Garuda to sell five of its aircraft to repay debts

NUSA DUA, Bali (JP): National flag carrier Garuda Indonesia will sell off five of its aircraft later this month to help repay its US$390 million offshore debts, a company executive has said.

Garuda's Finance Director Emirsyah Satar said here on Saturday the planned sales of five Airbus A300-B4s was also part of the company's fleet-streamlining strategy this year.

"The five aircraft would be sold by the end of the month to repay our debts," he told reporters on the sidelines of a discussion on tourism here held by Garuda as part of its 50th anniversary.

Emirsyah said, however, the sales proceeds would likely not cover Garuda's entire debts.

"We cannot expect to pay off our debts with the proceeds of these aircraft sales," he said.

Several parties from Europe and the United States had expressed an interest in the aircraft, he said. Most likely these companies would convert the planes into freighters, he said.

Emirsyah declined to give an estimate of the amount expected to be raised from the sales, but said that a brand new similar model of the A300-B4 would cost around $100 million.

"A used aircraft could be offered 10 times cheaper than its brand new counterpart, depending on its condition," he added.

Garuda owes $390 million to 80 foreign creditors from countries like South Korea, Japan, and those in Europe. It also owed Rp 290 billion (about $34 million) to local financial institutions, mostly state-owned banks, Emirsyah said.

He said the airline was currently still making interest payments on its debts but was seeking to further renegotiate them in the upcoming months with the help of its financial consultant, Deutschebank of Germany.

Garuda has embarked on a massive overhaul of its management and operations, after taking a severe financial beating from the over a year-long monetary woes that have hit the country since mid-1997.

Last year, it booked a significant net loss, the amount of which has not been announced by the company. But a depreciated rupiah boosted last year's gross revenues to Rp 10 trillion, mostly from dollar-denominated international routes.

This year Garuda expects to earn Rp 270 billion in net profit out of lower revenues of Rp 7 trillion.

As part of the restructuring, the airline has cut down on operations and downsized its fleet as well as its workforce.

It now operates 40 aircraft for its 20 domestic destinations and 21 international routes. Nineteen of the planes are leased by Garuda while the remaining 21 are owned by the company.

The national flag carrier returned six leased aircraft in June as part of its cost cutting program.

State Minister for the Empowerment of State Enterprises Tanri Abeng said earlier that the airline would return another five leased jets to improve its financial performance.

This will reduce Garuda's Boeing armada to 12 from 17 aircraft, all leased under a long-term contract.

As of December, it has given "voluntary early retirement" options to 1,516 personnel, costing the company Rp 110 billion in compensation. Garuda's staff now totals 10,953 people.

Also attending the Saturday event here, Garuda's president Abdulgani said the airline was considering reopening its Jakarta- Los Angeles route for the summer schedule this year.

The route was closed early last year at the height of the crisis.

Abdulgani said Garuda would, however, change the previous routing that required a stop in Honolulu, Hawaii, because the island yielded little revenue.

"America is an important destination to us, but we are currently exploring other routes because Honolulu was not very profitable," he said.

For its golden anniversary celebration, Garuda invited 113 foreign tour companies and 70 local sellers to attend the Travel Dialogue and Travel Mart over the weekend.

-- Devi M. Asmarani