Loss-making Garuda plans major cost cutting drive

Garuda Indonesia has announced a major restructuring programme aimed at reversing a downturn in its financial performance.

The national carrier, which posted losses of US$206 million in the first three quarters of 2014, has introduced the ‘Quick Wins’ initiative, which will focus on managing costs and driving more revenues.

This short-term strategy comprises three main components: network restructuring, fleet management and cost controls. Under the route rationalisation plan, Garuda will discontinue its service between Brisbane and Bali from 1 February 2015, as well as reducing the frequency of its JakartaTokyo Haneda service and postponing the launch of its new Jakarta-Nagoya route.

Garuda has been expanding and modernising its fleet in recent years
Garuda has been expanding and modernising its fleet in recent years

Flight schedules will be adjusted on routes to various destinations in Australia and Europe, although details of these changes are yet be released.

In terms of fleet management, Garuda said it will terminate the lease of “several aircraft”, as well as changing the configuration of its Boeing 737-800s. The number of business class seats on these single-aisle jets will be cut from 12 to eight, in an effort to attract more passengers and reduce costs.

Garuda will still take delivery of 15 new aircraft in 2015, but says it will not increase its staffing levels to cater for this expansion. As a result, its staff-to-passenger ratio will be reduced. This forms part of a broader plan to reduce operating costs by 10%.

Garuda struggled in 2014, with the devaluation of the Indonesian rupiah significantly impacting its financial results. While the airline achieved a 4% rise in revenues in the first nine months of 2014, its operating costs surged 13%.

But passenger traffic is still growing, rising 15% in the first three quarters of last year, and Garuda also recently received the prestigious five-star rating from SkyTrax. The Quick Wins initiative comes as Garuda completes its five-year ‘Quantum Leap’ programme, which has transformed the airline into a modern international carrier.

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