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ational flag carrier Garuda Indonesia has decided to furlough around 800 contract workers for three months starting on Friday as the airline struggles to stay afloat amid the COVID-19 pandemic.

Garuda Indonesia president director Irfan Setiaputra said the measure was a hard decision that needed to be made to help ensure the airline’s sustainability before it resumed normal operations.

“We have made this decision after thorough consideration by taking into account the employees and the company’s interests and to avoid layoffs,” he said in a statement on Sunday, adding that the decision had been discussed between the employer and the affected employees.

During the three-month period, the furloughed employees will still get their health insurance and Idul Fitri bonus, Irfan stated.

The COVID-19 outbreak has forced Garuda to park 100 of its 142 aircraft while its number of daily flights has declined 70 percent compared to normal days as people stay at home to avoid contracting and spreading the virus. In the first quarter of 2020, the airline recorded a 31.9 percent annual drop in passenger and cargo revenue.

Previously, Garuda Indonesia took several measures to maintain its cash flow amid the plummeting demand for air travel caused by the outbreak. The measures include cutting employees’ and executives’ salaries, cutting production costs for efficiency and renegotiating obligations to partners and aircraft lessors.

The airline also opened discussions with holders of its US$498.9 million in sukuk (Islamic bonds) due on June 3 as the company struggles to pay its dues.

Aviation observer Gerry Soejatman estimated recently that national airlines would continue to reduce their capacity and services in the next several months to avoid bankruptcy, especially as recovery in passenger demand would take a long time.

“In the meantime, airlines need to be very careful in maintaining their cash flow to survive until the passenger demand returns to normal,” he said.

The Indonesian National Air Carriers Association (INACA) earlier said that the country’s airlines are in dire need of financial stimulus to withstand the COVID-19-induced crisis, amid a sharp revenue decline and looming deadlines for short-term liabilities.

The comments came as Garuda Indonesia was in discussion to receive a state capital injection of Rp 8.5 trillion ($573.39 million) as a derivative of the latest issuance of Government Regulation No. 23/2020 on the national economic recovery program.

With the current situation, the INACA has called on the government to provide financial stimulus for the ailing airlines in the form of credit relaxation and soft loans.

“Airlines need stimulus to get fresh working capital to resume operation after two months of halted operation, and also to help them pay their restructured debts,” INACA chairman Denon Prawiraatmadja told The Jakarta Post on May 12.

Garuda grappled with $3.25 billion in short-term liabilities, including $498.9 million in sukuk due to be paid on June 3 this year, according to its 2019 financial report.

However, with decimated passenger numbers and grounded fleets, other airlines are grappling with debts and obligations to fleet lessors.

Publicly listed no-frills airline AirAsia Indonesia, for example, recorded Rp 2.1 trillion in short-term liabilities as of Sept. 30 last year, including Rp 42.7 billion due within a year, according to its financial report.

Currently, airlines are still burdened with costs such as parking fees for their grounded aircraft, maintenance costs, pilot license fees, and many other costs, Denon added.

While airlines have taken measures such as renegotiating costs with lessors and third parties, cutting operational costs, as well as furloughing employees, financial relief is still deemed essential for recovery, according to the INACA.

“If in May the stimulus is still not available, the impact will be disastrous, it will be more difficult to pick up the market,” Denon said, adding that the airlines also needed capital support during market pickup post-pandemic.

Data from the INACA show that passenger traffic dropped 8.23 percent year-on-year (yoy) between January and March to 25.5 million people, and the figures for April and May are expected to show an even further decline, as the government has banned people taking part in the Idul Fitri mudik (exodus).

— Mardika Parama and Adrian Wail Akhlas contributed to this story