[JAKARTA] Garuda is in talks with Indonesia’s sovereign wealth fund Danantara about an injection of capital, people familiar with the matter said, as the nation’s flagship airline struggles to right its finances.
The talks are preliminary and could change, and details regarding the size of the funds transfer are still being worked out, the people said, asking not to be identified because they’re not authorised to speak publicly.
Representatives for Garuda and Danantara didn’t respond to requests for comment.
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. It appointed a new chief executive officer in Wamildan Tsani Panjaitan in November and has been on a mission to fix its balance sheet and expand its international network.
At least 15 of its jets are grounded because it’s struggling to make maintenance payments, other people familiar with the matter said earlier this month. Some suppliers are also requesting advance payment for parts and labour due to concerns over Garuda’s financial situation, one of those people said.
As of 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 Garuda can function normally again as a company and obtain additional external funding.
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The carrier’s most recent debt restructuring concluded in December 2022, following a court-approved plan that was ratified in June of that year, which allowed the airline to restructure approximately US$9.6 billion in liabilities.
Indonesia’s government transferred its 65 per cent stake in Garuda to Danantara in March as part of a sweeping overhaul mandated by President Prabowo Subianto into how the country runs its state 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.
One reason Garuda is struggling financially now is due to the government’s domestic airfare price-cap policy, which is designed to regulate and control the cost of economy-class tickets and ensure affordability for passengers. That makes it harder for airlines in Indonesia to hike fares to boost revenue. BLOOMBERG
