Garuda records $63.2 million losses in H1 - Business - The Jakarta Post garuda indonesia cargo uk office

Garuda records $63.2 million losses in H1 Anton Hermansyah

The Jakarta Post

Jakarta | Mon, August 1, 2016 | 09:01 pm Garuda Indonesia aircraft are seen at the Soekarno- Hatta International Airport in Tangerang, Banten. (Kompas/Agus Susanto) Share  share on facebook  share on twitter  share on google plus  share on Linkedin  share on whatsapp  comment  share on email s orologi-di-design-rid-6623616.html. orologi svizzeri prezzihare this article follow Us   

National flag carrier Garuda Indonesia experienced US$63.2 million or around Rp 824 billion in losses in the first half of 2016, the company’s senior official said.

Garuda Indonesia president director Arif Wibowo said in a press conference in Jakarta on Monday that in the same period of last year, the company booked a net profit of Rp 392.6 billion ($29.3 million). The losses it suffered were triggered by tight competition in domestic flights, which led to a price war.

“What we have been facing in our domestic flights is a decline in yield, which reaches almost 10 percent compared to the previous year,” he said.   

Arif further explained that although Garuda Indonesia’s passenger revenue per kilometer had increased by 9.8 percent, accompanied by a 19 percent increase in Citilink Indonesia’s passenger revenue and a 20 percent increase in the latter’s passenger capacity, all of these factors could not cover the big losses suffered by the company.

Meanwhile, Garuda’s total revenue reached $1.76 billion in the first semester of 2016, down by 4.1 percent from $1.84 billion in the same period of last year.

Arif said the ongoing global economic turmoil had also affected the company’s operations. Nevertheless, he said, he was optimistic because the rupiah exchange rate had improved following the issuance of new policies from the government.

“With the government’s new policies and the rupiah, which is getting stronger, there is positivity ahead. There are good prospects in the future,” said Arif.

He further said Garuda strove to improve its work performance by operating nine of its 17 new aircraft and by expanding to Europe, where people could reach via Heathrow and Gatwick airports in London, the UK. (ebf)

 

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marche orologi uomo buoni Survival of the fittest: Arif Wibowo, CEO of Garuda Indonesia

Arif Wibowo, CEO of Garuda Indonesia talks to Tony Concil about the carrier’s successful transformation program

Are you happy with Garuda airline’s improving performance?

The airline had a successful initial public offering (IPO) in 2011 and that signaled Garuda’s transformation. Becoming a public company changed the culture of the business—the airline is now recognized as a global player and we joined SkyTeam over a year ago.

The challenge now is to continue to expand profitably and we plan to increase capacity by 10-15% this year. We have to ensure Garuda’s network is strong. The big push is in strengthening our middle-range markets, those with flight times of between five and seven hours.

China features heavily in our plans. We only fly to three Chinese cities from Jakarta—Beijing, Shanghai and Guangzhou. Outbound traffic from China is about 100 million people, but only 900,000 come to Indonesia so there is plenty of potential. We want to link more cities directly. From Indonesia, we already link Denpasar to Beijing and there are lots of secondary cities in China with the potential to support routes to Indonesia.

Saudi Arabia is also important. The majority of the 250 million Indonesians are Muslim. There is huge a demand to make the Hajj pilgrimage and Umrah.
Garuda Indonesia and Saudia each have the right to transport 80,000 people from Indonesia’s 160,000 quota. Some people wait for years before they can go.

We are adding cap­acity to Jeddah to fulfill this demand through Umrah religious travel. Over the course of the year, some half a million Indonesians do this smaller Hajj and we are doing our best to cater to their needs.

Longer term, we want to operate more services to Europe and utilize the support we would get from our SkyTeam partners there. We would like France, Germany, the Netherlands and the UK to be part of our network in the future. We can’t think about the United States yet because Indonesia has a category-two safety rating at the moment.

How was Garuda able to transform so quickly?

My predecessor introduced a five-year turnaround plan in 2009 known as Quantum Leap. I have spent two decades in Garuda and ran its low-cost subsidiary Citilink from 2014 until Emirsyah Satar retired from the airline late last year. As a team we concentrated on quick wins over those five years, but we were aiming high. It wasn’t enough just to have a world-class product. We also had to be world-class in generating revenue.

We did three things that allowed us to be more competitive. First, we had a look at our network and identified 20% of our routes that weren’t contributing as much as they should. Then we looked at pricing to see which fares were encouraging sales and which fares were not. Finally, we created a financial dashboard so that I could see what has happening by the day, even by the hour.

This discipline gave us the ability to make some fundamental decisions—not just on routes but also on how we configure our aircraft. For example, on our larger aircraft we replaced some business-class capacity with economy seating. That gave us more revenue and the SkyTrax five-star rating is evidence that people like our products.

We hit some headwinds on profitability in 2014—we posted our first loss since 2006—but the recent drop in the fuel price will help turn that around to some extent. However, the high US dollar in which we incur costs and the weak revenue-earning Rupiah, mitigates some of the benefit. We are continuing to look at the network, costs and competition to maximize revenues and profits. The second half of 2014 was better than the first and I am confident that we will more improvement as we move through 2015.

