Government to inject fresh funds to help pay Garuda's debt
Government to inject fresh funds to help pay Garuda's debt
JAKARTA (JP): State-owned airline Garuda Indonesia said on Wednesday the government would inject US$62 million annually for the next eight years to cover the fees payable by the company for the lease of 11 Boeing 737s.
Company president Abdul Gani said it leased the aircraft last year and it was obliged to pay the leasing fee to the U.S. Exim Bank.
The first payment is scheduled to be made this fiscal year which ends March 31, 2000.
He said the fund injection would be calculated as additional equity of the government in the company rather than as a loan.
The fund injection is part of the requirements made by the company's creditors for a debt restructuring program.
"Garuda presented a business plan to its creditors in London and Singapore last month.
"During the presentation, both Garuda and the creditors concluded that Garuda needed support from its shareholder, that is the government... in the form of an additional equity injection," Gani said.
According to Gani, Garuda's outstanding debt totaled $1.36 billion, including $610 million owed to the European Credit Agency for the lease of six Airbus aircraft.
The debt also included $300 million in commercial and promissory notes issued last year, $170 million owed to state Bank Mandiri and Bank Negara Indonesia and $280 million to suppliers.
He said Garuda would soon resume debt restructuring talks with its creditors after receiving assurance of the government's financial assistance.
"The creditors will see the impact of the government's financial assistance on Garuda's business and cash flow. And based on the cash flow, it will be known the amount of the debt that needs a delay in payment as well as the length of the delay," Gani said.
He said the airline booked operating income of Rp 486.5 billion ($59 million) during the first half of the year, compared to a Rp 1.1 trillion operating loss in the corresponding period last year.
He said it recorded the turnaround due to the corporate restructuring program in the company which began in the middle of last year.
He did not, however, reveal the company's net profit for the first half of the year.
He said the airline's load factors rose to an average 72 percent in the first half of the year from an average 68 percent last year.
The airline's punctuality has also risen to between an average 88 percent and 89 percent in the first half of the year from 68 percent last year.
Garuda has closed services on 17 international routes and reduced flights on domestic routes as part of cost-restructuring measures.
Garuda has hired consultants from German airline Lufthansa AG and German bank Deutsche Bank to help it solve its problems.
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's fleet consisted of more than 50 aircraft. (prb/jsk)