July 30, 2018 / 11:32 AM / 9 months ago

UPDATE 1-Fuel prices, currency may weigh on Garuda Indonesia's 2018 profit

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By Cindy Silviana

JAKARTA, July 30 (Reuters) - Rising fuel prices and rupiah depreciation could jeopardise flag carrier PT Garuda Indonesia’s full-year profit, its chief executive said on Monday.

State-owned Garuda reported a $116.86 million net loss for the first six months of the year, compared with a $281.8 million net loss in the same period last year which was lowered by significant one-off costs related to Indonesia’s tax amnesty program.

CEO Pahala Mansury told reporters he hoped the airline could still break even in 2018.

“We actually expect to reach our target profit of $8-10 million this year, but might need to review it again (depending on fuel prices and rupiah depreciation conditions)” he said.

Mansury attributed the narrowing of the first-half loss in part to flying its jets for more hours each day and cutting loss-making routes from 22 to 11.

The airline is postponing the delivery of new planes this year as previously announced but will take delivery of three Airbus SE A330neos in 2019 and five Boeing Co 737 MAXs in 2020, he said

Garuda had said earlier this year it expected a modest net profit of $8.9 million for the full year.

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

“In response to the fuel prices, we are planning to increase our hedging ratio up to 50 percent and will look at currency swaps to anticipate the depreciation of the rupiah,” Garuda’s Director of Finance and Risk Management Helmi Imam Satriyono told media.

Satriyono said “uninteresting market conditions” had also caused Garuda to cancel plans to issue a $500 million global bond. (Reporting by Cindy Silviana & Fanny Potkin; Editing by Sunil Nair and Kirsten Donovan)

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