Garuda Indonesia To Restructure Fleet

Garuda Indonesia is facing pressure on yields because of over-capacity and weak economic growth, forcing it to restructure its fleet and defer some aircraft deliveries.

Garuda and its budget carrier, Citilink, face intense competition from privately held Lion Airlines, which has become a dominant local player, helped by aggressive expansion.

"The markets seem to be in over-capacity, not only domestic but also regional," Garuda's Arif Wibowo told Reuters news agency.

He said air traffic at Indonesia's flag carrier had been hurt by weaker demand from the natural resources sector due to the collapse in prices for oil, gas and other commodities.

He said Garuda had been deferring deliveries of some planes, adding that the airline is also restructuring its fleet to fit in more economy seats at the expense of first class seats in most of its aircraft.

"We are facing strong tailwind from jet fuel prices and strong headwind from the economic growth in the region. The domestic growth is also below our expectations," said Wibowo, who became the airline's president in December 2014.

He said Garuda was still in discussions with Airbus and Boeing to buy 30 wide-body aircraft worth potentially USD$9 billion, but the process was taking longer than expected.

Indonesia is set to emerge as one of the world's top 10 aviation markets by around 2020, and could be in the top five with 270 million passengers by 2034, according to IATA projections.

Patchy safety record of airlines and creaking infrastructure have raised doubts over the potential of the market, however.