Garuda to suffer huge net loss of Rp400b this year

Garuda to suffer huge net loss of Rp400b this year

JAKARTA (JP): President of PT Garuda Indonesia Robby Djohan
said on Tuesday that he expected the national flagship carrier to
incur a net loss of roughly Rp 400 billion (about US$38 million)
this year due to the economic crisis.

He explained that the crisis, in which the rupiah has lost
about 75 percent of its value against the U.S. dollar since July
last year, had slashed passenger load factor to between 40
percent and 50 percent, and boosted operating costs which were
about 80 percent in the dollar.

"But we will try to minimize the loss through efficiency
programs," he told reporters on the sidelines of a hearing with
House of Representatives' Commission IV for transportation and
communications.

He said the airline enjoyed a net profit of Rp 200 billion in
August, attributing it to the peak tourist season which raised
the load factor to about 85 percent.

"We expect net profit to remain high in September because of
the strong load factor," he said, adding that the airline was
expected to fall into the red during the remaining months of the
year as load factor would drop below 50 percent.

He added that part of Garuda's efficiency efforts was a staff
rationalization program, in which around half of its 12,000
employees would be encouraged to join the voluntary program with
retrenchment compensation.

About 3,000 employees are expected to join the program next
month.

Robby also said that Garuda had cancelled a leasing contract
for six MD-11 aircrafts and three Airbus A-300 because it was
deemed too expensive.

Under the initial contract signed with Garuda's leasing
broker, a MD-11 aircraft cost $1.1 million per month.

Robby said he demanded $500,000 per aircraft, but the
brokerage firm offered $750,000 per unit.

The airline has also cut down unprofitable international
routes to save costs, or entered into joint operation agreements
with leading overseas airlines including KLM, Northwest and Swiss
Air.

Director General of Air Communication Soenaryo Y. admitted on
Tuesday that despite the 232 percent increase in airfares between
October and September, the country's five scheduled airlines were
still unable to cover operating costs.

"The airlines are still in difficulties in securing enough
cash to cover costs," he told the commission.

"Improving efficiency and productivity are the efforts taken
by the airlines."

He said the airlines had slashed the number of their operating
fleet to 90 aircraft as of September, and restructured 52
unprofitable domestic routes and 17 international ones.

He added that the industry would also seek tax consideration
to compensate for the declining market share due to direct
flights into the country by about 37 overseas scheduled
airlines. (rei)