Garuda upbeat over debt talks with creditors

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)