Feb 24, 2012

Garuda Indonesia
Gearing toward deployment of first freighter in 2014
Building a four-freighter system

Garuda Indonesia will deploy its first freighter in 2014 in a bid to reinforce its cargo business. Slated for successive deliveries beginning 2013, the company envisions that the freighters will be assigned to the trade routes in Japan, Europe and China. Its initial plan is to work with a four-freighter system, but Garuda will consider expanding the volume while monitoring the demands in the market. It is also studying the possible spinoff of its cargo division in the long run to further reinforce its operations.

Adi Ryanto Winarso, vice-president of Garuda's special business unit Garuda Cargo, talked to Kaiji Press regarding the company's strategies.

Garuda is currently advancing the company-wide promotion of its medium-term management plan Quantum Leap, which will be valid until 2015, pushing various reinforcement and rationalization measures even in the cargo division. One such measure is the introduction of freighters.

After entering into a joint freighter agreement with Korean Air (KAL), China Airlines and Malaysia Airlines, Garuda has come to use a portion of the space in the freighters operated by its partners as a marketing party. However, Winarso claimed that, "Half of the major airlines in the world operate freighters, so it would be indispensable for us to have our own freighters in order to shift our cargo business to high gear." The company initially planned to deploy the freighters by mid-2013, but in light of the deteriorating business climate characterized by such problems as the financial crisis in Europe, it decided to defer the deployment to 2014. As a result of the feasibility study (FS), Garuda realized that Japan, China and Europe will be the optimum main network for freighters, but it is possible that the freighters will be deployed to the Australia lane, too. The freighters will have a maximum capacity of 70 tons in payload, with the freighter aircrafts believed to be A330 units.

Prior to the introduction of the freighters, Garuda will also promote the reinforcement of the foundations of its cargo business. It significantly expanded the network of its General Sales and Service Agents (GSSA) in 2011, but for 2012, the company also plans to build a land transport system in Japan, Europe, the Middle East and China through joint operation, according to Winarso. Further, the IT system of its cargo division was also renovated last year. By introducing the eCargo, NOMAD and RAPID systems in succession into cargo management, ULD management and finance, respectively, Garuda successfully enhanced the efficiency and rationalized its operations. As for the targets behind the innovation of its IT system, Winarso said that, "The most important objective is to change the paradigm of the cargo business staff. Quantum Leap was necessary in making them understand the goals."

Aside from the cargo division, some of the other SBUs of Garuda are the Garuda Indonesia Training Center (GITC) and Citilink, a domestic low cost carrier (LCC) in Indonesia. "The SBUs are like sister companies already. We are considering spinouts, but we will probably only move toward that (spinoff) for real in/after 2015 (when the Quantum Leap ends)," said Winarso.

It has become clear that Garuda will be shifting to the Asia route based on its schedule for summer this year, but Winarso vowed that the company will concentrate on Asia even in the cargo division. The Europe services will be switched to a four-times-weekly scheme from the current daily service, but the capacity that will be cut back will be diverted to the Guangzhou flights, among others. "The narrow-bodied aircrafts in the Asia segment are being replaced with A330-200s (which have been deployed to the Europe lane). With the expansion in the capacity that can be offered to the market, we are now reaping the benefits," claimed Winarso.

Garuda currently operates a fleet of 87 aircrafts, comprising seven A330-200s, six A330-300s, three B747-400s, five 737-300s and 51 737-800s, along with two 737-300s, eight 737-300s and five A320s for Citilink.

The company aims to build a fleet of 150 aircrafts by 2015. In line with this, it is currently replacing its narrow-bodied aircraft-dominated fleet with wide-bodied aircrafts one after another, centering on the A330.

Looking back at the market in 2011, Winarso analyzed that, "The market as a whole had deteriorated, but our cargo load factor, including in the domestic segment, was quite poor at about 46%. In particular, results in the domestic segment, centering on the narrow-bodied aircrafts, were not good. The international segment also has a limited network, so Garuda failed to capture the market growth in this segment. Having no freighter is probably a major issue, too." Garuda's cargo sales were made up 60% by international and 40% by domestic sales.

With regard to cargoes to/from Indonesia in 2012, Winarso noted that Garuda is taking an optimistic stance given such factors as the above-6% GDP growth rate and the foray of new factories into the country. In a bid to boost sales in cargoes and maximize the import/export payloads, Garuda established the Cargo Sales Office at the cargo center in the International Soekarno Hatta Airport, where its headquarters is also located. With this move, the company aims to raise its load factor to 51% in 2012.

As for the infrastructure at the Soekarno Hatta Airport, the gateway to Indonesia's capital Jakarta, Winarso had this to say: "The airport authority is also moving toward improvements at the airport and in the cargo segment, plans for a so-called cargo village are being pushed. Airlines have already been asked and construction works for a cargo zone that is significantly bigger than the existing cargo area (four hectares) are due to commence in 2014." With the operation of a new cargo terminal, Garuda envisions that it will be more flexible in coping with the demands of its customers.

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