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Garuda Prepares to Spin-Off Citilink Subsidiary

Spin-off of Citilink Indonesia by Garuda to take Place After February IPO.

(12/11/2010) Garuda Indonesia has decided to proceed with a "spin-off" of its subsidiary low-cost carrier Citilink. as part of the business strategy to take the national carrier public in early February 2011.

The Director of Strategy and Technology Information at Garuda, Elisa Lumbantoruan, said the forward market for no-frill airlines is developing in such a way that is important for the Citilink Indonesia to stand on its own as an independent company.

She explained that plans to "spin-off" the subsidiary company must wait until Garuda completes is initial public offering (IPO) in February. "We will continue to seek an operating permits (SIUP) from the Minister of Transportation as one of the steps leading to a successful spin-off, but this must wait until Garuda successfully complete the IPO," she added.

Earlier, Lumbantoruan had put forth the possibility that Garuda and Citibank Indonesia would remain a single corporate entity under one operating license with two air operating certificates, similar to the structure of Qantas and Jet Star in Australia.

Currently, Citibank Indonesia is offering a no-frill flight service using five (Boeing 737s) on loan from Garuda.

Business plans call for Citilink to acquire 25 planes of a younger vintage by 2015.

Commenting separately, the CEO of Garuda, Emirsyah Satar, said what type of aircraft that will be operated by Citilink was still undecided with planes made by Boeing, Airbus Embraer or Bombardier all under consideration. Satar said: "What's clear is that Citilink will operate with only one type of aircraft. That's more effective and efficient in terms of maintenance and operations."

Emirsyah is bullish on running a corporation that can offer two separate airlines to serve both the full service and no frills market segments.

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