Garuda plans strategic growth; to boost capacity on S'pore route

Garuda Indonesia, which is restructuring its network and trimming costs to turn itself around, will still be boosting capacity into Singapore on its Jakarta and Surabaya services.

By October, Garuda will upgauge by using six widebody Airbus A330s to operate its ten daily services between Jakarta and Singapore, up from just two A330s today. It will do this by swopping out some narrowbody Boeing 737-800s, effectively lifting its weekly capacity on the route by about 20 per cent.

Meanwhile, its Singapore-Surabaya route will go from a once daily service to a twice daily service in October. It is also mulling over additional capacity for its Singapore-Bali route.

"Singapore is really an attractive point," said Garuda Chief Executive Arif Wibowo, noting that 60 per cent of traffic on the route are business travellers while some Indonesians own properties in Singapore as well. Mr Wibowo, formerly chief of the group's budget carrier arm Citilink, recently took over from previous Garuda head Emirsyah Satar who stepped down after nearly a decade.

"This year, we will grow about 12 per cent in capacity (for Garuda)," said Mr Wibowo. It aims to carry 25 million passengers, up from 21.5 million last year, while Citilink is expected to carry 11 million, up from 7.6 million.

By the end of this year, Garuda's narrowbody fleet will grow to 112 from 103 a year ago, while its wide body fleet will increase from 30 to 33, taking its total fleet to 145 planes by December. Meanwhile, Citilink will see its fleet grow from around 36 to 41 planes.

The past two years were turbulent for airlines in Indonesia, thanks to the sharp depreciation of the rupiah and volatile fuel prices. Intense competition contributed to a shake-out of sorts, with airlines such as Tiger Mandala going belly up.

But a growing emerging middle class in Indonesia and the recent fall in jet fuel prices are both beneficial for the industry, he pointed out. The group plans to hedge up to 25 per cent of its fuel needs this year.

To optimise its network and boost revenues, Garuda has adjusted capacity downwards for markets such as Japan and Australia, opting instead to raise capacity in other markets such as Asia and the Middle East. In Europe, new points in Germany and France are only likely to come by the end of the year or early next year.

Indonesia's national carrier is also cutting operating costs by up to 12 per cent this year as it seeks to swing back into the black from last year's net loss of US$373 million.

"In order to rebound, I have to restructure the network. Now is the time for us to consolidate the network first...to create more efficiencies," he said. "We have to rebuild the most optimum network between Garuda and Citilink because we are in a very competitive market."

The group also plans to strengthen its position in the domestic market on feeder and trunk routes, partly in anticipation of ASEAN Open Skies. "By having five gateways for Open Skies, we have to make sure that the network feeding these gateways (is) owned by Garuda. We are building two strategies - full service and low cost carrier."

Citilink, which posted a loss of about US$14 million last year, is expected to turn in a profit this year. The budget carrier is part of the group's strategy to wrest market share in the low cost carrier segment from rivals such as Lion Air and Indonesia AirAsia.

And eventually, the plan is to have Citilink launch international routes - potentially by next year - to cities such as Singapore, Kuala Lumpur and Bangkok.

Meanwhile, the Indonesian government is trying to build up infrastructure - not just airports but sea ports and even roads - amid growing travel demand. Expansion at Jakarta's Soekarno-Hatta Airport, for instance, will see its passenger handling capacity go from an expected 43 million annually in 2016 to 87 million by 2018. With the expanded capacity, the national carrier plans to move its operations to the airport's Terminal 3.

"We are aiming to build a really strong hub for Garuda, plus (for the) Sky Team. In the Southern Hemisphere, the only partner is Garuda," said Mr Wibowo, adding that it is seeking to channel Australian and European traffic via its hub in Jakarta.

There is also greater scrutiny of airlines by the Indonesian authorities as well as efforts underway to upgrade air navigation systems and enhance competencies in the wake of the Indonesia AirAsia crash last year.

Where safety is concerned, Garuda has been in accordance with Iata's Operational Safety Audit (IOSA) since 2008, while Citilink is currently working towards an IOSA accreditation, he added.

This article was first published on April 24, 2015.
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