Garuda plans to spin off cargo business division

After low cost carrier Citilink Indonesia, national flag carrier Garuda Indonesia will spin off its cargo division next year into an independent business to better tap into the country’s growing cargo business.

Cargo Garuda Indonesia vice president Rajendra Kartawiria said in Jakarta on Wednesday that the national flag carrier would set up a new subsidiary, PT Garuda Indonesia Cargo, to handle its cargo business.

The airline separated its low-cost flight services into a separate company named PT Citilink Indonesia in July to enable it to better compete with growing budget flight services in the country.

 “We see a lot of opportunity to grow in cargo sector and we will also collaborate with domestic and global forwarders to expand our business,” Rajendra told The Jakarta Post.

According to research and consulting firm Frost & Sullivan, Indonesia’s air cargo volume is expected to increase by 5.7 percent to 920,000 tons throughout this year from 870,000 tons in 2011.

Frost & Sullivan said the four main airports in the country — Soekarno Hatta International Airport in Cengkareng, Juanda International Airport in Surabaya, Ngurah Rai International Airport in Bali and Polonia Airport in Medan — accounted for 42.7 percent of total air cargo last year, with 36 percent passing through Soekarno Hatta.

Garuda saw a 12 percent growth in cargo during the first nine months of 2012 to 160,000 tons, compared to the same period last year, Rajendra said. The airline’s revenues from the cargo business rose 12.2 percent to US$154 million during the January–September period.

 “We have also started to book net profits this year from the cargo business after suffering losses in the previous years,” he added.

With growing revenues, the airline’s cargo division booked $3.9 million in net profits from January to September 2012, compared to a net loss that reached up to $8.3 million in the same period last year.

In order to improve its system, he said that the company planned to implement a world-class cargo standard through the International Air Transport Association’s (IATA) Cargo 2000 certification. “We are committed to providing a quality, competitive performance. Quality standards for the supply chain, improvement in the efficiency of the air cargo and customer services are the keys to win the market,” he said.

Before the spin-off, the airline has expanded its cargo terminal at Soekarno-Hatta International Airport to 4,625 square meter in April by spending around Rp 5 billion.

The company has recently started the operations of its 20 cargo service centers (CSC) in 15 different cities across the archipelago.