Garuda first half profit down 80%

Garuda Indonesia, the country's flagship carrier, saw its first half 2010 profit plunge 80 percent from a year ago on higher costs amid preparation for its US$400 million initial public offering, reported Reuters.

The hit to income comes as the company is trying to boost investor confidence ahead of a long-delayed IPO now planned for November, though the airline still expects full-year profit to be flat from last year's $112.6 million.

The airline saw first half net profit of $13.73 million, compared to $68.22 million a year earlier, said Elisa Lumbantoruan, Garuda's acting finance director.

"Our production costs increased significantly despite revenue increasing around three percent," Lumbantoruan said. "In June, we had 9,000 flights while in January we only had 7,000."

Airlines globally faced a tough 2009 but are recovering faster than expected this year, while Garuda usually enjoys a boost to sales of between 15 to 20 percent during the Ramadan festive season in the next month when people travel more.

A market source told Reuters that despite the government's intensive efforts to lure cornerstone investors to buy a stake in the IPO, including US-based Capital Group, it may find it hard for them to convince big investors.

"Capital Group said they're not interested to buy a stake in Garuda as its business profile is not promising as it faces heated competition from local and regional airlines," said the source, who advises institutional investors including Capital Group, which has stakes in Indonesian state telecoms and banks.
(Source:www.cargonewsasia.com)