Indonesian Garuda airline to spin off Citilink unit

Indonesia's leading flag carrier PT Garuda Indonesia aims to spin off its Citilink unit by the end of March so that it can compete in the country's low-cost airline business, local media reported Wednesday. The plan was made as the government in the vast archipelago country homed by over 238 million people had put a priority to build aviation industry amid fast growing demand for travel with effective transport means. Elisa Lumbantoruan, Garuda's finance director, said the company was preparing an application with the Ministry of Transportation, the airline regulator, seeking to have Citilink certified to operate its own aircraft as a separate entity. The Airline Operator's Certificate (AOC) would allow Citilink to use aircraft for commercial purposes. The certification is expected to be completed within three months, Elisa said. "Citilink will become an independent airline operator at the end of the first quarter of this year at the earliest", Elisa was quoted by the Jakarta globe as saying. He added that Garuda aimed to make Citilink a publicly traded company over the next two years, following an expected initial public offering. PT Garuda Indonesia established Citilink in 2001 to cater to a lower-end segment of the airline industry. It finds itself in an increasingly intense competition against low-cost carriers such as Lion Air and Batavia Air to carry passengers across Indonesia. The director said spinning off Citilink would enable it to expand its business. Growth in the low-cost carrier market has surpassed that of full-service carriers, he added. "The market for low-cost carriers is strategic because passenger growth could reach 15 percent,"he said. "The number of air passengers in the low-cost carrier sector is estimated at around 40 million people." Elisa did not provide details on Citilink's potential market, except that the airline expects to carry 3.4 million to 4 million passengers this year. He said last month that Citilink may have carried as many as 3 million passengers in 2011, which would be 50 percent more than it carried in 2010. Elisa said that Citilink planned to add 10 Airbus A320s to its fleet this year, which would make it have a total of 20 planes.