Photo by Garuda Indonesia

JAKARTA (TheInsiderStories) – State airline PT Garuda Indonesia Tbk (IDX: GIAA) plans to issue a dollar-denominated bond in first half of 2018, for an estimated Rp2 trillion (US$148.15 million), in order to refinance their loan that will matured in July 2018.

Lastly, the company issued a global SUKUK worth $500 million in May 2016. CEO Pahala Mansury announced during a press conference Thursday (25/10) said the company will rely on its fourth quarter (4Q) financial book and it is also considering an issuance of an Indonesian Rupiah-denominated global bond, known as a ‘komodo bond’ as suggested by the Minister of State-Owned Enterprises.

In fact, three different SOEs have expressed interest in issuing komodo bonds, namely, PT Perusahaan Gas Negara Tbk (IDX: PGAS), PT Wijaya Karya Tbk (IDX: WIKA) as well as PT Jasa Marga Tbk (IDX: JSMR).

During January to September (9M), Indonesia’s flag carrier still suffered US$76.1 million compared to US$137.9 million in the same period in 2016. Garuda Indonesia operating revenue rose 8.6 per cent to $3.1 billion in the 9M of 2017, compared to $2.9 billion in 9M of 2016.

The largest contributor to the airline’s revenue was regular flights accounted for $2.52 billion, while chartered flights contributed $256 million and Garuda’s other businesses contributed $332 million. The company’s total expenditures in nine months were recorded at $3.23 billion, mostly for operational costs, which reached $1.86 billion.

The increase in operating revenues is bolstered by the growth of the company’s operational performance in the international market, which is above the average performance of the Asia Pacific airlines. The company managed to transport 3.7 million international passengers to 9M 2017, up 12.8 per cent compared to 9M 2016 of 3.3 million passengers.

The growth was also supported by a significant increase in revenue contribution from the company’s digital platform of $450.6 million in 9M 2017, up 7.6 percent from the same period the previous year. The increase was driven by an increase in Garuda Indonesia Mobile Apps downloads of 698,000 downloads during 9M 2017, bringing the total download of the mobile app since it was first launched to date has reached 2 million downloads.

Garuda Indonesia also posted an increase in the number of passengers transported by a subsidiary of Garuda Indonesia in the LCC segment, Citilink, from 8.2 million passengers in 9M-2016 to 9 million passengers in 9M-2017. Citilink posted a passenger increase of 11.4 percent to 3.4 million passengers in 3Q-2017, from 3.1 million passengers in Q3-2016.

Throughout the 9M 2017 period, Garuda Indonesia Group (Garuda Indonesia and its unit PT Citilink Indonesia) managed to carry 26.8 million passengers along, or grow 3 per cent compared to 9M 2016 period of 26 million passengers.

The Company is currently focusing on efficiency, and aims to reduce costs by up to $30 million. Various severe actions have reduced costs, including closing unprofitable Jakarta-London and Jakarta- Melbourne routes, thus saving 30 per cent in expenses.

Company is also renegotiating with nine lessors and vendors, including Rolls Royce for engines, a ground handling and hotel operator in Jeddah, et cetera. They have also commenced negotiations to delay delivery on three or possibly four aircraft already ordered as the Company wants to increase current utilization that more or less reaches nine hours and 21 minutes.

Other efforts include extending rent periods to cut rental costs 22 or 25 per cent. Also, renegotiation of $500 million global SUKUK listed in Singapore Stock Exchange, to build efficiency for the company.

Garuda also will implement full hedging of fuel prices for the next one year: the hedging ratio was previously only 10 to 15 per cent, but now sits at 35 to 50 per cent. Fuel is a major contributing factor to expenses, and has risen 14 per cent on an annual basis.

Writing by Yosi Winosa, Email: yosi.winosa@theinsiderstories.com