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Analysis: Garuda completes restructuring, back to black, resumes stock trading
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Passengers walk into the plane from the Garuda Indonesia airline at I Gusti Ngurah Rai airport, Bali, Indonesia, 29 April 2012. Three securities companies have completed the sale of PT Garuda Indonesia Tbk (GIAA) shares of 10.9% or as much as 2.47 billion shares to businessman Chairul Tanjung through PT Trans Airways. The Garuda shares were released at a price of Rp1.5 trillion or Rp620 per share. (JP/R. Berto Wedhatama)
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roubled-ridden flag carrier Garuda Indonesia completed its massive debt restructuring, allowing the company to turn around to profit last year, after massive losses in the past few years, and its stock resumes trading in the Indonesian Stock Exchange beginning this week after being suspended for the past six months.
Garuda thus began the new year with positive outlook as the government revoked the public activity restriction (PPKM), marking the end of the COVID-19 pandemic. This is expected to boost more travel, including air travel. Garuda expects that the increase in travel will in turn boost seat occupancy and eventually profitability.
In 2022, Garuda’s seat occupancy rate amounted to 72.1 percent, up from only 40.2 percent in 2021. As a result, the company managed to turn around its finance to book a whopping profit of US$3.6 billion in the first nine months of last year, as compared to a loss of $1.7 billion in the same period of 2021 and a total loss of 4.16 billion for the whole year of 2021.
The profit last year was made possible following Garuda’s restructuring of its $9.8 billion debt, 65 percent ($6.3 billion) of which was owed to lessors. Garuda said that the restructuring, that includes haircut and debt conversion into equity, cuts its debt by around 50 percent. But not all debtors agreed to Garuda’s debt-restructuring proposal. Two major lessors under Greylag challenged the restructuring by suing Garuda in a number of jurisdictions.
According to Garuda CEO Irfan Setiaputra, Garuda has won two legal battles in Indonesia and Australia against Greylag Goose Leasing 1410 Designated Activity Company and Greylag Goose Leasing 1446 Designated Activity Company. Now, Garuda filed a counter legal case against Greyag at the Jakarta District Court to protect other debtors that have agreed to its debt restructuring.
Following the completion of the debt restructuring, which State-Owned Enterprises Minister Erick Thohir described as the country’s biggest corporate restructuring ever, Garuda received the promised state capital injection (PMN) of Rp 7.5 trillion ($484 million) through rights issue. With the capital injection, the government’s ownership in Garuda now stands at 64.54 percent, Trans Airways at 7.99 percent, the public 4.83 percent and creditors now hold 22.63 percent shares.
Irfan promised that the PMN would be the last for Garuda. And the money would not be used to pay out debt or pay compensation to employees, but for aircraft restoration. It aims to do restoration for 60 percent of its total fleet.
