Garuda lifted by Saudi Arabian all-clear (The Financial Times)

By John Aglionby in Jakarta
Published: August 2 2007 17:18 Last updated: August 2 2007 17:18

Garuda Indonesia, the national carrier, on Thursday welcomed a decision by Saudi Arabia not to adopt a European Union ban on Indonesian airlines and said this year would see its first profit since 2003.

The EU last month banned all Indonesian airlines from flying to its 27 member countries, citing poor airline safety and regulatory supervision standards following two crashes. Saudi Arabia usually follows EU transport commission rulings but, after Indonesian lobbying, decided to investigate first.

Jusman Djamal, Indonesia’s transport minister, on Thursday said an audit team from Saudi Arabia’s General Authority of Civil Aviation had declared Garuda fit to fly to the kingdom.
Garuda does not fly to Europe, so is not directly affected by the EU move, but it flies 300,000 people to Saudi Arabia each year.

The airline on Thursday announced a first-half net profit of Rp148bn ($16m) compared with a loss of Rp361bn in the same period a year earlier. Revenue increased to $570m from $494m, while the load factor rose to 76 per cent from 70 per cent and the revenue per seat per kilometre flown rose 8 per cent to 7.2 US cents.

Garuda lost Rp800bn in 2004, Rp688bn in 2005 and Rp197bn in 2006. Mr Emirsyah insisted this year’s figure would be a profit.

The airline has debts of $640m and it has failed to reach a restructuring agreement with European export credit agencies, its large creditors.

Alex Maneklaran, finance director, said he hoped an agreement would be struck this year. Garuda also intended to sell several non-core assets such as buildings and land as part of its cost-cutting programme, he said.

The Indonesian government, which owns Garuda, has promised to inject Rp1,000bn to prop up the company. It has disbursed half of that but Mr Maneklaran said the money had been allocated to debt refinancing.

This year the government said it would sell up to 49 per cent of the company but that has been postponed until the debts have been refinanced.

Additional reporting by Taufan Hidayat
Copyright The Financial Times Limited 2007