Three Bidders Compete for 18% Indonesia’s GMFI Shares

Management of Garuda Indonesia - Photo by TheInsiderStories

JAKARTA (TheInsiderStories) – Three bidders have entered due diligence process for the sale of 18 percent shares of PT GMF AeroAsia Tbk (IDX: GMFI), a subsidiary of state-owned flag carrier PT Garuda Indonesia Tbk (IDX: GIAA), the company’s senior official said on Thursday (04/05).

The President Director Pahala Mansury explained, Garuda will release 18 percent of GMF’s shares to the investor, of which around 8.0 per cent are new shares of its unit.

GMFI, the country’s largest aircraft maintenance, repair and overhaul (MRO) provider, has secured approval from shareholders on March 6 to offer new shares for sale through a private placement.

Under the plan, GMFI will issue 2.82 billion units of new shares or 10 per cent of the company’s enlarged capital. Of the amount, 2.34 million units or 8.28 per cent will be offered to a strategic investor, while 485.62 million units of shares or 1.72 per cent will be offered to employees under the Employee Stock Option Plan.

Mansury said at least six companies have been interested to become a strategic investor of GMFI and most of the bidders come from European zone. Our sources said the bidders namely Air France KLM Engineering & Maintenance (AFI KLM E&M), Swiss Air Technic and other undisclosed name.

Currently, GMF, AFI KLM E&M and Japan’s Mitsui Co&Ltd had secured a partnership to establish a new maintenance, repair and operations (MRO) facility at Hang Nadim International Airport in Batam, Riau Islands.

The Ministry of Industry has projected the value of the country’s MRO business to rise to US$2.2 billion by 2025, from only around $970 million in 2016.

Furthermore, He explained, the winner of the share sale will be announced early in June and it is expected to be closed by end of June.

“The three bidders undergoing the due diligence process had been shortlisted from six companies, which are mostly from Europe. We are still optimistic that it will be completed by the end of May. We hope early in June it will be finalized and can be signed and closed by end of June,” he told reporters at the press conference in Jakarta.

He continued, the fund from the right issue will be used to strengthen the cash flow of Garuda and also strengthen GMF’s capital structure to invest and its capability to purchase machines and for development of components and engines.

Despite its efforts to improve efficiency, Garuda must deal with harsh realities as it posted a loss in the first quarter. The airline recorded a $64.3 million loss over the January-March period, although the figure was down 36.5 percent from the $101.2 million loss posted last year.

Mansury outlined returning profit is the main focus for the company this year. Garuda said earlier this year it expected a modest net profit of US$8.9 million for the full year on the back of higher passenger volumes.

“We see our performance is showing an improvement compared to 2017,” Mansury said.

Reviewing Unprofitable Routes

To tackle the efficiency issue, the company will review some existing international routes, including Jakarta-London; Jakarta-Manila direct flights, to consider the market potential of the long distance route in Asean region.

“Review will continue to do restructuring, trimming the route or reduce the frequency,” he said.

Garuda Indonesia is currently focusing on opening new markets in countries like China and India, which have the potential to bring foreign tourists to Indonesia through several entrances that include Bali.

In addition, the state-owned carrier also extends the domestic network of the country.

Jakarta-London long-distance routes served by Garuda Indonesia have been operated since April 2017.

Garuda Indonesia serves nonstop flights to and from London Heathrow using Boeing 777-300 ER aircraft with a capacity of 314 passengers, consisting of eight first class seats, 38 business class seats and 268 economy class seats.