Jakarta. State-run airline Garuda Indonesia has “technically” gone bankrupt due to the fact of being insolvent and in negative equity amid allegations of corruption and misappropriation, a senior official said on Tuesday.
According to the September 2021 financial reports, Garuda has negative equity of $2.8 billion and the burden increases by $100-150 million per month, said Kartiko Wirjoatmodjo, a deputy for the state-owned enterprises minister.
"Under the banking interpretation, such a condition means that [Garuda] is technically bankrupt although it’s not officially declared so,” Kartiko said in a hearing with a House of Representatives commission overseeing state-owned companies.
“Garuda cannot repay nearly all of its debts and it’s likely to hold back employees’ salaries.”
He blamed poor management and past corruption for the financial hardship in Garuda today.
“There were corruption problems ranging from burdensome partnerships and inflated aircraft prices to bribery and money laundering in 2011 and 2012,” Kartiko said.
The Covid-19 pandemic has worsened Garuda’s financial crisis as revenues fell sharply due to global travel restrictions.
In late 2019, Garuda generated around $235 million in monthly income but the figure dropped to as low as $27 million when the devastating impact of the pandemic began to hit the airline the following year.
"Whenever mobility restriction is imposed, it has a direct impact on Garuda. In December 2020 the monthly revenue climbed to $100 million but then public mobility was restricted and revenues fell again,” Kartiko said.
“People often asked me: ‘What did really cause Garuda to suffer, corruption or Covid-19?’ My answer is both.”
The government is working out to get the best solution to pull Garuda out of the crisis.
The most practical way is to scrap unprofitable flights and refocus on lucrative routes, Kartiko said. The airline will fly 140 routes next year, in comparison to 237 routes in 2019.
Consequently, the number of aircraft in Garuda and subsidiary Citilink will be reduced to 134 from the combined fleets of 202 planes in 2019.
The company is renegotiating rates with creditors and aircraft lessors to restructure its debts and reduce debt loads, Kartiko said.