Garuda likely to seek Government bailout

JAKARTA - Garuda Indonesia, which posted its first loss in three years amid surging fuel costs and more than US$800 million ($1.1 billion) of debt, may ask the nation's Government for a bailout to keep flying, says State Enterprise Minister Sugiharto.

Garuda, Indonesia's national airline, needs about US$115 million a year to repay loans and about 10 trillion rupiah ($1.4 billion) more to pay wages, buy jet fuel, maintain its planes and cover costs.

The Jakarta-based airline posted a 2004 loss of 811.3 billion rupiah this week, from 2003's profit of 2.81 billion rupiah.

"They are in the midst of proposing to the Government for an additional paid-up capital," Sugiharto, whose ministry oversees Indonesia's state-owned companies like Garuda, said. "We are about to decide whether we need to help Garuda."

Record oil prices are causing losses at Garuda, Thai Airways International and other Asian airlines as surcharges only partly cover the higher fuel bill.

Garuda is turning to the Government for help to fend off Singapore Airlines, Malaysia's AirAsia and Asia's low-fare carriers, which are buying planes and expanding routes.

Garuda's shares are not publicly traded. Indonesia delayed a plan to sell the airline's shares to 2007 and Sugiharto declined to say if the bailout would bring the sale forward.

"Garuda is in a turnaround period, probably in one or two years," Sugiharto said.

In May, Garuda said it could report a 2005 operating loss estimated at between US$10 million and US$20 million because of rising jet fuel prices.

To protect Garuda and two other state-owned airlines, Indonesia's Government banned overseas carriers from landing in Jakarta and other cities including Medan, Surabaya and Denpasar.

"Garuda is being competitively threatened on its own territory by Lion Air and internationally threatened by JetStar Asia and AirAsia," said Andrew Miller, chief executive of the Centre for Asia Pacific Aviation in Sydney.

Indonesia, with 18,000 islands and a population of 238 million people, has 26 airports and at least 18 airlines.

- BLOOMBERG