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PT Garuda Indonesia is targeting a return to profit next year after a loss in 2017 as the flag carrier works to reduce expenses and operations improve.
The airline is predicting a profit of $75 million in the second half ending December but won’t be able to post a profit for the 12-month period following a larger loss in the first six months of the year, Chief Executive Officer Pahala Mansury said. Losses in the first half totaled $284 million, he said.
The Indonesian carrier is boosting aircraft utilization by reducing flight turnaround time and cutting expenses, steps that will help Garuda turn in a profit next year, Mansury said. The executive, who took the helm six months ago, said Garuda aims to bring down its cost per available seat kilometer to 5.5 cents to 6 cents, from 6.7 cents currently.
“We have been increasing the utilization rate of our aircraft and will continue to do so,” Mansury said in an interview in Jakarta on Oct. 18. “This will be the key factor to determine whether we are profitable in future and whether our financials improve.”
By comparison, cost per available seat kilometer across Singapore Airlines group, which includes budget carrier Scoot, was 6.83 Singapore cents (5 cents) in the latest fiscal quarter ended June, according to data compiled by Bloomberg.
Garuda is in discussions with planemakers to defer aircraft delivery, Mansury said, without giving specific details. In 2015, the carrier committed to 60 planes from Boeing valued at $10.9 billion at list prices and 30 aircraft from Airbus valued at $9.1 billion, before discounts that are customary in the industry for large orders.
The company is restructuring its low-cost carrier Citilink and converting debt in the unit to equity, the CEO said. In addition, Garuda plans to boost revenue from other aviation-related businesses such as aircraft maintenance and its hotel subsidiaries.
Mansury said Garuda is leveraging on Indonesia’s geographic position to get more overseas customers. Revenue from international flights expanded almost 15 percent in the first half from a year earlier, while the share from domestic travel fell.
Garuda shares gained as much as 1.8 percent to 334 rupiah on Monday, trimming its year-to-date drop to 1.2 percent. That compares with a 24 percent gain in the Bloomberg Asia Pacific Airlines Index in 2017.
Starting next month, the airline will fly non-stop to London from Jakarta after years of setbacks, allowing it to tap around 700,000 passengers who travel between Australia and the U.K. each year on the so-called “Kangaroo route.”
The group is targeting a net income margin of 1 percent to 2 percent in 2018, compared with 0.21 percent last year.
“Garuda Indonesia’s situation has improved,” Mansury said.
–With assistance from Kyunghee Park
©2017 Bloomberg L.P.
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