Garuda hopes to secure more than half of Indonesia's air travel market. (ID Photo/David Gita Roza)

Garuda to Decide by End-2015 on Airbus or Boeing for 30 Wide-Body Jet Order

BY :SIVA GOVINDASAMY

NOVEMBER 13, 2015

Bali, Indonesia. Garuda Indonesia will decide whether to buy 30 wide-body jets worth potentially $9 billion from either Airbus or arch-rival Boeing by end-2015, the airline's chief executive said in an interview on Friday.

Indonesia's flag carrier signed letters of intent for both 30 A350s from European aircraft maker Airbus and 30 787s from US supplier Boeing at June's Paris Airshow, but will go ahead with only one order.

Representatives from both firms have been pressing the full-service carrier to firm up a deal since then.

"We are still comparing the two aircraft but we will go with only one type," Chief Executive Officer Arif Wibowo told Reuters, speaking on the sidelines of an industry event in Bali.

The airline wants the 30 new jets to replace the Airbus A330s it uses on medium- and long-haul routes within Asia, and potentially to additional points in Europe.

The new order comes as the airline tapers growth plans to try to cut costs and boost its bottom line amid aircraft overcapacity in Southeast Asia.

Garuda faces intense competition in its domestic market, and restrictions at airports within the country not yet upgraded or fully equipped to handle increases in traffic.

Garuda made a net profit of $27.7 million for the six months ended June, versus a $203 million loss a year earlier, but the second half of 2015 is "challenging", said Wibowo, who became the airline's CEO in December 2014.

Wibowo said fuel efficiency and operating costs will be the main factors in the decision as the airline continues to work on gradually trimming expenses against the backdrop of a tough second half.

A recent volcanic eruption in Lombok has cost the airline $12 million in passenger cancellations, and the haze that started from forest fires in Sumatra and engulfed Southeast Asia a further $8 million, he said.

Meanwhile Garuda is also negotiating with Airbus and turboprop aircraft manufacturer ATR, a joint venture between Airbus and Italy's Finmeccanica, on deferring delivery of aircraft it was due to receive over the next two years, said Wibowo.

Garuda hopes to delay delivery of at least some of the six Airbus A330s already on order that are due in 2017. It's also talking to Airbus about converting some A330 orders to the upgraded A330neo model  due to enter into service later this decade and promising better fuel efficiency and lower operating costs.

The airline was also due to take nine ATR 72 turboprop planes in 2016, but now wants only three next year.

Reuters

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