Garuda targets profit in 2018 on cost cuts after loss this year

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 car- rier 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 aviationrelated businesses such as aircraft maintenance and its hotel subsidiaries. (Bloomberg)