Garuda Indonesia has reportedly encountered strong institutional resistance to its IPO, raising concerns that it may raise less than the USD1 billion the airline is aiming for (Financial Times, 24-Jan-2011). The low level of institutional interest would be a blow to Garuda, which has completed a five-year debt restructuring and turnaround in its financial and safety performance as well as its product. The Indonesian Government is believed to have insisted on a high IPO price against the advice of banks. Institutional investors have reportedly complained that the pricing valued the airline at 18 times forecast earnings, compared with about eight times earnings for Thai Airways and nine times for Cathay Pacific.
Garuda IPO hit by pricing worries
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Southeast Asia Fleet Outlook:
Southeast Asia, along with the Middle East, are the only two regions with as nearly as many aircraft on order as in the active fleet. Southeast Asian airlines currently have nearly 1700 aircraft on order compared to an active fleet of approximately 1800 aircraft.
Indonesia refuses to approve Singapore Airlines and Lufthansa JV, protecting Garuda once again
Indonesia has taken another step backwards from liberalisation with moves that benefit flag carrier Garuda at the expense of Singapore Airlines (SIA). In the latest examples, Indonesia is refusing to approve SIA’s new joint venture with Lufthansa and allow SIA to launch a new fifth freedom route from Jakarta to Sydney.
Refusing to allow SIA and Lufthansa to coordinate prices and schedules in the Indonesia-Europe market may not have a significant impact on the overall SIA-Lufthansa JV. However, it is an unfortunate move by Indonesian authorities to protect Garuda ahead of the airline's potential launch of services to Germany.
Preventing or delaying SIA from launching Jakarta-Sydney has a bigger short term impact as it leaves in place – at least for now – the Garuda and Qantas duopoly in a growing market. SIA has also been temporarily stripped of 19 weekly slot pairs at Jakarta Soekarno-Hatta International Airport, in another related and seemingly protectionist move.