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)