Garuda pilots agree not to go on strike

P ilots

at Indonesian flag carrier Garuda have agreed not to go on strike, chief executive Pahala Mansury said yesterday, easing pressure on the airline’s earnings at a time when oil prices are surging.

The Garuda Pilot Association (APG) had threatened last month that at least 1,300 pilots and 5,000 cabin crew members from the carrier would go on strike, over complaints about management, reduction in flight hours and the removal of annual raises.

Mansury said the airline still expected to break even in 2018, despite suffering from higher oil prices and rupiah depreciation, as well as the pilot discontent.

“We expect to earn a profit in the third quarter,” he told Reuters.

Garuda and the APG did not comment on whether pilots would be receiving a raise as part of the agreement cancelling the strike.

The International Air Transport Association last month lowered its forecast for industry profits in 2018 by 12% due to rising costs of fuel and labour, as well as an upturn in the interest rate cycle.

State-owned Garuda reported a $64.3 million net loss for the January-March period, compared with a revised $101.2 million loss in the same period last year.

The carrier said earlier this year it expected a modest net profit of $8.9 million for the full year on the back of higher passenger volumes, after reporting a net loss of $216.5 million for 2017.

Meanwhile, PT Garuda Maintenance Facility AeroAsia (GMF AeroAsia), a maintenance unit of Garuda, is eyeing partnerships with five new airline clients by the end of 2018, with a focus on Russian and Indian airlines.

Iwan Joeniarto, CEO of unit, said he aimed to increase the portion of revenue from foreign airlines from 12 to 30% within five years.

GMF AeroAsia said it had already signed partnerships with Thailand’s Bangkok Airways and Bangladesh’s Novo Airlines in the second quarter of 2018 and was bidding for a tender from Russian airline Rossiya.

GMF AeroAsia is trying to broaden its revenue sources beyond Garuda, which has delayed jet deliveries as it struggles financially.

The maintenance unit, which listed last year, wants to raise another $200 million by selling a 20% stake to a potential strategic partner to help expand existing operations and build a new maintenance facility on Indonesia’s Batam Island, just 31 kilometres (19 miles) off Singapore’s coast.

“GMF AeroAsia has budgeted $100 million for capital spending on the Batam project and has sought a tax break from the government,’’ Joeniarto told Reuters.

He declined to provide a construction timeline.

The company has a long-standing partnership with Air France Industries KLM Engineering & Maintenance, and said in January that it had short-listed the European group as a strategic partner.

However, Joeniarto said the final decision would depend on shareholders and approval from the government, with three candidates being currently considered for the partner role.