[JAKARTA] Garuda Indonesia is in talks with the country’s sovereign wealth fund Danantara about an injection of around US$500 million, according to sources familiar with the matter, as the struggling national carrier looks to turn its business around.
An agreement could be reached as soon as June or July and would be part of an initial stage of funding that may be done in two parts to help the carrier right its finances, said the sources, who asked not to be identified because the information is private.
Some of the money is planned to go to Garuda’s budget carrier Citilink in order to get more than a dozen of its jets back in the air, the sources said. The Indonesian government is also considering moving control of Citilink to state-owned oil giant Pertamina, they said, adding that discussions are fluid and no final decisions have been made.
Representatives for Garuda declined to comment on any specific financial assistance that Danantara may provide, and instead referred to a statement made last month, in which the carrier said that “such corporate action is fully under the authority of the shareholders and related stakeholders”.
A representative for Danantara declined to comment. Pertamina said that Indonesia’s “state-owned Enterprises Ministry had an idea once about a merger of Pelita Air and Citilink, but until now, we haven’t got more updates”, referring to Pertamina’s small, privately owned airline.
Garuda, which is majority-owned by the state, returned to a net loss last year after two years of profit thanks to the post-Covid travel boom. Its ongoing financial struggles saw the airline appoint a new chief executive officer in Wamildan Tsani Panjaitan in November, who has been on a mission to fix its balance sheet and expand its international network.
As at December, Garuda had around US$1.4 billion more in debt than assets, a capital shortfall some analysts have said needs to be closed before the carrier can function normally again as a company and obtain additional external funding.
The carrier’s situation has drawn the attention of President Prabowo Subianto and, in March, Indonesia’s government transferred its 65 per cent stake in Garuda to Danantara as part of Prabowo’s sweeping overhaul of how the country runs its state-owned companies.
The 76-year-old airline is a major employer and a key mode of transport for Indonesia, a nation that’s made up of 17,000 islands over an area spanning the distance from New York to London. BLOOMBERG
