Mismanagement, corruption cost Garuda $1b: ICW

Mismanagement, corruption cost Garuda $1b: ICW

JAKARTA (JP): Mismanagement and corruption have caused state-
owned flag carrier Garuda Indonesia to lose at least US$1
billion, Indonesia Corruption Watch (ICW) say.

The watchdog said on Tuesday that indications of
mismanagement, corruption and collusion were found in the leasing
of the airline's aircraft and aircraft maintenance projects
dating back to 1989.

"Garuda has been weighed down by huge debt problems, most of
which have been caused by the projects," ICW said in a statement
distributed during a hearing session between Garuda management
and members of House Commission IV for transportation and
infrastructure affairs.

The projects are the leasing of four Airbus A330-300s from a
joint venture between Japanese firm Yamasa Corporation and
consortium of banks led by Morgan Grenfell; the leasing of two
Boeing B747-200 jets from the Japan Fleet Service; the leasing of
a Boeing B747-400 from the International Lease Financing
Corporation; and a maintenance agreement on 17 Fokker F-28s with
the other state-owned air carrier Merpati Nusantara and private
firm PT Sakanusa Dirgantara.

ICW said that corruption in the Yamasa and Morgan Grenfell-led
leasing project started in 1989 when Garuda, under the leadership
of the then company president Soeparno, decided to lease nine
Boeing B300-300s without performing proper feasibility studies.

ICW alleged that some Garuda officials colluded with
representatives of the two lessor companies to mark up the
leasing contract so that Garuda had to pay more, inflicting loses
of about $1 billion in the process.

It said the mark-up of the contract value and collusion by
Garuda officials the company lost at least $26.8 million from the
leasing of two Boeing B747-200s, $42.5 million from the leasing
of Boeing 747-400 and $7.1 million from the Fokker maintenance
project.

"There is adequate proof of corruption and collusion conducted
by Garuda officials along with accomplices from companies with
whom Garuda made contract agreements," ICW said, naming former
head of company asset supervisor Capt. Agus Wahyudo as one of the
Garuda officials implicated in the corruption.

Some members of the House Commission IV demanded Garuda
management investigate the incidents of corruption and dismiss
officials involved in them.

Garuda's president Abdul Gani said he would form a team to
investigate the cases.

He did not deny the truth of ICW's accusations, saying there
was a possibility that bad practices had occurred in the
projects.

He said that the company had been trying to sort out past
projects that were tainted with corruption. Garuda has submitted
data and documents about eight projects to the Attorney General's
office, including the maintenance agreement with Merpati and PT
Sakanusa as mentioned by ICW, that were carried out in a corrupt
and collusive manner, he said.

"But we apologize if we cannot sort out all the cases of
corruption and collusion at once, because our main focus over the
last couple of years has been solving problems related to
negative cash flow and debt restructuring," he told the
commission members.

Gani said Garuda had to focus its attention on cash flow
improvement and debt settlement in order to keep the airline
alive amid the bad financial performances it had seen for years.

He said Garuda had been in the red for the last 10 years and
had only been able to return to the black last year when it
recorded a net profit of Rp 617 billion.

Company finance director Emirsyah Satar said Garuda had seen
better results so far this year, with first quarter net profit
amounting to Rp 29 billion, as against a projected Rp 116 billion
net loss.

He said as of end of March this year Garuda had recorded Rp
21.3 billion in operating profits, also well above the predicted
figure of Rp 27.7 billion in operating losses.

Emirsyah said Garuda expected to book 2000 full-year net
profits of Rp 668 billion. (cst)