Garuda continues IPO plan despite revenue snag

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)