Garuda's restructuring of $800m debt nearing completion

The Jakarta Post ,  Jakarta   |  Sat, 03/15/2008 11:56 AM  |  Business

National flag-carrier Garuda Indonesia is slated to complete the restructuring of its massive debt load in the first semester of this year, an airline executive says.

"We have almost completed the debt restructuring negotiations. We hope the final agreement with our foreign creditors can be inked this semester," the airline's strategic and information technology director, Elisa Lumban Toruan, said Friday.

Garuda has total debts of US$800 million, including $500 million to the European Credit Agency.

The airline had proposed to its creditors a longer debt maturity period, Elisa said.

Aside from the restructuring, the company is also scheduled soon to sell some of its shares to the public.

"An initial public offering is part of our strategic plan. Stakeholders and members of the House of Representatives have approved the plan," she said.

She also said that as part of efforts to boost efficiency, since Jan. 15 Garuda had halted the operation of its budget-carrier Citilink pending a reorganization of the division.

She said Citilink was not profitable because it failed to secure the highest share of the domestic low-cost airline market, despite its being a pioneer in the domestic budget airline market.

"The growth of the middle to lower segment of the market is amazing, causing low-cost carriers to compete fiercely," she said.

Elisa said Garuda was preparing a new strategy and facilities for Citilink to compete with other domestic low-cost carriers.

"We are going to reorganize the routes, the aircraft and the human resources for Citilink," she said.

She said Garuda hoped to implement the new strategy by the end of July 2008.

"A possible problem that could delay the implementation is difficulties in finding suitable aircraft," she said.(rff)

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