The State-Owned Enterprises Minister Erick Thohir speaks in a working meeting with the House of Representatives Commission VI, which oversees trade, investment, state-owned enterprises, small- and medium-sized businesses, and national standardization, on Tuesday, Jan 25, 2022. (Antara Photo/Dhemas Reviyanto)

Garuda Makes Progress in Its $13.8b Debt Restructuring Process


JANUARY 26, 2022

Jakarta. Four major airplane lessors have agreed to the state-controlled airline Garuda Indonesia's debt restructuring proposal, providing significant support to the airline's plan to repay its $13.8 billion debt and continue its operation as the country's flag carrier, a minister told the lawmakers on Tuesday. 

"We have the support from four lessors; 35 others are still progressing. This is what we are pushing so that the majority of lessors support the debt restructuring," the State-Owned Enterprises Minister Erick Thohir said in a working meeting with the House of Representatives Commission VI. The commission oversees trade, investment, state-owned enterprises, small- and medium-sized businesses, and national standardization.  


"If we can get an additional three lessons on board, this means that the majority of lessors agree. The remaining lots are small," Erick said.

Erick said that he was confident Garuda would resolve its debt issue. 

"Examples of success already exist, such as in Philippine Airlines, which managed to restructure $2 billion. Of course, we will use this momentum to improve the system and cost structure at Garuda," he said.

PKPU Process

Following the acceptance of a petition to suspend debt payments to its creditors by the Central Jakarta Commercial Court last month, Garuda entered the Suspension of Debt Payment Obligations (PKPU) process, similar to Chapter 11 of the United States Bankruptcy Code. 

The airline has received claims on its outstanding debt to the tune of Rp 198 trillion ($13.8 billion) from creditors, Irfan Setiaputra, Garuda's president director, told the Globe's affiliated TV station BeritaSatu last week. 

Early on, Garuda struggled to stay solvent in the face of excessive costs and aggressive fleet growth tainted by corruption. That was even before the Covid-19 outbreak that brought air transport to a halt. 

Last Friday, the Central Jakarta Commercial Court decided to extend the deadline for creditors to submit their claims on Garuda by 60 days, at the debtor's request and the majority of creditors.

"This additional time provides an opportunity for all stakeholders involved to complete verification and ensure the PKPU process runs according to the precautionary principle. This extension also gives us time to prepare a more mature peace plan through more intense and constructive negotiations," Irfan said. 

During the extension period, all stakeholders would coordinate with the management team to complete the administrative aspects in the PKPU, Irfan said. These include verification of documents and calculations on account payable for the management team can issue a list of fixed receivables as the basis for voting at the end of the PKPU process. 

"During the PKPU process, we ensure that all flight services including passenger, cargo, and aircraft maintenance services continue to operate normally," Irfan said.

Garuda operates 38 aircraft today, a small fraction compared to 140 aircraft the airline used to run before the Covid-19 pandemic. Irfan said the airline planned to increase its fleet size to 66 airplanes this year. 

"In the future, we hope that with increased traffic, restructuring, negotiations, and new funding in the future, we hope to be able to add more aircraft," Irfan said. 

Major Shareholder Support

Indonesian billionaire Chairul Tanjung, the patriarch of a diversified conglomerate CT Group that owns second-largest shares in Garuda after the Indonesian government, has pledged his support to the flag carrier's revamp. 

In his first public appearance in almost a decade early this month, Chairul said he planned to inject additional capital into Garuda. 

"When [PKPU] is finished, we plan to add more capital to strengthen it," Chairul said. 

CT Group currently controls a 28.26 percent stake in Garuda through Trans Airways. The government controls 60 percent while the public holds the rest. 

"[The capital injection plan] has been discussed between the government and us. Later, we also plan to invite strategic investors. Well, it's all in the discussion stage. So, be patient," Chairul said.