DEPOK (eNBe Indonesia) - Flag carrier Garuda Indonesia (GIAA) has delivered the proposal of a restructuring scheme to lessors and creditors, part of its efforts to recover its earnings performance.
GIAA’s President Director Irfan Setiaputra said the restructuring process is accelerated, and the lessors and creditors will soon review the proposal.
GIAA presented its long-term business plan and offered managing business liabilities with lessors, creditors, and main suppliers. The flag carrier revealed that it would transform into a more adaptive business entity, efficient and portable.
GIAA has coordinated with the restructuring team and advisors to continue building intensive coordination with the lessors and creditors, respond and learn every feedback of the proposed scheme, and seek the best agreement.
Along with this, GIAA is optimizing its flight services, focusing on cost leadership and efficiency while prioritizing the security and comfort flights to all passengers.
Irfan explained that GIAA would optimize network routes to profitable routes, focusing on domestic and certain flights for international routes with cargo-transportation destinations. The number of aircraft will be adjusted to market conditions, boosting cost-efficiency.
GIAA will also negotiate contracts for aircraft leasing to boost earning contribution from the cargo segment and seek agreement with creditors on debt restructuring.
Minister of State-owned Enterprises (SoE) Erick Thohir has said that the Government will not inject the state budget for bailing out Garuda. But the business scheme for protecting Garuda is under discussion by related parties. The funding for Garuda has not been decided yet.
Erick added Garuda has two options of funding; derived from other state firms with stable cash flow or seeking new investors. Garuda’s business model is also reviewed to focus on the domestic market.
With new investors, Government’s ownership in Garuda would not be significant anymore. Currently, Government controls 60.5% of GIAA shares, Trans Airways 28,2%, and public investors hold 11.1%.
Garuda now focuses on debt restructuring after the Commercial Court of Central Jakarta rejected the suspension of debt payment (PKPU) proposed by My Indo Airlines (MIA) as a creditor.
MIA is said to resume the negotiation with GIAA on the debt settlement for US$700,539 as claimed by MIA related to the cargo agreement in 2019.
GIAA also reported that the London Court of International Arbitration (LCIA) has on Sept. 6, 2021, made an arbitration verdict on the lawsuit from Lessor Helice and Atterrissage over GIAA, relating to the aircraft rent payment.
LCIA obliged GIAA to pay said aircraft rent, paying interest on delayed-paid rent and costs of court proceedings.
GIIA is said to reduce its aircraft fleet from the current 80 units. It is renegotiating and postponing purchase orders for more than 90 aircraft as part of the restructuring proposed by the lessors.
Flightglobal.com reported that Garuda expects to launch a UK scheme of arrangement as part of a restructuring.
Garuda has defaulted on a $500 million sukuk. Its debt totals $4.5 billion, and it runs a $100 million negative cash flow a month due to high costs and low revenues during the coronavirus pandemic.
The pandemic has forced the airline to shut some flights, with average passenger numbers per flight also down significantly.
Garuda reported that it (parent only) booked revenue of US$568 million in the first nine (9M) to September of 2021, with the total operating cost of US$1.29 billion.
The passenger number reached 2.3 million pax per September this year, projected to reach 3,3 million by the end of this year.***
