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Garuda seeks double-digit revenue growth
National flag carrier PT Garuda Indonesia has targeted double-digit growth in revenue next year, a goal it expects to reach through its plan to increase flight frequency and add new routes
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ational flag carrier PT Garuda Indonesia has targeted double-digit growth in revenue next year, a goal it expects to reach through its plan to increase flight frequency and add new routes.
Garuda planned to book in 2018 an 11 to 12 percent revenue increase from this year’s US$3.2 billion target, Garuda president director Pahala N. Mansury said in a press briefing on Monday.
“We would increase the flight frequency of several routes as well as open new routes,” he said, adding that the airline would launch at least 30 new routes in 2018, one third of which would be international ones.
The two factors are expected to help Garuda to record a 6 percent increase in passengers next year from the 35 million to 36 million passengers it expects to serve in total this year.
The eruption of Mount Agung in Bali, Indonesia’s top tourist spot, has largely impacted the company, which expects to record a 10 to 15 percent decrease in international traffic in December.
The carrier cancelled around 100 flights in a few days in early December as volcanic activity increased.
Pahala, however, said that Garuda would get back on its feet as soon as mid-January as Bali was considered safe.
The state aviation company has been grappling with a worsening financial performance throughout the year. Over the January-September period, it recorded a loss of $222 million, around fivefold the figure it recorded in the same period last year.
To turn its loss into a profit next year, Garuda planned to pay more attention to its non-flight businesses, such as cargo transportation, warehousing and catering, from its subsidiaries, Pahala said.
“We expect to reach break even as a result of airline services next year. However, other businesses will help us to generate a profit,” he added.
Garuda corporate secretary vice president Hengki Heriandono said that its cargo business had the potential to generate a profit, with its revenue expected to jump by 15 percent next year.
At present, non-flight services contribute to 30 percent of the carrier’s overall revenue. It looks to raise the figure to around 45 percent in the upcoming year.
“We anticipated stronger competition in the airline industry. The online economy was also growing, so we hope to take advantage of it,” he told The Jakarta Post.
To improve its financial performance in 2018, Garuda has also planned to make changes that would increase efficiency, such as pushing down fuel use rates, renegotiating leasing contracts for aircraft and halting aircraft delivery until 2019.
Garuda previously said it would prepare up to Rp 3 trillion in capital expenditure (capex) in 2018, mainly to maintain its aircraft and support operational activities.
Currently, it deploys 190 aircraft, 50 of which are used by its low-cost subsidiary, Citilink.
The airline plans to source capex from the positive cash flow in its internal cash. However, it also planned to generate additional funds of $200 million through a bonds issuance and bank loans. Pahala said that Garuda was waiting for a decision from its shareholders over the bonds issuance. “We are likely to issue the bonds in the first quarter of next year,” he said. (srs)
