February 13th, 2011
07:58 AM GMT
Like Indonesia, its national airline Garuda is a turnaround story. With most turnarounds, there are many growing pains.
Garuda had its IPO in Jakarta on Friday and suffice to say, it was a disappointment.
Garuda shares were priced at Rp750 per share (equivalent to 8 U.S. cents). Going into the IPO , there had been heavy criticism that the shares were overpriced compared to the price-to-earnings ratio of other airlines.
The market confirmed that. By the end of the day, Garuda shares finished 17% lower at Rp620 per share.
During the first hours of trade, CNN spoke with CEO Emirsyah Satar who said, "I guess right now, as you know, the Indonesian index has gone down. So it’s not only Garuda shares that have gone down but some of the blue chip shares right now have gone down. There’s not much more that I can say, but that’s market forces."
It is true that the Jakarta Composite is down about 7% so far this year. Part of this slide is because of concerns over inflation and the central bank's recent interest rate hike. Many investors believe the central bank waited too long to raise interest rates and may be behind the curve in tackling inflation, so they've pulled out of the market. Jakarta's stock market was the best performing in Asia with a 46% gain by the end of 2010. Its domestic economy grew by 6.1% last year. Garuda missed the boat on timing its IPO for this year instead of last year, but hindsight is 20/20.
Satar says he believes the stock market will rebound in the next six months and hopes Garuda shares will follow suit. In the meantime, Garuda plans to use the $350 million it has already raised in the IPO to expand its fleet to 153 aircraft by 2015.
International travelers who dread standing in long lines at passport control may be interested in one innovative service Garuda offers: immigration staff on some of its flight routes. Does this mean passengers can bypass those lines? Yes.
"I have to say that this immigration onboard service that we give, I think it’s the only service of any airline in the world in terms of giving full immigration onboard in the aircraft. So, passengers flying Garuda from Japan, Korea, Australia, and also from Europe, we’re going to do the immigration on board,” he said.
“For foreigners who would like to go for visa on arrival, we’ll give you the visa in the plane itself and therefore once you arrived in Jakarta or Bali you don’t have to queue anymore in immigration," he added.
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