Indonesia’s Garuda to Choose Between A350 and 787 This Year

Garuda Indonesia Persero PT expects to decide between Airbus Group SE’s A350 and Boeing Co.’s 787 models this year as it prepares to order at least 20 of the large aircraft, the airline’s president director said.

The Indonesian flag carrier forecasts growth to pick up significantly in 2019 and will need the new planes to handle expected capacity, Arif Wibowo said Wednesday at the Singapore Airshow. The airline has no plan to use Airbus’s A380 superjumbo, he told Bloomberg TV earlier in the day.

Garuda returned to profitability last year with net income of $76.5 million, compared to a $370 million loss the year before, according to data compiled by Bloomberg. Still, its shares tumbled 44 percent in 2015, nearly four times as much as the 12 percent decline in the benchmark Jakarta Composite Index and far below the 19 percent gain in the Bloomberg Asia Pacific Airlines Index.

Shares were down 2.4 percent Wednesday at 449 rupiah as of 10:14 a.m. in Jakarta. The stock is trading near eight-month highs and has risen 45 percent so far this year, making it the seventh-best performer on the local index.

Trimming Hedges

The company expects oil prices to remain low and is reducing its fuel hedges, Wibowo said. The carrier forecasts passenger numbers to rise 10 percent this year and is seeking to capture 50 percent of the domestic market, up from 44 percent currently, he told reporters earlier this month.

If the U.S. Federal Aviation Administration upgrades Indonesia’s safety rating to Category 1, Garuda hopes to launch non-stop service to the U.S. West Coast, giving it an advantage over competitors who make the trip with one stop, Wibowo said. He said the FAA is currently evaluating Garuda itself, with the results due out in the second half of the year.

The carrier also hopes to start non-stop service to London but is limited by the runways at Jakarta’s international airport, which Wibowo said can not yet handle a fully loaded 777.

Garuda plans to have a two-class cabin configuration on planes serving the Middle East, Southeast Asia and North Asia, with a similar configuration on any new planes they order, Wibowo said. Only four of the carrier’s 777s, used on flights to Amsterdam and London, will offer first-class seating, he said.