Reuters and Beritasatu.com report that a special committee of Indonesian lawmakers from the People’s Representative Council (DPR) has recommended a government injection of Rp. 7.5 trillion (US$522.4 million) for Indonesia’s troubled national flag carrier Garuda Indonesia on the presumption the Airline can first negotiate a debt settlement with its many creditors. The recommendations of Commission VI must also undergo a DPR-wide voting process.
Garuda is currently operating under a 20 May 2022 court-imposed deadline by which the Airline must finalize the details of its total debt and successfully conclude negotiations with creditors.
The recommendation was based on findings and recommendations from Commission VI of the DPR, who were tasked to help save the iconic Indonesian Airline.
Commission VI’s recommendations were formally read into the official record of the DPR on Friday, 22 April 2022.
Responding to the recommendation, Garuda’s CEO, Irfan Setiaputra, said the DPR’s latest move represented the solidarity supporting the financial restructuring of the national flag carrier. Adding: “We express our thanks for this support and the hard work of all Commission VI of the DPR and embrace their recommendations consistently and sustainably.”
Irfan said the DPR’s support is critical to the restructuring now being implemented by Garuda. Commission VI’s commitment to saving Garuda Indonesia, said Irfan, gave a positive outlook on steps to revitalize the Airline, confront the many challenges ahead, and ensure the company’s long-term sustainability.
The Minister for State-owned Enterprises (BUMN), Erick Thohir, used the announcement to assure that his ministry and the management of Garuda Indonesia will implement the recommendations of Commission VI of the DPR. He said he is convinced that the opportunity represented by the cash injection will enable Garuda to remain in business.
Minister Thohir said the current trend of rapid growth in domestic and international air passenger demand comes at the moment of the possible government cash injection announcement. The Minister said his ministry and the Airline will now focus their energies on crucial areas that include the rescheduling of the company’s debt burden, the cost of aviation fuel, and the lack of supply for the domestic aviation sector.
The cash injection for Garuda Indonesia is dependent on the success of current efforts to reschedule its massive debt. Among the recommendations made by the DPR to Garuda and the BUMN include:
- Routine progress reports and updates on recovery steps for the national flag carrier.
- Updates on the optimization of the Airline’s route network.
- Updates on the rationalization of the number of airlines in Garuda’s armada.
- Updates on strategies to optimize the Airline’s cargo revenues.
- Updates on steps to involve strategic investors in the Airline’s financial restructuring.
Indonesian billionaire and former Minister Chairul Tanjung intends to increase his 28.3 % stakeholding in Garuda Indonesia, now held by his airline business entity PT Trans Airways. Tanjung’s commitment to take a larger stake in Garuda is reportedly contingent on completing the Airline’s court-ordered restructuring. Tanjung’s shareholding in Garuda is the second-largest block of shares, following the government’s stake in the carrier.
Meanwhile, according to Reuter, State Prosecutors continue to investigate graft claims in Garuda’s many international lease agreements for aircraft.
Garuda calculates its current outstanding debt at US$9.8 billion.