Fitch's rating reflects Garuda's dominating market leadership in Indonesia's full-service carrier (FSC) industry as the company commanded about 28 percent of Indonesia's aviation sector at end-2012. This figure includes the performance of Garuda's low cost carrier Citilink.

According to the Fitch report: "Garuda managed to gradually improve its operating parameters, as indicated by an increasing load factor, improving operating efficiency and on-time performance, to a level consistent with higher-rated peers. Such improvements are largely attributable to Garuda's extensive fleet rejuvenation initiatives as manifested in a significant decrease in the average fleet age to about 5.8 years at end-2012 from 11.5 years in 2006. These developments provide support to the rating, considering the high leverage nature of its operation and the airline's constrained liquidity position."

However, "Garuda's low liquidity position, as measured by the cash/revenue and unencumbered assets/ unsecured debt ratios, is a constraint on its rating." 

Due to the favorable macroeconomic context, Fitch expects Garuda to continue its growth momentum as well as its dominance in Indonesia's FSC industry. This dominance implies that the company can pass on fuel costs to end-customers, thus maintaining stable profit margins. Fitch also states that its Garuda rating takes into account government support as the Indonesian government (BBB-/Stable) is a controlling shareholder in Garuda.

For a detailed company profile of Garuda Indonesia click here.