One influential Indonesian has stepped up to support beleaguered Garuda Indonesia while another alleges corruption in the same week creditors lodged claims worth US$13.8 billion against the airline. The events add another chapter in the long-running and colorful Garuda Indonesia saga.
A high drama week at Garuda Indonesia
Last week was the deadline for final claims from out-of-pocket Garuda Indonesia creditors. All up, 470 creditors put in claims totaling $13.8 billion in a scramble for cash as the airline tries to cut its crippling debt load.
Garuda Indonesia says it has debts of $9.8 billion. The four billion dollar difference isn’t peanuts, and the airline’s administrators will work through the claims and verify them over the next couple of weeks.
Hot on the heels of this news was confirmation from billionaire Indonesian businessman Chairul Tanjung that he would increase his investment in Garuda Indonesia after the airline finalizes its court-led debt restructuring.
Mr Tanjung already owns a 28.3% stake in Garuda Indonesia and is the airline’s biggest shareholder after the Indonesian Government, which retains a 60.54% stake.
Meanwhile, a long-simmering graft scandal regarding the lease of ATR 72-600 aircraft resurfaced this week after Indonesia’s state-owned enterprises minister, Erick Thohir, handed over audit documents he said indicated some unconventional financial dealings.
There was little Garuda Indonesia CEO Irfan Setiaputra could do but grit his teeth and support any investigation. Like a high-stakes soap opera, the dramas at Garuda Indonesia show no signs of abating.
Garuda finds a safe harbor in a supervised debt restructuring process
Garuda’s problems predate the pandemic and subsequent travel downturn. For years, financial issues, management issues, and ingrained cultural issues have hampered the airline. The pandemic and travel downturn simply brought the problems to the fore.
Last year, Irfan Setiaputra acknowledged Garuda’s problems when he said the airline needed a comprehensive restructuring.
“Failure to carry out the restructuring program could result in the company being terminated suddenly,” he told employees.
But getting that restructuring process underway involved dealing with myriad creditors. It was a process akin to herding cats. Meanwhile, debts at the airline were rising by $100 – $150 million per month.
In November, Garuda Indonesia said it owed aircraft lessors around $6.3 billion of the total $9.8 billion it says it had in liabilities. The airline has planes leased from 30 lessors. Aside from sending many planes back, Garuda wanted to swap debt for equity and/or issue zero-coupon bonds, reducing their liabilities to $3.7 billion, or just 19 cents for every dollar now owed.
In early December, a creditor filed a debt petition in Jakarta’s Central District Court that finally allowed Garuda to suspend its debt repayment obligations and enter a supervised debt restructuring process.
The supervised restructuring process allows Garuda to avoid negotiating individually with its many creditors – a process that was proving lengthy, intractable, and ultimately unsustainable.
Administrators set a claim filing deadline of January 5. Those 470 creditors duly submitted their claims. On January 19, the court will rule on the validity of the claims and see the next stage of the restructuring process commence.
A promise of future money for Garuda Indonesia
Meanwhile, Chairman of Indonesian industrial conglomerate CT Corp and former Government Minister, Chairul Tanjung, lent Garuda Indonesia some much-needed support earlier this week.
Mr Tanjung has been a long-time Garuda Indonesia booster – as well you might be when you own over a quarter of the airline. He owns 7,316,798,26 shares in Garuda Indonesia via a CT Corp business unit, PT Trans Airways.
“We hope the court process will be finished soon,” a Channel News Asia reports Chairul Tanjung saying this week. “Once it is done, our plan is to increase capital to strengthen Garuda.”
But Mr Tanjung did not say by how much he intended to “strengthen” the airline. Further, given the restructuring process can run for up to 270 days under Indonesian law, his money can stay safely in his wallet for the time being.
The Garuda Indonesia saga has been characterized by rhetoric, big claims, and promises that never materialize. It will be worth watching whether later this year, Chairul Tanjung puts his money where his mouth.
Another investigation looms for Garuda Indonesia
But Erick Thohir turned Chairul Tanjung into the sideshow this week. The State-Owned Enterprises Minister handed over to Indonesia’s Attorney General’s Department this week a dossier alleging corruption in the ATR 72-600 procurement process and some other dodgy dealings.
Garuda Indonesia has 13 ATR 72-600 aircraft, all leased and primarily coming from Nordic Aviation Leasing. Given Garuda’s form in the aircraft procurement field, this news surprises no one.
In 2020, the UK Serious Fraud Office commenced an investigation into Bombardier regarding their provision of aircraft to Garuda Indonesia. In the same year, former Garuda CEO Emirsyah Satar went down for eight years for bribery and money laundering involving Airbus aircraft and Rolls-Royce engines.
Can Garuda Indonesia put the ongoing dramas behind it?
Irfan Setiaputra found himself appointed the CEO of Garuda in 2019 – the fifth in about five years. Part of his job was to clean up the airline. He not only has to handle the pandemic and restructuring, but Mr Setiaputra also has to deal with the fallout from historical malfeasance at Garuda Indonesia.
“We know based on valid data that in the procurement process for airplanes, leasing, there are corruption indications with various brands,” Minister Thohir said this week. In a statement, Garuda Indonesia said it would support any investigations.
Any investigation should not impact the restructuring process, and talk of problems with the ATR procurement process isn’t new. Garuda’s fleet plans constantly change. But in the latter half of 2021, the airline said it would return five of their 13 ATRs.
Garuda Indonesia is a magnet for drama. Perhaps that’s because of the people involved with and running the airline. Maybe it is because of the way it does business. Maybe it’s just the Indonesian way of resolving problems. Either way, the decline and potential resurrection of Indonesia’s flag carrier is a rolling story that never stops being interesting.
Source: https://simpleflying.com/garuda-indonesia-restructuring-latest/
