Economics and Business News


How Erick Thohir Cuts Garuda's Rp139 Trillion Debt

SOE Minister Erick Thohir is trying to restructure debt as a measure to save Garuda Indonesia. However, if the business is judged not to be going well, bankruptcy is the last option. Until now, the debt of PT Garuda Indonesia (Persero) Tbk has swelled to reach USD 9.8 billion, or equivalent to Rp. 139 trillion (exchange rate of Rp. 14,200). The following is Erick Thohir's efforts to pay off Garuda Indonesia's Rp139 trillion debt, which FGM quoted from Okezone, Saturday (11/13/2021).

1. Erick Admits Garuda Indonesia's Business Error Currently, Garuda is carrying the work and financial burden due to high debt. "Especially for Garuda, this is indeed a mistake that we also didn't mean anything, but indeed we want to be a part of what we have to learn," said Erick in an interview session with IDX Channel, quoted on Thursday (16/9/2021).

2. Contracts with a number of SOEsRegarding restructuring, Garuda has obtained approval to restructure its long-term debt. Currently, management has signed agreements with a number of SOEs with an average term of three years. The agreement was agreed with PT Pertamina (Persero), PT Angkasa Pura I (Persero), PT Angkasa Pura II (Persero), and the Public Company of the Indonesian Aviation Navigation Service Provider (Perum LPPNPI).

3. Changing the Business Model Regarding the change in the business model, said Erick, Garuda will focus on domestic flight routes. This step was taken to take advantage of the potential domestic market niche. Apart from focusing on domestic flights, Garuda will also strengthen its cargo business.

4. Collaboration with EmiratesPT: Garuda Indonesia (Persero) Tbk (GIAA) cooperates with an airline from Dubai, Emirates. SOE Minister Erick Thohir noted that the collaboration was aimed at enabling Garuda Indonesia to focus on the domestic flight business. In addition, the agreement in the form of code sharing also confirms that Garuda customers can still explore international routes through the Emirates airline. Through code sharing cooperation with Emirates in serving international flight routes, Garuda still has value in the eyes of its customers. This is expected to have a positive impact on supporting Garuda's new orientation, which will focus more on serving domestic routes. After all, we can't stay silent, can we? Business and finding solutions must be considered. This includes formulating new strategies and focusing on Garuda's domestic flight business, "said Erick.

5. Potential EvaluationFlight data is still dominated by domestic passengers. It is estimated that 78 percent of passengers use planes to travel between islands, with a total financial turnover of IDR 1,400 trillion."After all, if we look at the data before COVID itself, 78% of the tourists are local tourists, and the rest are foreign tourists. Of the 78%, the turnover is Rp. 1,400 trillion. So, indeed, later we will focus on domestic flights only. This is for business model changes, "he said.

6. Lowering the Costs of Aircraft RentalManagement is also required to make efforts to map out aircraft leasing financing. Erick noted that Garuda's aircraft leasing reached 28%, the highest in the world. This is another reason for issuers to bear the financial burden. So, that's why we are focusing on negotiations with lessors and we categorize there are two lessors whose classification of corruption is in accordance with the KPK findings, etc.. We don't want our negotiations to be weakened, please just take the plane. For B to B, it is expensive, so we are trying to renegotiate, "he said.

The employee union is worried that Garuda Indonesia will have the same fate as Indosat.

Chairman of the Garuda Indonesia Employees Union (Sekarga) Tomy Tampatty is worried that Garuda will have the same fate as Indosat because there is an option to reduce the government's shares (dilution). This is after Deputy Minister of SOE II, Kartika Wirjoatmodjo, conveyed the dilution option of PT Garuda Indonesia Tbk in the context of debt restructuring during a working meeting with Commission VI of the DPR RI. Garuda Indonesia could be like the 2nd Indosat, which was released into foreign hands when the daughter of the First President of the Republic of Indonesia, Soekarno, Mrs. Megawati, was the President of the Republic of Indonesia and the Indosat incident became the worst record of the Indonesian people," said Tomy on Saturday (11/13/2021). Currently, the dilution plan is still optional in Commission VI DPR RI. However, Tomy hopes that Commission VI and all DPR factions will reject this option. "We hope that the Speaker of the House of Representatives, Mrs. Puan Maharani, and all members of the House of Representatives, reject the request for approval because if the DPR-RI approves, the majority of Garuda's shares owned by the government will be sold to private or foreign parties," he said. 

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