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)