Indonesian Tourism Minister urges action to save flag carrier Garuda
Indonesia’s Tourism Minister has called for urgent action to safeguard the immediate future of cash-strapped Garuda Indonesia.
Sandiago Uno said another wholesale restructuring is its only hope of surviving its current financial plight.
“We should collectively back the restructuring plan since Garuda is a national flag carrier. We must do anything to save Garuda,” he said.
He said restructuring is the most viable option on the table.
Other options have been put forward such as allowing state-owned charter airline Pelita Air take over Garuda’s operations.
Garuda Indonesia Director Irfan Setiaputra said the company is continuing steps to improve its business performance, and has been in talks with key creditors for several months.
It defaulted on a large ‘Sukuk’ Islamic loan earlier this year and has been returning planes to lessors to cut expenditure.
The government is reluctant to bail out the airline again given its huge asset-debt deficit.
The airline has few major assets and nearly all its aircraft fleet are leased.
“If we meet a dead-end, we will close Garuda down because injecting more state money is impossible given the company’s massive debt loads,” Kartiko Wirjoatmodjo, deputy for the state-own enterprises minister said last week.
Kartiko added that even if it survives this latest crisis, it will emerge much smaller and long haul routes will likely be shelved.
Bloomberg reported this week that it needs about $1 billion just to stay afloat and the government is open to relinquishing its majority stake, Wirjoatmodjo says.
“We continue to negotiate and communicate with all creditors to reach the best settlement and debt restructuring that will improve the company’s fundamental performance,” Garuda corporate secretary Mitra Piranti said in a recent filing to the Indonesia Stock Exchange.
Garuda is still regarded as a quality airline but has been hampered by poor leadership for years.
Two former CEOs have been convicted of fraud and corruption in the past couple of years.
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