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The company had approached financial investors and foreign airlines to increase its capital, Kartika Wirjoatmojo, deputy minister of state-owned enterprises, told reporters.
Restructuring of the airline’s obligations, agreed this month, has come six months after an unpaid creditor forced it into proceedings for a court-supervised debt moratorium.
In negotiations supervised by the court and in out-of-court settlements, Garuda had halved its debt to $5.1 billion from $10.1 billion, Kartika said.
The company has also renegotiated the terms of aircraft orders and leasing contracts. It was formerly paying abnormally high rents for aircraft.
During restructuring, Garuda had managed to cut lease rates for wide-body aircraft by at least 65% and for narrow-body aircraft by 35%, Kartika said.
Some lessors had also agreed until December 2023 to vary lease payments according to the amount of time aircraft were used.
“Garuda was rarely profitable, because of its low fleet utilisation and high lease costs,” the deputy minister said. “… With an efficient fleet, optimised domestic routes and reduced lease rates, Garuda can make a profit, we believe.”
The carrier would still face challenges in managing costs amid soaring fuel prices, but it expected to turn its operating income positive after reporting negative cashflow each month during the COVID-19 pandemic, he said.
The deputy minister reiterated Garuda’s plan to focus on serving domestic routes and maintaining only profitable international services.
Including low-cost unit Citilink, the Garuda group would operate 120 aircraft, down from 210 in 2020.
The government has said it will top up Garuda’s capital through a rights issue later this year and that the company will later make a second rights issue, inviting a strategic partner to invest in it.
Kartika said Garuda approached international airlines and financial investors for the second rights issue.
“We believe with our huge domestic market … there will be huge potential” for investors, he said.
As of last month, the government owned 60.54% of Garuda’s shares, according to a stock exchange filing.
