"We also posted a Rp 38.4 billion loss in the first quarter this year," Merpati's president Budiarto Subroto told the House.

Merpati, which has just been separated from Garuda, faces a tough battle as it is known as a regional carrier that serves mostly domestic feeder routes and limited regional routes.

Unprofitable routes and gross inefficiency have hurt Merpati because its fleet includes a wide variety of airplanes. The company is also burdened with Rp 600 billion in debts which it now expects to be converted into government equity shares.

"Merpati plys more than 300 routes, 11.5 percent are 'fat routes', 14.3 percent 'middle routes' and 74.3 percent 'pioneer routes'", Budiarto said.

The term pioneer route, or thin route, is used to describe low-traffic low-profit routes.

Budiarto said the government should review airfares, not just on thin routes.

"Even on routes where Merpati enjoys a full load-factor the operating costs are very high," he said. The Denpasar-Ampenan and Jakarta-Bandung are among its unprofitable routes, he said.

Merpati carried 4.7 million of the about 13.5 million domestic air passengers in 1996. (icn)