SOEs Ministry devises five-tier rescue plan for Garuda Indonesia

The State-Owned Enterprises Ministry has said it is devising a rescue plan involving corporate business transformation for national flag carrier Garuda Indonesia, which is currently embroiled in a financial crisis.

“We are striving to devise the best formula to rescue the airline by prioritizing business transformation,” State-Owned Enterprises Deputy Minister II, Kartika Wirjoatmodjo, told Commission VI of the House of Representatives (DPR RI) at the Parliament Complex, Jakarta, on Tuesday.

The ministry has identified inefficient and poor corporate governance in the past as the main reason for the airline’s current financial issues, he informed.

The government is planning five measures to rescue Garuda Indonesia from bankruptcy, with the first measure being cutting flight routes served by the airline, Wirjoatmodjo revealed.

Garuda Indonesia would see its flight routes reduced from 237 to 140 super premium routes, with the focus shifting to domestic destinations, he said. The number of international flights will also be reduced, he added.

“Unfortunately, this measure would cause significant reduction of flights in several airports,” he noted.

The second measure is reducing the combined fleet of Garuda Indonesia and subsidiary Citilink of 202 aircraft to 134 aircraft by 2022, he informed.

The airline fleet reduction would see the aircraft model used by the airline streamlined into seven types, the deputy minister added.

Renegotiation of aircraft leases, which is aimed at lowering the lease price in proportion to the current market rate, is the third measure devised to rescue the airline, he informed.

The fourth measure is to enhance the utilization of aircraft belly capacity to increase revenue from cargo flights and to digitize the airline’s operation, Wirjoatmodjo said.

Chasing revenue opportunities from extra facilities offered through the unbundling scheme, product expansion, and implementation of dynamic pricing strategy is the fifth measure planned for the airline, the deputy minister revealed.

Wirjoatmodjo expressed the hope that Garuda Indonesia’s balance sheet will improve and positive performance will be recorded after the airline rescue plan is implemented.

Despite the concrete planning, the business transformation and restructuring plan for the flag carrier must be able to attract new capital to kickstart the plan implementation, he said.

“What is important right now is that the creditors would agree to our rescue plan, as without their consent, we can do nothing,” the deputy minister said.

 

 

Source: Antara News

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