Garuda imposes US$5 surcharge
Garuda imposes US$5 surcharge
Moch. N. Kurniawan
The Jakarta Post
Jakarta
Indonesia's flagship carrier Garuda Indonesia has imposed a
US$5 surcharge on international air tickets since Oct. 1 to
finance the extra cost of higher insurance premiums, according to
a senior executive of the Association of Indonesian Travel
Agencies (Asita).
Asita chairwoman Meity Robot said that travel agencies had
imposed the surcharge on Garuda international flight tickets
since that date.
"It (the surcharge) is the first time in a decade. Even the
Gulf War didn't have an impact like this," she told The Jakarta
Post.
Garuda, however, was reluctant to provide an explanation and
instead gave a conflicting statement.
"We're still discussing the possibility of imposing a
surcharge," Garuda spokesman Pujobroto told the Post.
Global insurers had raised premiums per passenger for "third-
party war and terrorism insurance" following the Sept. 11
terrorist attacks on the U.S.
Airlines must take out the insurance otherwise they will be
banned from flying by their aircraft lessors or from landing at
designated airports.
Garuda finance director Emirsyah Satar said earlier this week
that the airline had secured coverage for third-party insurance
of up to $1 billion from London firms.
He said that Garuda must pay additional premiums of between
$20 million and $25 million per year for the insurance coverage,
besides having to pay about $10 million per year for hull
liability. The premiums will be paid in quarterly installments.
According to Asita, Garuda joined the growing list of world
airlines imposing a surcharge to pass on the burden of the higher
insurance premiums to passengers.
Meity pointed out that KLM Royal Dutch Airlines had also
imposed a $5 surcharge, Philippines Airlines $6, Singapore
Airlines $1.25, Thai Airways International $1.25 and Malaysia
Airlines $1.25.
The U.S. attacks have caused a serious blow to the world
airline industry, which analysts say was heading toward a
prolonged slump.
It is not clear whether Garuda will also impose a surcharge on
domestic air tickets, although a source at the company said
earlier that such a move would be unnecessary if the surcharge on
international air tickets was sufficient to cover the extra
insurance cost.
Garuda had been struggling to make a reasonable profit as the
1997 regional financial crisis had multiplied its dollar-based
costs but cut down its rupiah-based revenue.
The airline, which is to be privatized by the government in
2003, reported a 90 percent drop in its 2000 net profit to Rp
53.24 billion ($5.49 million) due to foreign exchange losses.