What’s going on at Garuda Indonesia?

Most people would agree that Garuda Indonesia are one of the most improved airlines in the world over the past few years. They seemed to be on a clear upwards trajectory that would enable them to remain successful well into the next decade. So I was very surprised to learn recently that they recently posted appalling figures for the first half of 2014.

garudalogo

Garuda have reported a first half loss of $212m, compared to just a $30m loss for the first half of 2013. So what does this drastic increase in losses mean to the company, and to its passengers? Well, Garuda plans to cancel some of its aircraft orders to minimise the damage to its coffers, and it will also terminate or significantly reduce flights on its loss-making and underperforming routes, such as flights from Jakarta to Taipei, and planned new routes for the future, including to Mumbai and Manila, will now be abandoned altogether.

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One of the reasons for these poor first half figures is the continuing influx of low-cost airlines in the South East Asia region, all of which take passengers away from Garuda, who, as a full-service airline, usually have fares higher than the budget carriers. While the problems for Garuda in this respect are nowhere near as bad as for Malaysia Airlines, who have to contend with Air Asia on its doorstep, they are still larger problems than first anticipated. It seems this contributed to the Indonesian flag-carrier making unexpectedly large losses, which has not been helped by adding larger aircraft to its fleet in anticipation of fuller loads.

First Class on Garuda is extravagant - but is it really needed?
First Class on Garuda is extravagant – but is it really needed?

In the recent past, regional airlines such as Thai and Malaysia Airlines have been making great losses and many questions have rightly been asked of them, whereas at the time Garuda Indonesia were an airline on the up. However, these latest figures have shown that not all is rosy at Garuda HQ and it will be interesting how (or IF) they try and rectify these latest poor results.

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9 thoughts on “What’s going on at Garuda Indonesia?

  1. We will see if this development will continue… The competition gets harder every year in the Industry one airline worth to mention definetly is air asia!

    Nice work keep it up and always three greens!

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  2. Not only Garuda, a lot of airlines in Indonesia are suffering too. Some even closed flight routes they only opened a few months earlier. This is largely due to rupiah’s depreciation against the USD. Garuda’s income is mainly in rupiah while its expense is almost entirely in USD. So there’s a big discrepancy here as rupiah lost some 20% of its value against the greenback.

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    1. Hi Bama. I didn’t know other airlines in Indo have closed routes too. But it’s interesting what you say in regard to the currency exchange. I hope GA management can sort it out, as they are known nowadays as arguably the closest rival to Singapore Airlines and Cathay Pacific in Asia! They didn’t need this latest bad news!

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      1. The biggest problem is that the ministry of transport refusal to adjust the maximum domestic airfare cap despite the IDR depreciation against USD. Since the bulk of GA’s operation is in Indonesia and the slower demand for international travel ex-Indonesia due to the currency depreciation, GA could not depend on its International route to subsidize the currently loss making domestic operation.

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