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Government prepares contingency plan to save Garuda Indonesia

Garuda Indonesia-IFM-image
The carrier could be taken over by Pelita Air Service if it enters liquidation

The government of Indonesia has come up with a contingency plan to save troubled carrier Garuda Indonesia, media reports said. The carrier could be taken over by Pelita Air Service, a subsidiary of state-owned oil company Pertamina, in case it enters liquidation. The carrier, in which the government is a majority share holder, would be liquidised in case the restructuring programmes fail.

Kartiko Wirjoatmodjo, deputy minister of state-owned enterprises said that the debt negotiations and restructuring were underway with all lenders, aircraft lessors, and global Sukuk (syariah bond) holders.

He said, “Should the restructuring fail, we have no other option but to close it and find a new (national flag carrier) as it is impossible for (the government) to inject capital with such debt value.”

Garuda Indonesia’s ill fate has been well documented over the years. Inadequate management and losses incurred over the years were dragging the carrier down and the Covid-19 pandemic pushed it towards bankruptcy.

Currently, the carrier faces its worst crisis since its formation in 1947. As per Garuda Indonesia’s financial report, the carrier earned around $56 million, while the aircraft rental was about $56 million, aircraft maintenance cost around $20 million; fuel cost around $20 million; and salaries $20 million. It has accumulated a debt of around $4.9 billion.

While some members of the government do believe that the carrier can be saved. Indonesian House of Representatives member Herman Khaeron said that if the situation returns to normal following the pandemic, then Garuda will be able to improve its performance and cover its liabilities.

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