Wednesday, October 20, 2010
Garuda Is Back in Business and Ready for $300m IPO, Upbeat Chief Says
Source: Jakarta Globe
AFP & JG

Singapore. Indonesian flag carrier Garuda is "back in business" and moving forward with plans for an initial public offering and expansion, just months after a European Union travel ban was lifted, the airline's president director said on Wednesday.

The airline plans to hold an IPO in February to fund the expansion, including the purchase of new aircraft, Emirsyah Satar said on the sidelines of an aviation forum in Singapore.

Garuda wants to raise $300 million to strengthen its capital structure and help fund six new Airbus A330-200 aircraft valued at $1.15 billion.

Garuda, which saw its profit fall by 80 percent in the first half of the year, had hoped to generate $400 million by floating 30 percent of its shares.

Last month it postponed its IPO, which had been slated for November.

The carrier is aiming to ride the growth in air travel demand, especially within the Asia-Pacific region, which has overtaken North America as the world's largest market, with 647 million travelers last year.

Garuda also has its eyes on the huge domestic market. Emirsyah said there was plenty of untapped potential there.

The carrier wants to expand its international destinations from 18 two years ago to 28 by 2014 and raise the number of domestic routes to 34 from 23 over the same period.

Emirsyah said China, Japan, South Korea, Australia and the Middle East were among the key markets and offered plenty of growth potential because of trade and tourism.

"Right now, we follow where the trade and tourist growth is," he said.

In his keynote speech at the Aviation Outlook Asia forum, he said the carrier was aiming to fly close to 28 million passengers by 2014 under its "Quantum Leap" plan, compared with 10 million two years ago.

He also wants to expand the carrier's fleet to 116 aircraft within four years, from 54 in 2008.

Since his appointment in 2005, Emirsyah has piloted Garuda's stunning turnaround as he undertook a massive exercise to nurse the airline back to health.

Looking back five years when Garuda was suffering financial problems, he said it had no choice but to make tough decisions, including shedding staff and streamlining the company.

But apart from losing money, Garuda was facing huge debts, poor aircraft utilization and was operating on mostly unprofitable routes, he said.

"We did a complete and honest analysis of the business. We really had to admit what went wrong, and I always believe if something goes wrong, blame it on yourselves instead of others," he said.

All Indonesian airlines were banned from EU airspace in 2007 after a series of crashes and incidents exposed poor safety standards across the country's aviation industry.

But Garuda was cleared by European regulators in 2009 and it completed its first flight back to the continent in June, landing in Amsterdam.

Emirsyah said that regaining permission to fly to Europe was crucial for the company's reputation. "If you look at the revenue contribution, it will not be significant," he said.

"You are only talking about one route, Amsterdam, but symbolically we are back as a safe airline."

The all-clear from the Europe Union came soon after Garuda, which posted a net profit of more than $100 million last year, was named the world's most improved airline by London-based research company Skytrax in May.

"In the past, what we were doing was setting the strong foundation," Emirsyah said. "Well, we are back in business."