Garuda Indonesia's Debt Balloons to $2.2B on Coronavirus Pandemic Woes

KOMPAS.com – Indonesia’s national airline Garuda Indonesia has reported debt and bank loans as of July 1 totalling $2.2 billion or Rp 31.9 trillion as it struggles to stay afloat amid the  coronavirus pandemic. 

In addressing the economic hardship brought on by the coronavirus pandemic, Garuda Indonesia has taken steps to operate more efficiently, according to CEO Irfan Setiaputra during a meeting with Indonesia’s House of Representatives Commission VI on July 14.

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Garuda Indonesia’s $2.2 billion debt comprises of $905 million short-term loans and $645 million long-term loans.

“The $645 million loans encompass $500 million in Sukuk financing that we have negotiated and extended the date of payment for another three years. The deadline to pay back the loan would have been June 3, 2020, but is now until June 3, 2023,” said Irfan.

Indonesia’s national airline has a remaining cash flow of $14.5 million or Rp 210 billion.

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Restructuring

Aside from restructuring the company’s debts, Irfan said that Garuda Indonesia has also restructured its plane leases to push down the price of aircraft.

Other measures taken include maximizing flights for cargo and rentals.

On July 14, the company had 10 flights specifically for transporting cargo.

Irfan said that although Garuda Indonesia does not have aircraft specifically for cargo, the company has gained permission from the Ministry of Transportation.

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As such, it can transport cargo above the machine of its aircraft engine for a maximum weight of 70 kilograms.

Irfan said that Garuda Indonesia has renegotiated payments to service providers, airports, and jet fuel providers.

To rescue Indonesia’s national airline, additional drastic measures include offering early retirement to 400 of the company’s employees for those aged 45 years and above.

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Irfan stressed that the option of early retirement is voluntary.

Moreover, 800 of its part-time employees were offered unpaid leave while Garuda Indonesia’s board of commissioners and directors have taken a hefty pay cut since April.

The company’s undertaking in recent months is expected to help it save $67 million by year-end.

Looming bankruptcy

On July 7, Irfan admitted that the possibility of bankruptcy loomed above Indonesia’s airline industry.

Although the coronavirus pandemic has opened up the possibility for the company to offer lower ticket prices, the measure would only add more burden to Garuda Indonesia.

Irfan believes that there is a possibility for Garuda Indonesia to declare bankruptcy if it lowers ticket prices despite understanding the need for marketing promotions to entice travelers such as cheaper flights.

Nevertheless, Irfan finds that the effort is difficult for Garuda Indonesia to implement given the tough economic climate during the coronavirus pandemic. 

(Writer: Jawahir Gustav Rizal | Editor: Virdita Rizki Ratriani) 

Source: https://www.kompas.com/tren/read/2020/07/15/125412965/sejumlah-masalah-melilit-garuda-utang-rp-319-triliun-dan-400-karyawan