PT Garuda Indonesia, Indonesia's biggest airline, expects to raise around US$300 million this year from a stake sale to help fund its expansion plans, the company's President Director Emirsyah Satar said.

The airline is in talks with carriers and non-airlines for a strategic partnership and expects to secure a deal this year, Satar said in an interview on December 26. The government will likely reduce its 96 percent stake in the Jakarta-based carrier, he added, declining to elaborate.

Garuda expected to make its third straight loss last year amid record fuel prices, competition from budget carriers and the cost of repaying some US$790 million in debts. The carrier is targeting a profit this year, as it seeks to renew its fleet with more fuel-efficient aircraft, Bloomberg News said.

"We need to strengthen our capital base so that we can source new planes and expand," Satar said, adding new shares will be offered to potential investors. "We're hoping to make a profit or at least break even," this year, he added.

The airline expected to narrow its loss in 2006 to at least 300 billion rupiah (US$33 million) from 688 billion rupiah in 2005. The airline had a net loss of 811.3 billion rupiah in 2004. The Indonesian parliament in September approved a one-trillion-rupiah cash injection to help turn the airline around.

Garuda may pick its partner by the end of March, State Enterprises Minister Sugiharto told reporters in Jakarta on January 3.

Strategic investors may opt to obtain a stake in Garuda or provide a subordinated debt to the airline, he said. "By the end of the first quarter of 2007, we'll know who the strategic partners are," he said.

Garuda is set to start discussions with up to five potential investors, including overseas airlines, interested in taking a stake, Orient Aviation reported in its December 2006-January 2007 issue, citing Satar. The report didn't name the potential investors.

Garuda operates a fleet of 49 aircraft, serving 28 domestic and 29 international routes, Satar said. This year, it plans to add at least two Boeing 737-800s and four B737-400s through leases, he said. It needs to replace older B737 planes as their leases expire.

The airline agreed in September 2005 to lease 10 B787-800s, known as Dreamliners, and 18 B737s. Garuda will receive all the planes by the end of 2013.

The new planes are expected to cut Garuda's fuel costs, which now account for about 36 percent of its total expenses compared with 18 percent in 2002, Satar said.

Garuda plans to turn Citilink, now its fully-owned subsidiary, into an airline for budget travelers, Satar said. The plan has yet to be approved by the government.

Citilink will compete with low-cost carriers including PT Lion Mentari Airlines. The carrier will expand its operations, which comprise two B737s serving eight domestic cities, Satar said.

Garuda expects to meet with European creditors in the second week of January to discuss restructuring about US$500 million debt from the lease of six Airbus A330s. It's the airline's second attempt at debt restructuring since 2001.

The carrier signed three agreements on November 15, 2001 to reorganize US$1.2 billion of debt following three years of talks with lenders. The deals included one with European creditors to reschedule US$610 million and another for US$460 million in rupiah- and dollar-denominated debt.