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Flight Curtailments May Increase Bad Debt

Garuda Warned that Fewer Flights and Fewer Tourists May Impact on Ability of Local Tourism Players to Repay their Loans.

(11/12/2006) The Indonesian language Bisnis Bali reports that Garuda's plans to stop direct international flights to Bali may cause tourism transportation operators to default on their bank loans.

The Owner of Serasi Transport, Made Kondra, told Bisnis Bali that the cessation of direct overseas flights by Garuda "will cause businesspeople operating the tourism sector to fail in making repayments to the bank." He described how the policy of the National Carrier will affect the two largest inbound market sources of tourists for Bali and render current recovery efforts useless.

Kodra, who is also a member of the Regional Parliament, called on Garuda to review its decision to stop direct flights to Bali, especially in light of indications that tourism recovery efforts are beginning to bear fruit, with arrival numbers showing improvement over recent months.

Data from the Bali branch of Bank Indonesia demonstrate that unpaid loans in the tourism sector increased by 3% in the first quarter of 2006 while occupancy dipped to below 30% at many island hotels following the October 2005 bombing. However, in recent months, a brighter economic picture has begun to emerge with the number of unpaid loans decreasing.

According to Bank Indonesia, as of October 2006 local banks have outstanding loans totaling Rp. 8.9 trillion (approximately US$967.4 million).