Garuda to return five more leased jets to cut costs

JAKARTA (JP): National flag carrier Garuda Indonesia has received a commitment from giant aircraft maker Boeing which allows the financially troubled airline to return five leased airplanes, a minister said yesterday

State Minister of the Empowerment of State Enterprises Tanri Abeng said the deal would reduce Garuda's Boeing armada to 12 from 17 aircraft, all leased under a long-term contract.

"There's a lot of money being saved," he said in a seminar on privatization program. He did not cite specific figures.

Tanri said the ongoing restructurization at Garuda would provide the company with a net profit of Rp 500 billion in 1999, from a projected loss of Rp 3.25 trillion loss this year.

"Efforts are being made to slash leasing costs and renegotiate overseas debts due this year."

Twenty-four of Garuda's 52 aircraft are leased from foreign lessors. The company returned six leased aircraft in June, and received approval from Airbus last week to lower the monthly leasing installment to US$750,000 from $1.05 million.

The sharp depreciation of the rupiah against the U.S. dollar has multiplied Garuda's dollar-denominated costs, which represent 70 percent of total costs, and the country's year-long economic crisis has sharply cut passenger volume.

Garuda president Robby Djohan said in June that it would be sufficient for the airline to operate 37 airplanes due to the difficulties.

As part of its cost-saving measures, the company has discontinued several European routes.

Robby is also in negotiations to restructure $200 million in foreign debt due this year.

Tanri said Garuda was on the brink of financial collapse early this year following a threat from the U.S. and several European countries to seize its aircraft if it flew to the U.S. without settling unpaid leasing installments.

"In my first working meeting with former president Soeharto, I was given a document on the likelihood that our flagship carrier would be grounded at international airports," he said.

Tanri was installed by Soeharto in March, and reappointed by President B.J. Habibie in May.

"But now Garuda is far from such a likelihood," he said, adding that without the prompt implementation of restructurization the airline might already be out of business.

He said Garuda was a priority for him because it was strategic to the country.

"In addition to the privatization program, my other priority was to restructure troubled state-owned strategic industries," he said, citing state-owned electricity company PT PLN and steel maker PT Krakatau Steel.

He said the restructuring process started by replacing the "incapable" boards of directors of the companies.

"After we made the replacement there was a large amount of money that we could save at Krakatau Steel," he said. He discussed economical measures in the procurement of raw materials, sales and subsidiaries.

He added that capable directors would not be replaced but instead given full support to further increase the value of the company.

State-owned telecommunications provider PT Indosat and port operator PT Pelindo are examples of healthy companies, he said.

Rumors have circulated that Tanri is planning to replace the president of toll road operator PT Jasa Marga with a former executive at Bakrie & Brothers, in which Tanri was president before his ministerial appointment.

Jasa Marga president Maryadi D. confirmed yesterday he would be replaced but declined to comment on speculation he opposed Tanri's choice of replacement. (rei)