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)