Already hit by falling profitability Garuda Indonesia has been stunned by a government scheme to allow major rivals virtual open entry into its home market.

The carrier has 'protested fiercely' at proposals by minister of transport Haryanto Dhanutirto to invite British Airways, KLM and Japan Airlines to apply for increased frequencies to Indonesia and extend services on to domestic sectors. The move would also have a serious impact on the country's two other main carriers, government-owned domestic Merpati Nusantara and privately owned Sempati.

But Dhanutirto's plan is based on the belief that domestic capacity won't exist to handle the estimated 7 million international tourists visiting Indonesia annually by the year 2000. He claims Garuda will only offer a third of the total capacity required and that the other two airlines will fail to take up the slack.

Dhanutirto says he will 'try to accommodate all flight frequency requests', but is constrained by the nation's limited open skies policy aimed at avoiding price wars. No official invitations have gone out to offshore carriers yet.

The move comes amid financial problems and an on-going search for an airline equity partner ahead of a planned privatisation in 1996. Garuda projected a profit of $130 million for 1994 but reduced this to $87 million. Press reports suggest the carrier lost $21.7 million. In response, the airline has acted to reverse its fortunes by imposing a hiring freeze and shuffling its order book. But Garuda has so far failed to find a partner after talks with KLM ended with an alliance, including joint cargo services, but no investment.

Source: Airline Business