Garuda is “technically bankrupt”: official
Jakarta. State-owned airline Garuda Indonesia has “technically” gone bankrupt due to its insolvency and negative equity amid allegations of corruption and embezzlement, a senior official said on Tuesday.
According to financial reports for September 2021, Garuda has negative equity of $ 2.8 billion and the burden is increasing from $ 100 million to $ 150 million per month, said Kartiko Wirjoatmodjo, deputy minister of public enterprises.
âAccording to the banking interpretation, such a condition means that [Garuda] is technically bankrupt although this is not officially declared, âKartiko said during a hearing with a House of Representatives committee overseeing state-owned enterprises.
âGaruda cannot repay most of his debts and is likely to withhold employee salaries. “
He blamed mismanagement and past corruption for Garuda’s financial difficulties today.
âThere were corruption issues ranging from heavy partnerships and inflated aircraft prices to corruption and money laundering in 2011 and 2012,â Kartiko said.
The Covid-19 pandemic worsened Garuda’s financial crisis as income fell sharply due to global travel restrictions.
At the end of 2019, Garuda generated around $ 235 million in monthly revenue, but that figure fell to $ 27 million when the devastating impact of the pandemic began to hit the airline the following year.
âWhenever a mobility restriction is imposed, it has a direct impact on Garuda. In December 2020, monthly income soared to $ 100 million, but public mobility was subsequently restricted and income fell again. “said Kartiko.
âPeople would often ask me, ‘What really hurt Garuda, the corruption or Covid-19? My answer is both.
The government is trying to find the best solution to get Garuda out of the crisis.
The most practical way is to cut unprofitable flights and refocus on lucrative routes, Kartiko said. The airline will offer 140 routes next year, up from 237 routes in 2019.
As a result, the number of aircraft at Garuda and its subsidiary Citilink will be reduced to 134 out of the combined fleets of 202 aircraft in 2019.
The company is renegotiating its rates with its creditors and aircraft lessors to restructure its debts and reduce its indebtedness, Kartiko said.