Troubled Garuda Indonesia, IDR 70 Trillion in Debt, Reducing Aircraft and Offering Early Retirement

Garuda Indonesia aircraft. (Photo: Doc. Garuda Indonesia)

JAKARTA - The financial performance of the airline PT Garuda Indonesia (Persero) Tbk (GIAA) has not improved in 2021. Even reported, Garuda Indonesia is being hit by debts of up to Rp70 trillion.

Quoted from Bloomberg, Monday, May 24, Garuda Indonesia President Director Irfan Setiaputra said that the red-plate airline is in a tough financial condition. According to him, Garuda Indonesia has a debt of USD4.9 billion or around Rp70 trillion.

The amount of debt increased by more than Rp1 trillion per month in line with the delay in payments made by the company to suppliers.

"Currently GIAA's cash flow is in the red zone and has equity of minus Rp41 trillion," Irfan said.

Garuda Indonesia will also conduct a business restructuring that includes a reduction in the number of aircraft fleets by up to 50 percent. These efforts need to be made to address the crisis caused by the COVID-19 pandemic.

One form of restructuring is through the reduction of the operational aircraft fleet.

"We have 142 aircraft and according to preliminary calculations regarding the impact of the current recovery, GIAA is likely to operate with no more than 70 aircraft," he said.

The total aircraft fleet covers all sectors of Garuda Indonesia's business except for Citilink. Irfan stated that Garuda Indonesia currently operates 41 aircraft and cannot fly the remaining fleet because it cannot pay debts to creditors for months.

However, when Bloomberg confirmed the news, Irfan declined to comment. Similarly, Garuda Indonesia's Corporate Communications Department also did not respond when asked for information by Bloomberg.

The impact of the coronavirus pandemic was also felt in the decrease in Garuda Indonesia sukuk price. It noted that over the past month the price of SUKUK issued by GIAA worth 500 million U.S. dollars fell about 7 cents to 81. This level is the lowest price since January 2021.

Previously, in June last year, GIAA managed to obtain approval from investors to extend the maturity period for 3 years. In a separate statement last Friday, May 21, Irfan also said that his party is in the early stages of offering an early retirement program effective July 1, 2021, as a cost-saving effort.

Garuda Indonesia currently has 15,368 employees and operates 210 aircraft as of September 2020. The passenger volume of all Garuda Indonesia group of companies fell 66 percent last year in line with cross-border travel restrictions and low domestic demand. By mid-2020, GIAA has also housed 825 employees after making a pay cut.