Garuda Indonesia is bracing rough times as kerosene prices continue to rise while the government decided to lower air fares on domestic routes, putting the airline into financial woes.
Indonesia flag carrier Garuda is confronted to many difficulties. As fuel prices are rising sharply, many destinations are generating losses. Another blow has been the decision by the government to enforce a decrease in fares on domestic routes as passengers have been complaining about a sharp rise since the end of last year. The government decided to cap fares by asking airlines to reduce the highest domestic fae in economy class by 12% to 16%.
Garuda is now planning to reduce flight frequencies on many routes or even terminate services in a bid to cut losses.
Among the routes being axed, the airline already closed the Singapore-Tanjung Pandang (Belitung Island), although it has only been in service for six months. It followed the termination of Denpasar-Mumbai at the end of March. The airline is also looking at sharply reduce its presence in Europe. The Indonesia-London route has been up and down a couple of ti,es since it was relaunched in 2016. Garuda announced already last year to terminate the route in October 2018 but finally reintegrate it a month later with a triangle flight linking London to Jakarta via Bali. Flights will now be discontinued from August. The carrier is also looking at reducing the flight frequency of its Jakarta-Amsterdam route from six to three weekly services.
Meanwhile, for domestic destinations, the airline will reduce the flight frequencies to Morotai in North Maluku, Maumere in East Nusa Tenggara and Bima in West Nusa Tenggara. Justifying to local newspapers this decision, Garuda Indonesia management explained that ” it is a difficult decision, but we have to take it so that we can achieve this year’s performance target.” Garuda was also upset by the fact that the government’s decision for failing to provide an IDR8 billion (USD550,000) subsidy to operate the services.
This year, Garuda Indonesia hopes to record $5.81 billion in revenues, a jump of 33% compared to the results of 2018.