Faisal Maliki Baskoro, Indonesia – Despite Garuda Indonesia's first-half nosedive, which saw profit plummet 80 percent, the flagship carrier still expects to meet its 2010 earnings target and go public before the end of the year.
Elisa Lumban Toruan, Garuda's acting finance director, on Friday reported first-half profit of Rp 123 billion ($14 million), down from Rp 612 billion in the year-earlier period. He said the decline was a consequence of the airline's aggressive push to expand service.
"Seat occupancy in the first half was only 70 percent, lower than the 73 percent recorded last year. This is due to our new routes that have yet to provide significant return," he said. He also said Garuda is now operating around 9,000 flights per month, 2,000 of which serve new routes.
After adding over a dozen domestic routes in 2009, the state carrier reopened service to Amsterdam this year, and hopes to fly to Paris, London, Frankfurt and Rome in 2011.
Garuda and the State Enterprises Ministry are optimistic that the carrier can achieve its target of 15 percent profit growth over last year's 1 Rp trillion, and have set November for its IPO and named underwriters.
"We are optimistic that Garuda can carry out its IPO this year. Garuda's decline in profit is a seasonal trend, and since July the company has been bouncing back," State Enterprises Minister Mustafa Abubakar said on Friday.
He said it was typical for airlines to be more profitable in the second half due to the holidays, and predicted that new routes and airplanes would help Garuda draw significant second-half earnings.
According to Garuda spokesman Pudjobroto, the hajj pilgrimage season, as well as Christmas and New Year's, will help boost profit in the remainder of 2010.
Meanwhile, Mahmudin Yasin, the ministy's deputy for privatization, said that Garuda had appointed a three state brokerage companies as underwriters for the IPO: Bahana Securities, Mandiri Sekuritas, and Danareksa Sekuritas. "We're optimistic that the IPO can be carried out at the end of November," he said.
As recently as July, Garuda had been struggling with debt problems. But last month, European credit agencies helped the airline reorganize the debt in anticipation of its share sale. Garuda expects to raise $400 million by selling 30 percent of its equity.
Some of the proceeds will go toward expanding its fleet, which is expected to number 103 planes by 2013. At the end of 2009, Garuda had 67 aircraft.
Most of the fleet expansion, though, will be financed through loans. In June, Garuda president director Emirsyah Satar said the carrier was in talks with the Export-Import Bank of the United States for a $1.5 billion to $2 billion loan, with the money intended for leases of 10 Boeing 777s and 10 Boeing 737-380s.
In July, British engine maker Rolls-Royce said that it had won an order worth $420 million from Garuda to supply Trent 700 engines for six Airbus A330 aircraft, Agence France-Presse reported.