February 8, 2018 / 12:49 PM / 10 months ago

Garuda to work fleet harder, hedge oil to help return to profit: CEO

SINGAPORE (Reuters) - PT Garuda Indonesia (GIAA.JK) plans to work its fleet harder, increase oil hedging and add more international flights to help return to profit this year, the airline’s chief executive said on Thursday.

Workers clean the body of a Garuda Indonesia Airbus A320 aircraft inside Hangar 4 of PT Garuda Maintenance Facility (GMF) Aero Asia at Soekarno-Hatta airport in Jakarta, September 28, 2015. REUTERS/Beawiharta

The national carrier last month said it was targeting a small net profit of $8.9 million this year after posting a $222 million loss in the first nine months of 2017. Garuda is due to release its full-year 2017 results later this month.

“It is not going to be a significant profit,” Garuda CEO Pahala Mansury told reporters at the Singapore Airshow. “But I think at least for us to be able to have some profits would be good.”

He said domestic ticket prices were improving as rival Lion Air slowed its rate of capacity growth, but higher fuel prices and airport charges meant a strong focus on costs would be needed to break even.

“I certainly asked the guys to increase the proportion of (fuel) hedging that we actually have,” Mansury said. “The other thing we have been doing is looking at new instruments like options and puts and collars to...hedge fuel as well.”

Garuda plans to increase domestic capacity by 12 to 15 percent and international capacity by more than 25 percent this year despite having deferred deliveries of new Boeing Co (BA.N) and Airbus SE (AIR.PA) jets and continuing to talk to turboprop maker ATR about doing the same, he said.

Other Southeast Asian national carriers like Vietnam Airlines JSC HVN.HNO and Thai Airways International PCL (THAI.BK) are drawing up plans for ultra-long haul flights to the United States.

However, Mansury said the focus for Garuda would be on having more frequent flights to destinations around the Asia Pacific region to attract more business travellers, with early talks underway with Chinese airlines about forming joint ventures on routes.

Garuda’s capacity increases are forecast to be achieved by boosting the number of hours each jet is flown per day, in a move that would also help offset the high fixed cost of the airplanes.

Flying hours on Garuda jets rose by 7.5 percent to 9 hours and 36 minutes per day in 2017, and the airline hopes to boost that further this year, Mansury said.

Reporting by Jamie Freed; Editing by Kirsten Donovan

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