Garuda upbeat over debt talks with creditors

JAKARTA (JP): National flag carrier Garuda Indonesia said on Thursday its debt restructuring proposal was received positively by its foreign creditors.

The airline's vice president for corporate communications, Pujobroto, said results from the first series of meetings with creditors in Singapore and London were very encouraging.

The meetings did not touch on the detailed issues of the debt restructuring proposal, but the creditors agreement to continue the talks in later meetings was very important for Garuda, he said.

Garuda executives met creditors in Singapore and London last week to present a five-year program to restructure the airline's US$1.1 billion debt.

"The presentation is an important step toward the continuing process of the debt restructuring program. We did not make any proposals on how the debts would be settled during the presentation, but another meeting will soon be set up to specifically discuss this matter," he told The Jakarta Post.

Garuda has been engaged in massive corporate restructuring since the country began to emerge from the economic crisis in late-1998. The airline suffered $46.1 million in losses in 1998 partly due to the crisis.

As part of its restructuring, Garuda asked German Deustchebank to advise it on its finances and German airline Lufthansa to help the company improve its management and service.

Separately, Garuda vice president of commerce Bachrul Hakim said the airline was counting on the debt restructuring program to further repair its financial condition.

"If the debt talks fail, we'll be in deeper trouble," he told the Post on the sidelines of a seminar on tourism hosted by Berita Ekonomi magazine.

He said Garuda cut a number of its routes, including to most destinations in the United States and Europe, as well as to a number of Asian cities, including Seoul, Taipei, Guang Zou and Fukuoka. This reduction of flights is part of the airline's new business plan.

"We cut over 40 percent of our international flights and lower than 40 domestic flights," he said.

He said reducing the number of flights and cutting unprofitable routes was part of Garuda's program of consolidation and rehabilitation.

He said the economic crisis not only compelled Garuda to dismiss some of its employees, but it also had to reduce the size of its fleet by selling or canceling the lease on some aircraft.

Pujobroto said Garuda sold around five of its Airbus B4 aircraft this year.

Bachrul, however, said he was optimistic Garuda would soon emerge from its financial difficulties because the company had begun to show signs of recovery, including an increased load factor.

"We're doing very good this year. We had an overall average load factor of over 80 percent throughout the first half of this year, a level we are sure will remain stable until the end of the year," he said, adding that Garuda had a load factor of around 60 percent in 1998.

He also said Garuda planned to resume flights to Korea and Taiwan as soon as the company's financial situation recovered. "We'll soon resume the flights, but not this year."

The carrier currently has 44 aircraft, comprising three Boeing 747-400s, four B747-200s, nine B737-300s, seven B737-400s, five B737-500s, six Airbus 330-300s, five DC-10-30s and five Fokker 28s. In the past, the airline had more than 50 aircraft.

Garuda expects a profit of $4.5 million this year and $5 million in 2000. (cst)