Garuda to lay off 3,000 employees

JAKARTA (JP): National flag carrier Garuda Indonesia will lay off at least 3,000 of its nearly 13,000 employees as early as next month as part of a massive restructuring program, the airline's president, Robby Djohan, said on Tuesday.

Robby said the dismissals, starting in early October, would be just one of several moves designed to enable the airline to survive the deepening crisis.

"We will try to make the rationalization process as easy and friendly as possible," Robby told reporters on the sidelines of his visit to the launching of Garuda's new "GA Express" program.

He said the process would be implemented gradually, with some of the workers being laid off and some possibly moved to Garuda subsidiaries.

"We will provide a (severance) package of between Rp 38 million (US$3,454) and Rp 98 million per person," he said.

As of last July, Garuda had a total of 12,732 employees, including 709 pilots, 78 flight engineers, 2,779 cabin crew members, 3,342 maintenance workers, 3,630 commercial staff employees and 2,194 administrative workers.

The airline had earlier transferred some 800 employees to ground-handling company Gapura Angkasa, a joint venture of Garuda and the state companies Angkasa Pura I and Angkasa Pura II. Gapura started operations early this year.

Garuda may also opt to move some of its workers to its maintenance facility unit at Jakarta's Soekarno-Hatta International Airport.

The $300 million maintenance facility, however, is planned to be sold as another cost-saving measure.

Robby said last Friday that Garuda's current ratio of employees to aircraft was 273 to one -- much higher than the ideal ratio of 167 to each airplane.

Garuda currently operates 50 aircraft.

He said Tuesday the airline needed at least $100 million in financing to help the company move forward with its restructuring plans.

"A $100 million loan would be good enough to help us start the restructuring program," he said.

The funds would be used to buy spare parts for the company's aircraft, to cover maintenance costs and to pay off the laid-off workers, he said.

Robby said he was confident that creditors would agree with Garuda's proposal to roll over between $285 million and $300 million out of the airline's total $400 million in overseas debts.

"We can regain their trust because we are able to pay the loan interest now and because of our efforts to repay the debts," he said.

"They must accept it. After all, they gave us short-term loans when they knew that the loans would be used for long-term programs," he said, pointing out that the foreign lenders were part of the cause of the company's inflated foreign debt problems.

Robby said Garuda's load factor on domestic flights had begun to recover and was currently about 70 percent. The company, however, still suffers about 10 percent to 20 percent losses from the high dollar-denominated cost of operating its planes, he added.

International flights have generated a healthier cash flow than domestic ones because they bring in foreign exchange income and have a load factor of 80 percent, he said.

He estimated domestic flight revenue would total about Rp 2 trillion this year, amounting to 30 percent of the airline's total revenue.

The airline also plans to switch to Boeing 737-300 planes from other aircraft now being used for domestic routes to improve efficiency and cut costs, he said.

Garuda launched a new program on Monday called the "GA Express" on its Jakarta-Surabaya route, which provides daily flights every two hours from 6 a.m. to 8 p.m.

The service, which uses 737-300 aircraft, prioritizes punctuality and is touted as being more efficient in its ticketing and reservation system.

Robby said the airline would apply the system to other destinations, including Denpasar, Bali; Yogyakarta; Medan, North Sumatra; Menado, North Sulawesi; and Pontianak, West Kalimantan by the end of the year. (das)