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Jakarta Post

Garuda shares slide after new airfare policy announced

  • News Desk

    The Jakarta Post

Jakarta   /   Wed, May 15, 2019   /   02:25 pm
Garuda shares slide after new airfare policy announced A Garuda Indonesia aircraft. (Shutterstock.com/e X p o s e)

Shares of flag carrier Garuda Indonesia decreased 2.93 percent to Rp 398 (3 US cents) on Tuesday, after the government announced it would lower airfare price ceilings by 12 to 16 percent, both for low-cost carriers and full service airlines that use planes with jet engines.

On Monday when the new policy was announced, Garuda Indonesia shares sold for Rp 410 each, 5.09 percent lower than Friday's price, kontan.co.id reported

Securities firm Jasa Utama Capital Sekuritas analyst Chris Apriliony said the policy had led to Garuda Indonesia’s shares sliding because revenue from ticket sales had previously been expected to improve the financial performance of the airline.

“But [potential revenue] will probably be slashed because of the policy,” Chris said on Tuesday.

He said that if ticket prices remained the same as last year’s level, investors would be wise to buy Garuda shares, the price of which would be Rp 350 to Rp 380. He projected that in the long run, Garuda share prices would reach Rp 450 each.

“If ticket prices are higher than last year's, Garuda Indonesia shares will be worth buying,” Chris added.

Speaking about the government’s reason for lowering airfare price ceilings, Coordinating Economic Minister Darmin Nasution said that in the first quarter, the increase in the air travel price index was 11.4 percent, higher than other modes of transportation -- land transportation (1.69 percent), railway (2.4 percent) and sea transportation (2.01 percent). (bbn)