Garuda Indonesia halves debt with restructuring, on track for profit – government

JAKARTA (Reuters) – Garuda Indonesia has halved its debt and achieved comparable cuts to plane leasing prices in negotiations which have set the airline up for profitability, the Indonesian authorities mentioned on Tuesday.

The corporate had approached monetary buyers and international airways to extend its capital, Kartika Wirjoatmojo, deputy minister of state-owned enterprises, instructed reporters.

Restructuring of the airline’s obligations, agreed this month, has come six months after an unpaid creditor compelled it into proceedings for a court-supervised debt moratorium.

In negotiations supervised by the court docket and in out-of-court settlements, Garuda had halved its debt to $5.1 billion from $10.1 billion, Kartika mentioned.

The corporate has additionally renegotiated the phrases of plane orders and leasing contracts. It was previously paying abnormally excessive rents for plane.

Throughout restructuring, Garuda had managed to chop lease charges for wide-body plane by not less than 65% and for narrow-body plane by 35%, Kartika mentioned.

Some lessors had additionally agreed till December 2023 to fluctuate lease funds in accordance with the period of time plane have been used.

“Garuda was not often worthwhile, due to its low fleet utilisation and excessive lease prices,” the deputy minister mentioned. “… With an environment friendly fleet, optimised home routes and lowered lease charges, Garuda could make a revenue, we consider.”

The service would nonetheless face challenges in managing prices amid hovering gas costs, nevertheless it anticipated to show its working revenue optimistic after reporting adverse cashflow every month throughout the COVID-19 pandemic, he mentioned.

The deputy minister reiterated Garuda’s plan to give attention to serving home routes and sustaining solely worthwhile worldwide providers.

Together with low-cost unit Citilink, the Garuda group would function 120 plane, down from 210 in 2020.

The federal government has mentioned it would high up Garuda’s capital via a rights subject later this 12 months and that the corporate will later make a second rights subject, inviting a strategic associate to put money into it.

Kartika mentioned Garuda approached worldwide airways and monetary buyers for the second rights subject.

“We consider with our big home market … there might be big potential” for buyers, he mentioned.

As of final month, the federal government owned 60.54% of Garuda’s shares, in accordance with a inventory trade submitting.

(Reporting by Stefanno Sulaiman; Modifying by Gayatri Suroyo and Bradley Perrett)