December 21, 2018 / 6:45 AM / 3 months ago

UPDATE 2-Indonesia's Garuda airline expects to make profit in 2018 -CEO

* Garuda expects to make profit in 2018

* CEO targets net profit of 1 trillion rupiah in 2019

* Garuda in early talks with Air Asia for a partnership

* Garuda’s maintenance unit to build tyre plant with CCI & Dunlop (Adds Air Asia comment)

JAKARTA, Dec 21 (Reuters) - Indonesia’s national flag carrier Garuda expects to end 2018 in profit and is targeting a net profit of 1 trillion rupiah ($69.03 million) for 2019, its chief executive said on Friday.

PT Garuda Indonesia (Persero) Tbk saved $96 million by working with lessors to restructure the financing of its planes until November 2019, CEO Ari Askhara told reporters.

“Our net profit for 2018 is positive, even though it might be a small amount,” he said, attributing the result to cost-cutting, renegotiation of aircraft leases and new partnerships.

The result would be a marked improvement for the airline, which reported a $116.86 million net loss for the first six months of 2018. Askhara in September declared Garuda had abandoned hopes of making a profit this year, after struggling with fuel costs and a rising rupiah versus the U.S. dollar.

The new partnerships include Garuda taking operational control of rival Sriwijaya Group in November, gaining a majority share of the fast-growing domestic aviation market.

That partnership could be escalated to a 51 percent share ownership of Sriwijaya, depending upon discussion with Garuda advisors and the state-owned enterprise ministry, Askhara told a media briefing. Garuda’s profit had yet to see a positive boost from Sriwijaya, he said.

“Garuda might also see a partnership with (Malaysia’s) AirAsia... through (Garuda unit) Citilink but it’s very early,” he said.

AirAsia’s president director Dendy Kurniawan confirmed in a statement that early talks with Garuda were underway, with “various forms of cooperation to support the industry being discussed”, but noted no final decision has been reached.

Garuda has been battling for market share against local market leader Lion Air, which in October suffered a crash of a Boeing Co 737 MAX jet, killing all 189 people on board.

Askhara said Garuda had 30 million passengers in 2018 and would expand its fleet to include a new Airbus SE 330 Neo in September 2019 and a Max jet at the end of 2020.

New profitable routes domestically and internationally are planned for 2019, he said.

Askhara also said an intended private placement of shares from subsidiary PT Garuda Maintenance Facility AeroAsia Tbk to longtime partner Air France Industries KLM Engineering & Maintenance had been cancelled.

He told Reuters he considered the current share price of GMF AeroAsia too low and wanted to increase the company’s valuation first.

Askhara also said GMF Aeroasia would partner with Dunlop and China Construction Indonesia to build a tyre plant in 2019, with the first stage seeing a $300 million investment from the companies involved.

The plant would be for the domestic market and supply 50 percent of its output to Garuda, 48 percent to Lion Air and 2 percent to AirAsia Group Bhd.

Domestic air traffic more than tripled in Indonesia over the past decade as rising prosperity and lower fares made flying affordable for more people.

With 129 million passengers in 2017, the Southeast Asian country is the world’s 10th-largest aviation market and is projected to continue growing.

$1 = 14,487.0000 rupiah Reporting by Cindy Silviana; Writing by Fanny Potkin; Editing by Kirsten Donovan

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