The Indonesian government, which is trying to restructure Garuda Indonesia’s debts, has reached agreement with four of the airline’s biggest lessors and hopes it can retire billions of debt in a similar way to how Philippine Airlines did when it recently emerged from voluntary administration. 

Minister of state-owned enterprises, Erick Thohir, has told local media the government wants Garuda to follow in the footsteps of Philippine Airlines, which emerged from bankruptcy at the end of last year after reaching agreements with its creditors that included retiring US$2 billion in debt while shareholders provided another US$505 million in capital.

Thohir says he is optimistic Garuda can successfully reach an agreement with creditors to restructure its debts, especially after the Central Jakarta Commercial Court approved a 60-day extension for the airline to complete its restructuring.

The additional time provides an opportunity for all stakeholders to complete verification and ensure the postponement of debt payment obligations (PKPU) process runs accordingly, he adds.

Thor has also told local media that four major aircraft lessors have agreed to Garuda’s debt structuring proposal.

Thohir further adds that talks with the 35 other lessors are progressing. He emphasized that if the airline gets three additional lessors on board, it will mean lessors representing the majority of Garuda’s fleet will be in agreement. The government announced last November that the airline’s turnaround plan includes reducing the fleet size to 134 from 202. 

Local media also quotes Garuda Indonesia president director Irfan Setiaputra as saying all the lessors have enrolled in the company’s restructuring program, demonstrating their commitment to try and find a solution to resolve the airline’s debt issues.

Setiaputra says all services, including passenger, cargo and aircraft maintenance will continue to operate normally.

“With increased traffic, restructuring, negotiations and new fundings, we hope that we can add more aircraft in the future,” he adds.

Jakarta Globe, without citing sources, reports that Indonesian billionaire Chairul Tanjung, from diversified conglomerate CT Corp, that has the second largest shareholding in Garuda after the government, has pledged support to inject additional capital into the airline.

Thohir has also told local media that if Garuda collapses, it will lead to a monopoly in Indonesia’s domestic airline market, creating a dilemma for the government.

He says such a monopoly will impact several business sectors, from undeveloped tourism regions as well as small-to-medium sized enterprises.

“With monopoly, ticket prices will become more expensive, thwarting the growth of the tourism industry.”

Thorhir stopped short of naming who the monopoly player would be, but Indonesia’s domestic passenger market is currently dominated by Garuda group and Lion group. The latter is controlled by Indonesian businessman Rusdi Kirana and his brother Kusnan Kirana.

Picture, from , shows Gardua A330s parked at Bali airport during the pandemic.

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