Garuda Indonesia’s “Crash Landing”
Summary
- Garuda Indonesia faces critical financial problems. The government seeks any possible rescue scenario after running out of Rp 1 trillion bailout fund to pay off debts. A D-Insights source revealed that the restructuring would involve filing for the Suspension of Debt Payment Obligations (PKPU). The risk of bankruptcy looms if the scenario fails.
- Garuda offered potential debt to equity swap to some creditors, lessors, and vendors. The option makes the most sense amid mounting debts and negative equity. If this option is agreed upon, there will be several new shareholders in Garuda. The continuation of Garuda as a national flag carrier will be decided later.
- At least soon, CT Group will not inject capital due to the risk of capital losses for operations and paying debts. According to CT Group representative commissioner Peter Gontha, the investment loss in Garuda has exceeded Rp 11 trillion, taking into account the falling share price and interest if the funds are placed in banks.
- The Lion Air Group -which is also in financial trouble- has successfully dominated the domestic aviation industry amid the pandemic. Last year, the Lion Group held more than 60 percent market share, surpassing the Garuda Group. The Lion Group may dominate the domestic market if Garuda's rescue scheme fails and is grounded.