The State-Owned Enterprises (SOEs) Ministry has been in talks with several foreign airline companies and financial investors to invest in Garuda, Kartika Wirjoatmodjo, Deputy SOEs Minister said on Tuesday.

To accommodate new shareholders, the government plans to lower its ownership but to no less than 51 percent after the airline raises funds via a rights issue in the capital market in the fourth quarter of this year.

He said investors would consider Indonesia’s position as one of the largest passenger airline markets in the world as well as the fact that Garuda will have a better financial performance in the future.

“We know many airlines were acting as hub players, as they did not have a domestic market. This could be a good combination, as we have a strong domestic market,” Kartika told reporters during a press briefing.

Read also: Creditors approve Garuda's restructuring plan

Creditors approved Garuda’s restructuring proposal on June 17 after months of negotiation to save the debt-laden airline from bankruptcy. The restructuring allows Garuda to halve its liabilities to just $5.1 billion.

Some liabilities remain but the airline has managed to extend its maturity period along with acquiring low interest rates.

The urge to save the airline has also been greater as Garuda Indonesia, including Citilink, held nearly a third of the country’s domestic air travel, according to the Transportation Ministry.

Kartika went on to say that Garuda had better prospects as the airline had not just successfully cut its debt, but also had a better business plan.

He noted that the airline had lowered its lease-to-cost-revenue ratio to just 13 percent from more than 30 percent previously, paving a way for the airline to book a profit. Wide-body aircraft get rate cuts between 65 and 70 percent, while the narrow body type gets around a 35 percent reduction.

The airline is set to cut its international routes, but will keep some like Amsterdam, Sydney and Singapore, Kartika said, adding that around 89 percent of Garuda routes would now be domestic, including tourism destinations that the government was working on.

With Garuda in much better shape, the ministry also plans to soon integrate Garuda under the SOEs tourism holding PT Aviasi Pariwisata (Aviata) or Injourney.

Garuda Indonesia CEO Irfan Setiaputra added that the airline would now give more focus to cargo flights both domestically and internationally. The airline aims to utilize the market potential in marine product exports, transshipment in the Asia Pacific region and e-commerce business.

Irfan also vowed that the airline would regain its dominance in umrah flights, which it has lost since the airline got into trouble.

Other initiatives would include intensifying the low-cost carrier (LCC) segment in Garuda’s subsidiary Citilink.

“It can’t be ignored that the biggest chunk of our market is LCC,” Irfan told reporters at Tuesday's briefing.

Read also: Pelita Air to add planes, routes in push for passenger segment

SOEs Ministry’s Kartika said Garuda still had to face increasing aviation fuel costs, which now consume nearly half of its revenue, from previously only a third before the pandemic.

“We hope that if aviation fuel prices return to normal, then Garuda could earn a higher profit,” Kartika said.

Garuda will need more time to jump-start its operation, Kartika said, adding that most of its fleet needed to undergo maintenance first. He predicted it would take up to three months before Garuda could fully operate its fleet.

The government will also support Garuda with a Rp 7.5 trillion fresh state capital injection in the third quarter, where some of the funds will be used for maintenance and the reconditioning of the airline’s fleet.

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