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Garuda Indonesia: Striving Amidst Countless Obstacles


The state-owned airline PT Garuda Indonesia Tbk (GIAA) is actively making rescue efforts to improve its current condition. As the COVID-19 pandemic continues to take its toll, the Indonesian flag carrier has to deal with a dramatic drop in the number of passengers, toppled with poor financial performance. During the management hearing meeting with commission VI DPR RI on Monday (6/22), the company presented a net loss of US$2.5 billion and increased its debt by 229 percent. According to the report, Garuda Indonesia's overall debt rose to US$12.73 billion in 2020, a significant increase from US$3.8 billion in the previous year. Hence, there is a difference of US$8.85 billion for the liability position as of the end of 2019 and the same period in 2020. One of the unpaid debts is the plane rental fee from Aercap, a lessor who leases several of Garuda Indonesia's fleets. In return, the management of Garuda Indonesia seeks to restructure its debt. The state-owned airline has then set to relocate nine aircraft leased by the company to the agreed location and appointed five financial and legal consultants for other restructuring plans. In spite of that, The Technical Director of Garuda Indonesia, Rahmat Hanafi, ensures that all aspects of the company's flight operations will continue as normal.


The stock value of Garuda Indonesia, GIAA has also been damaged by the pandemic, with a downward trend expected throughout 2021. However, the stock hit an all-time high in January 2021 before gradually declining in the following months. Although resuscitate plans have been made with how in May 2021 PT Trans Airways, owned by Chairil Tanjung, is expanding their ownership in GIAA, making them owns 25.809 of GIAA, while the government owns 60.5363 percent and the community owns 13.6545 percent. Yet, GIAA still faces many hurdles, resulting in a decision from the Indonesian Stock Exchange (IDX) to temporarily halt trading of GIAA in all markets, effective on June 18 (session I), until further notice. This decision was also made because the national airline failed to make timely coupon payments on its global Sukuk. Consequently, the IDX stated that the suspension indicates a problem in Garuda Indonesia's business activities. Furthermore, they developed a Special Notation in the form of code M, E, D, L, X to Garuda Indonesia to help raise investor awareness regarding the condition. The IDX Corporate Valuation Director, I Gede Nyoman Yetna, claimed that the temporary suspension of Garuda Indonesia was not a sanction but an act to protect investors. "We can say that the temporary suspension of securities trading is actually aimed at providing protection to investors," Nyoman told the reporters, Wednesday (7/28).


Furthermore, this policy was also adopted to cater an opportunity for the management to improve the business continuity or issue going concern. The Garuda Indonesia Employees Union (Sekarga), along with the Garuda Pilots Association (APG) and the Garuda Indonesia Cabin Crew Association (IKAGI), had previously asked the Minister of State-Owned Enterprises, Erick Thohir, to take rescue actions, particularly with debt restructuring. Garuda Indonesia Bersatu Secretary Coordinator Tomy Tampatty expressed that there are two main concerns for decision-makers. "The first is financial problems, considering a large number of debts, amplified with declining operational performance due to the COVID-19 pandemic. The second is the fundamental business issues that need to be reconstructed and managed thoroughly in order to optimize revenue," explained Tomy, Tuesday (8/10). With many difficulties Garuda Indonesia is facing, from financial performance plummetted, declining stock value, and its problem with liabilities, the decision that IDX has taken can be a way for us to decipher it as a process to reduce the severity of the condition further and to protect its investors from yet another wave of distress.


Sources

CNBC

CNN Indonesia

IDX Channel

Tempo


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