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Unexpected Turbulence Ahead

Garuda Looks to Weathering Stormy Economic Days Ahead.


Bali News:
Click Image to Enlarge

(11/10/2008)

Despite assurances from the Minister of Culture and Tourism that Indonesia is immune from any negative effect of the world economic crisis [See: Editorial – Ignorance is Bliss], Garuda Indonesia is clearly aware of a number of challenges the sudden change in the world's economic fortunes will present for the national flag carrier.

Garuda’s CEO, Emirsyah Satar remains generally optimistic, telling the press, "We are still positive about our operating profit despite the depreciation of the rupiah. Thus far, we have recorded a substantial income."

Emirsyah later admitted that the foreign currency cost related to the Rupaih's depreciation remains to be calculated.

During the first eight months of 2008 Garuda booked a net profit pf US$27.2 million, an increase of 5% in rupiah terms over the same period in 2007.

Aviation insiders are projecting the following possible impacts for Garuda, from the worsening economic crisis:

● A possible delay in the planned IPO originally scheduled for 2009. Current market conditions may be inimical to seeking a strong initial share price for Garuda shares offered to the public, necessitating a delay in plans to "go public" with a portion of the Airline’s stock portfolio.

● Tight credit globally may make it difficult for Garuda to secure the backing of financial institutions needed to conclude the lease arrangements for new aircraft on order and central to its corporate restructuring plans.

● Plans to commence service to Europe in 2010 may need to be delayed in the face of tight credit and reduced consumer demand for long-distance travel.

● Still to be factored in is the potental effects of declining passenger demand and heightened competition for domestic air passengers; lower fuel costs; and still-to-be-seen impact of the world financial crisis on passenger travel ex Australia, South Korea, Mainland China and Japan which represent key source markets for Garuda.

Buckle your seat belts!


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