Garuda Indonesia (GA, Jakarta Soekarno-Hatta) will remain a stand-alone entity under the latest aviation merger plans under consideration in Jakarta. Late last week, Minister of State-Owned Enterprises (BUMN) Erick Thohir told journalists that he intended to leave Garuda Indonesia alone and instead merge its low-cost subsidiary Citilink (QG, Jakarta Soekarno-Hatta) with Pelita Air (IP, Jakarta Soekarno-Hatta).
"Garuda is still alone. Citilink and Pelita (merged) because Garuda is already good, we are merging Citilink and Pelita," said the minister on August 31. Recently, ch-aviation reported that Thohir was examining a consolidation of the three carriers, with an eye on improving their operational and financial efficiencies.
According to Jakarta-based media, Thohir wants each of the three airlines to stick to their target markets, with Garuda Indonesia focusing on premium passengers, Pelita Air targeting mid-market travellers, and Citilink chasing the low-cost market. "The three of them will be complementary, not cannibalizing each other," said Thohir.
The minister said the plan, which remains subject to a review of each airline's financials, would see the state-owned owner of Pelita Air, oil and natural gas company PT Pertamina, take a stake in Citilink. However, he did not say how big any stake would be. Majority state-owned Garuda Indonesia currently owns 100% of Citilink, and the low-cost airline is widely considered the strongest performer in the Garuda Indonesia Group. Reflecting the importance of Citilink to Garuda's fortunes, shares in Garuda Indonesia fell over 6% in the wake of Thohir's comments.
Separately, Thorir continues to push for state-owned airlines to acquire additional aircraft. He says the extra capacity would put downward pressure on airfares. Currently, privately owned airlines such as Lion Air (JT, Jakarta Soekarno-Hatta) control 65% of Indonesia's domestic market share, with state-owned airlines having the remaining 35%. He says Indonesia is home to 550 commercial passenger aircraft, but the ideal number is 750. Thohir says more airlines, aircraft, and competition would drive down fares. "It can't be fast, but if the number of planes increases, the competition opens, so the tickets decrease," he said.
