Photo by Garuda Indonesia

Jakarta (TheInsiderStories) – PT Garuda Indonesia Tbk (IDX: GIAA), a state-owned flight carriers is ready to become Garuda targets to be an integrated airline service in the next few years. Having been 70 years in the aviation industry, Garuda Indonesia currently owned its maintenance, repair and overhaul (MRO) business unit PT Garuda Maintenance Facility Aeroasia, ground handling business unit PT Gapura Angkasa, catering business unit PT Aero Wisata,PT Aero Systems Indonesia,Garuda Indonesia Holiday France, PT Sabre Travel Network Indonesia, as well as low cost carrier PT Citilink Indonesia.

The company has allocated billions dollar funds to expand its presence in the industry. The company is focus on reducing their loss exposed by exchange rate volatility. Looking at the company financial statement, they booked net loss US$383.8 million in the first half, rose 349 percent from US$ 63.2 million in the same period of 2016. The company vision become fully integrated airline service is expected to move Garuda Indonesia’s operational and financial performance into positive territory in the next two years. The Insider Stories try to figured out Pahala Mansury, its CEO to gain corporate plan in the next view years.

Below is the transcript :

Q: Tell us about company flight traffic condition at the present?

Photo by Garuda Indonesia

A: Demand from middle income population and tourism has rose. The amount of traffic we carry internationally rose 20 percent year on year. Meanwhile revenue and international route ticket sale also rose 15 percent year on year. This is positive outcome, regarding about half from our revenue comes from international routes. Having said that, we keep develop domestic market. We have Citilink in low cost carrier business which is 70 percent its market is domestic. So our development on both domestic revenue and traffic will mainly comes from Citilink, compared to Garuda Indonesia. Domestic market has big potency and we want to expand Citilink domestic market penetration to 20 percent in the next 3 or 4 years. We also want to increase our fleet to 235 airline from currently 189 airline, mostly for Citilink.

Q: More Airline for Citilink in the upcoming years?

A: We have currently 189 airlines, we want to add more airlines in total we will have 235 airline.  Garuda Indonesia will only have 5 airlines, and the rest for Citilink. About 5-10 new route will be added every year, both domestic and international routes. Yet in the 1-2 years we will focus on domestic route. For example Raha in South Sulawesi, or Padang, Pekan Baru and Medan in Sumatra. For intenational route, Citilink already serves carter route, in cooperation with travel agents. Yes we will develop destination route on the South East Asia low cost market, especially in tourism region. For example Bali-Puket route etc.

Q: You have mentioned to public that company will do efficiency until US$100 million, what is your move?

A: This year we are in the process of negotiation with some our aircraft manufacture. There should be three until four airlines will be delivered this year, but we ask them to delayed it. We want to increase our current utilization that more or less reach 9 hours and 21 minutes. Additional new order definitely no. One of our effort to do efficiency is extend rent period so that we can reduce rent cost up to 22 unti 25 percent. Other effort, is to study effectiveness of 20 routes consisting of both 10 domestic and international route. Company will study about their schedule change, airline substitution, and make sure it is connected to other flight routes. Last option is to shut down routes that give little benefit to the company. For example, direct flight to London that didn’t give profit to Garuda Indonesia.

Q: Any other move?

A: We also preparing renegotiate of $500 million global sukuk listed in Singapore capital market so it will make more efficiency for the company. We also will make improvements to the initiatives either by optimizing, costing,and improving the route used by Garuda Indonesia. You know, we hope to become an integrated aviation group in the future. So we have to managed to obtain positive growth in line with the Quick Wins 5 program. Starting from the operational aspects, services, information technology, until the management of significant revenue throughout the period of first semester-2017. Through initiatives covering fleet optimization, service level improvements, route optimization, digital service upgrades and improved revenue management systems. The company will be able to obtain positive operating performance growth amid the downward trend in the operational performance of the global aviation industry.

To that end, we also doing such initiative to trigger flight activities such as Garuda Online Travel Fair 2017 regularly. Ticket sales at Garuda Online Travel Fair 2017 in the first semester reach Rp 162 billion. This semester we also offers 2.6 million promotional tickets that can be bought online on the airline website and mobile app. We offers discounts up to 85 percent off the full ticket price of select destinations which can only be bought on certain hours. The tickets will be valid for the next six months.Five top routes are available at the GOTF 2017, both domestic and international. The top five domestic routes include Denpasar, Padang, Balikpapan, Lombok and Labuan Bajo. Meanwhile, the top five international routes on offer are Melbourne, Seoul, Singapore, London and Hong Kong. The sales of cheap flight tickets may contribute to Garuda Indonesia’s revenue albeit to a small extent.

Q:  I heard that GMF will going to become public listed company this year, can you tell us about its preparation so far GMF?

We already in the registration process in the Indonesian stock market and financial service authority and there will be another phase process. The valuation of GMF reach US$ 1 until 1.5 billion and we will offering until 20 percent to 30 percent with the amount reached US$ 200 until 300 million. We have a fixed timeline for IPO which is we expect to be done lately on second week of next October.

We also seeking to raise fund from several potential strategic partners in Europe and Asia Pacific. Because we want to develop GMF to be able to explore new market in the future, as well as develop more capabilities including engine maintenance, component maintenance etc. Some of our strategic partner already start due diligent process and we will not limits them if they want to do it together with the IPO timeline. They can do in the same timeline with IPO process and after IPO process. We expect to offer 10 until 15 percent to strategic partners.

(Written by Linda Silaen and Yosi Winosa, Email: linda.silaen@theinsiderstories.com)

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