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Garuda Enters Discussions to Purchase 20 New Airbus A320 Aircraft.

2009 Delivery of 20 New Airbus A320s and 25 Boeing B737-800NGs for Indonesia's Financially Troubled National Carrier.

(9/12/2007) PT Garuda Indonesia have announced that they will purchase 20 Airbus A320 to strengthen their armada serving both regional and domestic routes flown by the National Carrier.

The Director of Operations for Garuda, Ari Sapari, told the Indonesian-language Bisnis Indonesia that the arrival of the new Airbus A320s will roughly parallel the planned delivery of 25 new Boeing B737-800NG expected to be delivered in 2009.

Sapari told the press that the order for the new Airbus A320 had been confirmed verbally with the planes' manufacturer following approval of the purchase by the Minister for State-Owned Enterprises.

The Garuda official was unprepared to disclose the price of the new airplanes saying the purchase was still under negotiation. Bisnis Indonesia estimates the total value of the contract for the 20 aircraft at US$1.3 billion with each plane costing US$65 million.

The National Carrier has already concluded an agreement with Boeing for the purchase of 25 new B737-800NG with delivery set to commence in May 2009 and be completed by February 2012. The Company has paid a US$23 million deposit with Boeing with efforts now underway to create a consortium to lend funds to complete the purchase or to find a suitable lease arrangement for the aircraft.

Garuda's debts as of June 30, 2007 totaled US$737.38 million with an additional Rp. 180 billion (approximately US$19.56 million) owed to PT Bank Negara Indonesia and PT Bank Mandiri.

According to Bisnis Indonesia, the Airline's heavy debt burden traces back to an earlier Airbus purchase when, between 1988-1992, Garuda spent US$1.2 billion on six A330-300 aircraft. Aviation experts estimate the purchase price for the planes was "marked up" by US$74 million per plane, inflating the Company's debt load by US$444 million.

A long-standing pledge by the Airline to thoroughly investigate and disclose details of the earlier aircraft purchase remains outstanding.