Garuda to spend $100m on expansion, new aircraft

Nani Afrida, The Jakarta Post, Jakarta | Tue, 11/10/2009 12:38 PM

Garuda Indonesia will spend US$100 million next year as part of its five-year expansion plan, which aims to increase the national flag carrier's fleet from 67 to 116 aircraft by 2014, to serve 27 million passengers.

"We plan to spend $100 million in capital expenditure in 2010 to buy more planes as well as to fulfill Garuda's other operational expenditure," Garuda finance director Eddy Purwanto told reporters on Monday.

He said Garuda still requires yet more capital to improve its infrastructure to provide its passengers with wider and better services.

If it manages to achieve this expenditure target , then it will be the third time the airline spent has $100 million in capital expenditure or more in one year,. It also spent over $100 million on capital expenditure in 2008.

The 2009 capital expenditure (so far) used in part to purchase new Airbus aircraft from Toulouse in south western France and from Boeing in Seattle in the United States.

Next year's proposed spending will be part of the airline's ambitious five-year expansion program to make it not only the largest airline in the country, but also one that can compete with its regional rivals.

On Monday, Garuda received one new Airbus 330-200 and one new Boeing 737-800.

Garuda has ordered 10 new Boeing 777-300ERs and 50 Boeing 737-800s. Previously, the company has received three Airbus 330-200s and one Boeing 737-800.

"Until today, we have about 67 aircraft. So, by 2014 we will be targeting to have at least 116 aircraft," Garuda president director Emirsyah Satar said, adding that the expansion program called for the modernization and revitalization of the Garuda aircraft fleet.

With this larger fleet, Garuda will be able to strengthen and expand it regional presence, flying more routes and with greater flight frequency.

"We will increase our routes and our increase the number of flights from 1,700 times per week in 2009 to 3,000 times per week in 2014," Emisyah said.

He said that the company was targeting to serve 27 million passengers by 2014, up from 10.1 million passengers recorded in 2008.

Emirsyah is confident the company would be able to achieve its operational targets and make Rp 3.75 trillion ($397.5 million) in profits by 2014.

In 2008, the airline booked Rp 669 billion in profits, out of total revenue of Rp 19.4 trillion.

For this year, Garuda has set a minimum 10 percent growth target for net profits compared to a year earlier. In the first half of this year, net profits stood at Rp 612 billion.

The company is now preparing to sell 40 percent of its stake though an initial public offering (IPO) next year (in 2010), in a process Garuda expects to bring in $300 million to $400 million in proceeds.

"Our target is still on these figures," he said.

The planned IPO is part of a debt restructuring agreement between the company and its creditor Bank Mandiri to settle a previously unpaid debt of about $100 million.