What Does Erick Thohir Expect From Garuda Indonesia's Cooperation With Emirates?

Minister of SOEs, Erick Thohir. (Photo: Doc. Ministry of SOEs)

JAKARTA - The Ministry of State-Owned Enterprises as the majority shareholder of Garuda Indonesia continues to widen its perspective and examine various possible options related to recovery measures, in the midst of restructuring the national airline. The goal is that Garuda Indonesia can focus on business orientation on domestic flight routes.

This emphasis was conveyed by the Minister of SOEs, Erick Thohir after witnessing the signing of the cooperation between Garuda Indonesia and Emirates in Dubai, UAE, last Wednesday, November 3. The agreement in the form of code sharing states that Garuda customers can still explore international routes through the Emirates airline.

"Efforts to restructure continue. Negotiations for Garuda's debts, which reached USD 7 billion due to the most expensive leasing cost which reached 26 percent, and corruption, are being negotiated with lessors," he said in a written statement, quoted Friday, November 5.

However, Erick said that his party is still trying to open up other options.

"At least, in order to help Garuda recover," he said.

Erick said that through code-sharing cooperation with Emirates in serving overseas flight routes, Garuda still has value in the eyes of its customers.

That way, continued Erick, is expected to have a positive impact in supporting Garuda's new orientation which will focus more on serving domestic routes.

"After all, we can't stay silent, can we? The business and finding solutions must still be considered. This includes formulating new strategies and focus for Garuda's domestic flight business," he said.

As is known, Erick Thohir really wants Garuda Indonesia to focus on working on the domestic flight market to improve business performance. According to Erick, Garuda had been stuck in an unhealthy business when it started working on overseas flight routes.

Based on data from Garuda Indonesia, it is known that domestic passengers dominate as much as 78 percent with revenues reaching IDR 1.400 trillion. Meanwhile, the number of passengers destined for overseas was only 22 percent with the acquisition of IDR 300 trillion.

"Garuda must focus on domestic, I'm sure it will return to health, but it will take a long time," said Erick Thohir, quoted by Antara, Sunday, October 24.

Therefore, the Ministry of SOEs continues to oversee the ongoing restructuring process at PT Garuda Indonesia (Persero) Tbk. However, during the restructuring process, Erick admitted that he was reluctant to negotiate regarding the abuse of authority and corruption.

Garuda was trapped in a mountain of debt of up to IDR 70 trillion, so the company suffered losses. The COVID-19 pandemic has also battered Garuda Indonesia's financial performance.

The Ministry of SOEs said that one of the causes of Garuda Indonesia's loss was the agreement on the price of the aircraft from the lessor company.

"Negotiations must be tightened, especially regarding leasing/lessor (providing a fleet of aircraft with a lease scheme) aircraft that are corrupted and the price is too high," said Erick.