Europe’s Carbon Scheme Won’t Impact Garuda’s Profit: CEO

The European Union’s Emissions Trading Scheme (ETS) will not have a significant impact on Garuda’s bottom line this year, according to the company’s president and CEO Emirsyah Satar, as the airline currently flies to just one European destination – Amsterdam.

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The Indonesian state-owned airline has been debating whether or not to stop flying to the Dutch capital in response to the scheme, and is in discussions with the government about approaching Brussels on the matter.

"We're following what they require. We're submitting our data regarding how much emission we're spending... Regarding our 2012 results it [the ETS] will not impact a lot," Satar told CNBC on Wednesday.

Garuda relaunched its route to Amsterdam in June 2010 after a six-year absence, and had been planning to expand its operations to Europe by 2014. That is, until the EU introduced the scheme requiring airlines flying to or from Europe to buy carbon permits to offset their emissions.

Satar said the airline is currently focused on capitalizing on growth in its domestic market. He attributed the carrier’s 56 percent surge in net profit last year to the booming Indonesian economy, which logged its fastest pace of growth in 2011 since the Asian financial crisis of 1997-98.

Garuda reported a net profit of 805.53 billion rupiah ($87 million) in the 12 months ended December 31st, 2011 compared to 515.52 billion rupiah in the year before.

The government still has a 69 percent stake in the airline, which went public last year after raising $578 million in an initial public offering. Only 53 percent of the shares on sale were sold, with some analysts saying the IPO price of 750 rupiah a share was too expensive. The government then ordered three state securities houses Mandiri Sekuritas, Danareska Sekuritas and Bahana Securities to pick up the unsold shares in February 2011.

The three firms are due to start offloading the flag carrier's shares next week, a move Satar welcomed. He said once the shares have been sold, the share price will be a better reflection of Garuda's market value.

“When they leave it to the markets... the value of our shares will really reflect more reality in terms of how much our shares should be valued," he said.