ASEAN KEY DESTINATIONS
Govt tells Garuda to double fleet in 5 years
State-run airline PT Garuda Indonesia has been urged to expand its business more aggressively in both domestic and international markets, as the government tells the flag carrier to more than double its aircraft fleet in five years after the company placed orders for 60 new aircraft recently.
Garuda president director Arif Wibowo said on Monday that the State-Owned Enterprises (SOE) Minister Rini Soemarno had requested that his firm have a fleet of at least 450 aircraft in five years, up from 190 this year.
“Garuda has been urged to expand aggressively with both organic and non-organic growth so that it can conquer domestic, regional and international markets,” he said after a closed-door meeting at the SOE Ministry on Monday.
Garuda estimated that it could reach the target in 10 years, while the minister wanted it faster, in around five years, he added.
Garuda had recently placed orders for 60 new aircraft, of which 30 were Boeing 737 MAX 8 and the other 30 would be either Boeing 787-9 or Airbus A350 XWB, Arif said.
Garuda has not disclosed the value of the orders, but Bloomberg has previously reported that the combined price for the 30 MAX 8s and 30 787-9s is US$10.9 billion, while the price for 30 A350s is put at $9.1 billion.
Garuda aims to add more medium-and long-haul flights in the future as it plans to have 53 wide-body aircraft by 2025, up from 35 this year.
The aggressive expansion is a strategic way to boost Garuda’s competitive edge amid tough competition in the challenging aviation industry.
The SOE Ministry has set a target of getting 19 of Indonesia’s state-run enterprises listed on Forbes’ 2,000 best companies in 2019.
Arif declined to reveal the size of investment needed for both organic and non-organic growth and to add more aircraft in the future, but he said that his firm would review all possible funding options.
“We always explore any available opportunity. We’ve already obtained funding from the Asia market so far, so we’ll seek opportunities for funding from non-Asian sources, including the US,” he told reporters.
The firm has previously raised $500 million from global Islamic bonds issuance and a credit facility commitment from Bank of China (BOC) Aviation.
The global bonds will be used to refinance the company’s $350 million in debts maturing this year and to fund part of the firm’s capital expenditure (capex).
Garuda, meanwhile, has utilized $130 million of a credit facility from BOC Aviation to refinance pre-delivery payments (PDP) for Airbus aircraft for its budget carrier Citilink.
Garuda will have a total of 190 aircraft by end of this year, consisting of 97 Boeing, 24 Airbus, 18 CRJ, 11 ATR aircraft operating under the brand Garuda Indonesia as well as 36 Airbus and four Boeing aircraft operated by its budget carrier Citilink, according to the firm’s internal data.
Garuda itself was ranked the eighth-best airline in the world and the world’s best cabin staff at the 2015 Skytrax World Airline Awards.
The firm, listed on the Jakarta Stock Exchange (IDX) as GIAA, reversed $168.04 million of net losses in the January to March period last year to $11.4 million of net profits in the same period this year.
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