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.