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Garuda’s recovery from debt crisis hinges on business restructuring
National flag carrier Garuda Indonesia needs more than cash to survive another day. To solve its Rp70 trillion (US$4.9 billion) debt crisis, the airline requires government help and a profound restructuring of its business.
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A Garuda Indonesia Boeing 777-300 ER aircraft embellished with a face mask design stands on the ground during the coronavirus pandemic. (Garuda Indonesia/File)
T
he way out of national flag carrier Garuda Indonesia’s crisis hinges on the company’s restructuring effort to bolster its financial performance, regardless of plans the government has outlined, analysts have said.
The government has been considering several options for the publicly listed company, including a loan or declaration of bankruptcy, which would allow for restructuring of the carrier’s liabilities, liquidating the company and possibly establishing a new national flag carrier.
Jakarta-based aviation consultant Gerry Soejatman said Wednesday Garuda would need restructuring not only for its leasing agreements but also for its fleet and human resources to lower the company’s potential need for yet another bailout, regardless of any government measures.
“Whether the company gets bailed out [or not], it still needs restructuring, otherwise the bailout will remain huge,” Gerry told The Jakarta Post in a phone interview.
With the COVID-19 pandemic battering the transportation sector particularly hard, Garuda has been operating at a loss, with more than 70 percent of its fleet grounded. Only 41 of its aircraft are in operation, since it cannot fly the other ones after failing to pay the lease, president director Irfan Saputra said on May 19 in an address to the carrier’s employees, a recording of which was leaked to media.
Read also: Indonesian airline Garuda posts $1 billion loss by end of Q3 amid weak demand
The company’s debt totals Rp 70 trillion (US$4.89 billion) and has been rising by around Rp 1 trillion per month lately, with negative equity standing at Rp 41 trillion.
