Garuda Indonesia Eager to Turn Loss into Profit in 2018
Despite posting a net loss in full-year 2017, Indonesia's national flag carrier Garuda Indonesia is optimistic that it will see net profit in 2018. Last year the airline's net loss reached USD $213.4 million, dropping dramatically from a net profit of USD $9.4 million in the preceding year. What strategy will Garuda Indonesia apply to turn the loss into a profit in 2018?
In full-year 2017 Garuda Indonesia's sales rose 8.1 percent year-on-year (y/y) to USD $4.17 billion. Most of the company's sales - USD $3.4 billion or approximately equivalent to 81 percent of its total sales - originate from scheduled flights.
Meanwhile, international flights account for USD $1.23 billion, or roughly 45 percent of total income from scheduled flights, while the remainder - USD $1.47 billion - originates from domestic flights.
Despite growing sales, Garuda Indonesia's operating expenses rose more steeply in 2017 due to a 25 percent increase in fuel costs to USD $1.25 billion), while other expenses rose 11.3 percent (y/y) to USD $2.03 billion. Pahala Mansury, President Director of Garuda Indonesia, added that other matters that put pressure on the company's balance sheets were the tax amnesty program as well as a USD $7.5 million fine that had to be paid to Australia after Garuda Indonesia was found to have participated in a cartel to fix the prices of cargo flights.
But Garuda Indonesia is optimistic that 2018 will become a much better year in terms of corporate earnings. The company targets sales to rise 17.5 percent (y/y) to USD $4.9 billion and record a net profit of USD $8.7 million. The company applies five strategies to realize these targets. Firstly, by optimizing cost efficiency for flights. Secondly, by renegotiating existing contracts. Thirdly, by improving the utilization of its fleet. Fourthly, by boosting the quality of its service (including the use of jet bridges). And lastly, by safeguarding stable tariffs.
Together, these strategies can result in a significant improvement of Garuda Indonesia's corporate earnings, Mansury said. For example, renegotiating existing contracts can save the airline an estimated USD $100 million.
In the first trading session on Tuesday (27/02) shares of Garuda Indonesia, listed on the Indonesia Stock Exchange, fell 1.27 percent to IDR 312 a piece. So far this year, however, the airliner's shares have risen 4 percent.
Stock Quote Garuda Indonesia - GIAA:
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