LONDON – The financial distraught airline Garuda Indonesia may pull the plug on selling first-class flights and may pull more plugs if not all international routes as the airline look inward to the large domestic market.
Award Winning Service Cut
The inefficient state-owned Skyteam airline will focus on business, premium economy and economy class seats in its domestic market, citing that its domestic market for air travel is large enough for the airline to sustain itself.
In addition, it is more suitable for the Indonesian market, Erick Thohir, Minister of State Enterprise noted in an interview.
The minister exerted that Garuda Indonesia will, unfortunately, pull its plus on most international routes to shave costs. However, some routes will still be flown, such as the pilgrimage flights to Saudi Arabia.
Minister Thohir stated that: “Garuda had the wrong business model in the past, with its leasing costs way above the industry average, so we need to fix that,”. International flights can still be served via code-sharing arrangements with other airlines, he added.
Garuda Airlines is gradually increasing its operations in order to meet the target of returning to operating profit in 2023. Currently, the airline is undergoing a restructuring of about US$9.5 billion in debt.
The Indonesian state airline has successfully narrowed its loss in the 1st quarter of the year, and plans to increase its fleet to 120 from 30! This signals the airline that the fleet is returning to its pre-pandemic size. The return to the pre-pandemic size might not include its wide body.
The airline has plans to acquire additional aircraft from lessors recommended by OEMs like Airbus or Boeing the minister added. The minister is very optimistic and upbeat that the airline making the correct decisions in making aircraft deals as Indonesia itself has a large aviation market.
The minister guestimated that there will be as many as 1,800 passenger aircraft flying in the southeast Asian archipelagic nation in the near future.
Revising Aircraft Orders
The Indonesian national carrier is willing and able to revise a deal for its previously inked 49 Boeing 737MAX jets, which are still yet to be delivered to the airline. The possible outcomes of the negotiated contract can be pushing back delivery dates or shrinking the order size.
Kartika Wirjoatmodjo Deputy Minister for State-Owned Enterprises stated mid-year: “Boeing wanted us to keep our commitment on the Max purchase,” The statement was made when the Minister met with Boeing officials earlier in the year.
“We want them to renegotiate, just like Airbus, by pushing back the deliveries or reducing the orders for 737 Max. They don’t want it. So like it or not, we might have to settle it in an American court, we have to do Chapter 15.”
The airline also stated that they halted receiving the Boeing 737 MAX in early 2019 after the two incidents involving Ethiopian and Lion Air, which led to the global grounding of the model worldwide.
The airline’s creditors, which included plane lessors, earlier this year greenlighted a plan to restructure its debt, which is worth approximately US$9.5 billion or 142 trillion rupiahs.
The Indonesian government has agreed to give the company more financial ceiling as both parties are banking on the capitalisation of the pent-up demand and the recovery of air travel.
What will the fleet composition of the Indonesian airline look like? Or will the national carrier see only all narrow Body fleets with one or two wide bodies for Hajj flights?