Garuda Indonesia Due for a Major Restructuring

Ongoing financial troubles at the Indonesian national carrier mean its fleet could be halved in the near future.

Photo: ronniechua/iStock

Executives at Garuda Indonesia are now planning a total overhaul of the airline, according to a Bloomberg story by Jakarta-based journalists Harry Suhartono and Tassia Sipahutar. The reporters were given access to a recording of the carrier’s President Director Irfan Setiaputra taped last week, when he addressed staff and said the company was in need of comprehensive restructuring. He elaborated that Garuda was looking to reduce the number of operational aircraft from its current count of 142 to no more than 70, effectively halving its fleet to give it a better chance of surviving the pandemic-induced crisis.

In the same remarks, Setiaputra said Garuda Indonesia is now operating only 41 aircraft, with the rest still grounded because the state-owned company has been delaying its payments to the planes’ lessors for months. He added that cash flow was negative and Garuda Indonesia had so far accumulated 70 trillion rupiah (US$4.9 billion) in debt. According to Bloomberg, the airline chief said a failure to restructure Garuda “would result in an abrupt end of the company.” It is understood that the planned overhaul does not apply to Citilink, Garuda’s low-cost subsidiary.

Compared to 2019 levels, the overall passenger volume for the Garuda Indonesia Group dropped by two thirds in 2020. Demand for both domestic and international air travel is still weak, and Indonesia’s borders remain closed to visitors and non-citizens without residency status or work-sponsored limited stay visas. Ever-evolving internal travel restrictions have not helped either; the Indonesian government has only just lifted a weekslong ban on non-essential domestic travel over the Lebaran period, traditionally the biggest holiday of the year.

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