Garuda may stop European flights
Garuda may stop European flights
JAKARTA (JP): National flag carrier Garuda Indonesia is
considering reducing or stopping its remaining flights to Europe
in a cost-saving measure, an airline official said yesterday.
"Garuda is currently reevaluating the European routes. We may
reduce the existing European flights or even stop flying the
routes at all," said Pudjobroto, a spokesman for the
airline.
He said that the long-haul European routes were very costly to
maintain since the rupiah's sharp plunge against the U.S.
greenback.
Garuda has already stopped six of its 10 routes to Europe
including to Madrid, Munich, Vienna, Zurich and Rome in the wake
of the monetary crisis, he said, adding that the airline had
embarked on a code-sharing cooperation agreement with Swissair
and Lauda Air to serve passengers from Jakarta to Zurich and
Vienna and vice versa.
"We are now only serving Paris, London, Frankfurt and
Amsterdam," Pudjobroto said.
He added that Garuda was also considering letting KLM fly the
routes through the code-sharing mechanism.
Garuda's newly appointed president Robby Djohan said after
being appointed on June 15 that downsizing the airline and
restructuring its operations would be his top priority in order
to ride out the current economic turbulence.
Garuda at present operates 52 aircraft, of which 24 are leased
from foreign firms. Last month the airline returned six leased
aircraft to reduce costs. Robby said that it might be sufficient
for Garuda to only have 37 airplanes during the current difficult
times.
Garuda reportedly has US$200 million in foreign obligations,
half of which are due this year.
Tax exemptions
Minister of Communications Giri Suseno Hadihardjono said
yesterday that the government would provide tax exemptions and
credit facilities to help ease the burden faced by the country's
ailing airline industry.
The import duty and value added tax on the import of aircraft,
machinery and components would be waived, he said in his opening
remarks at a seminar on the transportation industry.
He said that the value added tax and income tax on leased
aircraft would also be terminated temporarily.
Furthermore, airport service tariffs will be based in rupiah
and airlines will be allowed to use their own ground-handling
facilities.
The airlines would also be allowed to pay for their fuel
through a credit mechanism, he said.
He didn't give the timetable for the introduction of the these
facilities.
Giri explained that the sharp plunge of the rupiah against the
dollar had caused the operational costs of the airline industry
to soar because 60 percent of their overheads are in dollars.
The current monetary crisis has also seen the number of
domestic passengers slump to 2 million in February from 4.2
million in July, when the crisis started.
Such difficulties have forced the airlines to return many of
their leased aircraft and stop servicing certain routes.
"If these sufferings continue for a long time, the national
airlines will go bankrupt," he said.
Ridwan Fatarudin, a former president of state-owned Merpati
Nusantara Airlines said the national airline industry had been
operating with negative capital for the past few years.
An aggressive expansion program launched in 1993 caused an
oversupply, forcing most airlines to sell tickets at lower
prices, Ridwan explained.
He urged the airlines to attract new investors or form
alliances with foreign operators.
In order to attract investors, however, the country's airline
industry should be further deregulated and restructured.
He pointed out that the complicated bureaucracy required to
get permits to import aircraft should be cut down and handled by
a single office.
The country's open sky policy which allows foreign airlines to
directly fly to several tourist destinations should also be
reviewed, he said.
Indonesia currently has five scheduled airlines: the state-
owned Garuda and Merpati, and private airlines Mandala, Bouraq
and Dirgantara Air Service. Privately owned Sempati Air recently
ceased operations. (rei)