Garuda targets Citilink to be profitable by 2014

Jakarta
Source: Flightglobal.com
This story is sourced from Flightglobal.com

Garuda Indonesia wants its low-cost subsidiary Citilink to turn a profit by 2014, as it continues to search for a strategic investor.

Speaking to Flightglobal Pro in Jakarta, its chief executive Emirsyah Satar says Citilink is at an "investment stage", and needs to reduce operating costs, increase aircraft utilisation and build economies of scale to grow its business.

"LCC and full service, the mindset and philosophy are very different. In full service, you tend to add this and that to increase yield but in LCC, efficiency is the name of the game so you have to increase utilisation. Citilink hasn't got that yet," says Emirsyah. "They still have a lot to do. I would be lying if I say they've got it. Otherwise they would be making money."

Citilink posted a net loss of $28.4 million in 2012, and $39.1 million in the first half of 2013.

"It better be profitable by next year," says Emirsyah.

Garuda will also operate the incoming ATR 72-600s that were initially destined for Citilink, to allow the carrier to focus on point-to-point routes and take on competition from other budget operators in Indonesia.

Emirsyah adds that the airline is in talks with potential investors, and the priority is to find one that will be of the right fit for Citilink.

"It has to fit with our strategy in terms of the market. We're also looking at their knowledge and how successful they are. It might be a private equity or a combination, we're still open. I would say by year end we should at least have some names, but maybe not execute it yet," he adds.

In May, Flightglobal Pro reported that Citilink is in search of a "strategic investor" that will be able to contribute financially and also share low-cost management knowledge with the airline.

Citilink's president and chief executive Arif Wibowo says the airline is looking to raise its aircraft utilisation to above 10 hours and accelerate its plans for regional expansion to bring down its losses. It is looking to start services to Singapore, Kuala Lumpur and Perth, and targets to launch its first international route by the first quarter of 2014.

The carrier, which completed its separation from Garuda and received its own air operator's certificate last July, operates 27 Airbus A320s and aims to grow its fleet to 50 aircraft by 2015.