Garuda pays $105.3m in debts, interest

Rendi A. Witular, The Jakarta Post, Jakarta

Despite its financial difficulties, national flag carrier Garuda Indonesia has managed to meet its financial obligations for 2004 to international creditors.

Garuda said in a statement recently that it had paid a total of US$105.3 million in debt installment and interest due on Dec. 28.

"With the payment of the installment, Garuda's total debt and interest have been reduced to $827.9 million," said the carrier.

Since it signed debt restructuring agreements with its creditors in November 2001, the airline has paid a total of $454.7 million in installments and interest to creditors, the company said.

Some $627 million of Garuda's remaining debts is owed to an international consortium consisting of creditors in the United Kingdom, Germany and France. The remaining $200 million is in the form of promissory notes, which are due in 2007.

Garuda defaulted on more than $1.1 billion in debts to international creditors during the Asian financial crisis that started in late 1997. Creditors then agreed to extend the payment period until 2010.

Garuda is scheduled to pay $111.1 million of its remaining debts and interest next year, $112.8 million in 2006, $108 million in 2007, $120.3 million in 2008, $122.8 million in 2009 and $218.7 million in 2010.

Garuda's operational revenue is estimated to reach Rp 10 trillion ($1.1 billion) in 2004, up from Rp 8.3 trillion in 2003. The airline's passengers were also projected to rise to about eight million from seven million in 2003.

The airline has several times complained to the government and lawmakers that it had been left behind by its competitors in the region due to its inability to expand or rejuvenate its fleet because of a lack of funds and the limit on new borrowing set by its creditors. Creditors will only allow the firm to borrow a total of US$25 million over 10 years.

Garuda has said that one of the options to boost the airline's competitiveness and to avoid financial difficulties such as it experienced in 1998 was to refinance the airline's debts.

The Office of the State Minister of State Enterprises is still seeking the best life-saving options for Garuda. The options include debt refinancing, a merger with troubled state-owned airline Merpati Nusantara Airlines and debt-into-equity conversion.

In order to improve its performance next year, Garuda plans to lease at least 12 new airplanes, comprising Boeing 737 New Generation, Boeing Classic and Airbus A330, for new regional and domestic routes.