Thu, 12 Feb 2004

Garuda Indonesia hurt by global uncertainties

Dadan Wijaksana Rendi A. Witular, The Jakarta Post, Jakarta

Citing unfavorable global conditions and stiffer competition at home, national carrier Garuda Indonesia's pre-tax profits in 2003 nose-dived by 76 percent from the previous year, it was revealed on Wednesday.

Garuda President Indra Setiawan said that the company posted Rp 238.7 billion (about US$28 million) in pre-tax profits last year, a sharp decline from Rp 1 trillion booked a year earlier.

"While domestic competition has become tougher, the reason for the decline (in profit) was mainly because of continued unfavorable international conditions," Indra told legislators during a meeting with the House of Representatives Commission IX on financial affairs while presenting the company's unaudited 2003 financial performance.

As the airline industry had barely recovered from the Sept. 11 terrorist attacks in the U.S. and war on Afghanistan in 2001 and 2002, it had to weather equally shocking occurrences last year.

"The outbreak of SARS (Severe Acute Respiratory Syndrome) in the first semester, followed by the Iraq war in 2003 were among the main factors that had narrowed our share in the international market," said Indra.

All led to a 16 percent drop in the company's total operating revenue to Rp 8.3 trillion from Rp 9.7 trillion in 2002, mainly attributable to a 16 percent fall in passenger revenue from 7.2 trillion in 2002 to Rp 6 trillion last year.

Another factor affecting the company's cash flow was repayment of debts under its debt restructuring program that started in 2001 and is slated for completion in 2010, Indra said.

As agreed to under the restructuring program, Garuda had paid off a debt totaling $111.8 million last year, for both the principal and interest. That leaves the company's debt as of December last year at $928.9 million.

Garuda embarked on a massive debt restructuring program in 2001 to get out of a debt trap -- resulting from years of what was deemed as inefficient operation.

As for 2004, provided there are no other external shocks and with a number of network innovations, Indra described the prospects as fair.

Corporate spokesman Pudjobroto shared the same optimism. "While we're planning to add a number of flights to certain areas such as Beijing, Guang Zho, Ho Chi Min, Hanoi and others, we're also studying the possibility of opening new routes probably in the Middle East, or other cities in China," Pudjobroto said.

Wednesday's hearing came amid plans by the Office of the State Minister of State Enterprises, which represents the government as Garuda's shareholders, to shake up the company's board of directors.

State Minister for State Enterprises Laksamana Sukardi pledged the selection process would be transparent and accountable.

"There won't be any KKN (collision, corruption, nepotism). I don't know where those allegations have come from," he said, adding that the fact that he is a politician may have made him an easy target of criticism from the opposition.

Laksamana is a top official of the ruling Indonesian Democratic Party of Struggle.

Allegations of KKN are on the rise, as one of the candidates to fill Garuda's top spot turns out to be Samudra Sukardi -- Laksamana's brother -- a career professional who is the president of one of Garuda's subsidiaries.

Other candidates include; Erry Firmansyah, former president of the Jakarta Stock Exchange and Erwin Rasyid, vice president of Bank Negara Indonesia.