[tourismindonesia] Indonesia's Garuda H1 profit dives 80pc

Saturday, August 14, 2010, 11.36 AM

Indonesia's Garuda H1 profit dives 80pc
Published: 2010/08/14

JAKARTA: PT Garuda Indonesia, the country's flagship carrier, said yesterday its first half 2010 profit plunged 80 per cent from a year ago on higher costs amid preparation for its US$400 million (US$1 = RM3.15) initial public offering (IPO).

The hit to income comes as the company is trying to boost investor confidence ahead of a long-delayed IPO now planned for November, though the airline still expects full-year profit to be flat from last year's US$112.6 million.

The airline saw first half net profit of U$13.73 million, compared to US$67.93 million a year earlier, said Elisa Lumbantoruan, Garuda's acting finance director, after a meeting with the state enterprise ministry.

"Our production costs increased significantly despite revenue increasing around 3 per cent," Lumbantoruan told reporters.

"In June, we had 9,000 flights while in January we had only 7,000."

Airlines globally faced a tough 2009 but are recovering faster than expected this year, while Garuda usually enjoys a boost to sales of between 15 per cent to 20 per cent during the Ramadan festive season in the next month when people travel more.

"I expect we can get at least US$111 million this year on profit," said Emirsyah Satar, Garuda's president director.

A market source said yesterday that despite the government's intensive efforts to lure cornerstone investors to buy a stake in the IPO, including US-based Capital Group, it may find it hard for them to convince big investors.

"Capital Group said they're not interested to buy a stake in Garuda as its business profile is not promising as it faces heated competition from local and regional airlines," said the source, who advises institutional investors including Capital Group, which has stakes in Indonesian state telecoms and banks.

The government has picked Mandiri Sekuritas, Bahana Sekuritas and Danareksa Sekuritas as local underwriters for the IPO, the state enterprises minister said yesterday.

"We're still optimistic on the IPO plan and expect a lot of interest from international investors," Lumbantoruan added. - Reuters



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