Garuda Indonesia is in talks with Airbus and Boeing about cancelling orders for aircraft. The imminent cancellations are part of the Indonesian flag carrier’s continuous endeavour to reorganise and reduce debt. An order for 49 Boeing 737 MAXs and 12 Airbus A330s is expected to be cancelled.
On Tuesday, March 1, the cancellation was announced during a meeting with creditors in Jakarta. Following the discussion, Garuda’s Director of Finance and Risk Management and Chief Executive Officer both acknowledged the imminent cancellations.
At Garuda Indonesia’s creditor meeting, future fleet reduction on the agenda
The airline, located in Jakarta, owes its multiple creditors $9.8 billion. The airline hopes to reduce the reduction to a more manageable $3.4 billion via the court-supervised restructuring procedure (known in Indonesia as PKPU proceedings). The most popular method for accomplishing this appears to be radical fleet surgery.
Garuda Indonesia had 142 planes in its fleet before the outbreak of COVID-19, but it was continually losing money. Following the restructure, the airline expects to have a fleet of only 66 planes, a 55 percent drop.
According to the airline database ch-aviation.com, Garuda’s current fleet consists of 117 planes, 99 of which are leased. According to the same database, Garuda presently has 30 lessors with aircraft. Garuda wants lessors to provide reduced rates and power-by-the-hour contracts for the planes it wants to keep. Garuda aims to settle its existing debts with all lessors by issuing Islamic bonds. The ability to persuade the various lessors to accept this contract is critical to the restructuring process.
Order cancellation shall avoid significant future debt
Another component of the fleet surgery is persuading Boeing and Airbus to cancel current orders, which will save Garuda $5.9 billion in future commitments. Garuda has nine A330-900 planes on order and four A330-800s that they wish to cancel. At list pricing, the order is estimated to be worth $1 billion. Garuda’s fleet plans change on a regular basis. Six A330-200s, 17 A330-300s, and three A330-900neo are already on the way. Last September, the airline announced that all A330-200s and ten A330-300s will be retired, but that the existing A330-900neo would remain.
Garuda’s proclaimed goal of downsizing to a smaller regional airline instead of operating as a long-haul carrier implies that its current and future wide-body jets are no longer needed. As a result, all of Garuda’s leased Boeing 777-300ERs are scheduled to depart.
