Garuda to impose new ticket surcharge soon

Garuda to impose new ticket surcharge soon

Rendi A. Witular, Jakarta

Flag carrier Garuda Indonesia plans to introduce a new surcharge
on tickets amid soaring global oil prices, which has seriously
affected the price of jet fuel, a senior airline official said.

Garuda commercial and marketing director Bachrul Hakim said
the company was set to implement the surcharge before the
upcoming peak season that starts a week before the Idul Fitri
holiday.

Idul Fitri falls on Nov. 15 and Nov. 16 this year.

"We will introduce the surcharge on all domestic and
international flights as soon as possible before the holiday
season to cope with soaring oil prices," Bachrul said on Thursday
after a ceremony to mark a cooperation with Citibank.

The airline has set the Idul Fitri peak season from Nov. 11 to
Nov. 22, and the Christmas and New Year peak season from Dec. 22
to Jan. 3, 2005.

Bachrul refused to disclose the amount of the planned
surcharge, but said it would not differ much from the range of
US$10 to $15 per flight imposed by other international airlines.

"Garuda's average price ceiling for fuel is about $35 per
barrel, but now the price has risen to more than $40. So we have
to seek ways to offset losses resulting from the problem," he
said, adding that Garuda had also been cutting costs in all
departments for efficiency.

Fuel accounts for about 40 percent of Garuda's operational
costs.

The surcharge plan has been submitted to the Indonesian
National Air Carriers Association (INACA) for approval.

Oil prices have jumped 66 percent this year on high demand
amid disrupted production in several oil-producing countries,
including Iraq and Russia. U.S. crude oil has reached a record
$54.45 a barrel, while Brent crude hit $51.50 a barrel on
Tuesday.

On Sept. 15, Garuda imposed a 100 percent surcharge on select
international routes, such as to Japan and Australia.

Bachrul said the airline would maintain the surcharge until
global oil prices fell back to a preferred average of under $35
per barrel.

"A ticket surcharge is not like a ticket rise, in which we
increase the base rate. This is just a temporary hike to cope
with the jump in oil prices. Garuda will probably raise its
ticket price next year," said Bachrul.

Garuda is undergoing a restructuring program due to its
massive debt accrued from rampant internal corruption during the
former New Order regime, when government officials often used the
company as their personal cash cow.

To date, it is unclear how the airline with settle its $800
million debt, as its 2004 profit would be unlikely to be enough
to fully service its debts.

Worse still, the Office of the State Minister of State
Enterprises has left the Garuda management hanging in the balance
for over a year, as it has yet to select a new president to
replace outgoing chief executive officer Indra Setiawan, whose
term has ended.

State Minister of State Enterprises Laksamana Sukardi had
previously insisted on putting his brother Samudra Sukardi at the
helm of the national airline, but many parties have objected to
the plan on the grounds of nepotism.