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View all search resultsAnother chapter in saving Garuda: Lessons from the AerCap deal
In the majority of aircraft lease agreements, monthly rent payments are obligatory, regardless of the circumstances.
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Garuda Indonesia has finally sealed a deal with AerCap, one of the largest global aircraft leasing companies, by signing a global side letter on July 28. This will eventually dismiss a bankruptcy lawsuit filed against Garuda by AerCap at the New South Wales Supreme Court.
The deal will oblige the national flag carrier to relocate nine leased Boeing 737-800NG aircraft to approved routes. Going forward, this will be a major breakthrough for Garuda in renegotiating the complicated and tough agreements on current aircraft leases with other lessors.
Garuda’s fleet is shrinking and will keep decreasing in the near future. Reports say that the flag carrier is operating only about 40 aircraft out of the 142 in its fleet. As of June, these 142 aircraft were being leased from 34 lessors around the world, showing the huge task that Garuda faces to bring its fleet to the required size of just below 70.
Travel restrictions and passenger health concerns have contributed the most to the extremely low demand for air travel.
Throughout 2021, Garuda’s fleet operation struggles have been exposed. If we recall previous occasions, the airline suffered from the alleged involvement of Bombardier CRJ1000 aircraft operations in a bribery case involving former executives. The State Owned Enterprises Ministry has emphasized that it is trying to return the aircraft to Nordic Aviation Capital, the lessor, ahead of its lease term to avoid further losses. However, there has been no indication that any decisive solution has been reached.
Garuda Indonesia CEO Irfan Setiaputra said in May that the company would have to go through a comprehensive and total restructuring. The airline would have to gradually cut its fleet from 142 to no more than 40 and shift its business focus to the domestic market. By June, the airline had agreed to send two Boeing 737-800NG aircraft back to lessors. Recently, Garuda filed for a suspension of debt settlement obligations.
