Indonesian Garuda’s 2-Part IPO Plan to Hit Market Next Year

Flagship carrier Garuda Indonesia will go ahead with its initial public offering in two stages next year, with the total share sale expected to raise more than Rp 4 trillion ($450 million).

“The first stage will be carried out in February and the second share sale will be conducted at a later date when necessary,” Mustafa Abubakar, the state enterprises minister, said on Friday.

“We have gained approval from the House of Representatives to sell a 40 percent stake, but we’re only going to float 30 percent in the first phase and another 10 percent when we feel it is necessary,” he said.

“I’m optimistic that Garuda’s IPO will go smoothly despite its below-par performance this year,” he added.

Garuda’s IPO had been originally scheduled for the third quarter of this year but was delayed because the company was still revamping its $240 million debt to the European Credit Agency and consolidating its financial report.

The plan for the February float was almost derailed after the State Enterprises Ministry announced incorrect figures for Garuda’s financial results in the first nine months of this year.

It announced a Rp 39.5 billion loss, while the airline had in fact posted a nine-month profit of Rp 194 billion.

But Garuda’s sluggish overall financial performance this year could see the airline fall short of its full-year net profit target of Rp 1.15 trillion. It recorded a net profit of Rp 1 trillion last year.

Garuda earlier said it planned to submit its IPO proposal to the Indonesia Stock Exchange (IDX) next week.

Elisa Lumbantoruan, the company’s acting finance director, said it was still preparing a business plan for next year. Part of that plan includes how to use the 24 new planes it is in the process of leasing.

“Garuda has never before bought 24 new airplanes in a single year,” he said.

The need for 200 pilots to fly the next-generation Boeing aircraft also poses a problem for the company, he said.

“Our pilots are licensed to fly the classic series. We need time for training to enable them to fly the next-generation jetliners,” he said.

 “Hopefully we can get the pilots next year, or by 2014 at the latest.”

Garuda plans to use the proceeds from the IPO to increase its fleet to 116 by 2014 from 67 last year, as well as to open more international and domestic routes.