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Garuda Seeking to Cut Links with Citilink

As IPO Deadline Approaches, Garuda Consider Ditching it's Low-Cost Subsidiary Citilink.

(9/13/2010) In an effort to sharpen its balance sheet on the eve of its public share offering, the national carrier Garuda Indonesia is reported by the Jakarta Globe to be seeking to spin off its under-performing subsidiary Citilink Indonesia.

Didu, who works for the Minister of State-Owned enterprises confirmed that Garuda wants to improve its bottom line by divorcing the low-cost carriers from the financial results of Garuda. According to Didu: "Citilink is struggling to turn a profit. Competition in the low-cost carrier sector is quite tough. Garuda should spin off Citilink and focus on improving its performance ahead of its IPO."

Seeking the proper timing and financial conditions before offering shares to the public, Garuda's original plans to launch its IPO in mid 2010 have been delayed until at least November 2010.

Citilink lost money in 2009 against revenues of US$33.3 million. Projected revenues of US$77.7 million in 2010 are expected to put Citilink into the black.

The difference in business cultures between Garuda operating as a full-service carrier and the no-frills approach of low-cost Citilink are also cited as a reason to separate the two companies.