Garuda Indonesia Delays the Arrival of New Airplanes
Indonesia's flag carrier Garuda Indonesia, a state-controlled five-star airline that is listed on the Indonesia Stock Exchange, requested to postpone the arrival of new airplanes in an attempt to improve the company's corporate earnings. Pahala M. Mansury, General Director of Garuda Indonesia, said the order (the number of airplanes) has not been revised, neither has the company's fleet plan (that runs to 2020) been changed. Only the timing of arrival of five planes has been altered.
Originally, the new airplanes would be delivered to Garuda Indonesia in the period ranging from H2-2017 to 2019.
Earlier in 2017 the Garuda Indonesia Group already received five new planes (four operated by low-cost carrier Citilink Indonesia, a subsidiary of Garuda Indonesia, and one airplane that is operated by Garuda Indonesia). Based on the existing schedule Garuda Indonesia will receive one more airplane this year (a ATR-72). However, if possible the airline also wants to postpone the delivery of this plane. Whether this is still possible depends on further negotiations with the manufacturer.
There are two reasons why Garuda Indonesia wants to delay the delivery of new planes. Firstly, it will put less burden on the company's corporate earnings in 2017 and 2018. Secondly, it would become easier for the airline to optimize usage of the existing fleet.
Mansury hopes to see improving market conditions over the next two years. That would also open opportunities for Garuda Indonesia to seek more aggressive business expansion, for example by opening new domestic and international flights.
Garuda Indonesia's net loss was USD $283.8 million in the first half of 2017, while its revenue rose 7 percent (y/y) to USD $1.88 billion. The net loss is caused by several factors, including transactions (worth USD $137 million) related to the government's tax amnesty program, and a USD $8 million fine that had to be paid in Australia after being found guilty of participating in a cartel to fix the prices of cargo flights. Moreover, costs of jet fuel rose 36.5 percent to USD $571 million.
However, corporate earnings are expected to improve in the remainder of the year, partly on the back of increasing traffic of pilgrims transport as well as on efficiency measures (related to funding, fuel costs, and leasing). A positive matter is that Garuda Indonesia's air passengers grew 3.9 percent (y/y) to 17.2 million in the January-June 2017 period.
Aviation expert Arista Atmadjati said Garuda Indonesia's decision to postpone the delivery of more planes up to 2019 is a good decision considering market conditions remain bleak in the aviation industry. He adds that Garuda Indonesia should also consider to restructure its flight route network as some of these routes are a loss for the airline.
On Tuesday afternoon (01/08) Garuda Indonesia's shares are about 0.50 percent in red territory. So far this year the company's shares have risen 1.78 percent to IDR 344 a piece.
Stock Quote Garuda Indonesia - GIAA:
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