SINGAPORE: Budget airline Citilink, owned by PT Garuda Indonesia Tbk, is set to turn profitable this year, partly boosted by the government's crackdown on cheap fares, its chief executive said.
Albert Burhan, who was appointed as Citilink's CEO this month, said the airline is looking to report its first annual profit in 2015 after it started operations in late 2011.
"In 2015, the environment is better for us," Burhan, who was previously Citilink's chief financial officer, told Reuters in an interview on Monday, citing lower fuel prices and a less competitive market environment as helping the airline in its turnaround plan.
While Garuda focuses on the premium segment in Southeast Asia's biggest airline market, Citilink is part of the flag carrier's strategy to better compete with the dominant domestic budget carrier, Lion Air.
Citilink reported a net loss of $12 million in the nine months ended September on revenue of $288 million. Indonesia tightened rules on the sale of cheap local tickets to boost airline safety, days after AirAsia flight QZ8501 crashed en route from Indonesia to Singapore on Dec. 28.
"In 2014, sometimes competitors disrupted us with a campaign of low fares," said Burhan.
The AirAsia plane crash is unlikely to have a deep impact on the industry, Burhan said. "It will only be a short-term hiccup and then it will recover again," citing a bounce-back in travel after previous airline crashes.
Citilink has also benefited from the exit of Tiger Airways' Indonesian affiliate airline last year and the grounding of indebted PT Merpati Nusantara Airlines in the competitive low fare market.
Burhan said Citilink will consider launching an IPO over the next few years as it builds scale and becomes more profitable. Last year, Garuda delayed a plan to sell a 49 percent stake in the unit due to low valuations.
Citilink flew just under 8 million passengers last year, up more than 40 percent from the previous year as it increased the number of routes, frequencies and added more aircraft.
"The focus on profits is the right move as in recent years the focus has been more on strategic domestic growth and market share," said Brendan Sobie, chief analyst at industry consultancy CAPA.
Citilink captured about 15 percent of the Indonesian low-cost carrier market in 2014, up from about 5 percent in 2011, according to CAPA.
Comments
Comments are closed.