What will liberalization of the Association of Southeast Asian Nations (ASEAN) mean for Garuda?

We view it in a positive light. It will make travel easier for passengers and we need to be ready to cater to this potential, even if it means even stiffer competition.

Total traffic among the ASEAN open skies members is approximately 66 million. Nearly half of that market relies on Indonesia. Our position is good so long as we keep a strong position in our home market. We anticipate our group passenger numbers will rise by six million to a total of 36 million.

This includes growth in domestic services where it really is survival of the fittest. Last year four operators ceased operations. That still leaves a market where five airlines compete vigorously.

What does Garuda do differently to other airlines in the region?

We want to think differently from other airlines in Asia because we can’t rely on Jakarta alone. Of course, it is the main hub and makes a big contribution—almost 50%—to our domestic network. But Indonesia is a nation of 250 million people who are discovering the convenience of flying.

There are at least five Indonesian cities that could develop into hubs—Surabaya is already moving in that direction. That puts us in a very different position than Singapore, or Thailand or Malaysia where there are only one or two hubs for each.

Domestically there also huge potential for growth. We have 220 airports, of which only 37 can accept jet aircraft. That is a natural driver to hub traffic with turbo-prop traffic feeding our jets at the more major airports. The role of Citilink is critical in this development because the demand is more in the mid- to low-range on price than it is for premium services.

To what extent is Jakarta meeting your current needs?

Jakarta was built in 1985 with capacity of about 20 million but last year the airport served more than 40 million people. Many things have to be developed both landside and airside. We have 600 flights per day and we have to use remote parking a lot of the time and that is inconvenient for passengers. Fortunately, a dedicated Garuda terminal will open in the middle 2016. That will make 37 extra bridges available.

Garuda is the only SkyTeam partner in southern Asia. That means Jakarta has to be the hub for the alliance and not just Garuda. Capacity must be developed further and that goes for air traffic management too. We are not maximizing the capacity of the two runways at the moment.

Does Garuda have enough skilled personnel to support its growth plans?

Finding people with the right skills is a constraint as much as infrastructure. In Indonesia, there are around 16 pilot schools but we support only four because the majority are not of sufficient quality. As we approach 2020, we will need approximately 400 new pilots so there will be a shortfall. We also need skilled mechanics and engineers.

What needs to be done to improve Indonesian safety?

Indonesia is in category two of the US ­International Aviation Safety Assessment (IASA) program. And there has been at least one hull loss in the country every year since 2010. So there is an issue. Garuda has been IOSA-registered since 2008. IOSA is the same for all airlines, it is a global standard.

Global standards should drive safety improvement in this country. That starts with government policy and continues down to airports, air navigation and airlines.

That’s why IOSA should be mandatory for all Indonesia airlines. It would be good to have government safety policy based on IOSA. And it is an easy way to convey the message to public that safety is paramount.

We have a new Minister for Transport who is building up his organization. With stronger resources the ability to manage compliance will improve. In some ways it is an issue of skilled human resources.

Moving back to IASA category one is a significant undertaking, but the Philippines was able to do it in six years. A key learning point from the process was the need for ­government to work closely with the airlines. Fortunately, we have valuable experience from our operations around the world.

Where will Garuda be in 10 years?

We are just beginning to establish ourselves as a global player and I would hope the airline would have capitalized on that by 2025. It would mean a bigger network and that Garuda has become a global brand and not just the Indonesian flag carrier.

What are the particular qualities and skills you need as an airline chief executive?

It is important to have participative leadership. That means management has to communicate the details and not just the overall strategy because the transformation of the airline is still ongoing. It is about cascading leadership down to the frontline staff.

You have to trust in your people. There needs to be good collaboration between all business colleagues. Everybody must be more professional and accept that we are a performance-based company. It is a systematic approach to human resources.

Personally, I am demanding and I look at all the details. I am constantly in touch with my people. I use WhatsApp to communicate with our city and country managers, asking them what is going on in their markets and what they are doing to improve or take advantage of opportunities.

Working in an airline is not a nine-to-five job. We need to make sure we are awake and at our best at all times.

Arif Wibowo

Current roles:

President & CEO Garuda Indonesia; Chairman of the Indonesia National Air Carriers Association (INACA); Head of Permanent Committee on the Air Transportation sector; Chairman of the Association of Asia Pacific Airlines (AAPA).

Previous roles:

Director international relations; Director marketing alliance, General Manager for Fukuoka, Japan, Senior General Manager for Japan, Korea, China & USA, and EVP Marketing & Sales.

Awards:

Indonesia Travel and Tourism Association awarded Citilink as the Indonesia Leading Low Cost Airline in 2012, 2013 and 2014.

Citilink was also awarded the Service to Care Award in 2012 and 2013 by MarkPlus Insight.

Education:

Master of Management in Air Transportation; Degree in Mechanical Engineering; Certified Professional Marketer (CPM Asia)

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