Garuda Gets Four Bids for Stake in Budget Airline Unit Citilink

Feb 11, 2014 12:03 am ET

Feb. 11 (Bloomberg) -- PT Garuda Indonesia has bids from four companies to purchase a stake in its low-fare unit Citilink as the national airline seeks a partner to expand amid a boom in air travel.

Garuda expects to take a decision on the strategic partner by June, Chief Executive Officer Emirsyah Satar said in an interview in Singapore today. The Jakarta-based company said yesterday it’s planning an initial public offering for Citilink. Satar declined to name the four bidders.

Getting a strategic partner and raising funds will help Garuda compete with PT Lion Mentari Airlines in a market where passenger numbers are expected to increase as much as 20 percent this year. From Indonesia to Vietnam to Myanmar, carriers in Southeast Asia are also buying aircraft as about 600 million people -- as much as the combined population of the U.S., Germany and Brazil -- fly more.

“The budget market is growing quite fast in Indonesia,” Satar said. “We feel we need a partner who is really experienced in terms of driving the low-cost carrier.”

Standard Chartered Bank Plc and Bahana Securities Ltd. are advising Garuda on the stake sale, Satar said.

The emergence of low-cost carriers such as Lion Air and AirAsia Bhd. have helped fuel demand for flying in Southeast Asia as tickets get cheaper. Lion Air and Sepang, Malaysia-based AirAsia have together ordered 764 planes worth $73.8 billion at list prices since 2011.

By the end of this year, Lion Air and state-controlled Garuda will surpass Singapore Airlines Ltd. as the region’s biggest carriers by fleet size, the CAPA Centre for Aviation, which advises airlines, said last year.

Indonesia overtook its former colonial master, the Netherlands, in 2011 to become the world’s 16th-largest economy, according to data compiled by Bloomberg. If it maintains a growth rate of about 6 percent, it will leapfrog Germany and the U.K. by 2030 to rank seventh, consulting firm McKinsey & Co. predicts.

--With assistance from Karolina Miziolek in Hong Kong. Editors: Anand Krishnamoorthy, Frank Longid