Garuda Indonesia Is In Debt And Technically Bankrupt, Erick Thohir: It's Not Easy, But This Is The Responsibility Of The Ministry Of SOEs

JAKARTA - Minister of State-Owned Enterprises (BUMN) Erick Thohir has signaled that he will maintain PT Garuda Indonesia (Persero) Tbk as the national airline. As is known, Garuda's current condition is in debt of 9.8 billion US dollars, approximately IDR 139 trillion. In fact, Garuda is also called technically bankrupt.

Erick emphasized that the Ministry of SOEs would not give up on saving Garuda. According to him, in the midst of the difficulties faced by Garuda, there is still confidence from parties from abroad.

"We did not give up, the proof is with all the difficulties and opportunities to sign code sharing with Emirates. So there is still trust but we must not love blindly which in the end also endangers decision making and also endangers Garuda itself. Now, these are positions that are indeed not easy And that's part of the responsibility of the Ministry of SOEs," he said at the Kick Andy Show, quoted on Tuesday, November 16.

According to Erick, currently what Garuda will undergo is restructuring. Where the Ministry of SOEs must negotiate leases with corruption cases and aircraft leases which are up to 28 percent expensive compared to other countries which are only 6 percent.

"We have to go there first. It's not an easy choice," said Erick.

Erick said that after the restructuring of Garuda was completed, his party would change Garuda's business model. The focus of Garuda will be working on the domestic market.

"We have to focus on our business model domestically for the next few years to be financially healthy rather than Garuda," he said.

Furthermore, Erick said that Garuda should follow the example of US airlines. According to Erick, US airlines have more domestic routes than international or overseas routes. This is because Indonesia's domestic market is very strong.

"We have a market, don't sell it cheap. This new domestic is very large. Look what happened to US Airlines, they have many domestic routes, and how many US planes go abroad?" he said.

Previously, Deputy Minister of SOE II Kartika Wirjoatmodjo revealed that the equity balance of PT Garuda Indonesia (Persero) Tbk had exceeded PT Asuransi Jiwasraya (Persero). He said that Garuda had negative equity of USD 2.8 billion or approximately IDR 40 trillion.

"We emphasize that Garuda's balance sheet is currently experiencing negative equity of 2.8 billion US dollars, so this is a record, if the record was previously held by Jiwasraya, now it has been shifted by Garuda. So Garuda's negative equity has reached IDR 40 trillion," he said in a meeting with Commission VI of the House of Representatives (DPR), Tuesday, November 9.

For your information, PT Asuransi Jiwasraya (Persero) was recorded to have negative equity reaching IDR 38.4 trillion as of December 2020. Meanwhile, Garuda Indonesia as of September 2021 was in a negative position of USD 2.8 billion or IDR 40 trillion.

Kartika said that the drop in the level of Garuda Indonesia's balance sheet was also caused by the statement of financial accounting standard (PSAK) 73 made by the company in 2020-2021 which caused the impact of the decline in equity to deepen.

According to Kartika, this position has technically dragged the company into bankruptcy.

"In this condition, in terms of banking, it is technically bankrupt, but not legally, this is what we are currently trying to get out of this position," he said.

Furthermore, Kartika said, the assumption of bankruptcy is because in practice some of Garuda Indonesia's obligations have not been paid. In fact, the salaries of employees have been cut since 2020. As for the salaries of company officials, some have been withheld.

"So we must understand together that Garuda's situation is actually technically bankrupt. Because of its long-term obligations, none of it has been paid, including global sukuk, including himbara, and so on," he said.