Garuda to sell shares to foreign investors

Garuda to sell shares to foreign investors

JAKARTA (JP): The government will sell a stake of the national
flag carrier Garuda Indonesia to foreign investors through direct
placement before offering part of its shares on the capital
market, Minister of Finance Mar'ie Muhammad says.

"The buyer of the stake must be a foreign airline which has
recorded a good reputation internationally," he told a hearing
with the Budgetary Commission of the House of Representatives
(DPR) in a hearing here yesterday.

He said the government will tender the sale of the stake among
prospective foreign investors, which will be able to help improve
the performance of the 45-year-old airliner.

"The privatization plan has been approved by President
Soeharto," he said, adding that the sale of the stake will be
part of the airline's restructuring program.

Mar'ie said the government has not decided on the portion of
the stake which will be sold to foreign parties.

The minister said that under the restructuring program, the
equity participation of foreign parties in Garuda is expected to
help improve its financial structure and management.

When Garuda operate healthily, part of its shares will be
offered to the public through the capital market, he said.

Garuda's financial reports got qualified opinions from the
Government Audit Agency (BPKP) in the years before 1992. Its
financial reports, according to an official report received by
The Jakarta Post, for the following years had not been audited.

In 1993 the government classified the airline's financial
performance as unhealthy. The financial performance, based on the
airline's profitability, liquidity and solvability, was regarded
as less healthy in 1989, 1991 and 1992, but it was very healthy
in 1990.

Garuda's after-tax profit dropped to Rp 73.44 billion
(US$33.50 million) last year from Rp 92.98 billion in 1992. Its
total assets are estimated at Rp 3.67 trillion as of this year,
as compared to Rp 2.80 trillion as of last year and Rp 2.43
trillion as of 1992.

Independence

Mar'ie said the privatization of Garuda will also make it more
independent financially from the government, which will no longer
support the raising of commercial loans for it.

"The government, which is improving its budget management,
will be more disciplined in allocating foreign aid for its
projects," he said. "The government will allocate its budget,
including the funds gained from foreign aid, to finance projects
which are not developed by the private sector."

He assured the commission members that once the government has
selected prospective foreign investors for joining the airline,
it will tender the sale of the Garuda stake.

A commission member, Tadjuddin Noer Said, hailed the
government's decision on Garuda's privatization but suggested
that the government maintain the majority of the shares,
considering the airline would still be carrying out a social
mission.

"I even expect that the privatization plan should also be
applied to other state owned companies which are facing
difficulties to survive," he told The Jakarta Post yesterday.

Garuda, operating a fleet of 57 aircraft, flies to 39 cities
on its international service routes, including, Honolulu, Los
Angeles, London, Frankfurt, Amsterdam, Zurich, Madrid, Berlin,
Sydney, Darwin, Townsville, Riyadh, Jeddah, Bangkok, Ho Chi Minh
City, Beijing, Tokyo, Osaka and Manila.

In domestic service, the airliner serves 13 major cities, such
as Jakarta, Solo, Denpasar, Biak, Jayapura, Surabaya, Medan,
Batam, Balikpapan, Yogyakarta, Banda Aceh, Ujungpandang, and
Manado.

Its fleet includes two Boeing 747-400, six Boeing-747-200s,
one Boeing-747-200B, eight Boeing-737-300s, seven Boeing-737-
400s, nine Airbus-300-B4s, 10 Airbus-300-600s, six MD-11s and
eight DC-10-30s. (fhp)