Photo: Antara Garuda Indonesia, Indonesia’s national carrier, has halved its debt and achieved cuts equal to the cost of aircraft leasing in talks with creditors, according to a stock exchange filing on June 28. The company has also approached financial investors and foreign airlines to increase its capital, Kartika Wirjoatmojo, the country’s deputy minister for state-owned enterprises, said, noting that a positive outcome of the negotiations will make the airline profitable. The airline’s debt restructuring, reached in early June, has been forced into court-supervised proceedings by outstanding creditors six months ago…
Indonesia’s national carrier Garuda Indonesia has halved its debt and achieved cuts equal to the cost of aircraft leasing in talks with creditors, according to a June 28 stock exchange filing.
The company is also approaching financial investors and foreign airlines to increase capital, Kartika Wirjoatmojo, the country’s deputy minister of state-owned enterprises, said, noting that a positive outcome of the talks would make the airline profitable.
to restructure the airline’s obligations, agree In early June, six months after an outstanding creditor forced it into court-supervised debt moratorium proceedings.
Debt falls to $5.1 billion
In court-supervised negotiations and an out-of-court settlement, Garuda has halved its debt to $5.1 billion from $10.1 billion, Kartika said, adding that the airline has also renegotiated the terms of aircraft orders and lease contracts.
He noted that Garuda, which is now 60.54 percent owned by the Indonesian government, had previously paid “unusually high” rents for the planes, and that the restructuring process was able to reduce rental rates for wide-body jets by at least 65 percent. %, and narrow-body aircraft fell 35%.
“Garuda is rarely profitable because of its low fleet utilization and high lease costs,” the deputy minister said, according to Reuters.
“We believe Garuda can be profitable with an efficient fleet, optimized domestic routes and reduced lease rates,” he added.
Estimated positive operating income
Garuda Indonesia will still face challenges in managing costs amid soaring fuel prices, but the airline eventually hopes to turn its operating income positive after reporting negative cash flow each month during the Covid-19 pandemic.
The airline will now focus on serving domestic routes and maintain only profitable international services. Including its low-cost unit Citilink, Garuda will operate just 120 aircraft, down from 210 in 2020.
The government has said it will replenish Garuda’s capital through a rights issue later this year, with the company later conducting a second rights issue for international airlines and financial investors.
Given the considerable potential of the recovering domestic air travel market in this country of 274 million people living on some 6,000 inhabited islands, it is planned to invite potential strategic partners to invest in Garuda Airport.
