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Jakarta Post

Garuda Indonesia cancels int'€™l expansion plans amid loss

  • Nadya Natahadibrata

    The Jakarta Post

Jakarta   /   Thu, July 31, 2014   /  01:21 pm

Publicly listed national flag carrier Garuda Indonesia is canceling this year'€™s plans to open two new international routes '€” Jakarta'€“Manila and Jakarta'€“Mumbai '€” as the company suffered from increasing losses during the first half of this year, a Garuda senior executive said.

As previously reported, the state-owned enterprise recorded a loss of US$211 million from January to June, almost 20 times greater than a $10.92 million loss booked in the same period last year.

According to Garuda'€™s vice president for communications Pujobroto, the airline is forced to take efficiency measures to cope with rising costs that had put pressure on the firm'€™s expansion plans.

With a weaker rupiah and an increase in fuel prices, Garuda had to cope with increasing operational costs, of which 40 percent was used to pay for fuel, he said.

The firm'€™s financial report released last week showed that Garuda'€™s revenue rose 0.7 percent to $1.74 billion this half, while its expenses, which include flight operations, climbed 15 percent to $1.96 billion.

During the first half of this year, the airline booked $12.86 million in losses from currency exchange, while in the same period last year the firm was still posting profits of $1.4 million from it.

'€œWith the current conditions, we have to cancel our plan to open a new route to Mumbai, India this year, as well as the plan to open to new route to the Philippines,'€ Pujobroto said in a recent media briefing.

The airline had previously planned to open the new routes during the second half of this year.

As part of its efficiency campaign, the country'€™s flag carrier also planned to close its less profitable routes, including Jakarta-Taipei, starting in Aug. 10 this year, Pujobroto said.

In anticipating the downturn, the airline will also reduce the company'€™s capital expenditure by $54 million this year, as well as temporarily cease the operation of its more fuel-intensive aircraft and delay the arrival of new aircraft it has ordered.

Garuda currently operates a total of 149 aircraft, including Boeing 777-300ERs, Airbus A330-200/300s, Boeing 737-800NGs, Bombardier CRJ 1000 NextGens and ATR 72-600s, that have an average age of five years.

'€œBy joining SkyTeam earlier this year, Garuda has improved its connectivity,'€ he said.

'€œTherefore, even though we have a plan to close the Taipei route we will sign a code share agreement with China Airlines [a member of SkyTeam], so we can still fly our passengers from Jakarta to Taipei,'€ he added, explaining that the daily route'€™s load factor was only around 50 to 60 percent.

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