Seriously! Garuda Management Prepares Bankruptcy Scenarios If This Is Not Fulfilled

Garuda Indonesia planes

JAKARTA - The management of Garuda Indonesia has openly prepared a scenario of stopping business activities or going bankrupt if a number of performance improvement plans that are currently being sought find a way to help.

Citing Garuda Indonesia's 2020 financial report submitted to the Indonesia Stock Exchange (IDX) today, the national airline claimed to have taken six strategic initiatives.

First, negotiating with creditors so that the company can get a relaxation of debt payments.

Second, negotiating with the lessor to get a better scheme for operations, including but not limited to reducing monthly rental payments and maintenance reserve funds, and changing to a power by the hour arrangement.

Third, perform a positive rationalization of the number of employees in accordance with the company's long-term plan. Fourth, submit an application to the competent government agency for the disbursement of the remaining funds from the mandatory convertible bond facility.

Fifth, requesting the competent government agency to allow the company to get a relaxation in the payment of its tax obligations.

And the sixth is to ask for financial support and approval from the competent authorities in the government so that the company can carry out financial restructuring and group operations. Just so you know, the last step mentioned by the issuer codenamed GIAA is another form of request for state capital participation (PMN) aka capital injection.

"The management is of the opinion that, taking into account the plans and measures mentioned above, the company will have sufficient financial resources to continue its business continuity and therefore the preparation of consolidated financial statements on a going concern basis is appropriate," Garuda Indonesia said on Friday, July 16.

However, the implementation and effectiveness of the management plan in improving the company's financial condition will depend on these five crucial assumptions, namely creditors will agree to relax debt payments, lessors will agree to negotiate restructuring of lease obligations, rationalization of the number of employees.

Then, shareholders will continue to provide financial support to the company, and the Directorate General of Taxes will approve the relaxation of payment of tax obligations.

“If it cannot realize the plans and actions mentioned above, the company may not be able to continue operating as a going concern. These consolidated financial statements do not reflect the adjustments needed if the company cannot continue as a going concern," said Garuda.

For information, the career national flag carrier suffered a consolidated loss of US$2.5 billion or equivalent to Rp. 36.2 trillion (exchange rate of Rp. 14,503) throughout 2020.

Garuda said the group's current liabilities exceeded its current assets of US$3.8 billion and the group had an equity deficiency of US$1.9 billion.

Then, the company's operating income in the 2020 financial year was recorded at US$1.4 billion. This figure is in free fall compared to 2019 when there was no pandemic with 4.5 billion US dollars.