Jakarta. National carrier Garuda Indonesia could face bankruptcy amid ballooning debts and financial hardships due to the devastating impact of the Covid-19 pandemic.

According to media reports on Sunday, the government has prepared all possible contingencies for Garuda, including liquidation and a replacement by state-owned air charter company Pelita Air Service if ongoing rescue measures are fruitless.

“If we meet a dead-end, we will close [Garuda] down because injecting more state money is impossible given the company’s massive debt loads,” Kartiko Wirjoatmodjo, a deputy for the state-own enterprises minister, told Antara news agency.

He said Garuda is currently negotiating with lenders and tens of aircraft lessors in its attempts to restructure debts.

Even if Garuda can stabilize its financial conditions, it’s almost certain that the company will no longer be able to serve long-haul flights in the future, Kartiko added.

According to Garuda’s financial results in June, the company has a debt of $4.9 billion and the load increased by Rp 1 trillion ($70 million) every month because of delay in loan payment, Kompas news website reported.

Before the pandemic, Garuda booked around Rp 100 billion in profit in 2019, but by the third quarter of 2020, it suffered a massive loss of Rp 15 trillion.

The website also reported that the government has prepared Pelita Air Service, a subsidiary of state-owned oil company Pertamina, to serve domestic flights if Garuda files for bankruptcy.

State-Owned Enterprises Minister Erick Thohir said earlier Garuda leased its fleet from at least 36 aircraft lessors, some of them had been involved in “corrupt practices” with the previous Garuda management.

Garuda has faced a number of civil lawsuits from lessors for inability to pay the rent.

Garuda corporate secretary Mitra Piranti said in a letter to the Indonesia Stock Exchange the company “continues taking strategic steps to accelerate business recovery with the main focus on improving the company’s fundamental performance”.

The return of tourism business increases optimism for the company’s future, Mitra added.

“In addition, we continue to negotiate and communicate with all creditors to reach the best settlement and debt restructuring that will improve the company’s fundamental performance,” he said.