[JAKARTA] Garuda is paying twice as much to lease its latest Boeing 737 Max jet than it does for the older 737 planes in its fleet, another potential blow to its finances as it tries to return to profitability.
The struggling Indonesian airline is paying around US$400,000 per month for the 737 Max 8 it has leased from BOC Aviation, according to people familiar with the matter. The state-owned carrier pays on average US$200,000 a month for its existing older Boeing 737-800 fleet, the people said, asking not to be identified discussing details that are private.
BOC Aviation declined to comment. Representatives for Garuda didn’t respond to a request for comment.
Garuda, which is now owned by Indonesia’s sovereign wealth fund Danantara, reported a full year loss in 2024 for the first time since restructuring nearly US$10 billion of debt in 2022.
While the new Max 8 offers better fuel economy than the older planes, it’s not clear whether the savings would be enough to compensate for the higher leasing costs. Outside of the difference in the age of the airframe, the doubling of the lease cost can in large part be attributed to the discounted rental prices that Garuda managed to get from its lessors during those debt restructuring negotiations.
Danantara extended a US$405 million loan to Garuda just days before the airline agreed to lease the additional 737 Max. On Friday, the plane was en-route to Indonesia, according to data from flight tracking website FlightRadar24.
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Garuda is already having trouble keeping its existing fleet in the air, with about 10 per cent of its planes grounded as recently as May as it struggled to make maintenance payments. Nearly 16 per cent of revenue in 2024 was for maintenance and repairs, the highest ratio among flag carriers globally, data compiled by Bloomberg show.
Garuda could receive US$800 million to US$1.2 billion more from Danantara to assist with payments to maintenance and leasing companies, Bloomberg reported earlier this week, citing people familiar with the matter.
Further pressure on the airline may come as it has to take new aircraft after Indonesian President Prabowo Subianto reached a trade deal with US leader Donald Trump that included the purchase of 50 Boeing aircraft. That could force Garuda to agree to a deal under terms it doesn’t necessarily favour and with jets it doesn’t actually need.
Trump announced in a social media post on Tuesday that Indonesia will order 50 aircraft, including “many” of Boeing’s larger 777 planes, without disclosing a buyer. Garuda chief executive officer Wamildan Tsani Panjaitan has previously said he’s in talks to buy 50 to 75 Boeing aircraft, including 737 Max and 787-9 Dreamliner models. BLOOMBERG
