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Garuda to Sell Off Aerowisata?

Garuda's Road to Recovery: Airline's Cash Crunch Becoming Increasingly Acute as Debt Deadlines Loom.

(2/27/2006) The Indonesian-language Bisnis Indonesia reports that Garuda Indonesia plans to sell off its airline catering subsidiary PT Aerowisata Catering Services and seek a strategic partner for the operation of its airline technical support company - Garuda Maintenance Facilities (GMF).

According to a document obtained by the Bisnis Indonesia, the Indonesian national airline also plans to spin-off its low cost domestic carrier Citilink, once a suitable foreign partner is secured.

Critical Times Ahead

Deeply in debt to European creditors, [See: Garuda Posts US$70.7 Million Loss for 2005 ], the Airline is scrambling to reschedule debt payments and secure fresh capital injections. Should Garuda fail to secure enough cash to meet its obligations by a March 2006 deadline it faces the possibility of a cross default, being forced into bankruptcy by a creditor seeking relief via the courts, and a possible seizure of six Airbus A-330aircraft operated by Garuda but owned by the European Consortium holding the airline's debts.

On a wider level, economic observers fear that the financial collapse of Garuda might have larger detrimental effects, including a lowering of Indonesia's world-wide credit rating and negative multiplier effects in other segments of the national economy.

Sources report that Garuda's management has prepared 6 separate options to address its current financial imbroglio for presentation to the Presidential Cabinet and National Parliament ranging from debt relief and a cash injection from the Government to the outright liquidation of the Company's assets in order to meet its debt obligations.