Rising fuel costs are keeping a lid on the share price of Garuda Indonesia.
The CEO of Garuda Indonesia, Emirsyah Satar, warns that he is unable to predict when the airline’s share price will recover lost ground and achieve the Rp. 750 per share price proposed to investors when the airline first went public.
Quoted by Bisnis Indonesia, Emirsyah said: “At that time, the worldwide aviation industry was under pressure because of world fuel prices. This means, the industry was in poor shape and that had an influence on Garuda’s shares.”
When Garuda shares were first offered to the public on February 12, 2011, the price immediately sank 6% from Rp. 750 a share to Rp. 700, continuing a rapid slide to Rp. 580 before staging a modest recovery to close the day at Rp. 620 per share.
Garuda Indonesia shares are now trading at Rp. 510.
The current share price is certain to haunt Indonesia’s Minister for State-owned Enterprises, Mustafa Abubakar, who made bold public pronouncements, reported in the press, that Garuda would return to a share price of Rp. 750 per share within 6 months of the initial IPO. Now, with the six-month post-IPO launch date just weeks away, the Minister’s predicitons will apparently fall short of his prediction by more than 30%.
Garuda Indonesia incurred a loss of Rp. 183.6 billion (US$20.7 million) in Q1 2011. In the same quarter one year before the airline booked a profit of Rp. 18 billion (US$2 million).
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