Garuda may default on debt due to SARS

The Jakarta Post, Jakarta

The country's national carrier, Garuda Indonesia, may default on its debt repayment this year due to a sharp downturn in business triggered by the Severe Acute Respiratory Syndrome (SARS) epidemic, a senior company official said.

"We have to admit it's difficult. By the end of this year, we will still owe US$60 million, from $100 million previously," Garuda finance director Emirsyah Satar was quoted by Antara as saying.

He said that Garuda had no contingency plan yet to avoid a possible default.

"There's no 'plan B' yet," he said.

Meanwhile, Garuda president Indra Setiawan said that the airline would not be able to meet this year's profit target due to various uncertainties plaguing the industry.

He said that the management had reduced the company's net profit target this year to Rp 150 billion (US$16.85 million) to Rp 170 billion, from an initial projection of around Rp 520 billion.

He added that, in a bid to survive turbulence in the airline business, Garuda had taken various cost-cutting measures, including the closure of unprofitable overseas routes.

But Indra dismissed rumors that the management would slash working hours and cut the number of its employees.

The two officials were speaking on the sidelines of a ceremony held to install the new board of commissioners of the company.

Former minister/state secretary Marsillam Simanjuntak was appointed new president commissioner, while former banker Gunarni Soeworo was one of the new board members.

Meanwhile, Garuda marketing director Bachrul Hakim said that the company would purchase new aircraft to strengthen its domestic services.

He said that the purchase would be made when the situation in the industry had improved.

"We are still studying the possibility of adding new aircraft to support our 'City-Link' program," he said.

"Relying on five Fokker 28 aircraft (for the program) is not possible, so we must add new ones; it could be the MD82, Fokker 100 or Fokker 50," he said.