Distressed Garuda May Remove First Class Seats in Domestic Bet

DISTRESSED airline PT Garuda Indonesia may stop selling first class tickets as it focuses on flying local.   

The state-owned carrier will concentrate on business, premium economy and economy seats because it is more suitable for the market, State Enterprises Minister Erick Thohir said in an interview late Thursday. He reiterated that Garuda will stop most international routes to cut costs, except for a select few, including pilgrimage flights to Saudi Arabia.

“Garuda had the wrong business model in the past, with its leasing costs way above the industry average, so we need to fix that,” said Thohir. International flights can still be served via code sharing arrangement with other airlines, he added.

The airline is revamping its operations to meet a goal of returning to operating profit in 2023 while restructuring about $9.5 billion in debt. Garuda, which narrowed its loss in the first quarter, plans to boost its fleet to 120 from 30, gradually returning to its pre-pandemic size. The International Air Transport Association said in July air travel demand is recovering, driven mostly by domestic bookings.

Garuda will acquire the additional planes from one or two lessors assigned by Boeing Co. or Airbus SE, said Thohir, adding that he is confident it will have no problem making deals due to the country’s huge air travel market. He predicted that as many as 1,800 planes in total will eventually be needed to serve the entire archipelago. 

Garuda’s creditors, which included plane lessors, earlier this year approved a plan to restructure liabilities worth 142 trillion rupiah ($9.5 billion). The agreement gave the company more financial headroom as it seeks to capitalize on a rebound in air travel.