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Garuda Indonesia Avoids Bankruptcy, To Focus On Domestic Routes

Yulian Ardiansyah - : Aug 2, 2021 - : 11:35 pm

Aercap Ireland Limited (Aercap), one of the lessors for Garuda Indonesia’s aircraft, agreeing to withdraw its bankruptcy lawsuit against the Indonesian flag carrier.

With the airline signing a Global Side Letter Agreement with it, Aercap on July 28 agreed to withdraw its bankruptcy lawsuit against the carrier. The lawsuit was registered in the New South Wales Supreme Court, Australia, on June 21, 2021.

As part of the agreement, Garuda Indonesia will relocate its nine Boeing 737-800NG aircraft that are under lease to an undisclosed location.

“In line with the agreement […], the company ensures that all aspects of flight operational activities will continue as normal,” said Rahmat Hanafi, Garuda Indonesia Technical Director, in a written statement to the Indonesian Stock Exchange (BEI). “The company also ensures that the follow-up to the agreement with Aercap will be carried out by always prioritizing the principles of Good Corporate Governance.” He added.

On a related note, Erick Thohir, the Indonesian Minister of State Owned Enterprise (Menteri BUMN), has said that he has asked Garuda Indonesia to stop competing with foreign airlines on international routes and to focus instead on domestic ones.

Domestic tourists are contributing to the overall economy as much as IDR1,400 trillion (about US$97.28 billion) compared to IDR300 trillion (US$20.85 billion) from foreign tourists, he said during a television interview on Aug. 1.

“Garuda [Indonesia] will focus on domestic,” Thohir said. “It won’t be as it used to be by competing internationally. We have to return to 90 percent domestic [routes],”

Garuda Indonesial recorded a US$384.35 million net loss with a total revenue of US$353.07 million in the first quarter of 2021, a 54% decrease compared to the last year’s revenue of US$768.12 million in the same period. However, the company managed to reduce its expenditures to US$702.18 million from the previous year’s US$945.71 million.

It is expected that with the shift to focus on the domestic routes, Garuda Indonesia will be able to further reduce its loss to better weather the current global pandemic situation.


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