Indonesia flag carrier Garuda Indonesia has reported a loss of 63.2 Million USD for the first half year of operation in 2016.
Garuda went through a big quality improvement program that included the acquisition of new aircraft, a really good first class product and entering the SkyTeam Alliance.
The Jakarta Post (see here) reported about the press conference where the H1 results were published.
National flag carrier Garuda Indonesia experienced US$63.2 million or around Rp 824 billion in losses in the first half of 2016, the company’s senior official said.
Garuda Indonesia president director Arif Wibowo said in a press conference in Jakarta on Monday that in the same period of last year, the company booked a net profit of Rp 392.6 billion ($29.3 million). The losses it suffered were triggered by tight competition in domestic flights, which led to a price war.
“What we have been facing in our domestic flights is a decline in yield, which reaches almost 10 percent compared to the previous year,” he said.
Arif further explained that although Garuda Indonesia’s passenger revenue per kilometer had increased by 9.8 percent, accompanied by a 19 percent increase in Citilink Indonesia’s passenger revenue and a 20 percent increase in the latter’s passenger capacity, all of these factors could not cover the big losses suffered by the company.
Meanwhile, Garuda’s total revenue reached $1.76 billion in the first semester of 2016, down by 4.1 percent from $1.84 billion in the same period of last year.
While losing money is never a good thing, a 63 Mio USD loss over two quarters is really not much in airline terms. Compare this with Malaysia Airlines which in 2014 incurred losses during the first nine months of the year that reached 1.3bn ringgit (340 Mio USD back then) before it delisted from the stock exchange.
Garuda has a solid product and will eventually recover but it shows how thin the profit margins are. When you have 1.84 Billion$ in revenue and the profit is 29.3 Million that is really a drop in the bucket. And that’s during a good year. Of course national carriers serve another purpose than just making profit as they are the lifeline of the country to the world and provide a large amount of jobs. Those are just some reasons why these national carriers such as Malaysia Airlines or Thai Airways will always be kept alive even if they incur insane losses.