Soeharto tells Garuda to go back to basics

Soeharto tells Garuda to go back to basics

JAKARTA (JP): President Soeharto has requested state-owned PT
Garuda Indonesia return to its core business of aviation in order
to strengthen its capital structure, Minister of Transportation
Haryanto Dhanutirto said.

Speaking at a House of Representatives Commission V for
transportation hearing, Haryanto said Garuda's management is
preparing to cut loose a number of its subsidiaries. He said the
move was in response to the President's advice.

"The President explained that in the past nobody had the
capital needed to build hotels, so Garuda stepped in," Haryanto
said. "But now there are many big hoteliers, so he (Soeharto)
suggested that Garuda sell them (its hotels) to improve its
financial structure."

He acknowledged that selling or transferring assets was not
simple.

"I can assure you that none of Garuda's employees will be
sacked. Should there be a transfer of assets, it will apply to
the employees as well," Haryanto stated.

Haryanto refused to disclose which of Garuda's subsidiaries
would be transferred, but acknowledged they would include a
number of hotels. Garuda subsidiary PT Aerowisata operates hotel
and catering services.

He added that many other subsidiaries would be considered.

Haryanto said apart from its assets, which would be sold
through a bidding process, Garuda has a government debt of US$754
million.

Garuda has been burdened with hundreds of billions of rupiah
in liabilities since the late 1980s.

Under a restructuring program last year, the airline slashed
the number of international services it offers to cut operational
costs.

Haryanto said yesterday that apart from streamlining its
internal organization, Garuda also planned to limit the role of
its subsidiaries.

"We are now discussing which of Garuda's subsidiaries -- such
as the education and training center and the Garuda Maintenance
Facility -- can be established as business units," he said.

In April, the government agreed to pay the Garuda's
obligations of up to Rp 1.6 trillion (US$695.65 million) by
buying nine Boeing aircraft and transferring them to the company.
Garuda's fleet is comprised of seven Boeing B-737-400 aircraft
and three B-747-400s.

The move was made to improve the company's financial structure
and facilitate its plan to conduct an initial public offering.

Go public

Garuda's president, Soepandi, announced yesterday that his
company plans to list its shares on the capital market in 1998,
after a private placement next year.

Soepandi acknowledged that Garuda would change its capital,
marketing, operation and organization structures in order to
revitalize business.

He said Garuda would maintain a stake in the subsidiaries once
they were privatized.

He declined to speculate what Garuda's shares would be worth
after the privatization of its subsidiaries.

Minister Haryanto told the commission that his office was
working on 86 cooperation proposals, consisting of 38 proposals
for investments in infrastructure programs and 48 in supporting
investments. The total amount of investment might reach Rp 11.36
trillion, he said.

Haryanto said 41 proposals, totaling Rp 3.29 trillion, were
now being discussed by the ministry. He said nine proposals worth
Rp 2.31 trillion have been submitted to the Ministry of Finance
but have not been approved, and 29 proposals worth Rp 5.53
trillion have been approved by the Ministry of Finance. (pwn)