By I MADE SENTANA And EDHI PRANASIDHI

Indonesia flagship carrier PT Garuda Indonesia said its net profit last year rose 56% from a year earlier, as the strong local economy helped the airline outperform despite high fuel costs and a slowdown in the industry globally.

Garuda said its load factor, or the percentage of seats filled, rose to 75% at the end of last year from 72% a year earlier, while the strong Indonesian economy helped to boost earnings. Garuda has little exposure to the U.S. and European markets, and Indonesia's economy expanded 6.5% last year.

The strong results from Garuda come as the global airline industry has been hit by a double whammy of soaring fuel prices and low demand. Some airlines have been cutting back services or raising prices to help cope. Singapore Airlines Ltd. recently reduced cargo capacity by 20% and raised fuel surcharges following a 53% plunge in fiscal third-quarter net profit.

The International Air Transport Association in November cut its forecast for industry profits in 2012 by a quarter to $3.5 billion, but warned that could plunge to a loss of more than $8 billion if Europe's debt problems trigger another banking crisis.

Garuda, however, said that net profit for the 12 months ended Dec. 31 surged to 805.53 billion rupiah ($87.8 million) from 515.52 billion rupiah in 2010, while revenue jumped 39% to 27.16 trillion rupiah from 19.53 trillion rupiah.

The 69%-government-owned company, which last year raised $578 million in an initial public offering, said its operating profit rose to 1.01 trillion rupiah, reversing from a 67.16 billion rupiah loss in 2010.

Analysts attributed the increase in net profit at the nation's largest airline by assets to an increase in load factor, mostly from its domestic services.

"Garuda may respond to higher fuel costs by raising ticket fares or improving operating efficiency as it had done in 2008 and again in 2011," Citigroup said in a recent report.

Citigroup said it expects Garuda's 2012 net profit to rise to 1.5 trillion rupiah based on jet fuel cost assumption of $115/barrel, compared with the current $134/barrel. That would mark a 86% increase from 2011.

Garuda Chief Executive Emirsyah Satar said in January he expects 2012 operating profit to increase by 21%.

The strong earnings came after Hong Kong-based Cathay Pacific Airways Ltd. reported a 61% drop in 2011 earnings earlier this month and warned that it is bracing for an even tougher year ahead of an uncertain global outlook and persistently high jet fuel prices.

Write to I Made Sentana at i-made.sentana@dowjones.com and Edhi Pranasidhi atedhi.pranasidhi@dowjones.com

wsj.com

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