RPT-Fitch: Garuda's reported net loss has no direct Impact on it's Rating

Fri Jul 25, 2014 3:38am EDT

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July 25 (Reuters) - (The following statement was released by the rating agency)

PT Garuda Indonesia (Garuda, A-(idn) '/ Stable) posted disappointing numbers continue at 1h14, but do not directly impact on the Fitch ratings has projected profile Weak financial Garuda will remain in the time until the next two-three years.

Garuda reported a net loss of USD211juta the first 6-month period in in 2014, compared with a net loss of USD11juta one year ago, which is caused by the loss of the exchange rate and the operating costs sales, increased operating expenses, and increased competition from the internationally. In Fitch's view, the possibility of a small increase in financial profile materially within two to three years into the future.

Stable Outlook on Fitch's ratings are supported by the view that although Garuda's weak liquidity position, the company will be able to maintain its liquidity position sufficient within the next 12 months to meet short-term debt.

As of June 30, 2014, Garuda has cash of USD367juta compared with long-term debt that will mature in 12 months at USD236juta. he company also has to pay the loan the Export Credit Agency (ECA) of USD62juta thus guarantee on 6 planes have also been released. in the end of March 2014, Garuda has not pledged assets amounted to USD602juta.

Fitch expects its achievement will improve in 3Q14, aided by kurtal increase in the volume of travel and fuel surcharge, which will begin to give greater impact on the rate of profit.

Garuda also can reduce aircraft deliveries scheduled after 2015 to reduce the burden of capital expenditure. During 1H14, capital expenditures decreased to USD321juta USD136juta from one year ago. Fitch's positive view plan company to reduce capital expenditures in 2014 amounted to USD54juta improve liquidity position.

Although Garuda domestic passenger volume increased by 11% in 1H14 yoy- yield fell to USD 0.10 from USD 0.11 a year ago, primarily due to the weakening of the Rupiah against the Dollar. domestic flights Garuda quoted in Rupiah, while most of the operating expenses Dollar denominated. Garuda began to implement a fuel surcharge in March 2014, but it is slow to provide a positive impact on nise the new Garuda positive operating income in the month of June 2014.

Fitch looked Garuda focus on international routes with the level of profit high, such as Jeddah and Amsterdam, and the route is stopped such advantageous route Jakarta - Taipei began August 1, 2014 will help improve profits. This strategy is especially important because of the international Garuda is also affected by the political turmoil in Thailand, where the flight to Bangkok is one of the routes are profitable.

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