Garuda to purchase 28 Boeing aircraft

Garuda to purchase 28 Boeing aircraft

Leony Aurora, The Jakarta Post/Jakarta

Signaling optimism despite being glaringly in the red,
national flag carrier PT Garuda Indonesia is buying 28 new
aircraft from the U.S. jet-maker Boeing Co. in a contract worth
US$2 billion.

The contract is a renegotiation of previous contracts signed
since the late 1980s with the world's second-largest commercial
aircraft producer, the airline's financial director Alex
Maneklaran told The Jakarta Post on Friday.

The new agreement was signed by Garuda president Emirsyah
Satar and Boeing senior vice president Dinesh Keskar in New York
on Friday, the airline said in a statement.

In the deal, Garuda will buy 10 Boeing 787-Dreamliners,
instead of six Boeing 777s as in previous contracts, and 18
Boeing 737-New Generations to replace older types of Boeing 737s
agreed to before, Alex said.

"With current technology, we feel that the aircraft (ordered
previously) were outdated," he said.

Alex said the airline had not yet decided how it would finance
the purchase. "The management and the financial advisor will work
together on the scheme."

As Garuda had paid $20 million of pre-delivery payments in
previous contracts, for now, it needs only to add some $6 million
to the deal.

The first units of the 737-New Generations would join the
fleet in 2009 to serve regional routes, Alex said. The remaining
would be ordered gradually until 2012.

The Dreamliners, which can accommodate 240 passengers each,
will be delivered between 2011 and 2013. The state-of-the-art
aircraft can fly non-stop for 8,500 nautical miles, which means
passenger can fall asleep in Jakarta and wake up in London or
Vancouver without having to stop in transit.

"(The aircraft) fit with Garuda's business plan," Alex said.

Garuda currently operates 57 aircraft, of which only six are
made by Boeing's strongest competitor Airbus. The airline has
several times renegotiated deals with Boeing to adjust its plans
to market conditions.

Garuda's aggressive move came amid widening operational losses
as global oil prices soar and competition, especially with budget
airlines, heats up.

The full-service airline booked Rp 421 billion ($42.1 million)
in operational losses during the year's first seven months,
higher than the Rp 269 billion it lost during the same period
last year. It recorded a monthly yield of Rp 87 billion in July,
after six straight months of losses to begin 2005.

Garuda posted a net loss of Rp 811.3 billion last year, its
first loss since 1998, and way off 2003's Rp 2.81 billion net
profit.

The airline is likely remain in a tight situation while the
rupiah remains weak against the U.S. dollar. The airline uses
dollars to pay some 60 percent of its operational costs.

The price of aviation fuel, which makes up about 30 percent of
Garuda's operational costs adds $9 million for every US1 cent
price increase.

As of March, the company's total debts stood at some $826.5
million. Garuda is currently in negotiations for a rescheduling
with European Credit Agencies, its largest group creditor, to
which the airline owes more than $500 million.