JAKARTA, 23 January 2006 - Struggling Garuda Indonesia said its losses narrowed in 2005 due to improved cost efficiencies but earnings were hard-hit by bombings on Bali and high oil prices. The flag carrier's losses declined by 17.14 percent to Rp 672 billion (US$71.60 million) in 2005, its president Emirsyah Satar told a parliamentary commission. The already-ailing flag carrier has been hit hard by plunging arrivals on the Indonesian resort island of Bali after a triple suicide bombing there in October, as well as historically high oil prices.

Emirsyah said that Garuda missed a $55 million debt repayment schedule in December but did not give details. The carrier's debt-to-equity ratio stood at 25.4 times at the end of 2005. Total assets amounted to Rp 9 trillion, while debt was $1.2 billion, he said. Garuda spokesman Pujobroto said that the Bali attacks and soaring fuel prices eroded 2005 earnings by an estimated $14.7 million.

"We improved our efficiencies but still made a loss because of the fuel price hike and the Bali bombing," he said. "Due to the increase, fuel costs accounted for over 40 percent of costs, compared to an average of 23 percent to 30 percent in previous years," he said. Separately Mahuddin Yasin, a deputy to the state enterprises minister, said Garuda had "technically defaulted" on its debt repayment.

He said the company's cash balance has dropped to a low level and therefore requires a cash injection from either the government or creditors. "Or we can invite a strategic investor to step in," he said. Garuda announced on December 30 that it would default on some debt repayments that were due at the end of 2005. It warned then that it expected the impact from October's bombing by Islamic extremists to persist into the first half of this year.

A weakening of the Indonesian rupiah, rising interest rates and tougher competition have also weighed heavily on Garuda's performance, Emirsyah has said. The government is reportedly planning to sell Garuda to strategic investors in a bid to revive its flagging competitiveness.

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