Garuda boss says bankruptcy off table despite Covid strains

Bloomberg

The head of Indonesia’s flag carrier said better terms on aircraft loans will help it avoid falling into bankruptcy as the nation grapples with surging coronavirus cases.
“We discussed the risks, the benefits, the pluses and minuses and the company’s leadership decided against it,” PT Garuda Indonesia President Director Irfan Setiaputra said when asked in an interview about considering bankruptcy proceedings.
Garuda is expecting a 8.5 trillion rupiah ($580 million) bridging loan from the government to come through this year, according to Setiaputra, an industry outsider who joined the airline in January just before the Covid-19 outbreak began.
The injection would help after the airline suffered a $713 million net loss in the six months through June, though it is taking longer than initially hoped,
Setiaputra said.
Airlines worldwide are under immense pressure as the pandemic and tight restrictions on movement decimated demand for travel. Several have collapsed, filed for bankruptcy protection or are restructuring, including Thai Airways International Pcl, which this month got court approval to proceed with a business reorganisation plan.
Setiaputra said he’d reassured lessors that the company
wouldn’t enter bankruptcy.
“I think that has given them a lot of confidence and now they see Garuda as one of the airlines in this region with good prospects for recovery.”
Yet the backdrop is worsening in Indonesia, which has nearly a quarter of a million virus cases. There were 4,176 confirmed infections on September 21 alone, a daily record, and an official from the taskforce handling the pandemic response warned that Jakarta’s health system is overwhelmed.
Latest data show air travel around the vast Indonesian archipelago picked up in July from deep lows. A total of 1.46 million people flew domestically that month, compared with just 87,000 in May, according to the country’s central statistics bureau. The numbers were still a long way below the early months of the year before the virus spread through the Southeast Asian nation.

Gaining Altitude
Declining traffic squeezed Garuda to such a degree that it extended the repayment of a $500 million sukuk, an Islamic bond, by three years. The airline also missed a payment on an asset-backed security and is facing a lawsuit in London over aircraft rental fees. Garuda’s
Z-score, a model used to predict bankruptcies, is stuck at its lowest in at least a decade.
The company’s shares fell 3.5% on Tuesday in Jakarta. They’ve dropped 55% this year.
Setiaputra took the helm of the company in January after the previous boss was dismissed for allegedly smuggling a classic Harley-Davidson motorcycle and two Brompton folding bicycles into Indonesia on a Garuda flight from Toulouse. The pandemic was a baptism of fire for an executive with a background in technology and mining. “This was really tough for me, I had no prior knowledge about the industry,” Setiaputra, 55, said.
Indonesia has closed its borders to most foreign visitors, leaving Garuda’s hopes pinned to domestic travellers and other revenue streams such as cargo.