Indonesia’s Garuda airline targets 6-7% passenger growth this year

garudaJAKARTA: Indonesian airline PT Garuda Indonesia Tbk is targeting a 6-7% increase in passenger numbers this year, its new chief executive told Reuters on Wednesday.

Garuda plans to launch flights servicing its fourth Chinese city of Chengdu in June, Pahala Mansury said in his first interview with foreign media since his appointment last month.

The state-controlled airline carried a total of 35 million passengers last year and already flies to the Chinese cities of Beijing, Shanghai and Guangzhou.

Garuda last month posted a first-quarter net loss of US$98.5 million, from a US$1 million net profit a year earlier, mainly because of higher fuel costs and increased competition.

“The competition in the airline industry is tremendous,” Mansury said. “The future of growth for Garuda is to optimize domestic routes, where we have to compete in the low-cost segment, as well as international routes.”

Garuda’s competitors include regional airlines such as Malaysia’s AirAsia Bhd and Singapore Airlines Ltd, as well as private Indonesian carrier Lion Air.

Garuda expects fuel costs to remain relatively flat around US$292 million in the second quarter, with a one-off tax amnesty hit of US$137 million to its bottom line, Mansury said.

Last year, Indonesia launched a nine month tax amnesty scheme aimed at bringing back billions of dollars to the country.

So far this year, Garuda shares are little changed, underperforming the broader Jakarta stock exchange, which has gained around 7%.

Negotiations

Mansury, who previously oversaw treasury and finance at PT Bank Mandiri Tbk, is expected to boost the airline’s credibility among creditors and spearhead talks with aircraft lessors, an official at the state enterprises ministry has said.

The Indonesian government owned 60.5% of Garuda as of the end of 2016, Thomson Reuters data showed.

Garuda plans to start negotiating with 27 lessors to reduce rental costs, Mansury said, declining to give further details.

As of March, the airline had a fleet of 199 planes, of which 177 were leased, according to its presentation slides.

Apart from controlling its expenses, Garuda also plans to review its routes, optimize its fleet and increase the financial contributions from its food catering and ground-handling units, Mansury said.

“Garuda is already good in terms of operations and customer experience, but we need to improve our financial performance.”