SYDNEY (Centre for Asia Pacific Aviation) - The Indonesian Government has announced plans to sell 49% of Garuda Indonesia and inject fresh funds into the airline, to help revive the ailing carrier.
While the mode of privatisation is yet to be finalised, the government reportedly favours an IPO over a trade sale, although there is speculation Singapore Government interests could be approached.
Among Garuda's best assests are its restricted entry international routes. But investor interest is likely to be dampened by intense domestic competition in Indonesia, security issues, high fuel prices and Garuda’s heavy debt burden (over USD820 million in total). The airline this week confirmed losses in 2005 would be USD70 million – worse than the USD50 million originally predicted.
It is clear that the Indonesian Government is now keen to act, after several years of indecision. While perhaps unconnected, the Malaysian Government has also recently adopted a more definitive approach towards Malaysia Airlines. The two flag carriers formed a loose alliance some time ago, but it is unlikely that they will see their salvation in close relationship.
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