Garuda seeks new routes and airplanes

Garuda seeks new routes and airplanes

JAKARTA (JP): National flag carrier Garuda Indonesia plans to
look for new international routes and new airplanes despite a
recent decision to return several leased jets and halt a number
of its established foreign routes.

Garuda president Robby Djoham said on Wednesday that the
airline's plan to open new routes and procure new airplanes was
part of its effort to put the carrier's financial performance
back on track.

The international routes would garner much-needed foreign
currency earnings, he said, which would help the airline offset
its U.S. dollar-denominated expenses.

Garuda has been badly hit by the rupiah's sharp plunge against
the dollar since as much as 80 percent of its total costs are in
the American greenback. Most of the airline's revenues are in
rupiah and domestic passenger volume has plunged due to a sharp
fall in public purchasing power.

"The dollar earnings would be very important. My strategy is
to have as many international routes as possible. We have plans
to reopen the Abu Dhabi and Manila routes, and other profitable
routes," he told members of the House of Representatives
commission VIII for state budget and state-owned companies.

He stressed that Garuda would only fly profitable
international routes, pointing out that the airline had recently
stopped flying to money losing destinations, including France,
Italy, Greece, Taiwan, China and South Korea.

He said that of Garuda's 10 established European routes, the
airline would only continue its London, Amsterdam and Frankfurt
flights because they were "very profitable due to the strong load
factor".

If Garuda does not close down its unprofitable international
routes, it will lose US$60 million a year for each route, he
added.

"Route management is critical to increasing revenue," he said.

Garuda plans to serve its new international routes with Airbus
A-340 planes, which are smaller and easier to fill than larger
Boeing 747 jets which had been used in the past.

"We expect to enjoy a profit next year," he said, declining to
make any forecast.

He had announced on Tuesday that Garuda expected to suffer a
loss of Rp 400 billion (US$42 million) in 1998.

Overhauling fleet

Robby said the airline's efforts to turn a profit would also
include revamping its fleet.

Garuda currently has 46 operational airplanes, down from 57 in
the middle of June when Robby took over the pilot's seat at the
ailing airline.

It currently serves its Middle East route with DC-10s and
Boeing 747-200s, its European route with Boeing 747-400s, its
Australian and Asian flights with Airbus A-330-300s and its
domestic destinations with Boeing 737-300s, 747-400s and 747-
500s.

The airline's revamping plans include phasing out its B747-200
and DC-10 units.

"We may replace them with Airbus A-340s and Boeing 777s. We'll
think it over and start looking for new airplanes next year," he
said, adding that it would not procure any Boeing 777s before
2000.

He explained that Garuda would look to lease the new airplanes
because such agreements were at the moment quite affordable.

"The monthly leasing cost for an A-340 is now around $600,000
to $700,000 per month compared to over $1 million a few months
ago. Now is the best time to lease airplanes," he said.

"We expect that over the next two years we will be able to
upgrade and have an efficient fleet," he added.

Garuda recently returned a number of leased airplanes,
including several DC-10s.

He explained that the airline had previously had too many
different types of aircraft, which forced up maintenance costs.

The airline was also considering handling only the maintenance
of its Boeing 737-300s and Airbus A-330s, while handing over the
maintenance of its other airplanes to Malaysia.

"But they would in turn hand over the maintenance of their
737s to us," he added.

He said other efforts to make the airline more efficient
included stopping business contracts made through corrupt,
collusive and nepotistic practices -- a move which could save up
to 5 percent of current total expenses.

"Garuda's net profit margin is only between 5 percent and 8
percent, so we can't afford inefficiency," he said. (rei)