How Garuda Indonesia Saved Themselves From Destruction: Lower Airplane Rental Fees By 11 Million US Dollars Per Month

JAKARTA - PT Garuda Indonesia (Persero) Tbk (GIAA) claims to have succeeded in saving aircraft rental costs of US$11 million per month. These costs can be reduced after the state-owned airline is successful in negotiating with several aircraft lessors.

Garuda Indonesia President Director Irfan Setiaputra said that under normal conditions before the COVID-19 pandemic, the total aircraft rental expense reached 76 million US dollars. However, these costs could have been successfully reduced.

With this achievement, continued Irfan, it is hoped that operational costs can continue to be suppressed to maintain business continuity amid the minimal occupancy caused by the COVID-19 pandemic.

"In the past one month we paid 76 million US dollars for aircraft rental. Now it has dropped to around 55 million US dollars per month for aircraft rentals," he said at a Hearing Meeting (RDP) with Commission VI of the Indonesian House of Representatives (DPR) in Parliament Building, Jakarta, Monday, June 21..

Irfan explained that the company will continue to make efforts to save financial flows until the aviation business conditions are conducive again. In addition to reducing rental costs, flight routes that do not benefit will also be closed.

Furthermore, Irfan said, as a result, employee reductions had to be taken in order to save Garuda Indonesia from the threat of bankruptcy. The reduction was carried out through an early retirement program that targets at least 1,099 employees with more than 30 years of service.

"So there are other offers that will be discussed again with other friends. What is clear is that we have no desire to abuse employees at all and secondly we know that today is not the right time to ask people to leave," he said.

Meanwhile, Garuda Indonesia Deputy President Director Dony Oskaria explained that currently the company is still paying for 142 aircraft with a total cost of up to 80 million US dollars per month. In fact, only 41 aircraft were operated due to low demand. These costs come from rental costs, maintenance and repair costs and other maintenance costs.

"Our leasing cost is only 56 million dollars (per month) from the previous 75 million US dollars. So there are approximately 80 million dollars per month that we must pay by book," he said on the same occasion.

"The difference between these two (101 non-operational aircraft) is approximately 40 million dollars alone. So our loss is actually purely because the aircraft had underutilized assets, whose assets we still paid for at our fixed costs but the aircraft did not generate revenue," he continued.

Dony said that if the company did not renegotiate with the lessor, even though it received funding assistance in the form of state capital participation (PMN) from the government, the company would still be at a loss every year.

Previously, Garuda Indonesia had returned two fleets of B737-800 NG aircraft before the expiration of the lease period. The acceleration of this return is carried out after an agreement between the company and the aircraft lessor in which one of the conditions is to change the registration code of the aircraft concerned.

As is known, the state-owned airline is currently bleeding in the face of maintaining its business in a state of debt bondage of up to Rp70 trillion. The amount can increase every month by as much as IDR 1 trillion due to the lack of passenger occupancy.

It was recorded that the loss that must be borne by Garuda Indonesia in a month reached 100 million US dollars. While the expenditure is 150 million US dollars, while the income received is only 50 million US dollars.