Paul Lewis/SINGAPORE
Garuda Indonesia's newly appointed president has embarked on a comprehensive overhaul of the financially stricken carrier, involving new financing for a reduced fleet of aircraft, cutting routes, new code-share agreements, the axing of over 40% of the airline's staff and the sale of non-core businesses.
"What is very important to Garuda is restructuring virtually almost all of its resources. We need to change the airline from a very product-orientated culture in the past to one that is market orientated," says Garuda president Robby Djohan, speaking exclusively to Flight International.
One of his first actions has been to secure financial backing for delayed deliveries of Boeing 737-300/500s. A long-awaited Indonesian Government guarantee on Exim bank financing will enable Garuda to take six more 737s, in addition to the five delivered in late 1997. "The deal is done, they have approved it," says Djohan.
The remaining six aircraft, out of the original 12 737-300s and five -500s ordered in 1996 as a trade-in on unfulfilled 737-400 and 747-400 deliveries, are being remarketed by Boeing. Garuda has also returned six leased MD-11s to Boeing, but reversed an earlier decision to dispose of six Airbus Industrie A330-300s.
It is now seeking to cut the monthly $1.05 million finance charge per aircraft. The European Credit Agency in turn has offered to reduce this to $750,000 providing the carrier secures a state guarantor. "Our cash flow shows that to break even, we probably need to pay $550,000 to $600,000," says Djohan, who plans to resume talks in mid-September.
The airline ultimately wants to cut its fleet from 51 aircraft to around 35, including the disposal of eight A300B4s. The fleet will comprise 747-400s for flights to Europe, DC-10s and 747-200s to the Middle East, A330s to Asia and 737s on domestic routes.
It has cut services to Amsterdam, Athens, Bangkok, China, Kuala Lumpur, Manila, Paris, Rome and Taipei. Garuda instead has combined some routes and is negotiating a series of code-share agreements with KLM, Lufthansa and Qantas, the first of which it hopes to have in place by October.
Djohan's other major challenges are to cut the airline's 13,000-strong payroll "down to 7-8,000 people", and restructure its finances. "Our short-term debt is in the region of $300 to $400 million. What we're trying to do, working with Deutsche Morgan Grenfell, is defer the majority by five years."
It is also talking with potential investors to sell off non-core airline operations, such as the Garuda Maintenance Facility and Aero-wisata catering.
Source: Flight International
