GIAA: Approved to Relist, Bound to Recuperate?

After a seemingly endless 1,5 years, the Indonesian Stock Exchange has at last unsuspended PT Garuda Indonesia Tbk (GIAA)’s stocks. The national flag carrier, whose stock was previously frozen due to a baffle in concerning debt, made its return on Tuesday (1/3) and has had a turbulent comeback in its first 2 days of relisting. In its opening session, there were 373.380 transaction lots recorded in GIAA shares by 10 AM. The stock shot up by 9% and hit a price of Rp224/share, touching its upper daily limit. In spite of that, the euphoria didn't last long as prices plummeted the following day, hitting its lower daily limit at Rp118/share after dropping 6,93% in the morning session. It is believed that the initial positive sentiment originated from the optimistic speculations about the company's restructuring plan. After years of financial instability, the restructuring of Garuda Indonesia's debt program intensifies in late 2021. According to Erick Thohir, the Minister of State Owned Enterprises of the Republic of Indonesia, the restructuring of Garuda Indonesia is the biggest and the most complex Indonesian corporation restructuring in its history. The completion of the restructuring was marked by the issuance of New Bonds and New Sukuk on 28 and 29 December 2022 as the final series of strategic corporate actions carried out by Garuda Indonesia to achieve an effective date based on the peace agreement. According to Irfan Setiaputra, Director of Garuda Indonesia, by fulfilling the various corporate strategic steps, Garuda is ready to immediately implement the Peace Agreement effectively starting January 1, 2023.

The state-owned airline with the stock ticker GIAA was suspended back in June of 2021 due to severe financial problems and an overwhelming amount of debt. As a company, Garuda Indonesia has accumulated Rp142 trillion in debt as of 14 June 2022. The debt consists of a List of Fixed Receivables (DPT) claimed by lessor companies of Rp104,37 trillion, a DPT for non-lessor companies of Rp34,09 trillion, and a preferential DPT of Rp3,95 trillion. Garuda Indonesia's president director Irfan Setiaputra admitted he was overwhelmed in managing the company’s debt settlement and restructuring. "Currently, there are 501 creditors registered and verified in Garuda’s postponement of obligations payment (PKPU) process. The creditors consist of 355 lessor companies, 123 non-lessor companies and 23 preferred creditors,” he stated. This concern led to the Indonesian Stock Exchange to halt the purchase and selling of Garuda Indonesia's stock (GIAA) to protect investors from substantial fluctuations. Furthermore, the company stated that 50% of creditors had already agreed on the restructuring plan proposed by Garuda. The proposal is one of the ways to solve its ongoing debt problems.

In a statement on Tuesday (1/3), Irfan Setiaputra assured that Garuda is optimistic that they are able to maximize the momentum in reviving business performance, alongside the construction of an increasingly solid foundation that is also supported by a lean and adaptive cost structure. In 2022, the aviation giant recorded a positive performance reflected on a debt reduction by up to 50%. By the third quarter of 2022, the state-owned airline has posted profits of up to US$3.7 billion. Furthermore, by negotiating with lessors and optimizing aircraft numbers and types, GIAA was able to lower the aircraft lease fee in half and set a more appropriate power-by-hour (PBH) rate in the last year. To support their recuperation to an even greater extent, they have also received a State Capital Investment (PMN) fund worth Rp7.5 trillion from the Indonesian Government. Looking ahead, Garuda said that they would continue to develop a multi-hub network by strengthening flight connections from important hubs including Jakarta, Denpasar, Bali, and Kualanamu Medan to locations in the network with high passenger demand. Additionally, the airline will increase its focus on cargo, which will help maximize the growing momentum of the national export sector. Lastly, the airline will also concentrate on expanding its market share in the charter sector, particularly in the Umrah. Seen as a promising market, Garuda plans to increase the number of direct flights between Indonesian cities and Middle Eastern pilgrimage destinations. With international borders reopening, it is to be hoped that the recovery of the travel and tourism sector will support Garuda’s return to both the Indonesian market and skies. "May Garuda fly high again, this time with sustainability and profitability." as said by Erick Thohir.

Sources:

Bisnis

CNBC Indonesia

Tempo

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