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Garuda Indonesia is the national airline of Indonesia, based at Jakarta’s Soekarno-Hatta International Airport. The carrier operates an extensive domestic and regional network of services throughout Asia, Australia and the Middle East. In Jun-2010, Garuda resumed services to Europe (initially Amsterdam via Dubai) after an extended EU imposed ban.
Garuda has undergone a thorough restructuring in what it labelled "The Quantum Leap", which involved a dramatic redesign of the airline's strategic direction, network, brand and fleet. The airline launched an IPO in 2011 which was substantially under-subscribed at the relatively aggressive pricing sought. In Apr-2012, the government announced that talks were under way for a consortium of local investors to absorb the overhang, still held by the underwriters.
Garuda Indonesia stated (25-Nov-2013) that in line with the airline’s efforts to develop and strengthen its flight network, especially in the domestic sector, it plans to launch a new sub-brand “Explore” along with the introduction of the airline’s ATR 72-600 aircraft into its fleet, on 25-Nov-2013. In addition to the sub-brand “Explore”, at the same time Garuda Indonesia also introduced the sub-brand “Explore Jet” along with the operation of its Bombardier CRJ1000 NextGen fleet since Oct-2012 to serve the airline’s network in both eastern and western Indonesia.
Location of Garuda Indonesia main hub (Jakarta Soekarno-Hatta International Airport)
Garuda Indonesia share price
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Indonesia’s Merpati Nusantara Airlines is facing a financial crisis and is looking to recapitalise and restructure its network to survive. The government-owned carrier has already shrunk in recent years while all its competitors and Indonesia’s overall domestic market have expanded rapidly. But Merpati has held onto some trunk routes, where it competes against larger and stronger carriers.
The most logical solution is for Merpati to abandon competing against Indonesia’s main carriers and focus entirely on regional routes to remote areas. But the number of regional routes requiring government subsidy are declining.
More efficient Lion Air has a fast-growing regional subsidiary operating ATR 72s and is looking to add smaller turboprops to access an even larger chunk of Indonesia’s vast regional market. Garuda is also introducing ATR 72s in Nov-2013, leaving even less room for a government-backed regional carrier. The Indonesian government seems to recognise there is no longer a need to keep Merpati running.
A new air services agreement recently forged between Mexico and Indonesia opens up an opportunity for a codeshare between Aeromexico and Garuda, which in early 2014 will be joining the Mexican flag carrier in the SkyTeam alliance. The expected partnership should result in the first of many codeshares between carriers from Southeast Asia and Latin America.
Southeast Asian and Latin American carriers are starting to seek out opportunities to partner with each other as ties and trade between their regions increase. The current lack of partnerships between Southeast Asian and Latin American carriers give Gulf and European carriers an advantage in carrying passengers between two of the world’s fastest growing aviation markets.
Aeromexico is the only Latin American carrier serving Asia, where it sees opportunities for expansion using its new Boeing 787 fleet. But Aeromexico only serves North Asia and will need to rely on partnerships to serve Southeast Asia.
Lion Air Group new full-service subsidiary Batik Air is planning further expansion as it starts to focus on longer routes, including international services.
Two medium-haul domestic routes will be added in Dec-2013 as the carrier takes delivery of a fifth and sixth 737-900ER. More domestic and the start of international expansion is expected in 2014 as Batik takes the first batch of A320s from the landmark 234-aircraft deal signed by Lion and Airbus in Mar-2013. In 2015 Batik intends to start operating 787s, supporting further international expansion.
Batik is also preparing to move its base from Jakarta Soekarno-Hatta to closer-in Halim Airport, which Indonesian authorities are opening up for commercial jet services in a bid to relieve congestion at Soekarno-Hatta. Halim will provide further differentiation and product segmentation for Batik as the main Lion brand will focus on operating aircraft in single-class configuration from Soekarno-Hatta.
Philippine Airlines (PAL) is planning to launch services to London in early Nov-2013, the first step in an ambitious plan for resuming flights to Europe. PAL has secured Heathrow slots but the flight times are not ideal as they do not support connecting services, which the carrier will likely need to sustain the new route.
PAL will face intense competition from several carriers in the Manila-London market as well as in planned new services to continental Europe. While PAL will be the only airline offering non-stop service between the Philippines and Europe, the market is well served on a one-stop basis by several Asian and Gulf carriers.
PAL announced on 17-Sep-2013 that London Heathrow will be its first European destination since 1998 with flights beginning on 4-Nov-2013. The Manila-London Heathrow route will initially be served with five weekly frequencies using 777-300ERs.
Singapore-Indonesia has emerged as one of the world’s fastest growing markets with capacity up 40% year-over-year. While capacity increases on the two largest routes connecting the two countries – Singapore to Jakarta and Bali – have captured most of the attention, secondary routes are growing even faster.
The third and fourth largest Indonesian destination from Singapore, Surabaya and Medan, will see capacity nearly double in Nov-2013 compared to Nov-2012. To the 10 other smaller Indonesian destinations served from Singapore, capacity is increasing by a collective 78%.
LCC group Tigerair has quadrupled its Singapore-Indonesia operation over the last year, growing its share of capacity in the process from about 4% to 15%. Tigerair now serves eight Singapore-Indonesia routes, up from only two a year ago.
AirAsia has a 17% share and also now serves eight Singapore-Indonesia routes, up from four a year ago although its capacity has increased a more modest 34% from a much higher base. The Singapore Airlines (SIA) Group is the market leader with a 31% share and will soon serve all 14 routes as regional subsidiary SilkAir has added three Indonesian destinations.
The Singapore-Jakarta market is seeing a 24% influx in capacity as several carriers have raced to add flights in 2H2013 following a breakthrough in the bilateral between Singapore and Indonesia. Tigerair and Garuda have led the way with significant increases while Singapore Airlines (SIA) and Jetstar have also pursued more modest additions.
Singapore-Jakarta has become the fastest growing major international route. It is now the second largest international route after Hong Kong-Taipei and the 12th largest overall.
A further 25% increase in capacity is likely in 2014 as carriers implement more of their newly awarded traffic rights.The sudden surge could result in short-term over-capacity. But over time the additional capacity should be absorbed given the fast-growing demand for services to and from Indonesia, which has emerged as one of the world’s most dynamic emerging markets.
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